By Daniel Harrison

The English High Court has again demonstrated its willingness to exercise supervisory jurisdiction in support of arbitration proceedings by granting an anti-suit injunction and a freezing order against a party which started foreign court proceedings despite an arbitration agreement.  This judgment emphasises the English courts’ desire to uphold and protect arbitration agreements when a party tries to evade arbitration.

Mercuria Energy Trading Pte Ltd v Image Mine Products Pvt Ltd[1] – The facts

The claimant (“Mercuria”) alleged that the defendant (“Image Mine”) had breached an agreement for the sale of coal by failing to provide a letter of credit.  That agreement contained a dispute resolution clause that provided for disputes to be determined by LCIA arbitration.

Image Mine claimed that the agreement had been repudiated by Mercuria and started court proceedings in India, its home jurisdiction.  Mercuria commenced arbitral proceedings under the LCIA Rules.  Image Mine applied for an injunction from the Indian court restraining Mercuria from proceeding with either the LCIA arbitration or English court proceedings in support of it.  Mercuria in turn applied to the English High Court for an anti-suit injunction to restrain Image Mine from pursuing the Indian proceedings and for a worldwide freezing order over Image Mine’s assets.

The High Court judgments

The judge granted both an anti-suit injunction and a worldwide freezing order.

  1. i) The anti-suit injunction

The Court found that the Indian proceedings were in breach of the arbitration agreement because the purpose of those proceedings was to render ineffective the tribunal’s jurisdiction under the agreement.  The Court therefore decided that it could exercise its supervisory jurisdiction to restrain parties from pursuing such proceedings pursuant to the English Supreme Court case of Hydropower.[2]

The Court recognised that in some cases where foreign proceedings are brought in breach of an arbitration clause, it is appropriate to leave it to the foreign court to recognise and enforce the parties’ agreement on forum.  However, Smith J. found that this exception did not apply here because the Indian proceedings could take up to nine years (excluding any appeal) and “a party to a contract for London arbitration is entitled to speedier resolution”.  Smith J. also remarked, as an ancillary consideration, that the parties elected that English law should govern their contractual relationship.

  1. ii) The freezing order

The Court found that the freezing order would sufficiently enhance the prospects of enforcement to justify making it, noting Mercuria’s submission that Image Mine had disregarded the previous orders in this case.  The Court was not dissuaded by the question as to whether a permanent freezing order would serve any purpose given Image Mine’s disregard of such orders.  The Court noted that the freezing order should be subject to a proviso that it should not continue if the LCIA tribunal determined that it was inappropriate.

Practical takeaways

This judgment is another example of the English courts’ willingness to protect arbitration agreements with an English seat where a party seeks to evade arbitration by issuing foreign court proceedings.  This includes issuing anti-suit injunctions to restrain the other side from continuing with the foreign proceedings as well as freezing injunctions to enhance a claimant’s chances of enforcing a potential arbitral award.  Parties who want arbitration-friendly supervisory courts would be well advised to consider a seat in England and Wales for their arbitration.

Case: Mercuria Energy Trading Pte Ltd v Image Mine Products Pvt Ltd [2015] EWHC 2930 (Ch)

[1] [2015] EWHC 2930 (Ch)

[2] AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] UKSC 35

This post was prepared with the assistance of Mihail Krepchev in the London office of Latham & Watkins.