Background
Here, Front Comor, a vessel owned by West Tankers Inc and chartered by Erg Petroli SpA (under a charterparty governed by English law and containing a London arbitration clause) collided with Erg's jetty at Syracuse, Italy, causing damage to the jetty.
Erg's insurers, claiming the money they had paid to Erg, and relying on their rights of subrogation under the Italian Civil Code, brought proceedings against the shipowners (i.e. West Tankers) in the Tribunale di Syracuse in Sicily.
Consequently, the shipowners commenced proceedings in the English High Court, seeking an anti-suit injunction restraining the insurers from pursuing proceedings other than arbitration – due to the existence of the arbitration agreement between the parties. The High Court granted the injunction. However, the insurers then appealed to the House of Lords, arguing that the granting of the injunction was contrary to Council Regulation (EC) No 44/2001 of 22 December 2000 ("the Regulation") which provides that the EU court "first seised" of an action will have exclusive jurisdiction and will decide any challenges to that jurisdiction. However, arbitration is excluded from the scope of the Regulation, pursuant to article 1(2) (d). Accordingly, the House of Lords referred the question to the European Court of Justice, that being – does the Regulation preclude a court of a Member State from making an order (i.e. an anti-suit injunction) restraining a person from commencing or continuing proceedings before the courts of another Member State because such proceedings are in breach of an arbitration agreement?
Findings of the ECJ
In short, the European Court held that an anti-suit injunction preventing proceedings in another Member State (i.e. Italy) from being prosecuted because they were against an arbitration agreement (i.e. England) was incompatible with the Regulation.
In that regard, the Grand Chamber of the European Court of Justice held that
"if, because of the subject matter of the dispute, i.e. the nature of the rights to be protected in proceedings, such as a claim for damages, those proceedings came within the scope of the Regulation, a preliminary issue concerning the applicability of an arbitration agreement, including in particular its validity, also came within its scope of application".
Therefore, the Grand Chamber found that an injunction such as the one granted by the High Court would be contrary to the principle that every court seised of a dispute should itself determine the issue of jurisdiction, under the rules applicable to it. It therefore ruled that it was incompatible with the Regulation for a court of a Member State to make an order, restraining a person from commencing or continuing proceedings before the courts of another Member State on the ground that such proceedings would be contrary to an arbitration agreement. In this case, it was for the Sicilian court to determine whether it had jurisdiction to determine the dispute, or to decline jurisdiction in favour of the stipulated arbitration
This case was recently considered and applied in DHL GBS (UK) Ltd v Fallimento Finmatica Spa [2009] EWHC 291 (Comm).
The practical effect of the judgment remains to be seen but although it could potentially undermine the autonomy of English arbitration clauses, it is unlikely to have a significant impact on the construction of contracts containing London arbitration clauses. Parties choose London as a seat because of the procedural certainty that it provides. For parties based outside Europe there still remains the prospect of English anti-suit injunctions in respect of proceedings commenced outside of the EU. For parties based inside Europe, however, whilst English anti-suit injunctions may not be available against related proceedings in another EU state, if the English arbitral body also declares that it has jurisdiction then those English arbitration proceedings may still be pursued.
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.