ECJ: West Tankers Case Chenguang Dai | Vaibhav Sathe
Case Background: Events •Italy •Ergs insurers •August 2000 •a vessel owned by West Tankers and chartered by Erg •Italinlan oil company •Collision in the Italian port of •Charterer of vessel Syracuse which collided •Charterparty •Governed by English law •Clause:provide for arbitration in London •Australia •Owner of vessel which collided
Case Background: Events•Erg claimed against itsinsurers•Get paid €15.5million Anti-suit injunction proceedings Syracuse proceedings •Commoercial court in London •submitted its claim to a court •sought an injunction in Syracuse, Italy •The Commercial Court issued a •making the Italian permanent injunction court the “first-seized” •Upon insurers appeal, the court court under the Brussels certified the case to the House of Regulation Lords•London•Arbitration proceedings•West tankers denied liabilities
Case Background: Legal Framework Anti-suit Injunction Conflict of laws (or private international law) is a set of procedural rules that determines which legal system and which jurisdictions applies to a given dispute. In the area of conflict of laws, anti-suit injunction is an order issued by a court or arbitral tribunal that prevents an opposing party from commencing or continuing a proceeding in another jurisdiction or forum. If the opposing party contravenes such an order issued by a court, a contempt of court order may be issued by the domestic court against that party.
Case Background: Legal Framework Brussels Convention: Regulation 44/2001 (Brussels I) Judgment given by any court in EU to be recognized in entire EU territory unless recognition is contested Jurisdiction is to be exercised by the EU country in which the defendant is domiciled, regardless of his/her nationality In respect of liability insurance or insurance of immovable property, the insurer may, in addition, be sued in the courts for the place where the harmful event occurred. The regulation does not apply to: - arbitration Parties to a contract are free to designate a court to rule on any dispute even though that court might not have jurisdiction
Case Background: Legal Framework United Nations: New York Convention Recognition of contractual arbitration to resolve international commercial disputes Countries are required to give full effect to arbitration agreements by denying the parties access to litigations in domestic courts. Instead, such matter should be referred to arbitration tribunal as agreed upon in agreement. United Kingdom: Supreme Court Act 1981 High Court can grant injunction in all cases in which it appears to the court to be just and convenient to do so. The Arbitration Act 1996, Sec. 44 has allowed courts to regularly exercise this power to grant injunctions for the purpose of arbitration proceedings.
Did this result into London being favorite seatof International Arbitration?Can one EU member state court grantinjunction to litigation proceedings in otherEU member state court?Why EU should handicap itself by denyingthis powerful weapon to seat of arbitration,while New York, Singapore and Bermudaprovide same?
Case Background: Events House of Lords ECJ • Is it consistent with the Jurisdiction Regulation for a court of a Member State to make an order to restrain a person from commencing or continuing proceedings in another Member State on the ground that such proceedings are in breach of an arbitration agreement?"
House of Lords’ Viewpoint As in Gasser v MISAT, Member State court having exclusive jurisdiction can’t issue injunction to restrain litigation before another Member State court if that court was first seized of the dispute. Under Brussels I, Italian court has right to try the dispute. But, arbitration is excluded from scope of Brussels I. Question is to protect contractual freedom to have dispute determined by arbitration. Arbitration can not be self sustaining. It needs backing of powerful courts of law. Injunction provides competitive advantage to London For arbitration cases, Member states should trust arbitrators. For all other cases falling in ambit of Brussels I, the courts in EU should trust decisions of other EU courts. EU competes with rest of world, so why deny EU destination an opportunity to compete against Singapore and New York?
ECJ Advocate General’s viewpoint Aims of a purely economic nature cannot justify infringements of Community law (Brussels Convention) Litigation outside arbitration seat will result only if the parties disagree on applicability of arbitration clause to the dispute. It may mean there is no contractual consensus on arbitration. If national court determines that the arbitration clause is valid and applicable to the dispute, the New York Convention requires a reference to arbitration. There is therefore no risk of circumvention of arbitration. If other Member States were to follow the English example and also introduce anti-suit injunctions, reciprocal injunctions would ensue. Ultimately the jurisdiction which could impose higher penalties for failure to comply with the injunction would prevail.
Case Background: ECJ Verdict House of Lords ECJ • I s it consistent with the • In its Judgment of February 10, Jurisdiction Regulation for a 2009 the ECJ ruled that an court of a Member State to anti-suit injunction in support of make an order to restrain a arbitration restraining person person from commencing or from commencing or continuing continuing proceedings in proceedings before the courts of another Member State on the another Member State was ground that such proceedings incompatible with the are in breach of an arbitration Jurisdiction Regulation. agreement?"
ECJ Judgment (1/2) Court agreed to House of Lords that when viewed from perspective of English Courts, anti suit relates to arbitration and hence excluded from Brussels I regulation. But court found that Syracuse court has exclusive jurisdiction under regulation to rule on objection to its own jurisdiction. Anti suit injunction runs counter to principles of mutual trust as accorded by EU Member States to others’ legislative system So, when viewed from perspective of Syracuse Court, the anti-suit injunction compromises its power to determine its own jurisdiction. So, anti suit injunction can not be said to be related only to arbitration.
ECJ Judgment (2/2) So, while main proceedings do not violate Brussels I, they may have consequences which undermine effectiveness and objectives of Brussels I. Due to nature of rights to be protected, the question of applicability of arbitration (as raised in Syracuse court) comes under ambit of regulation. Court agreed with Advocate General and ruled that no court in one member state is in better position to determine if court in other state has jurisdiction. Allowing such injunctions is denying party chance to challenge applicability of arbitration clause in particular dispute Therefore, anti suit injunction in case where regulation is applicable is violation of trust under EU treaties. The court which is seized of the dispute should refer the case to arbitration unless it finds that arbitration agreement is not applicable.
Expert Comments on ECJ judgment ECJ decision not surprising as it readily accords with underlying principles of Brussels I regulation Blanket exception in regulation regards to Arbitration has resulted in complexity. Arbitration always requires judicial support from national courts in procedures, appointment of arbitrators, protection and guarantee of fundamental rights and values, and enforcement of awards. International dispute arbitrations often refer to more than one EU jurisdictions. The interface between regulation and arbitration is missing. House of Lords concerns are unjustified. ECJ does not affect power of English courts to issue injunctions outside EU region.
Implications ECJ affects power of English courts to issue injunctions against parties commencing litigations in member states of EU. Their power of issuing injunctions against rest of world remains unaffected. From economic point of view, European parties would be encouraged to choose London as seat of arbitration in contracts with non-European parties. European parties negotiating arbitration are unlikely to prefer New York, Singapore or Bermuda for economic reasons (Cost, Distance Inconvenience) just for single advantage of ability to issue counter injunctions. In parallel proceedings, parties always have protection of New York Convention in 142 UN Member States Unlikely to affect competitive advantage of London.