White & Case LLP partner Edward Attenborough and associate Mark Sanders explain how an update to EU law had cast doubt on the West Tankers case and the ruling on conflicts of jurisdiction
In its judgment in Nori Holdings Ltd & Ors v Public Joint-Stock Company Bank Otkritie Financial Corporation, the English Commercial Court reaffirmed the West Tankers Inc. v Allianz SpA decision that a court of an EU member state cannot grant an injunction to restrain proceedings in breach of an arbitration agreement in another EU member state.
The facts are that the claimants (companies incorporated in Cyprus and the British Virgin Islands) entered into pledge agreements with the defendant (a Russian bank), with the claimants pledging company shares as security for a series of loans. Each pledge agreement contained an arbitration clause, which provided for disputes to be resolved by arbitration in London. The defendant commenced court proceedings in both Russia (not an EU member state) and Cyprus (an EU member state) in breach of the agreement to arbitrate, arguing that the claimants had fraudulently terminated the pledge agreements. The claimants applied to the English Commercial Court for an anti-suit injunction, seeking to restrain the Russian and Cypriot court proceedings on the basis that the parties had agreed that any dispute would be resolved by arbitration.
The issue at stake is that Nori Holdings is the first reported decision by the English courts on this issue since the Recast Brussels Regulation (1215/2012) came into force. The Recast Brussels Regulation updated the original Brussels Regulation, which was the basis for the West Tankers judgment. Amendments to the legislation introduced by the Recast, however, created doubt over the continuing validity of the West Tankers principle.
The Recast Brussels Regulation Recital 12 contained ambiguous language on the scope of the arbitration exclusion under the Brussels Regulation, which had cast new doubt on the availability of anti-suit injunctions to restrain proceedings in another EU member state court in breach of an arbitration agreement.
Subsequently, in his opinion on the European Court of Justice (ECJ) case Proceedings Concerning Gazprom OAO (Case C-536/13),3 Advocate General Wathelet suggested that Recital 12 of the Recast Brussels Regulation (which explains the arbitration exclusion) should be read as permitting EU member state courts to grant anti-arbitration injunctions to restrain proceedings in other EU member state courts, introducing uncertainty over the validity of the West Tankers principle.
In his decision in Nori Holdings, Mr Justice Males reaffirmed the West Tankers decision that EU member state courts will not issue an anti-suit injunction preventing court proceedings in another EU member state where an arbitration agreement exists.
Mr Justice Males noted that there was nothing in the Recast Brussels Regulation to cast doubt on the continuing validity of the decision in the West Tankers case, which remains an authoritative statement of EU law. Mr Justice Males referred to and expressly disagreed with the opinion of Advocate General Wathelet in Gazprom.
The claimant’s application for an anti-suit injunction over the Cypriot courts was therefore dismissed. However, the defendant was ordered to discontinue its Russian court proceedings against the claimant (Russia, not being an EU member state, is not within the scope of the West Tankers principle).
White Case comment on the decision is that Nori Holdings has provided welcome clarity following the introduction of the Recast Brussels Regulation and Advocate General Wathelet’s comments in Gazprom. From the perspective of the courts of England & Wales, West Tankers is the authoritative statement of EU law on this issue. Where an arbitral tribunal is constituted, parties seeking to restrain EU court proceedings that breach arbitration clauses may more effectively apply to the arbitral tribunal itself for anti-suit relief.
Absent any successful challenge to the Nori Holding decision in a higher English court or the ECJ, the West Tankers principle remains good law. The position post-Brexit, however, remains to be determined and will depend on what – if any – civil co-operation regime the UK agrees with the EU as part of the UK’s withdrawal from the EU.