Originally published in BLG's Reinsurance and International Risk team Notes, Summer 2007
The traditional English approach is to hold the parties to their bargain, and grant an injunction in favour of the agreed jurisdiction or arbitration provision.
This has contrasted sharply with the position adopted by the European Court of Justice (ECJ). Article 27 of EC Regulation 44/2001 (the "Regulation") provides that the courts of one Member State should allow the court first seised of the dispute to determine whether or not it has jurisdiction. Inherent in the Regulation is a principle of trust: the trust by the courts of one Member State to allow the courts of another Member State to determine the correct jurisdiction. Following this principle, it has been held by the ECJ that anti-suit injunctions cannot be granted to restrain proceedings commenced in the courts of another Member State in breach of an exclusive jurisdiction clause (for example in Gasser v Misat (2003), the Austrian court declined jurisdiction until the Italian court (first seised of the dispute) determined its own jurisdiction, despite a clear exclusive Austrian jurisdiction clause in the contract).
The rationale of the ECJ is that if there is a clear dispute resolution provision, the foreign court is likely to dismiss its own proceedings in favour of the express contractual provisions. But this ignores the delay and mischief that can be caused by one of the parties to a contract commencing proceedings in another jurisdiction.
So far, it has remained possible to obtain an anti-suit injunction to restrain foreign proceedings where there is an arbitration agreement. Article 1 of the Regulation states expressly that the Regulation does not apply to arbitration. However, that may be about to change.
In West Tankers v RAS Riunione di Sicurta SpA (2007), the House of Lords recently asked the ECJ to decide whether or not it is open for the court of one Member State to grant an injunction restraining a person from commencing or continuing court proceedings in the courts of another Member State where those proceedings are in breach of an arbitration clause.
West Tankers chartered the "Front Comor" to Erg Petroli SpA ("Erg"). The vessel collided with a jetty owned by Erg in Syracuse. Erg made a claim against their insurers, RAS, who in turn commenced subrogated proceedings against West Tankers in Syracuse. West Tankers applied to the English court for an injunction to restrain the Syracusan proceedings on the grounds that any subrogated proceedings brought by RAS were subject to the London arbitration clause in the charterparty.
The matter has yet to be decided by the ECJ, but the House of Lords observed the following: parties choose arbitration to be outside the procedures of any national court, preferring privacy, informality and finality (as there is often no appeal). The courts are there to serve the business community, not vice versa. The EU is competing against the rest of the world in terms of dispute resolution: New York, Bermuda and Singapore are leading arbitration centres and there is no need for the EU to handicap itself.
In conclusion, where one party to a dispute may choose to commence proceedings in an EU Member State, despite an English jurisdiction or arbitration provision in the contract, the other party is advised to act quickly, otherwise they risk being dragged through a foreign litigation process.
It should be remembered, however, that the English court still has power to grant an anti-suit injunction if the foreign proceedings are commenced in a non-member state, such as the US.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
