Anti-suit measures granted by arbitrators: enforceability issues in the light of the 1958 New York Convention and the Brussels I Regulation. Vilija Vaitkutė Pavan

Anti-suit measures granted by arbitrators:
enforceability issues in the light of the 1958 New York
Convention and the Brussels I Regulation
Vilija Vaitkutė Pavan
LAWIN Partner, Attorney at Law
Russian Arbitration Day 2014

1958 New York Convention
/ The 1958 New York Convention has 2 objectives:
• Recognition and enforcement of arbitration agreement:
Art. II (3): The court of a Contracting State [...] in a matter in respect of
which the parties have made an agreement [...] shall [...] refer the
parties to arbitration [...].
• Recognition and enforcement of foreign arbitral award:
Art. III: Each Contracting State shall recognize arbitral awards as binding
and enforce them in accordance with the rules of procedure of the
territory where the award is relied upon [...].
2Vilija Vaitkutė Pavan, e-mail: vilija.vaitkute.pavan@lawin.lt

Arbitration agreement
/ By arbitration agreement a party undertakes:
• to refer any disputes to arbitration;
• to take part in the proceedings in good faith;
• to carry out the rendered award.

Aim of anti-arbitration and anti-suit measures
anti-arbitration measures:
(i) To prohibit arbitration tribunal from
hearing the case (e.g. Respondent, a
State entity in Ethiopia, obtained a series of
decisions by the Ethiopian courts, amongst
which the Supreme Court's „temporary
injunction against the Arbitral Tribunal
ordering the suspension of the arbitration
proceedings with immediate effect“
Salini Costruttori S.p.A and the Federal Democratic Republic of
Ethiopia, Addis Ababa Water and Sewerage Authority)
anti-suit
measures:(i) To protect and uphold arbitration
agreement (e.g. „It is not contested that an
arbitrator has the power to order the parties to
comply with their contractual commitments.
The agreement to arbitrate being one of them,
its violation must be dealt with in the same
manner when it is patent that the action
initiated in a state court is outside the
jurisdiction of such court and is therefore
abusive.“
14 May 2001, The Interim Award in ICC case No. 8307)
(ii) To obstruct the enforcement of the
arbitration award (e.g. the parties were
ordered to refrain „from doing anything
towards enforcing, complying with or
operationalising“ the arbitral decision until a
fraud claim brought by IPTL against Standard
Chartered is determined.
The High Court in Dar es Salaam (Tanzania), the injuncion of 23 April
2014 against a Hong Kong subsidiary of the UK‘s Standard
Chartered Bank and Tanzanian state power company Tanesco,
the parties to ICSID case).

Common law and the civil law
/ Fundamental conceptual division between the common law and civil
law countries:
• in the common law countries a court issues anti-suit injunctions to
protect the parties‘ contractual right to arbitration and to uphold
their arbitration agreement;
• the civil law countries tend to believe that anti-suit injunctions are
directed against foreign sovereignty as much as against the
parties themselves.

Anti-suit measures in arbitration
Anti-suit measures may be issued by:
National courts Arbitrators
(including emergency
arbitrator)

Anti-suit measures granted by national courts
Within EU
/ECJ‘s West Tankers Case: granting
anti-suit injunctions by one EU court in
respect of proceedings in another EU
court is precluded by Brussels I
Regulation;
/New Brussels I Regulation
-Wheareas clause (12).
Outside EU
/Continue to issue (e.g. Ust-
Kamengorsk Hydropower Plant JSC
v AES Ust-Kamenogorsk
Hydropower Plant LLP [2013] UKSC
35 (anti-suit injunctions from High
Court retraining the appellant from
continuing the Kazakh proceedings);
/Ingosstrakh-Investments v BNP
Paribas SA [2012] EWCA Civ 644; the
class of persons potentially subject to
anti-suit injunction in support of
arbitration extends beyond those who
are the parties to arbitration
agreement).

When to apply to court
/ Anti-suit measure is urgently needed;
/ Arbitrators may not consider it part of their function to issue
emergency orders;
/ Arbitral orders may be difficult to enforce;
/ Interim measures may require the involvement of third parties;
/ Governing law may limit arbitrators‘ jurisdiction to grant interim
measures.

Anti-suit measures granted by arbitrators
By its nature and legal effect
Interim measure Remedy for specific
performance in the final
award

Anti-suit measures granted by arbitrators
Powers derive from
Legal Instruments
(i) Arbitration agreement
(ii) General arbitration principles:
• arbitrators’ jurisdiction to sanction all breaches of
the arbitration agreement;
• arbitrators’ power to any appropriate measures to
avoid the aggravation of the dispute;
• arbitrator’s obligation to ensure the effectiveness
of their future award;
(i) Prima facie jurisdiction
(i) No unified international document
(ii) UNCITRAL Model Law Art. 17
(iii) Arbitration rules applicable to the dispute
(iv) Lex arbitri
(v) 1958 New York Convention (remedy for specific
performance)

2008 UNCITRAL Model Law Art. 17
(1)Unless otherwise agreed by the parties, the arbitral
tribunal may, at the request of a party, grant interim
measures;
(2)[...] (b) Take action that would prevent, or refrain from
taking action that is likely to cause, current or imminent
harm or prejudice to the arbitral process itself.

