Page 2 - Arbitration

nylj.com |
Arbitration | MONDay, JULy 18, 2016 | S5
aspect” of the arbitration agreement, finding that the anti-suit injunction was not neces- sarily limited to the arbitral proceedings themselves, but “for the purposes of and in relation to the negative promise contained in the arbitration agreement not to bring foreign proceedings, which applies and is enforceable regardless of whether or not arbitral proceed- ings are on foot or proposed.”10 In reaching its decision, the court confirmed that the power of English courts to grant anti-suit injunctions in relation to proceedings in non-EU Member States was unchanged by West Tankers or the Brussels Regulation.
Similarly, in Joint Stock Asset Management Company “Ingosstrakh Investments” v. BNP Paribas SA [2012] EWCA Civ 644, the English Court of Appeal affirmed that anti-suit injunc- tions could be issued against parties that were not signatories to the relevant arbitration agreement. BNP Paribas had obtained an anti- suit injunction from the English High Court restraining a Russian company, Ingosstrakh Investments, from pursuing proceedings in the Russian courts in relation to a guarantee entered into between BNP Paribas and a sec- ond Russian company, Russian Machines. The guarantee in question was governed by Eng- lish law and provided for arbitration seated in London. While troubled by the prospect of an anti-suit injunction being granted against a non-party to an arbitration agreement, the English Court of Appeal accepted that if col- lusion between Ingosstrakh Investments and Russian Machines could be established, it would be unconscionable and vexatious for Ingosstrakh Investments to pursue the claims in the Russian courts as the “stalking horse” for Russian Machines.11 Having found such collusion, the court affirmed the anti-suit injunction.
Though the AES and BNP Paribas deci- sions follow the positive approach to anti-suit injunctions contemplated by The Angelic Grace, an English court is still likely to consider the implications of an anti-suit injunction through the lens of international comity, particularly in circumstances where the injunction application is not promptly made. In Ecobank Transnational v. Tanoh [2015] EWCA Civ. 1309, the English Court of Appeal considered an application for an anti- enforcement injunction that was premised, in part, on the fact that the claims at issue were subject to an arbitration clause that pro- vided for London arbitration. In denying the application, the Ecobank court emphasized that considerations of comity were of less importance where there was an arbitration agreement,12 but applicants for both anti-suit and anti-enforcement injunctions must act promptly since in both cases “the English
Precedent shows that English courts have been more willing to grant anti-suit injunctions in favor of arbitration than New York courts.
faces different attitudes and restrictions on the availability of an anti-suit injunc- tion. Whereas a London court is (currently) restricted to issuing anti-suit injunctions to enjoin proceedings outside of the EU, the positive view of protecting the sanctity of the arbitration agreement is a significantly favorable factor. With a New York seat, the courts approach anti-suit injunctions con- servatively, but do so with an established test that favors protection of the enjoin- ing court’s jurisdiction and public policy of promoting arbitration, coupled with no geographic limitation on the court’s power to issue an anti-suit injunction.
•••••••••••••••••••••••••••••
1. Ust-Kamenogorsk Hydropower Plant JSC v. AES Ust- Kamenogorsk Hydropower Plant [2013] UKSC 35, at 21-
28.2. (1911) 105 LT 846, 850-852.
3. As discussed below, however, the ability of Eng-
lish courts to issue anti-suit injunctions has been con- strained by the Court of Justice of the European Union, which has ruled that anti-suit injunctions may not be issued by one EU Member State in cases where a paral- lel proceeding has been brought in another EU Member State.
4. Aggeliki Charis Cia Maritima SA v. Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd’s Rep 87 (CA) (In Millett LJ’s words, referring to anti-suit injunctions, the time had come for the English courts “to lay aside the ritual incantation that this is a jurisdiction which should only be exercised sparingly and with great caution.”).
5. See, e.g., Sokana Industries Inc v. Freyre & Co Inc [1994] 2 Lloyd’s Rep 57, 66.
6. The Angelic Grace, [1995] 1 Lloyd’s Rep 87, at 96.
7. China Trade, 837 F.3d at 35-36 (internal citations omitted).
8. Case No C-185/07 (2009); [2009] ECR I-663.
9. Regulation No 44/2001; anti-suit injunctions are also not compatible with the subsequent 2015 (recast) Brus- sels I Regulation 1215/2012/EU.
10. [2013] UKSC 35, at 46.
11. [2012] EWCA Civ 644, at 51, 57.
12. [2015] EWCA Civ. 1309, at 106.
13. Id., at 91.
14. See Deutsche Bank AG and another v Highland Cru-
sader Offshore Partners LP (CA) [2009] EWCA Civ 725, at 50 (“An injunction to enforce an exclusive jurisdic- tion clause governed by English law is not regarded as a breach of comity, because it merely requires a party to honour his contract.”).
15. The First, Second, Third, Sixth and District of Co- lumbia Circuits have adopted a more “conservative” approach; whereas the Fifth and Ninth Circuits, and per- haps the Seventh Circuit, follow the more “liberal” ap- proach focusing on whether the suit is duplicitous and vexatious.
