Global Vantage: Anti-Suit Injunctions: Coming to a Court near you?November 2020
Anti-suit injunctions (‘ASIs’) prevent a party that is subject to the issuing court’s jurisdiction from commencing or continuing with proceedings in a foreign jurisdiction. Earlier this month, the DIFC Courts reportedly granted their first ASI, representative of a wider trend that we have seen in recent years where ASIs are sought in the context of international Arbitration.
As globalisation continues to increase the number of cross-border disputes that come before the courts, we expect this trend to continue as we move into a new year in which many businesses will be desperate to increase trade overseas in an effort to bounce-back from the devastating impact of Covid-19.
When preparing an Arbitration agreement, it is common practice to include a governing law provision. Usually, this will stipulate the jurisdiction/forum that the parties agree will hear disputes that arise in connection with the agreement. However, when a dispute does arise, a party may nevertheless seek to circumvent this provision by initiating proceedings in an alternative jurisdiction to that which was agreed. This could, for example, be due to concerns over the costs of participating in proceedings in an unfamiliar jurisdiction, or simply ignorance as to what the parties previously agreed. It is in this scenario that ASIs can be a particularly useful asset for an aggrieved party.
As with other forms of injunction, ASIs attach to the responding party. Therefore, they do not automatically prevent foreign courts from continuing with proceedings initiated in their jurisdiction. However, they oblige the party that is subject to the ASI to take no further action with respect to the offending proceedings. Crucial to the effectiveness of ASIs are the consequences of failing to comply with their terms. This includes the potential for the respondent to be found in contempt of court, which could lead to imprisonment, or, in the case of a corporate entity, seizure of assets.
Yet, despite their apparent benefits, many jurisdictions remain cautious as to the granting of ASIs, or simply refuse to recognise the remedy altogether. Perhaps most notably in this respect, the decision of the European Court of Justice in Allianz SpA v West Tankers Inc means that national courts of European Union Member States are essentially prohibited from granting ASIs where, in breach of a valid Arbitration clause, proceedings have been commenced in another Member State. However, justification for this prohibition is in part based upon interpretation of the Recast Brussels Regulation, and as such the decision does not prevent national courts from granting ASIs (in EU Member States where they are recognised) where proceedings have been initiated outside of the EU.
More broadly, recognition of ASIs in foreign courts generally depends upon whether the jurisdiction operates on a common or civil law basis. Of course, there are exceptions to this rule, but in the main common law countries, such as Australia and Malaysia, tend to adopt a more liberal approach to ASIs than that of their civil law counterparts. Indeed, the recent decision of the DIFC Courts in Multiplex Constructions LLC v Elemec Electromechanical Contracting LLC is reflective of this trend, appearing to add another common law jurisdiction to the list of those that recognise ASIs.
The disconnect between the treatment of ASIs in common and civil law jurisdictions may be attributed to the level of discretionary power that judiciaries often enjoy in common law states. However, restrictions might also be justified on the basis of the potential consequences that the remedy has in relation to access to justice. In this regard, it is important to note that ASIs are often not the only remedy available for the protection of rights and obligations under a valid Arbitration agreement. For example, in the English Courts, it could be more appropriate and perhaps even easier for a party to issue an application for a stay of proceedings brought in breach of the Arbitration agreement.
Nevertheless, as local courts in emerging markets become more familiar with international arbitration, we expect that recognition of the ASI across the globe will continue to grow. Closer to home, it will be interesting to see how Brexit, as well as the continuing effects of Covid-19, impact upon the use of ASIs and the rules that apply to jurisdiction and the enforcement of judgments in our national courts.Download PDF