2010 ICC Rules Art. 28
"arbitral tribunal may make the granting of any such
measure […] it deems appropriate."

MKAS (ICAC) Rules Art. 36
1. Unless the parties agree otherwise, the arbitral
tribunal may, at the request of a party, order either
party to take such interim measures of protection in
respect of the subject matter of the dispute as it
considers appropriate.
[...]

Lex arbitri
/ May differ from country to country;
/ Italy - only state court has the power to grant interim measures;
/ Swiss - parties to the dispute might apply to the arbitral tribunal for interim
measures, and the tribunal even has power to seek assistance from a state
court;
/ United Kingdom - in the absence of an agreement to the contrary, the
arbitral tribunal has the power to issue interim measures;
/ Russia – Art. 17 of Federal Law on International Commercial Arbitration:
„Unless otherwise agreed by the parties, the arbitral tribunal may, at the
request of a party, order any party to take such interim measures of
protection as the arbitral tribunal may consider necessary in respect of the
subject-matter of the dispute. [...]“

Measures for non-compliance with interim measures (1)
/ 62% of the granted interim measures are complied with
voluntarily;
/ 10% of the parties seek the enforcement.
2012 International Arbitration Survey: Current and Preferred Practices in the Arbitral Process

Measures for non-compliance with interim measures (2)
/ Arbitral tribunal usually does not have power to ensure compliance,
but may sanction;
/ Parties are free to agree on the remedies arising out of the failure to
comply with interim measures;
/ "Adverse inference" is another possible penalty, but it should follow
from:
• arbitration agreement;
• TOR (if any);
• applicable procedure rules;
• Lex arbitri (e.g. England);
/ Decision on arbitration costs;
/ Can be enforced through judicial authorities (e.g. England);
/ Relief for damages might be sought.

Enforcement of interim measures
/ The form may have impact on enforceability: recommendations,
procedural orders, partial awards, directions, etc.;
/ If the interim measure is issued in the form of a partial award, it may
be possibly enforced under the New York Convention;
/ Some countries expressly foresees the enforcement of awards or
rulings/orders on interim measures (e.g. Lithuania):
“An arbitral award or ruling on interim measures made in any other
state may be recognised and enforced in the territory of the
Republic of Lithuania.” (Art. 26 of the Law on Commercial
Arbitration of Lithuania).

Measures for non-compliance with final award
/ May foresee the obligation to terminate the parallel proceedings and
the penalty if the party fails to comply with such obligation;
/ Later claim for damages (usually - litigation costs);
/ Consequences for non-compliance with final award.

Enforcement of final award (1)
/ Final award is subject to recognition and enforcement under the New
York Convention;
/ However, such award may be not recognized under the ground of
violation of public order;
/ The relation of New York Convention and Brussels I Regulation is still
not clear, ECJ preliminary ruling on this issue will be made (ECJ case
No. C-536/13).

Enforcement of final award (2)
/ Could the anti-suit measure be regarded as eliminating the court's
right to decide on its jurisdiction?
/ Are the anti-suit measures in line with Brussels I, and could it be
recognised and enforced in EU Member State?
/ The problem was raised in the ruling of the Supreme Court of
Lithuania in Republic of Lithuania v. OAO Gazprom (Supreme Court of
Lithuania Ruling in the Civil Case No. 3K-7-326/2013);
/ According to the Supreme Court:
• the uncertainty of relation between the New York Convention
and EU law exists,
• it is important to clarify that relation in order to ensure that the
Court does not violate its duty to ensure the full effectiveness of
EU law in order to uphold the principle of supremacy of EU law.

Conclusions
/ The anti-suit measures may assist in compliance of the parties with
the arbitration agreement;
/ Anti-suit measures may be issued by the state courts and by
arbitrators, both, at the very beginning and the end of the arbitration
proceedings;
/ The form of anti-suit measures depends on the stage of arbitration
proceedings and may have impact on its enforceability;
/ Arbitrators usually have power to sanction the party not complying
with anti-suit measure;
/ However, recognition and enforcement of such measures face
difficulties.

Anti-suit measures granted by arbitrators: enforceability issues in the light of the 1958 New York Convention and the Brussels I Regulation. Vilija Vaitkutė Pavan

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Anti-suit measures granted by arbitrators: enforceability issues in the light of the 1958 New York Convention and the Brussels I Regulation. Vilija Vaitkutė Pavan