Exploring the limits of the Chabra jurisdiction in arbitration cases

bernardoosullivan

The freeze jurisdiction of the English Court is wide and claimant-friendly. That has led to a trend in recent years of an exploration of the outer limits of the jurisdiction by claimants seeking to gain its benefits. Cruz City 1 Mauritius Holdings is another example of this exploration.

The question was whether the Chabra jurisdiction could be extended to foreign, non-cause of action defendants who have neither a presence or assets in England and Wales and who have also not agreed to be bound to our jurisdiction. In the end the court refused to extend Chabra in this way.

The Chabra defendants were direct or indirect subsidiaries of an Indian company who had agreed to arbitrate in England and against whom an unsatisfied arbitral award of $350m had been made.

As is often the case the issue turned on the service out gateway provisions in the CPR. Males J said that as this was a determination of a question of law about the gateways, his job was to actually decide whether the claimant could pass through them, not merely whether it had a good arguable case to do so. He reaffirmed the cardinal principle that where there was doubt in the construction of the jurisdictional gateways, it ought to be resolved in favour of the foreign defendant. He also held that the longstanding policy of the English courts to assist in the satisfaction of arbitration awards should not affect the construction of the jurisdictional gateways one way or another.

What made this case slightly different was that the primary gateway the claimant relied on was CPR 62.5(1)(c), the argument being that the Chabra relief that it sought was a “remedy….affecting…an arbitration award”. In this way it was said CPR 62.5 could be extended to entities that were not parties to the arbitration agreement. Putting it bluntly like that shows that the claimants faced an uphill struggle.

The court examined a clear line of older authority which suggested the claimant’s argument on sub-paragraph (c) was wrong. But the claimant relied on more recent authorities where it was held that service out on a non-party was at least arguable under CPR 62.5(1)(b) (so not sub-paragraph (c) that the claimants relied on in this case) and suggested the law had changed. Males J was not persuaded and went on to set out his view on sub-paragraph (b) also to the effect that it does not allow for service out on non-parties.

As a second line of argument, the claimants sought to rely on paragraph 3.1 (3) of Practice Direction 6 – the familiar argument of “necessary and proper party”. The problem here was the claimants fell full square directly into the decisions of Flaux J in Belletti v Morici [2009] EWHC 2316 (Comm) and Linsen International Ltd v Humpuss Sea Transport Pte Ltd [2011] EWHC 2339 (Comm) to the effect that this gateway was not open unless the substantive dispute between the claimant and the anchor tenant was before the English court. Again the claimants sought to argue that these cases were wrongly decided, and again Miles J refused to accept that argument. He said the cardinal principle came into play and doubt should be resolved in favour of a foreign defendant and he could not find a “real issue” to be determined such that the rule did not apply.

Males J also went on to apply the familiar ECJ case of Van Uden [1999] QB 1225 which speaks of the need for there to be a real connecting link between the provisional protective measures and the territorial jurisdiction of the court imposing the measures. He found no connecting link for the EU Chabra defendants and said he would decline jurisdiction over the other two, non EU, Chabra defendants as a result on this ground also.  

Cruz City 1 Mauritius Holdings v Unitech Limited and others [2014] EWHC 3704 (Comm)

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