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International Arbitration Law

Legal Update: June 2011

Arbitration Super-Injunctions
Whilst the English tabloid press works itself into a frenzy
over super injunctions to protect the privacy of the
rich and famous from exposure and ridicule over their
adultery and other indiscretions, the Commercial
Court and the Court of Appeal are steadily rening the
super-injunction of the arbitration eld: the anti-suit
injunction.
The latest word has come from the Court of Appeal
in AES Ust-Kamenogorsk Hydropower Plant LLP v UstKamenogorsk Hydropower Plant JSC. The case concerned
a 20-year concession to operate hydroelectric facilities
in Kazakhstan. The Claimant was the operator of the
concession and the Defendant, the owner. The owner
commenced proceedings seeking information about
the value of the concession assets.
The concession agreement was governed by the law
of Kazakhstan but contained an arbitration agreement
governed by English law[1] and providing for arbitration
in London under ICC rules. The owner brought a claim
against the operator in the Kazakhstan court for further
information about the value of the concession assets.
The operator applied to dismiss that claim on the basis
of the obligation to arbitrate in London. The Kazakhstan
court rejected the operator's application. The operator
then sought a declaration in the instant proceedings
from the English court that the owner was bound to
submit disputes, including disputes as to the
eectiveness of the arbitration clause, to arbitration,
and an anti-suit injunction to prevent the owner from
litigating disputes within the arbitration clause in the
courts of Kazakhstan.
By the time of the hearing before the judge, the claim
for further information in the Kazakhstan proceedings
had been withdrawn. However, the operator remained
concerned about the risk of further breaches of the
arbitration agreement and wished to maintain the
injunction. At the hearing, the owner challenged the
court's jurisdiction to grant the injunction and also
sought to set aside the order for service of the
proceedings out of the jurisdiction. The judge dismissed
the owners challenge to the court's jurisdiction and
granted a nal anti-suit injunction and a declaration.
He held that the court could not intervene under section
44 of Arbitration Act 1996 (as there was no actual or
intended arbitration to which it could apply) but
accepted that the court had jurisdiction under section
37 of Senior Courts Act 1981.

The owner appealed against a decision declaring that


its claim against the operator had to be brought in
London arbitration proceedings and not in the courts of
Kazakhstan and granting an anti-suit injunction to that
eect. It was common ground on appeal that the court
had no jurisdiction to grant a declaration or an anti-suit
injunction pursuant to the s.44 AA 1996 to protect a
party's rights under an arbitration agreement where
there were no arbitral proceedings on foot or intended
which was the case here. The owner argued that (1)
there was no power in the English court to intervene in
the absence of existing or prospective arbitration
proceedings in England, because if s.44 was not
available then the s.37 SCA 1981 (which provides simply
that: The High Court may by order (whether interlocutory
or nal) grant an injunction ) should be regarded as
unavailable in principle as well by virtue of s.1(c) AA
1996 (the Court should not intervene in the arbitral
process except as provided in the Act) and s.30 AA
1996 (the arbitral tribunal is competent to rule on
its own jurisdiction); (2) the English court ought to
recognise and/or enforce the decision of the Kazakhstan
court because the operator had submitted to the
jurisdiction of that court in the Kazakhstan proceedings.
In dismissing the appeal the Court of Appeal held that
where s.44 AA 1996 Act applied, it would be wrong as a
matter of principle to utilise s.37 SCA 1981 to get round
the limitations of s.44. However, where no arbitration
had been commenced and none was intended (and
hence s.44 was not engaged), and a party asked the
court to protect its interest to have its disputes settled
in accordance with its arbitration agreement, it was
open to the court to consider whether, and how best,
if at all, to protect such a right to arbitrate by the use
of s.37. Whether the Court would assist a claimant,
and if so, how, was a matter for the Courts discretion.
In exercising that discretion it would take care not to
usurp any arbitral process, but it was clear that it had
the jurisdiction to intervene in an appropriate case.

[1] Having provided for a London seat the law of arbitration agreement (as
opposed to the underlying contract) is English : C v D [2007]

That was not inconsistent with s.1(c) AA 1996 Act. The


words "should not intervene" in s.1(c) were directed
towards intervention in the conduct of an arbitration,
and not towards intervention in the conduct of litigation
which threatened the safety of an arbitration agreement
or any possible arbitration pursuant to it. In any event,
s.1(c) was only one of three principles stated in s.1 the
other s.1 principles (in particular, the need to avoid
unnecessary delay and expense) might well point in
favour of court intervention.
The Court of Appeal also held that the Kazakhstan
Supreme Court had misconstrued the arbitration
agreement. Under s.32(3) Civil Jurisdiction and
Judgments Act 1982 the court was not bound by the
Kazakhstan courts' construction of the English law
arbitration agreement (subject to any question of
submission to the jurisdiction of the Kazakhstan court),
or by its view that it was contrary to Kazakhstan public
policy. In the circumstances, there was no reason why
the Kazakhstan courts' judgments should be recognised
or enforced. Furthermore, the operator had not
submitted to the jurisdiction of the Kazakhstan court
where it had unsuccessfully challenged the jurisdiction
and then argued the merits while still maintaining its
objection to jurisdiction. In the circumstances, it had
not gone on to defend the merits after failing on
jurisdiction. The Court reminded itself of a classic
statement dating back to 1880: Even in arbitrations,
where a protest is made against jurisdiction, the party
protesting is not bound to retire; he may go through the
whole case, subject to the protest that he has made:
Hamlyn v Betteley.

The approach of the Court of Appeal is founded not only


on both the purpose and the policy of the 1996 Act but
also in considerations of eciency and convenience. On
the owners interpretation of the Act (founded on the
Vale do Rio [2000] case), the operator would have been
obliged to commence arbitral proceedings for the sole
purpose of seeking a ruling on a jurisdictional issue.
Since jurisdictional issues will usually reach the court at
some stage anyway, to require an arbitration to be
commenced in such circumstances would be articial
and inecient.
Further views of the author can be found at:
www.commercial-arbitration.com
Peter Ashford
Partner

T: +44 (0)1892 506 121


E: peter.ashford@crippslaw.com

Winners of the Corporate Intl Magazine


2010 Legal Award for Arbitration Advisory
Firm of the Year in England

Hydropower is helpful in clarifying the relationship


between s.37 SCA 1981 and s.44 AA 1996. Most
recent decisions indicate that where an interim
injunction is sought, as a matter of discretion, the
1981 Act power should be exercised to grant interim
relief only where it would also be appropriate for the
court to act under s.44. However, that restriction does
not apply where an application is made for a nal
injunction (see Welex AG v Roas Maritime [2003] and
Steamship Mutual Underwriting v Sulpicio Lines [2008]).

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