Arbitration proceedings in the EU can be obstructed by court action. The term torpedo claim has become a technical term for this. Originally, torpedo claim described an obstruction technique in patent law disputes, by involving slow moving courts. A court before which recourse is later sought must stop its proceedings, until the court invoked first has decided on its jurisdiction, if the lawsuit concerns the same cause of action and the same parties (Article 27(1), Regulation).

Therefore, actions to obtain a declaration of non-liability were brought before slow operating courts, mostly Italian and allegedly also Belgian courts. This was to hinder other courts from proceeding with the case, since the court later invoked could only proceed after the court first addressed had ruled on its jurisdiction in a legally binding way.

Later, torpedo claims were also applied to the relationship between courts and arbitral tribunals.

To start a torpedo claim, the opponent of the claimant in an arbitration files an action for a declaration of non-liability with a court, usually before the claimant in the arbitration starts the arbitral proceedings. The "priority rule" of the present Regulation, set out in Articles 27 to Article 30, does not apply to a conflict of priorities between a court and an arbitral tribunal. Therefore, the right to arbitrate is neither lost nor delayed by court proceedings started in breach of an agreement to arbitrate. However, the term torpedo claim is appropriate in this respect as will be seen in the following (see below Defence strategies).

The court addressed with the declaratory action now must answer preliminary questions on the validity, applicability and effects of the arbitration clause while examining its own jurisdiction, before it can rule on the main issue of the dispute, namely the declaration of non-liability. Only if the court holds the arbitration clause to be invalid can it proceed to rule on the declaration of non-liability.

According to ECJ case law, such preliminary questions do fall within the Regulation's scope, if the main question which is the subject matter of the dispute falls within the Regulation's scope (ECJ Cases C-190/89 Marc Rich, C-391/95 Van Uden and C-185/07 West Tankers). A declaration of non-liability relating to claims for damages, and mere preliminary questions on the validity of an arbitration clause, both fall within the Regulation's scope. Therefore, the court judgment on the declaration of non-liability also contains an (implicit) ruling on the validity of the arbitration agreement, and can be enforced under the Regulation in any member state subject to the Regulation.

However, if the subject matter in dispute concerns only the arbitration, these court proceedings and their judgments do not fall within the Regulation's ambit. These include court proceedings on the appointment of an arbitrator (ancillary proceedings before courts to support arbitral proceedings, see ECJ case C-190/89 Marc Rich) or on the annulment, recognition or enforcement of arbitral awards. Accordingly, these judgments do not benefit from one of the main advantages of the Regulation, which is the almost automatic recognition and enforcement of judgments in any member state subject to the Regulation.

Raising the arbitration defence in the court where the declaratory action has been brought (torpedo court) may take a long time. Typically years will pass until certain courts decide on the arbitration defence and the successive stages of jurisdictional appeal have been exhausted.

Although proceedings before the torpedo court do not hinder the starting of arbitration as such, contradicting decisions are to be expected if the torpedo court eventually holds the arbitration clause to be ineffective. The court ruling would become enforceable in every member state subject to the Regulation according to the enforcement procedure of the Regulation. However, the arbitral award on the same subject matter would become enforceable in every member state under the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention).

Therefore, if state court proceedings have been started, many arbitral tribunals tend to suspend the arbitration as a precautionary measure, and wait for the decision of the state court.

Filing an action on the declaration of the existence and validity of the arbitration clause with a court at the seat of the arbitration has the disadvantage that the torpedo court does not have to recognise the decision of the court at the seat of the tribunal.

The torpedo court can rule on its own on the validity and application of the arbitration clause, despite any declaratory action filed at the seat of the tribunal, because the subject matter in dispute (the declaration of existence and validity of the arbitration clause) does not fall within the Regulation's scope. This is because the declaration of existence and validity of the arbitration clause only relates to arbitration which is not covered by the Regulation's scope (Article 1(2)( d), Regulation).

Therefore, the torpedo court can ignore the ruling of the court at the seat of the tribunal, and is not required by the Regulation to enforce it. Accordingly, this remedy against torpedo claims is rather toothless.

Anti-suit injunctions were issued by British courts to stop a party who deliberately started court proceedings from continuing these proceedings under threat of sanctions. Therefore, anti-suit injunctions were considered to be a remedy against delaying state court proceedings.

However, since anti-suit injunctions would deprive a party of judicial legal protection it is entitled to, the ECJ declared such injunctions inadmissible (Case C-185/07 West Tankers or Front Comor). As a result, only the arbitration defence and the declaratory action currently exist to help arbitral proceedings against delaying tactics.

One of the goals of reviewing and updating the Regulation became to change this unsatisfactory situation, which erodes the effectiveness of arbitration agreements. It was feared that arbitration outside the EU might become more attractive. Places like New York and Singapore can still issue anti-suit injunctions, and therefore offer the parties the attractive impression that their dispute would be sheltered from any delaying tactics.

The reform process on reviewing and updating the Regulation started in 2007 with the publication of the Heidelberg Report. It proposed:

The European Commission (Commission)'s Green Book from 2009 followed the Heidelberg Report. It recommended:

During a consultation period, the Commission asked the member states, non-governmental organisations and academics for their opinions on the proposals. However, most opinions believed that integrating arbitration into the Regulation by deleting the arbitration exclusion would not be beneficial, since arbitration has already been successfully regulated by the New York Convention.

