Judgment clarifies the exceptional circumstances in which anti-arbitration injunctions against foreign-seated arbitrations might be granted.
By Oliver E. Browne and Robert Price
In Sabbagh v Khoury, Justice Knowles in the High Court issued an anti-arbitration injunction to restrain arbitration proceedings commenced in Lebanon on the basis that, contrary to the Lebanese arbitral tribunal’s findings, the tribunal did not have jurisdiction to hear the case.
The claimant, Sana Sabbagh, is the daughter of the late Hassib Sabbagh who founded the Consolidated Contractors Company (CCC) group of companies, the largest group of engineering and construction companies in the Middle East. She claimed that after her father’s stroke, the defendants, which include her two brothers, conspired to misappropriate assets and shares belonging to her father that lawfully belonged to his estate following his death (and in which Ms. Sabbagh was entitled to inherit a one-third interest).
Ms. Sabbagh commenced litigation in the English courts, and the defendants commenced arbitration in Lebanon shortly after, pursuant to an arbitration clause found in the articles of association of the CCC group’s parent company. The Court of Appeal held that Ms. Sabbagh was not bound by the articles of association as she was not suing the defendants as a shareholder of the parent company. In contrast, the Lebanese arbitral tribunal ruled that it had jurisdiction, and moved forward with the proceedings without Ms. Sabbagh’s participation. Ms. Sabbagh therefore sought an anti-arbitration injunction from the English courts to restrain the arbitration proceedings.
Justice Knowles held that the Lebanese courts had supervisory jurisdiction over the Lebanese arbitration, and that the English courts therefore had to be cautious about issuing an anti-arbitration injunction. Exceptional circumstances would be needed for it to do so. The exercise of such power would be appropriate if the continued pursuit of an arbitration would be vexatious and oppressive. Justice Knowles opined that the vexation or oppression need only be proved to be highly probable, as opposed to firmly established.
In this case, the parties caused the question whether the arbitration clause bound Ms. Sabbagh to be put to the English courts, they argued the question before those courts, and were therefore bound by the answer that Ms. Sabbagh was not bound by the arbitration clause. Justice Knowles held that the conclusions of the English courts are treated as conclusions that the Lebanese courts would have reached had they looked at the matter.
In light of the finding that there was no agreement to arbitrate, Justice Knowles held that it is vexatious and oppressive for the arbitration to continue, and issued an anti-arbitration injunction in favour of Ms. Sabbagh.
The usual scenario faced by the English courts is where one party is seeking an anti-suit injunction to restrain court proceedings commenced in breach of an arbitration agreement. If such court proceedings are not commenced in an EU Member State the English courts will grant anti-suit injunctions where it is just and convenient to do so (and they often do). However, if such court proceedings are commenced in another EU member state it seems the English courts will be unable to grant such injunctions. In which case, the anti-suit injunction will need to be sought from the arbitral tribunal itself; it therefore makes strategic sense for the arbitration proceedings to be commenced as quickly as possible so that the tribunal might be formed and ready to issue such injunctions if needed.
The anti-arbitration injunction is a close cousin to the anti-suit injunction, and can similarly be issued to restrain arbitration proceedings commenced where there is no agreement to arbitrate. The English courts can grant such anti-arbitration injunctions to restrain English-seated arbitrations where it is just and convenient to do so; however, the English courts will need to find exceptional circumstances to do so where the arbitration is seated in a foreign jurisdiction. Such exceptional circumstances can be found if litigation has been commenced in the English courts which has decided that there is no agreement to arbitrate, as in this case.
It therefore makes strategic sense, if it is anticipated that another party might try to commence arbitration proceedings in a perhaps less reliable foreign jurisdiction, for one to commence litigation proceedings in the English courts before the other party has the chance to do so.
This post was prepared with the assistance of Benjamin Xie in the London office of Latham & Watkins.
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