Commentary - English courts: a favourable seat for arbitration

Robert Stevenson, BLM London

The issue of using anti-suit injunctions to restrain court proceedings breaching an arbitration clause has been brought much to the fore following the House of Lords decision in West Tankers Incorporated v. AS Riunione Adriatica di Sicura SpA (The Front Comor) (2004) UKHL 4.

The House of Lords decided to refer the issue of such anti-suit injunctions to the European Court of Justice.

While s1 (2)(d) of EC Regulation 44/2001 excludes arbitration from the scope of this regulation that governs principally court proceedings, House of Lords decided on the referral, not because they felt any doubt about the legality of efficacy of such injunctions, but because of earlier decisions by the ECJ on the issue relating to exclusive jurisdiction clauses. In Turner v Grovitt (C-159/02) the ECJ ruled that such anti-suit injunctions should not be used in support of exclusive jurisdiction clauses.

In the meantime, parties to arbitration agreements continue to seek and be granted such injunctions, the latest being in the case of C v D, Court of Appeal, 2007.

D was a US incorporated insurer with a branch in England. It was the liability insurer of C, a US company. The policy was a claims made policy on the Bermudian form subject to New York law, with London as the seat of arbitration. D refused to indemnify C in respect of a number of claims, C initiated arbitration in London and obtained a favourable interim award. D intimated it would apply to a US Federal Court to vacate the award on the basis of "manifest disregard" of New York law. C applied, and obtained an anti-suit injunction restraining such proceedings.

D appealed and submitted that the court had been wrong to hold that the arbitration agreement itself (as opposed to the underlying contract) was governed by English law merely because the seat of the arbitration was London.

The appeal was dismissed, the Court of Appeal ruled that the parties were taken to have agreed that remedies for overturning the award were exclusively those provided for by the English Arbitration Act 1996. D's potential to challenge the award in the US was limited to the narrow scope provided for under the New York convention.

The purpose of the Bermudian form, as the court underlined, was to have New York law apply to the issues under the policy and English law apply to the arbitration, and while it is theoretically possible for the law of the seat of the arbitration not to apply, that was not the case in this instance.

This is apparently the first time the Court of Appeal has considered the Bermudian form.

Unless the ECJ rules in the front comer that such injunctions are contrary to EU law, the English courts will continue to grant such anti-suit injunctions arguably making London a more favourable seat for arbitrations when compared with other European countries where no such procedure exists.

The following law report contributed by specialist insurance practice Berrymans Lace Mawer first appeared in Post Magazine on 21 February 2008.

Disclaimer: The law report contains information of general interest about current legal issues, it does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. Specialist legal advice should always be sought in any particular case.