High Court refuses to grant anti-arbitration injunction

Stephanie Woods

In AmTrust Europe Ltd v Trust Risk Group SpA, the High Court confirmed that the English court has jurisdiction to make an injunction restraining the pursuit of arbitration proceedings, notwithstanding that the seat of that arbitration was is in another jurisdiction.  Such power should, however, only be exercised in exceptional circumstances and with caution.

The facts

The claimant, AmTrust Europe Ltd, was an English insurance company, and the defendant, Trust Risk Group SpA, an Italian insurance broker.  In 2010, the parties entered into a Terms of Business Agreement (the “ToBA”), which dealt with matters such as premium and commission payments.  The ToBA was subject to English law and the jurisdiction of the English courts.  Under the ToBA, the defendant was entitled to deduct commission from the insurance premiums it received.  The claimant maintained that the defendant was required to pay all other sums into a designated bank account and hold them on trust for the claimant pending monthly accounting.

Six months later, the parties entered into a Framework Agreement, which set out exclusivity arrangements in relation to the placement of certain kinds of insurance in Italy.  This agreement, to which the ToBA was scheduled, was expressed to be governed by Italian law and provided for disputes to be referred to arbitration in Milan.  The Framework Agreement also provided that if a material breach of the agreement by one of the parties was not remedied within 20 days, the agreement should be automatically terminated under Italian law as soon as a termination notice was served by the other party.

The relationship between the parties broke down.  The defendant claimed it was entitled to “advance commission” of €97 million, and purported to withhold premium payments to set off against this entitlement.  The claimant disputed this and served a notice of termination of the Framework Agreement if the defendant did not remedy its breach within 20 days.

The defendant commenced arbitration proceedings in Italy, under the terms of the Framework Agreement.  The claimant purported to terminate both the ToBA and the Framework Agreement, and then brought proceedings in the English court, relying on the law and jurisdiction provisions in the ToBA.  The claimant sought an order that the defendant pay an alleged shortfall of €32 million into the designated bank account, and an anti-arbitration injunction, restraining the arbitral proceedings begun by the defendant in Italy.

The defendant challenged the English court’s jurisdiction on the basis that there was now a single composite agreement between the parties in the form of the Framework Agreement, and that provided for Italian arbitration.

In the High Court, Mr Justice Blair found that the claimant had a good arguable case that the ToBA continued as a separate agreement, and its claim was covered by the jurisdiction clause in that agreement, so that the English courts had jurisdiction.  The Court of Appeal recently upheld that decision (see the article on the Olswang website here). 

The injunction application

The claimant then proceeded with its application for an “anti-arbitration” injunction to restrain the defendant from pursuing the Italian arbitration proceedings.  Specifically the claimant sought an order that the defendant should not “take any further steps in the arbitration proceedings in Italy to pursue any substantive claims arising under the ToBA including” certain claims identified in the defendant’s arbitration statement.

The application was made on the grounds that:

  • in accordance with Donohue v Armco Inc [2002] 1 All ER 749, the court should provide relief to enforce the parties’ agreement on jurisdiction in the absence of any strong reason for doing otherwise, and not require an applicant to show exceptional circumstances to justify an anti-arbitration injunction; and
  • if exceptional circumstances were required, such circumstances existed as:
    • there was no dispute that the parties agreed in the ToBA that the English courts should have exclusive jurisdiction;
    • the defendant was seeking to advance arguments in the arbitration that had already been rejected in the court proceedings; and
    • the defendant had failed to pay £80,000 on account of costs ordered by the Court of Appeal, and its refusal to undertake to stay or discontinue the Italian arbitration was “vexatious, oppressive and unconscionable”.

The defendant submitted that no injunction should be granted as the claimant had delayed in seeking relief, the circumstances did not justify relief and the claimant had brought a counterclaim in the reference.  The defendant also submitted that the claims pursued in the arbitration differed from those in the litigation, that it was not making any claims under the ToBA in the arbitration and it did not rely on that agreement.

Held

Mr Justice Andrew Smith acknowledged there was no dispute that the English court had jurisdiction over the defendant or that it had the jurisdiction to make an injunction restraining the pursuit of arbitration proceedings, notwithstanding that the seat of such proceedings was in another jurisdiction.  Such power should, however, only be exercised in exceptional circumstances and with caution.  The key question for the court was whether it was just and convenient to make an injunction under section 37 of the Senior Courts Act 1981.

In the current circumstances, an injunction was not justified as there was no dispute that the parties had agreed to the exclusive jurisdiction provision in the ToBA.  The dispute between the parties was to whether the ToBA applied to the claims in the arbitration.   It would be for the arbitral tribunal to determine whether the ToBA covered the disputes before it and the supervisory jurisdiction over such decisions should be the courts of the seat of the arbitration (here, the Milan courts).

Whilst the defendant sought to advance arguments in the arbitral reference that had already been rejected in the High Court proceedings, that rejection was not relevant to the arbitration.  The High Court and Court of Appeal had only decided that the claimant had established a good arguable case that the court had jurisdiction.  The court had not made any final decision on the balance of probabilities as to whether the defendant was pursuing arbitral proceedings where there was no relevant arbitration agreement or whether the arbitration clause in the Framework Agreement covered the disputes referred to the tribunal.

With regard to the claim that the injunction should be granted as the defendant had not paid the costs ordered by the Court of Appeal, Andrew Smith J held that this did not mean that the pursuit of the arbitration proceedings was vexatious or justify an anti-arbitration injunction.

Whilst it was not necessary for the court to consider the defendant’s arguments on delay and the counterclaims in the arbitration, brief consideration was given.  Andrew Smith J held that there was no relevant delay and if there was any delay it was not such that it would refuse warranting an injunction that it would otherwise be just and convenient to make.  With regard to the counterclaims, whilst clarification would be required in respect of those counterclaims, they alone would not have resulted in the court refusing the application.

Comment

The judgment highlights that the court will be particularly cautious when intervening to restrain foreign arbitral proceedings and provides a useful reminder of the court’s key considerations in making such an order.

AmTrust Europe Ltd v Trust Risk Group SpA [2015] EWHC 1927 (Comm)

Post By Stephanie Woods (3 Posts)

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