A vessel owned by West Tankers and chartered to Erg, an Italian company, collided with and caused damage to a jetty owned by Erg. The charterparty was governed by English law and contained an agreement to arbitrate in London. Erg claimed on its insurance up to the limit of its cover and commenced arbitration proceedings in London against West Tankers for the excess. Erg’s insurers commenced proceedings against West Tankers in the Italian courts to recover the amounts paid to Erg under the insurance policy. West Tankers commenced English court proceedings seeking:

An anti-suit injunction was granted at first instance, but the case was appealed to the House of Lords.

In an earlier case, the European Court of Justice (ECJ) held that anti-suit injunctions in support of exclusive jurisdiction clauses, and directed against proceedings in member states, are incompatible with the Brussels Regulation (Turner v Grovit, Case 159-02 [2004] ECR I-3536). However, arbitration is exempt from the Brussels Regulation under Article 1.1(2) (the arbitration exclusion).

In West Tankers, the House of Lords had to consider whether the English anti-suit proceedings fell within the arbitration exclusion, and therefore outside the scope of the Brussels Regulation. It concluded that the English court proceedings were entirely concerned with protecting the contractual right to have the dispute determined by arbitration. So, as the subject matter was arbitration, the proceedings fell outside the Brussels Regulation.

The Advocate General found the House of Lords’ view that the anti-suit proceedings fell within the arbitration exception “surprising”. For her, the decisive question was not whether the English proceedings fell outside the scope of the Brussels Regulation, but whether the Italian proceedings fell within it. This question was to be determined by an analysis of the subject matter of the dispute before the Italian courts. As that dispute was one in which the insurers were claiming damages arising from a collision, she considered its subject matter to be a claim in tort (and possibly in contract), rather than arbitration.

The House of Lords had expressed concern about the potential impact on London as a venue for international arbitration if such anti-suit injunctions were precluded. However, the Advocate General said that purely economic aims could not justify infringements of EC law. She was particularly unimpressed by the Lords’ suggestion that it was open to other arbitration venues to adopt the practice of the English courts and to protect arbitration agreements by the issue of anti-suit injunctions. Perhaps not unreasonably, she considered that this would lead to a form of anti-suit arms race, in which the parties would be forced to follow the will of the courts that imposed the greatest sanction for non-compliance with an injunction.

Much has been made of the potential impact of the Advocate General’s opinion on the use of London as a venue for international commercial arbitration. These concerns have been overplayed.

There are a number of reasons why parties choose a particular venue as the seat for their arbitration: location, neutrality, language, and the support of the local courts during the arbitral process. If the availability of anti-suit injunctions were a key determinant in a party’s choice of arbitral seat, then it would be difficult to explain the popularity of Zurich, Geneva, Stockholm and Paris as venues for international arbitration, where anti-suit injunctions are not available. Another point to remember is that the English courts can still grant anti-suit injunctions to restrain proceedings outside of the EU and the Lugano countries (Switzerland, Iceland and Norway).

That said, a weapon in enforcing arbitration agreements could soon be lost. Assuming the opinion is upheld by the ECJ, what should a party do when its contractual counterparty seeks to scupper the agreement to arbitrate by a so-called “torpedo” action? (see box “What is a torpedo action?”).

Apply for a stay. A party’s first action should be to seek a stay of the foreign court proceedings under Article II of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), which has been adopted into the laws of all member states. If the stay application is successful, the threat of parallel proceedings should be removed. Also, any costs incurred as a result of the breach of an agreement to arbitrate should be recoverable.

Commence London arbitration. Even if the stay application is unsuccessful, unlike the English courts, an arbitral tribunal is under no obligation to stay its proceedings if a foreign court has accepted jurisdiction over the dispute. Therefore, a party is free to commence arbitration in London in parallel with the foreign court proceedings (and, if it has not done so already, should consider doing so immediately). This is where a foreign torpedo action could backfire on the party that has brought it, as the arbitral award may be delivered long before the outcome of the foreign proceedings (which the party seeking to enforce the arbitration agreement could delay still further by, for example, appealing on the question of whether the foreign court has jurisdiction).

Enforce under the New York Convention. Once an arbitral award has been obtained, it is enforceable in any country that is a party to the New York Convention (although difficulties with enforcement may be encountered in the jurisdiction where parallel court proceedings have been commenced).

Therefore, while the Advocate General’s opinion (assuming it is upheld by the ECJ) marks a reduction in the English courts’ ability to support agreements to arbitrate, it should not dramatically impact the attractiveness of London as a venue for international arbitrations; nor will it remove a party’s options when faced with a foreign “torpedo”.