In SQD v QYP [2023] EWHC 2145 (Comm), the English Commercial Court refused to issue an anti-suit injunction (ASI) and anti-enforcement injunction to stop proceedings commenced by a claimant in its home country in breach of an arbitration agreement. The court reasoned that such an injunction would be inconsistent with the French courts’ approach to ASIs and the parties’ choice of Paris as the seat of arbitration.
Background
The dispute arose between two companies, SQD and QYP, under an agreement concerning an overseas project. QYP sought to terminate the agreement and collect payment from SQD, who argued they were prohibited from making the requested payment. Although the agreement contained an arbitration clause referring disputes to ICC arbitration seated in Paris, QYP brought proceedings in its home country (not specified in the judgment).
QYP argued that the arbitration agreement was unenforceable due to a lack of access to justice and representation. QYP maintained it could only defend its rights in its "own country", contrary to the dispute resolution clause. Consequently, SQD applied to the Commercial Court in London under s44 of the English Arbitration Act (Act) and alternatively under s37(1) of the Senior Courts Act 1981 (SCA) for an ASI and also an anti-enforcement injunction to halt the foreign proceedings.
Decision
Judge Bright J noted that the proceedings were likely a breach of the arbitration agreement, and that generally the English courts would exercise their powers in support of arbitration where they have jurisdiction, to ensure arbitration agreements are honoured. However, he questioned the appropriateness of granting an injunction in this case, given that the parties had not chosen England as the seat of the arbitration.
The judge was unpersuaded by QYP's claim that it would not have access to justice in a Paris-seated arbitration. He commented that QYP could instruct local lawyers, obtain necessary licences, and conduct the hearing remotely (all of which has led to speculation that QYP might be a Russian entity).
In denying the requested relief, the judge highlighted:
- While the agreement was subject to English law, and the English courts have an interest in securing the performance of contracts that are subject to English law, the English courts will not act in every case where the relevant agreement is subject to English law. The court had to exercise discretion with respect for the parties’ choice of a foreign seat and the supervisory role of the foreign courts. In examining the Departmental Advisory Committee reports leading up to the Act and the relevant authorities, the judge noted that while it was clear that the English courts have the power to support arbitrations even when they are not seated within the jurisdiction, it should not do so where that results in a "conflict" or "clash".
- It was not possible to obtain an ASI in France. Granting an ASI would be inconsistent with the approach of the French courts, the chosen seat of the arbitration. The court concluded that the parties must be taken to have chosen a Paris seat knowing that the French courts would not grant ASIs. It would be contrary to the parties’ intentions and the principle of comity to interfere with the French courts’ exercise of their jurisdiction by issuing an ASI. The court added that any ASI may even have been met with an anti-ASI (which the French courts are empowered to grant), which further emphasised the philosophical objection to ASIs in France.
Comment
This decision illustrates the importance of choosing a seat of arbitration that is consistent with the parties’ expectations and preferences regarding the enforcement of their arbitration agreement.
While the English courts can enforce arbitration agreements seated in England, they are cautious about granting such relief in support of foreign-seated arbitrations. The French courts' objection to ASIs was a decisive factor in this case. Parties should therefore carefully consider their options and strategies when faced with parallel proceedings in different jurisdictions.
UPDATE: We understand that this decision has subsequently been overturned in the Court of Appeal, although the judgment is not yet public. Public sources suggest that the Court of Appeal held that England was the most appropriate forum to determine interim anti-suit injunctions in circumstances where French courts would not issue them but would recognise them from an English court.
In addition, we understand there have been two further cases in which the English courts have been asked to grant anti-suit injunctions in respect of Paris-seated arbitrations. The first relates to the case of G v R. In that case, on 24 August 2023, the Commercial Court granted an injunction to restrain litigation in Russia, enforcing an ICC arbitration clause that provided for a Paris seat. The judgment has not been published. However, at the return hearing, the Commercial Court declined to grant the injunction, on the grounds that England was not the proper forum – see the judgment here.
We also understand that Mr Justice Bryan granted an interim negative anti-suit injunction on 31 August 2023 in respect of a third case. This judgment has not yet been published. We will blog on those cases in due course.
For further information, please contact Charlie Morgan, Partner, Emily Fox, Of Counsel, Liz Kantor, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.
