In a recent decision the High Court has refused an application for an anti-suit injunction to prevent a third party being joined to court proceedings in Mexico. In doing so, the court was careful to examine the nature and purpose of the foreign court proceedings before concluding that they did not amount to a breach of an arbitration clause.
Background
In Louis Dreyfus Commodities Kenya Limited v Bolster Shipping Company Limited, the applicant shippers ("LD") applied for a final anti-suit injunction seeking to restrain the respondent ship owners from joining LD as a party to proceedings before the Mexico City Federal District Court ("the Mexican Proceedings"). LD argued that joining it to the Mexican Proceedings would be a breach of a London arbitration clause contained in a bill of lading to which both LD and the respondent were parties.
The Mexican Proceedings concerned cargo shipped by LD on the respondent's vessel, and subsequently sold to "S". S alleged that the cargo (a consignment of grain) was damaged on arrival but it could not determine where the damage occurred or who was responsible for it. S issued the Mexican Proceedings against various parties, including the respondent ship owners. It was the respondent's case in the Mexican Proceedings that the cargo had been damaged before it was loaded, the suggestion being that damage occurred whilst in storage with LD. The owner sought to join LD to the Mexican Proceedings as a third party.
There was a disagreement between the parties as to the nature of the request for joinder. The respondent argued that the purpose of the joinder was for LD to assist the Mexican court in finding the truth, as a mere third party, and not to be held liable for the amounts claimed by S. LD argued that it was being joined as a party so that judgment could be rendered against it, or at least so that it would be bound by that judgment.
The key question was whether the respondent's conduct amounted to a breach of the arbitration clause in the bill of lading to which LD and the respondent were both a party. The clause required all disputes between the parties arising out of the contract contained in or evidenced by the bill of lading to be referred to arbitration.
Judgment
The court held that LD was not able to establish that the owners' conduct amounted to a breach of the bill of lading arbitration clause. Accordingly, LD's application was dismissed.
In this case, the joinder application by the respondent, when properly construed, required LD to be bound by the terms of the judgment of the Mexican court. However, this did not of itself breach the bill of lading arbitration clause. Importantly, the respondent was not inviting the Mexican court to resolve a dispute between it and LD. Nor was the respondent asserting a claim against LD and it did not identify any dispute between it and LD. Even if the respondent had intimated that S should pursue LD in the Mexican Proceedings, that would not amount to a breach of the arbitration clause. The court noted that a party to an arbitration clause does not undertake to his contractual partner that he will not, if sued by a third party, suggest that it was to the contractual party that the third party should rather look for recompense.
The procedure the respondent adopted in the Mexican Proceedings was unfamiliar to English law but it was permitted in Mexico and was established procedure there. Further, LD could not demonstrate that the respondent's use of that procedure constituted a breach of the arbitration clause. Accordingly, that clause had not been breached and it was not in the interests of justice to grant the anti-suit injunction sought.
Comment
This case is a salutary reminder that arbitration clauses are not always "bomb proof". English courts will carefully consider whether a party has breached an arbitration clause having first conducted a review of the competing foreign proceedings. In this case, the court was assisted by expert evidence on Mexican procedural law and was persuaded that the joinder application was a more practical step of securing the provision of evidence by LD than through the medium of it acting as a witness.
Further reading
Louis Dreyfus Commodities Kenya Limited v Bolster Shipping Company Limited [2010] EWHC 1732 (Comm)
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
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The original publication date for this article was 06/08/2010.