16. Kaepa v. Achilles, 76 F.3d 624, 627 (5th Cir. 1996).
17. English courts also focus on whether proceedings before the foreign court are or would be vexatious or op- pressive. See Deutsche Bank AG, [2009] EWCA Civ 725, at 50.
18. China Trade, 837 F.3d at 36.
19. Ibeto Petrochemical Indus. v. M/T Beffen, 475 F.3d 56, 65 (2d. Cir. 2007).
20. See China Trade, 837 F.3d at 35.
21. See Ibeto Petrochemical Indus., 475 F.3d at 64 (Courts and commentators have erroneously interpret- ed China Trade to say the Second Circuit only considers these two factors).
22. Paramedics Electromedicina Comercial, Ltda. v. GE Med. Sys. Info. Techs., 369 F.3d 645, 654-655 (2d Cir. 2004). 23. Karaha Bodas Co. v. Perusahaan Pertanbangan Minyak Dan Gas Bumi Negara, 500 F.3d 111, 126 (2d Cir.
2007).
24. Id. at 126-27.
court is interfering, albeit indirectly, with the working or output of a foreign court.”13
Position of the Federal Courts in New York
Whereas the issue of international comity may not play a significant role in an English court’s decision to grant an anti-suit injunc- tion if there is a valid arbitration agreement,14 international comity plays a much more cen- tral, and potentially restrictive, role in U.S. courts, including the Second Circuit.
There is a split among the U.S. circuit courts about the appropriate test and cir- cumstances for issuing an anti-suit injunc- tion. The split centers predominantly on the weight, if any, that should be accorded to international comity with foreign courts.15 Courts taking a “liberal” view of the issue have been reluctant to allow comity to influ- ence their decisions. The Fifth Circuit, for example, has declared, “[w]e decline ... to require a district court to genuflect before a vague and omnipotent notion of comity every time that it must decide whether to enjoin a foreign action.”16 Instead, the “liberal” view focuses on whether the parallel proceedings are vexatious or oppressive.17
By contrast, courts adopting a more “con- servative” view of the issue are inclined to consider issues of comity when confronted with an anti-suit injunction application. The Second Circuit’s decision in China Trade reflects this view, and creates a two-tier, mul- tifactor test (the China Trade factors) that should be applied when courts evaluate the need for an anti-suit injunction.
The first-tier or “primary” China Trade factors consider “(1) whether the parties to both suits are the same and (2) whether resolution of the case before the enjoining court would be dispositive of the enjoined action.”18 Although satisfaction of these “pri- mary” factors act as a condition precedent to obtaining an anti-suit injunction, they are not wholly determinative since the Second Circuit has held that, “due regard for principles of international comity and reciprocity require a delicate touch in the issuance of anti-foreign suit injunctions, that such injunctions should be used sparingly, and that the pendency of a suit involving the same parties and same issues does not alone form the basis for such an injunction.”19
Thus, the “secondary” tier of China Trade factors comprises an additional five factors
that may influence the Second Circuit’s evaluation of whether discretionary consid- erations, including the Fifth Circuit’s “vague and omnipotent notion of comity,” should limit the court’s ability to issue an anti-suit injunction. They are: (1) the threat to the enjoining court’s jurisdiction posed by the foreign action; (2) the potential frustration of strong public policies in the enjoining forum; (3) the vexatiousness of the foreign litigation; (4) the possibility of delay, inconvenience, expense, inconsistency, or a race to judgment; and (5) other equitable considerations.20
While all of the “secondary” factors should be considered, the first two—whether the foreign action threatens the enjoining forum’s jurisdiction or its strong public policies— generally are given greater weight by the courts.21 For example, in affirming an anti- suit injunction as an appropriate measure to enforce and protect a district court’s earlier judgment compelling arbitration, the Second Circuit has held that the “federal policy of favoring the liberal enforcement of arbitra- tion clauses,” which “applies with particular force in international disputes,” supported the issuance of the anti-suit injunction.22 Similarly, the Second Circuit has held that continuation of a foreign suit threatened the enjoining court’s jurisdiction and implicated strong public policy preferences.23 Further, the court held that foreign proceedings which threaten to undermine existing federal judg- ments are particularly vexatious, and “comi- ty considerations, though important, have ‘diminished force’ when a court has already reached a judgment involving the same issues and parties.”24
Application of the China Trade factors has also applied where no arbitration agreement is at issue. In Eastman Kodak v. Asia Optical, 118 F. Supp. 3d 581 (2015), the court issued an anti-suit injunction based on an analysis of the China Trade factors in circumstances where the underlying protected action was a pending action in the Southern District of New York.
Overall, the circumstances giving rise to any anti-suit injunction application made in the New York federal courts must fully con- sider the China Trade factors and, in particu- lar, the competing notions of international comity and the enjoining court’s jurisdiction and public policy.
In sum, a party contemplating whether to seat its arbitration in London or New York
LITIGATION SUPPORT SERVICES
To advertise Litigation Support Services and to receive advertising information,
please contact: Mayra Sinchi
Phone: (212) 457-9473 • [email protected]