ENGLISH COURT DETERMINES IT HAS NO JURISDICTION TO PERMIT A COUNTERCLAIM IN ENFORCEMENT PROCEEDINGS

In Selevision Co (a company incorporated in Saudi Arabia) v Bein Media Group LLC [2021] EWHC 2802 (Comm), the English Commercial Court determined that it did not have jurisdiction to permit a counterclaim in the context of an application for leave to enforce a New York Convention Award pursuant to section 101(2) of the English Arbitration Act and CPR 62, underlining the "highly summary" and "streamlined" nature of the enforcement process.

Background

BeIN Media Group (BMG) and Selevision entered into a Distributor Agreement whereby BMG retained Selevision as a non-exclusive distributor of set top boxes that allowed customers to watch BMG media channels. In June 2016, Selevision commenced DIFC-LCIA arbitration proceedings claiming that BMG had breached and wrongfully terminated the Agreement and claiming associated losses. BMG counterclaimed that Selevision itself had been in breach of the Agreement and also demanded compensation. By a final award, the arbitral tribunal determined that BMG had wrongfully suspended the Distributor Agreement, thereby entitling Selevision to terminate it. The tribunal dismissed BMG's counterclaim and awarded Selevision damages of approximately USD 8 million.

As BMG had assets within England and Wales, Selevision commenced enforcement proceedings in the English courts by requesting permission to enforce the award. When BMG acknowledged service, it indicated that it intended to contest the claim and had a counterclaim which exceeded value of Selevision's claim. It sought permission under CPR 8.7 to bring a counterclaim, and to serve a Part 20 claim on an additional defendant, together with a stay of enforcement of the award.

The nature of BMG's proposed counterclaim was that Selevision had orchestrated and was responsible for a very large piracy of BMG's broadcasting rights in the Kingdom of Saudi Arabia and elsewhere in the MENA region. BMG justified bringing its counterclaim by reference to the wording of English Civil Procedure Rule (CPR) 62.18(3), which provides that an arbitration claim must be started by the issue of an arbitration claim form in accordance with the Part 8 procedure, which in turn refers to Part 20 regarding counterclaims and additional claims.

The Court was tasked with determining the following four issues:

1. Whether it had jurisdiction to allow a defence and counterclaim in the context of an application for leave to enforce a New York Convention Award pursuant to section 101(2) of the English Arbitration Act and CPR 62;
2. If the Court did have such jurisdiction, whether it should exercise its discretion in favour of granting permission in this case;
3. If the Court exercised its discretion, whether it had jurisdiction to grant a stay of enforcement pending determination of the counterclaim; and
4. If the Court did have jurisdiction to order a stay, whether it should do so in this case.

Decision

On the first issue, the judge, Mr Justice Butcher, concluded that although the rules were not expressed with "the clarity which would be desirable", CPR 8.7 was not part of the procedure for applications for the enforcement of awards, and Part 20 claims could not be brought within them. The court did not, therefore, have jurisdiction to allow the counterclaim. Applications under CPR 62.18 for permission to enforce awards were intended to be a simple method to permit the enforcement of awards. Any counterclaim raised at that stage would, almost by definition, have to relate to a matter outside the scope of the arbitration agreement, or otherwise they should have formed part of the arbitration.

Despite his conclusion on the first issue, the judge went on to consider, obiter, whether, if he was wrong on the first issue, he should exercise his discretion to grant permission to hear BMG's counterclaim. The judge considered that the balance came down clearly against permitting the counterclaim, on the basis that (i) to permit the counterclaim risked thwarting enforcement of the award (ii) the counterclaim was unrelated to the subject matter of the award and (iii) the admission of the counterclaim would entirely transform the action given the need for statements of case, disclosure, witness statements and probably expert evidence. This conclusion was also influenced by the fact that the subject matter of the proposed counterclaim had almost no connection with England and Wales.

The judge also commented more generally that if Part 20 proceedings were permissible at all in arbitration claims, it would be highly exceptional for them to be permitted, as they would generally be inappropriate. Enforcement proceedings were intended to be highly summary and essentially quasi-administrative proceedings, and to permit counterclaims or other additional claims would be likely to thwart or complicate enforcement.

As a result of the judge's decision on the first two issues, the application for a stay then fell away, but the judge added that he would have in any event refused a stay of enforcement, citing Potter J in the case of Far Eastern Shipping v AKP Sovcomflot [1995] 1 Lloyd's Rep 520 who said the Court "will rarely, if ever, regard it as appropriate to make such an order in respect of a Convention award, when, by definition, under the Convention, the time for enforcement has arrived".

Comment

Though perhaps unsurprising, this decision provides welcome confirmation that parties will not be permitted to raise new counterclaims at the enforcement stage of a New York Convention arbitration award. The English Civil Procedure Rules (CPR 62.18) are intended to provide a "very streamlined" and "quasi-administrative" procedure to ensure the swift enforcement of arbitral awards.

Finally, the judge's confirmation that the English court will rarely exercise its discretion to grant a stay of enforcement of a New York Convention award is further confirmation of the English court's pro-arbitration stance and distaste for any "practical inhibition" of enforcement.

For more information, please contact Andrew Cannon, Partner, Liz Kantor, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.