English CA Confirms Jurisdiction To Restrain Foreign Arbitration In Exceptional Case

Herbert Smith Freehills review the English Court of Appeal’s decision in Sabbagh v Khoury and others, [2019] EWCA Civ 1219, where the CA partly upheld the injunction granted by the Commercial Court restraining the pursuit of arbitration proceedings seated in Lebanon.  In doing so, the Court of Appeal confirmed the power of English courts to restrain a foreign arbitration on grounds that the foreign arbitration is oppressive and vexatious and provided helpful guidance on the exceptional circumstances in which English courts may exercise this power.

In relation to the jurisdiction of the English courts to grant an injunction restraining a foreign arbitration, the CA rejected the Claimants’ argument that the English courts had no jurisdiction to grant an injunction to restrain the pursuit of a foreign arbitration, specifically on the basis that the foreign arbitration is oppressive and vexatious, because the grant of such an injunction was fundamentally inconsistent with the scheme of the Arbitration Act 1996 and the 1958 New York Convention.  The CA held that English courts have the jurisdiction to grant such an injunction, such power conferred by section 37 of the Senior Courts Act 1981; it is well established that an injunction may be granted to restrain foreign (court) proceedings where the pursuit of such proceedings is oppressive and vexatious and there is no reason that a similar power should not exist in relation to foreign arbitrations unless such power is modified / excluded by statute (finding also that it was not possible to extract such a modification / exclusion from the Arbitration Act).  The CA also found that an English Court will not grant an anti-arbitration injunction where the dispute falls within the arbitration agreement (thereby refusing to grant an injunction restraining the Claimants from prosecuting that part of the claim concerning the shares).

In relation to whether it was a precondition to the grant of an anti-arbitration injunction that England is the natural forum for the underlying dispute, the CA rejected the Claimants’ submission that, just as with anti-suit injunctions, English courts should not restrain a foreign arbitration on the basis that the arbitration was oppressive and vexatious unless England is the “natural forum” for the underlying dispute.  The CA noted that the rationale underlying this precondition for anti-suit injunctions on grounds of oppressive and vexatious conduct was that the anti-suit injunction involved an indirect interference with the sovereign jurisdiction of the courts of foreign states.  Since this is inconsistent with the principles of comity, the Court considered that it must be kept within strict bounds and the test of natural forum is one of the key means of achieving this but found that this rationale did not apply to a foreign arbitration since an anti-arbitration injunction did not involve an interference with the jurisdiction of a foreign court (except in the “very indirect way” of interfering with a foreign court’s supervisory jurisdiction).

The authors note that this is the first time the Court of Appeal has fully considered the points of principle which such an injunction raises and extract from the decision the following points of principle:

  • English courts have the power to grant an anti-arbitration injunction where it is just and convenient to do so (section 37(1) of the Senior Courts Act 1981)
  • Since such an injunction interferes with the fundamental principle that courts should respect, and give effect to, arbitration agreements, where it is clear that the dispute is within the scope of the arbitration agreement, no injunction should be granted
  • When the converse is true (i.e. it is clear that the dispute is outside the scope of the arbitration agreement) either because it is common ground between the parties or because of a previous determination (e.g. pursuant to an application to stay proceedings before English courts), the court may grant an anti-arbitration injunction but only if the circumstances of the case require it (e.g. when the proceedings are considered oppressive and vexatious)
  • Save in the case of exclusive jurisdiction agreements, the grant of an anti-arbitration injunction remains an exceptional step.

See also the reviews by:

See also the review of Li v Rao (2019 BCCA 264) by McCarthy Terault, where a Canadian court granted an anti-arbitration on the basis of a forum selection agreement in favour of a Canadian court.

About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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