District court issues anti-suit injunction against foreign litigation and compels arbitration | Practical Law

District court issues anti-suit injunction against foreign litigation and compels arbitration | Practical Law

Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel) and Daniel J. Hickman (Associate), White & Case LLP

District court issues anti-suit injunction against foreign litigation and compels arbitration

Published on 04 Oct 2012USA (National/Federal)
Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel) and Daniel J. Hickman (Associate), White & Case LLP
The United States District Court for the Southern District of New York has issued an anti-suit injunction against foreign litigation and granted a petition to compel arbitration.
In Travelport Global Distribution Systems BV v Bellview Airlines Ltd, (SDNY, Sept. 10, 2012), Travelport, a Dutch company, entered into a Distribution Agreement with Bellview, a Nigerian company, to provide a computerised travel reservation system in Nigeria. The agreement contained an arbitration clause under the auspices of the "United States Council of Arbitration" and the UNCITRAL Arbitration Rules. When a dispute arose between the parties, Travelport terminated the contact and Bellview initiated an action in the Nigerian Federal High Court. Travelport argued that the dispute should be submitted to arbitration pursuant the Distribution Agreement, but Bellview refused to terminate the Nigerian suit. Bellview argued that that the arbitration clause contained in the Distribution Agreement was inapplicable because the specified arbitral body was "non-existent." Travelport responded by filing a petition in the Southern District of New York, seeking an anti-suit injunction in respect of the Nigerian suit and a court order compelling arbitration.
Bellview argued that arbitration was not mandatory because the Distribution Agreement used discretionary language. The court disagreed and concluded that the use of the permissive "may" is not sufficient to overcome the presumption that the parties agreed to arbitrate. Bellview also argued that the arbitration agreement was invalid because it referenced the "United States Council of Arbitration", a non-existent institution. The court found this argument without merit and held that a technicality would not preclude enforcement of the arbitration agreement, because the parties clearly expressed their intention to resolve the dispute through arbitration. Since it was unclear, however, the court deferred to the default UNCITRAL method for appointment of the arbitral tribunal.
Regarding the anti-suit injunction, the court acknowledged that principles of comity normally suggest that injunctions restraining foreign litigation be used sparingly and should only be granted with care and great restraint. The court recounted that there are two threshold requirements for the issuance of an anti-suit injunction as to foreign litigation:
  • The parties must be the same in both matters.
  • Resolution of the case before the enjoining court must be dispositive of the action to be enjoined.
Once these threshold requirements are met, there are five suggested factors for determining whether the foreign action should be enjoined – the so-called "China Trade factors":
  • Frustration of a policy in the enjoining forum.
  • The foreign action would be vexatious.
  • A threat to the issuing court's in rem or quasi in rem jurisdiction.
  • The proceedings in the other forum prejudice other equitable considerations.
  • Adjudication of the same issues in separate actions would result in delay, inconvenience, expense, inconsistency, or a race to judgment.
The court concluded that the two threshold requirements were met, because the parties are the same as the Nigerian suit and judgment in the case would be dispositive. Moreover, the court found that the China Trade factors strongly supported the issuance of an anti-suit injunction in respect of the Nigerian case, because there is a strong federal policy in favour of arbitration and Bellview appeared to be attempting to side-step the arbitration clause.
This case demonstrates the exceptionally strong federal policy in support of arbitration and offers an example of the courts' willingness to issue an anti-suit injunction against foreign litigation that is apparently being used to circumvent an arbitration agreement.