The Commission's Reform Proposal of December 2010 therefore upheld the arbitration exclusion. It only dealt with the problem of parallel proceedings on the validity and effects of an arbitration clause before state courts, or before a state court and an arbitral tribunal.

To fight parallel proceedings, Article 29(4) of the Commission's Reform Proposal provided that member state courts had to stay their proceedings, once proceedings to determine (as their main object or as an incidental question) the existence, validity or effects of an arbitration agreement have been brought before either:

Once either a court at the seat of arbitration or the arbitral tribunal holds the arbitration clause to be valid, any other EU member state court would have to decline jurisdiction and accept the validity of the arbitration clause.

The Draft Report of the European Parliament's Committee on Legal Affairs of June 2011 eventually deleted the Commission's proposed "stay of proceedings" provision, and proposed that the whole matter of arbitration should be excluded from the Regulation. For that reason, even judicial procedures on the validity or extent of the jurisdiction of the arbitral tribunal, whether as the principal issue or as a preliminary question, should be excluded from the Regulation.

The final version of the Regulation, which was adopted by the European Parliament on 20 November 2012 and resolved by the ministers of justice of the EU member states on 6 December 2012, maintains the arbitration exclusion in the Regulation, and does not include any "stay of proceedings" provision concerning arbitration. However, a new Recital 12 addresses the relationship between the Regulation and arbitration.

The following section examines the New Regulation's Recital 12, and its implications for arbitration in the EU.

At first sight, Recital 12 of the New Regulation seems to be the long awaited provision which clearly defines the boundaries between arbitration and Regulation matters, and helps to interpret the broad arbitration exemption stated in Article 1(2)(d).

Recital 12 contains the following statements:

These statements show that the New Regulation largely confines itself to summarising the present legal situation of arbitrations under the Regulation.

For example, the New Regulation does not contain any "stay of proceedings" provision (see above, Reforming the Regulation). It merely states that each member state court has the discretion to refer the parties to arbitration, stay or dismiss the court proceedings, or examine the validity of the arbitration agreement by applying its own national law.

This wording of paragraph 1 of Recital 12 resembles Article II(3) of the New York Convention, which requires the court of a contracting state to refer the parties to arbitration, unless the court finds the arbitration agreement to be null and void, inoperative or incapable of being performed. The problem with this wording is that it gives both the court and the arbitral tribunal the right to rule on its own jurisdiction, without granting priority to one of the tribunals. Therefore, such provisions cannot resolve parallel proceedings between member state courts and arbitral tribunals.

In line with the present legal situation, paragraph 2 of Recital 12 states that a court ruling on the validity of an arbitration agreement is not subject to the New Regulation if the validity of the arbitration clause is the subject matter in dispute (see above, Defence strategies: Court declaration on the arbitration agreement).

However, paragraph 2 of Recital 12 extends this principle to the case where a court rules on the validity of the arbitration agreement only in terms of a preliminary question.

Under the present Regulation, the priority rule of the Regulation set out in Article 27 to Article 30 can be used to obstruct parallel state court proceedings, since the court later invoked must stay its proceedings until the court first addressed has decided on its jurisdiction, which includes a decision on the validity of the arbitration agreement. Accordingly, the priority rule of the Regulation prevents parallel proceedings between state courts if both state courts have to rule on the validity of an arbitration agreement as a preliminary question. This reflects the notion that the court second seized is not in a better position than the court first seized to determine whether the first court has jurisdiction.

In contrast, it seems that under the New Regulation, the second court is not bound by the decision of the first court, nor is it required to stay its proceedings and wait until the first court has ruled on the validity of the arbitration agreement in terms of a preliminary question.

For example:

The risk of parallel court proceedings on the validity of arbitration agreements as preliminary questions therefore seems higher under the New Regulation. This increases the risk of conflicting court rulings on arbitration agreements.

According to Paragraph 3 of Recital 12, the Italian judgment on the merits of the case, which includes an implicit judgment on the invalidity of the arbitration clause, can be enforced in the member states under the New Regulation.

Therefore, in line with the present legal situation, a court decision on the merits of the case, which follows the court's finding that the arbitration agreement is null and void, inoperative or incapable of being performed, can be enforced under the New Regulation.

Accordingly, torpedo claims to obstruct arbitration proceedings are still possible under the New Regulation. To prevent contradicting decisions, arbitral tribunals will therefore still be tempted to suspend the arbitration once court proceedings are started, and may wait for the court decision (see above, Defence strategies: The Arbitration defence).

It is doubtful whether the newly inserted clarification that the New York Convention takes precedence over the New Regulation will always give the arbitral tribunal enough confidence not to suspend the arbitration. To do so, the arbitral tribunal must rely on the enforcing court being much more inclined to prioritise enforcement of the arbitral award under the New York Convention, rather than the competing member state judgment under the New Regulation.

It remains to be seen whether a court would refuse to recognise or enforce a court judgment which is contrary to a valid arbitral award since this would be "manifestly contrary" to the ordre public of the enforcement state (Article 45(1), New Regulation), on the grounds that there is public policy in enforcing valid arbitral awards in the enforcement state.

Paragraph 4 of Recital 12 states, in line with the present legal situation, that ancillary proceedings relating to arbitration are not covered by the New Regulation, and actions or judgments concerning the annulment, review, appeal, recognition or enforcement of arbitral awards do not fall within the New Regulation. Therefore, these judgments cannot be enforced under the New Regulation.

For example: