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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> AES Ust-Kamenogorsk Hydropower Plant Llp v Ust-Kamenogorsk Hydropower Plant JSC [2011] EWCA Civ 647 (27 May 2011)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2011/647.html
Cite as: [2012] 1 All ER (Comm) 845, [2011] 2 Lloyd's 233, [2011] ArbLR 15, [2011] 2 CLC 51, [2012] Bus LR 330, [2011] 2 Lloyd's Rep 233, [2012] WLR 920, [2011] EWCA Civ 647, [2012] 1 WLR 920
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A3/2010/1443 |
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION, COMMERCIAL COURT
MR JUSTICE BURTON
2009 FOLIO 1035
Royal Courts of Justice Strand, London, WC2A 2LL |
||
B e f o r e :
LORD JUSTICE WILSON
and
LORD JUSTICE STANLEY BURNTON
____________________
| AES Ust-Kamenogorsk Hydropower Plant LLP |
Claimant / Respondent |
|
| - and - |
||
| Ust-Kamenogorsk Hydropower Plant JSC |
Defendant / Appellant |
____________________
Mr Bernard Eder QC & Ms Jessica Wells (instructed by Allen & Overy LLP) for the Respondent
Hearing dates : Monday 13th & Tuesday 14th & Friday 17th December 2010
____________________
Crown Copyright ©
- This appeal is about the enforceability of an English arbitration clause in a concession agreement (the "concession contract") which binds two companies incorporated and carrying on business in the Republic of Kazakhstan. The contract is a 20 year concession between the owner and operator of hydroelectric facilities in Kazakhstan. Apart from its arbitration clause, which it is common ground is governed by English law[1], it is governed by Kazakhstan law. It is dated 23 July 1997. It was originally made between the Republic of Kazakhstan itself and AES Suntree Power Ltd ("Suntree"). Suntree almost immediately assigned its rights to an associated Dutch company, Tau Power BV ("Tau"); and the claimant, AES Ust-Kamenogorsk Hydropower Plant LLP, in turn became entitled to the rights of its parent or associate Tau as a result of a transfer agreement dated 1 October 2007. I shall call the claimant, in this court the respondent, the "operator". Similarly, the defendant and in this court the appellant, Ust-Kamenogorsk Hydropower Plant JSC, whom I shall call the "owner", became entitled to the rights of the Republic of Kazakhstan under the same transfer agreement. For good measure, that agreement expressly incorporated the contract's arbitration provisions.
- In these proceedings, the operator has sought and obtained a declaration that the owner is bound to submit disputes, including disputes as to the effectiveness of the arbitration clause, pursuant to its terms and an anti-suit injunction to prevent the owner from litigating disputes within the arbitration clause in the courts of Kazakhstan. The owner disputed the jurisdiction of the English court but failed. The judge, Burton J, made an order dated 16 April 2010 which included the following declaration and injunction:
- The operator submitted that, subject to the issues relating to the English court's jurisdiction, the court could, if so minded in its discretion, render a final, and not merely interim injunction, together with the declarations sought. That is what Burton J did. The owner made clear that, if its challenge to the court's jurisdiction here failed, it had no further submissions to make.
- The "subject matter of the Kazakhstan Proceedings" referred to in those orders was a claim brought by the owner against the operator on 12 June 2009 for further information about the value of the concession assets. The operator countered with an application to dismiss that claim on the basis of the obligation to arbitrate in London. The Kazakhstan court (the Economic Court) on 28 July 2009 rejected the operator's application to dismiss, inter alia in reliance on a previous decision of the Kazakhstan Supreme Court dated 8 January 2004, made in proceedings between the Republic of Kazakhstan on the one side and Suntree and Tau on the other, which had ruled that the contract's arbitration clause was void.
- In the present proceedings, the essential dispute concerns the jurisdiction of the English court. In this connection the following issues remain disputed on appeal: (i) the owner submits that the operator lacks a proper jurisdictional gateway for service of its proceedings out of the jurisdiction upon it in Kazakhstan; (ii) the owner submits that there is no power in the English court to intervene in arbitration in the absence of existing or prospective arbitration proceedings in England; (iii) the owner submits that the English court ought in any event to recognise and/or enforce the decision of the Economic Court, inter alia because the operator had submitted to the jurisdiction of that court in the Kazakhstan Proceedings. The judge rejected all these submissions and exercised his discretion to grant the declaration and injunction set out above. The owner made no submissions as to the exercise of the court's discretion: it founded its opposition entirely on the English court's lack of jurisdiction and power to make the orders sought. It now appeals, with the permission of Longmore LJ, to say that the judge was wrong to accept jurisdiction or to purport to exercise a power which he lacked.
- The arbitration clause in question is clause 32 of the contract. The contract is expressed as being between the "Republic" and the "Company" (ie Suntree) and also refers to the "Concession Company", ie any company created or acquired by Suntree for the purposes of operating the concession. It will be observed that clause 32 begins by carving out of itself the subject-matter of clauses 17.8 and 17.9. Those latter clauses concern tariff disputes which have to be referred, not to arbitration, but to an independent expert. The respective clauses provide as follows:
- There have been a number of proceedings in Kazakhstan in which the Republic of Kazakhstan has attempted to litigate in Kazakhstan matters which fell within the arbitration clause (see the judgment below at para 6). On 9 April 2003 the Republic returned to the issue by commencing proceedings against Suntree and Tau, claiming the annulment of clause 32. On 12 May 2003 the Kazakhstan Regional Court ruled that it did have jurisdiction to try the claim, rejecting Suntree's and Tau's motion to dismiss, but on 26 September 2003 the Regional Court rejected the Republic's claim. The Republic appealed to the Supreme Court which on 8 January 2004 allowed the appeal and held clause 32 to be invalid, giving two grounds for its decision. The first was that clause 32 did not exclude tariff disputes within clauses 17.8/17.9 but included them: this would put such disputes beyond the control of the Republic in matters which concerned monopolist pricing and ran counter to statutory provisions. The second was that the arbitration clause was unenforceable in practice, both because it senselessly required that disputes not related to tariffs would first have to go through the procedures relating to disputes which did concern tariffs, and because clause 32's reference to the Rules of the ICC was not a reference to the ICC itself and thus left the arbitral body unspecified.
- The Supreme Court decision was between parties to the contract from whom the parties to the present proceedings now before this court derive their rights. Although this was disputed at an earlier stage, it is now accepted that the present parties are privy to that decision, and that it is capable of binding them. It is not suggested that Suntree and Tau did not submit to the jurisdiction of the Kazakhstan court in those 2003/2004 proceedings; nor has it been submitted in this court by the owner that they did submit. The judge did not deal expressly with that issue. The matter has been left opaque, and the parties took their stand on the events in 2009. Nothing therefore turns on the Supreme Court decision itself, other than that it is a ground for the more recent decision of the Kazakhstan Economic Court.
- As for the 2009 Kazakhstan Proceedings, as stated above the owner commenced them on 12 June 2009 "to compel the Respondent to provide information on the property of the Plaintiff". The operator responded on 24 June 2009 with a request to dismiss the owner's claim "because this dispute is subject to resolution in arbitration court". On 2 July 2009, the owner served a response by which it relied on the Supreme Court decision of 8 January 2004 to the effect that there was no valid arbitration agreement between the parties and the court therefore had jurisdiction to try its claim. On 28 July 2009 the Economic Court issued its ruling rejecting the operator's request to dismiss, inter alia on the ground that clause 32 was annulled by the decision of the Supreme Court. It is common ground that at that point the operator had not yet submitted to the Economic Court.
- However, the operator then sought to defend the owner's claim for further information on the merits, albeit stating that it did so without prejudice to its contention that the court lacked jurisdiction because of the arbitration clause. That document, called a "Response", is undated but the operator says that it was filed on 29 July 2009 and describes it as a "defence" (see the operator's skeleton on the appeal to this court at para 4.7.2).
- At about the same time, on 31 July 2009 in London the operator obtained an ex parte anti-suit injunction from Andrew Smith J as well as permission to serve an arbitration claim form out of the jurisdiction on the owner. Then by a motion dated 4 August 2009 the operator brought the London proceedings to the attention of the Economic Court and applied to suspend the owner's proceedings. There was a hearing on 5 August, at which the court rejected the motion and "concluded that there was improper reliance on clause 32, and that [the owner's] claim for the confirmation requested should be upheld" by its judgment dated 5 August 2009 (para 8 (iii) of the judgment below).
- The owner submits that by pleading its Response on the merits and by participating in the hearing of 5 August 2009, the operator had submitted to the jurisdiction of the Kazakhstan court.
- The operator then appealed to the Regional Court. It did so, as it appears to me on reading its appeal document, only on the basis of the arbitration clause and not on the merits (although the judge said at para 44 of his judgment that the operator appealed on both grounds). It continued to maintain that its participation in the Kazakhstan proceedings was without prejudice to its reliance on the arbitration clause as excluding the Kazakhstan court's jurisdiction. It submitted that the Economic Court's judgment should be quashed and the owner's claim "left without consideration".
- The operator contends, on the basis of evidence of Kazakh procedural law before this court, that it was only entitled to appeal an objection to jurisdiction as part of an appeal against the decision on the substantive claim, "giving the [operator] no other realistic option but to participate in the court hearing of the substance of the dispute and to appeal a decision on jurisdiction only after a decision on the merits has been reached" (see its skeleton at para 4.7.3). It refers to the evidence of Professor Maidan Suleimenov that –
- The owner submits that, on this basis, the operator submitted to the jurisdiction of the Kazakhstan court on the merits of the owner's claim, by filing a defence which dealt with the merits after the court had rejected its motion to dismiss and by thereafter participating in the hearing of 5 August 2009 on the substance of the dispute.
- As it happens, whether the operator did or did not submit to the Kazakhstan court on the merits of the owner's claim, the parties have since agreed that that claim, for further information, would be withdrawn. However, the operator remains concerned that the request might be reinstated in Kazakhstan, or some other claim made there in breach of clause 32. There was some suggestion of an ICSID arbitration, but that had come to nothing by the time of judgment below. Since then, however, we are told that the operator's parent company has commenced an ICSID arbitration. That indicates that the investment behind the operator, although itself a Kazakhstan company, is foreign to Kazakhstan. However, such an ICSID arbitration is not within the Arbitration Act 1996, and it is common ground that it does not affect the analysis. In the circumstances, it therefore proved necessary for the dispute in the commercial court to proceed to a hearing and judgment, and thence to this appeal. However, there is at present no claim which immediately requires, on the operator's case, to be referred to arbitration, and there is nothing which the operator itself wishes to refer to arbitration. It is common ground that there are no arbitration proceedings under the concession contract's arbitration clause currently in prospect. For reasons which will become apparent, that is a matter on which the owner relies to deny jurisdiction to the English court to grant the relief which the judge granted below.
- In connection with the 2009 Kazakhstan Economic Court decisions, it will be necessary in due course to refer to sections 32 and 33 of the Civil Jurisdiction and Judgments Act 1982 (the "1982 Act"). Those sections provide as follows:
- The owner submits that (i) the Arbitration Act 1996 ("AA 1996") occupies the whole ground relating to the granting of relief in the form of anti-suit injunctions; (ii) nothing in the AA 1996 permits a court to interfere in the question of whether or not an arbitration agreement binds the parties to it before that question has been referred first to the decision of arbitrators themselves; (iii) therefore it is not open in principle for the court to avail itself of any jurisdiction to grant an anti-suit injunction which it might otherwise possess under section 37 of the Senior Courts Act 1981 (the "SCA 1981"); and (iv) in the absence of any current or prospective arbitration, there was and is no jurisdiction to grant relief under section 44 of the AA 1996 either.
- Section 37 of the SCA 1981 provides:
- Section 1 of the AA 1996 provides:
- Section 30 sets out the principle that arbitrators have jurisdiction to rule on their own jurisdiction, albeit subject to challenge in the courts inter alia under section 67, the so-called principle of kompetenz kompetenz:
- Section 31 states that an objection to the arbitrators' jurisdiction must be made at the outset of proceedings, but that a party is not precluded from raising such an objection by the fact that he has appointed an arbitrator. Such an objection may lead to a preliminary determination of the issue of jurisdiction in the court, but only with either the agreement of the parties or the permission of the arbitral tribunal, in which latter case the court has to be satisfied that there is good reason why the matter should be decided by the court (section 32). Therefore the scheme of the Act is that any question of the arbitral tribunal's jurisdiction should be taken before that tribunal at the outset. Any failure to do so, so that participation in the arbitration is continued without objection, will prevent the objecting party from doing so later (unless he did not know and could not have discovered the grounds for the objection): see section 73, headed "Loss of right to object". Subject to that, and to certain limitations imposed by section 70, section 67 allows for the arbitrators' ruling on their substantive jurisdiction, or award on the merits, to be challenged in the court on the ground of lack of jurisdiction. Section 70(2) provides that a challenge may not be brought if the challenger has not first exhausted any available process of appeal or review.
- Section 72 similarly allows a person who is alleged to be a party to arbitral proceedings but takes no part in them to go to court to dispute arbitral jurisdiction. It provides:
- However, although any objection to the arbitrators' jurisdiction must be taken at the outset, or else may be lost, by a party who takes part in the arbitration (otherwise, if a party stays entirely aloof), there is no obligation on the arbitrators to exercise their power to rule on their own jurisdiction. As section 31(5) states:
- Therefore, a question of substantive jurisdiction can always be taken to the court, either sooner, by agreement of the parties or the arbitrators' and court's leave under section 32, or later by challenge to an award under section 67, or, it seems, sooner or later by a party who takes no part in the arbitral proceedings, under section 72.
- Section 44 concerns powers exercisable in support of arbitral proceedings. It provides:
- It is to be observed that the sections within Part I (which extends down to section 84) refer as may be appropriate to "arbitration" in general (as in section 1(a)'s "the object of arbitration"); to "the arbitration" (as in section 3's "the seat of the arbitration"); to "arbitration agreement" (as in sections 5, 6, 7, 8 and 9); to "arbitral proceedings" (as in sections 12, 13, 14 and 32); and to "arbitrators" and "arbitral tribunal" (as in sections 15ff). Section 44 is placed under a heading (which precedes section 42) named "Powers of court in relation to arbitral proceedings". Section 44(1) itself refers to the court's power "for the purposes of and in relation to arbitral proceedings".
- It is not obvious from its own terms that the scope of section 44 extends to the grant by the court of an anti-suit injunction in support of arbitral proceedings. Section 44(2)(e) refers to the grant of an interim injunction, but not to final injunctions (see Cetelem SA v. Roust Holdings Ltd [2005] EWCA Civ 618, [2005] 1 WLR 3555, at para 64). In Cetelem this court discussed the power of the court, in aid of the arbitral process, to make interim injunctions for the purpose of preserving evidence or assets (see section 44(3)). In Starlight Shipping Co v. Tai Ping Insurance Co Ltd [2007] EWHC 1893 (Comm), [2008] All ER (Comm) 593 (The Alexandros T) Cooke J held that this "must include the contractual right to have disputes referred to arbitration" (at [21]), and thus embraced the right to seek at any rate an interim anti-suit injunction. I will assume that is correct (at any rate on the facts of that case), and it has not been formally disputed that it is, but Mr Eder expressed some reservations, and I would for myself consider the matter unsettled.
- The operator's claim form was issued on 31 July 2009. The claim was made on a form headed "Claim Form (arbitration)", whose printed language begins "In an arbitration claim between" (the names of the operator claimant and owner defendant were then inserted) and continues "In the matter of an [intended] arbitration between" (the names of the owner claimant and the operator defendant were inserted here again). The claim form sought two declarations and an anti-suit injunction. The declarations sought were (1) that clause 32 was valid and enforceable, and (2) that the "current dispute" between the parties fell within clause 32. The injunction sought was stated to be pursuant to section 44 of the AA 1996 and/or section 37 of the SCA 1981, to prevent the owner from commencing or pursuing legal proceedings in the Kazakhstan court. Reference was made to the witness statement of Mr Richard Smith of the same date.
- Mr Smith's witness statement referred to the owner's claim in the then current Kazakhstan Proceedings that it was entitled to information about the operator's assets covered by the concession contract. He said that such proceedings represented a breach of the arbitration agreement and created the risk that the operator would be subjected to the jurisdiction of the Kazakhstan courts in that or other subsequent disputes. Jurisdiction to serve out was claimed as follows:
- As stated (at para 16) above, the owner's claim was withdrawn and it is no longer suggested, nor was it suggested before the judge, that there was any claim currently being made which required to be referred to arbitration, or that there were in fact any arbitration proceedings in prospect.
- On the same day, 31 July 2009, the operator's application for permission to serve the "Arbitration Claim Form" out of the jurisdiction came before Andrew Smith J who made an ex parte order for permission to serve the claim form out of the jurisdiction "in accordance with CPR 6.36 (Practice Direction B, paragraph 3.1(20)), CPR 62.5(1)(b) and CPR 62.5(1)(c)", and also granted an interim anti-suit injunction against the owner pending a return date fixed for 21 August 2009.
- The return date was extended a number of times. By application notice dated 16 October 2009, the owner applied for an order that the court had no jurisdiction to try the operator's claim or should not exercise any jurisdiction it might have, and that service of the claim form be set aside.
- The owner's application and the hearing of the operator's application inter partes were heard by Burton J on 25 and 26 March 2010. By then, it had become apparent that there was no claim that either party currently wanted to make (other than the operator's claims herein): the owner had withdrawn its claim for further information in Kazakhstan, and the operator had nothing it wished to refer to arbitration in London.
- A greater number of issues were debated before Burton J below, but in this court the appeal has concerned four main issues.
- The first raises the question whether as a matter of principle the court has effective jurisdiction to grant a declaration or an anti-suit injunction to protect a party's rights under an arbitration agreement in circumstances where there are no arbitral proceedings on foot and none are intended pursuant to that agreement. It is now common ground for the purposes of this issue (it was not below) that section 44 of the AA 1996 does not provide such jurisdiction, for that is concerned with the court's powers in support of arbitral proceedings, actual or at least prospective. The operator submits, however, that section 37 of the SCA 1981 provides a jurisdictional basis for its proceedings herein. The owner submits that section 44 takes up the whole ground for any injunction or interference, that section 1(c) of the AA 1996 propounds a general principle that "the court should not intervene except as provided by this Part", and that section 37 of the SCA 1981 should therefore be regarded as providing no jurisdictional support in the arbitral context, or else as providing a merely theoretical jurisdiction which should not in principle be exercised in such a case. The judge considered that section 37 (but not section 44) provided the operator's claim with jurisdiction. I shall call this the "jurisdiction issue".
- The second issue, which, for technical reasons which will appear below, is closely connected with the first, raises the question whether the operator has shown a good arguable case for reliance on any jurisdictional gateway for service out of the proceedings in this case. Before the judge below the operator relied primarily, in the alternative, on three such gateways: (i) CPR 6.36 and Practice Direction B, para 3.1(20); (ii) CPR 62.5(1)(b); and (iii) CPR 62.5(1)(c). The judge rejected (ii), but considered that the operator was entitled to rely on (iii) and, if necessary, (i). The owner submits that the judge was wrong in this decision in favour of the operator. CPR 62.5(1)(b) is no longer relied on by the operator. However, in the further alternative, the operator has raised by respondent's notice a fourth gateway, namely CPR 6.36 and Practice Direction B, para 3.1(6)(c) ("contract…governed by English law"). This gateway was also before the judge, but was only raised subsequently to the initial ex parte application with which the proceedings began. The owner submits that a new gateway cannot be raised retrospectively at this stage to validate service out, where it was not relied on in the first place. The judge rejected this gateway, in reliance on jurisprudence which he considered prevented the court considering the matter inter partes from granting permission under a different gateway from that under which permission was originally sought. I shall call this second issue the "gateway issue". I will refer to the texts of the gateways in issue below.
- The third issue is whether the English court ought to recognise the decision of the Kazakhstan Economic Court that clause 32 of the concession contract, which contains the parties' arbitration agreement, is void as being against Kazakhstan public policy. The operator submits that the English court should not recognise those decisions, the owner submits that it should. This issue is debated in terms of section 32 of the 1982 Act. It is common ground between the parties that the English court is not obliged to recognise the Kazakhstan decisions, but has a discretion to do so. The judge exercised his discretion in favour of not recognising them, and the owner submits that the judge was wrong. I shall call this the "validity issue".
- The fourth issue is whether the operator submitted to the jurisdiction of the Kazakhstan Economic Court in the 2009 litigation in Kazakhstan. There is no longer any separate issue that there was a submission in 2004 to the decision of the Supreme Court, or in 2009 to the Regional Court (on appeal). The operator submits that it did not submit, because it always made clear its opposition to the Economic Court's jurisdiction (in reliance on clause 32's arbitration agreement). The owner contends that the operator did submit, by pleading and arguing the merits after it had lost the jurisdictional issue in that Court. This raises an issue under section 33 of the 1982 Act. On the basis of the disputed expert evidence before him, the judge held that the operator had a good arguable case that it had not submitted to the jurisdiction of the Kazakhstan court. The owner disputes that on this appeal.
- It is not clear to me what the interaction between the third and fourth issues is. On the basis that it is common ground that the English court has a discretion to recognise the Kazakhstan court's decision, I cannot see what role the question of submission has other than as an element in the exercise of that discretion. On the other hand, the issue of submission was argued both below and in this court entirely separately from the so-called validity issue.
- The structure of the argument arising from these four issues is therefore as follows. The judge below decided each of these four issues in the operator's favour, at any rate sufficiently for the operator to surmount each issue's hurdle. On appeal, it is clear that if the owner succeeds on any one of the first, second and third issues, its appeal succeeds. For if it succeeds on either the first or second issue, then the operator's proceedings fail for want of jurisdiction. And if it succeeds on the third issue, then the arbitration agreement which is the basis of its argument on the merits, is lost by reason of the decision of the Kazakhstan court which this court would have decided should be recognised here. On that basis there could be no good arguable case upon which the operator could rely. The role of the fourth issue is to my mind more problematic, for the reason mentioned above.
- It is now common ground that section 44 of the AA 1996 does not avail the operator, but is only available in support of current or prospective arbitral proceedings, of which it is now acknowledged there are none, even if it had been suggested when these proceedings first started that there were. So the question is whether section 37 of the SCA 1981 provides general support for the claim in these proceedings: which seeks to declare the ongoing validity and effectiveness of the arbitration agreement, and to provide an on-going anti-suit injunction against the risk of any further court proceedings in Kazakhstan or otherwise than under the arbitration agreement pursuant to ICC Rules in London.
- To decide this issue, which has been floating around, recognised or unrecognised, for some time, it is necessary to review the jurisprudence which has been presented to the court by the parties. In Cetelem SA v. Roust Holdings Limited [2005] EWCA Civ 618, [2005] 1 WLR 3555, at [74], Clarke LJ said this:
- Of particular importance in this context is the decision of Thomas J in Vale do Rio Doce Navegacao SA v. Shanghai Bao Shipping Co Ltd [2000] 2 Lloyd's Rep 1, on which Mr Antony White QC, on behalf of the owner strongly relies, but which Mr Bernard Eder QC, on behalf of the operator, submits was in the relevant respect wrongly decided. Although the authorities which I shall have to consider fall before and after Vale do Rio, it is useful to start with it, because it will provide focus to the enquiry.
- In Vale do Rio the claimant was a shipowner who asserted that he had made a contract of affreightment with a Chinese charterer (the first defendant) through a firm of Norwegian brokers (the second defendants). The charterer denied having made the contract. The contract, if it was made, contained a London arbitration clause. The owner sought a declaration that the alleged charterer was a party to the arbitration agreement contained in the contract. The claim form employed by the owner for bringing its proceedings was an arbitration claim form. If the owner succeeded in obtaining the declaration it sought from the court, it planned to commence arbitration proceedings against the charterer (see at para 6). The charterer was denying that it had authorised the brokers to make the contract. The owner joined the brokers to the litigation so as to obtain their evidence that the contract had been authorised by the charterer, but sought no substantive relief against them. It recognised that if the contract had not been authorised by the charterer, any claim in damages against the brokers would have to be pursued in Norway. The brokers disputed jurisdiction against them in England. The charterer had not been served and so was not as yet involved in the litigation.
- A number of issues were raised, one of which was a gateway issue which I will consider below. For the present I am concerned with what Thomas J described as issue 3: "Do the terms of the Arbitration Act permit the owners to make the application?" (at paras 43/60). Thomas J held that it did not and that the court lacked jurisdiction. The kernel of his reasoning is contained in the following extract from his judgment:
- I would make some preliminary observations at this point. First, although Thomas J appears to have resolved this issue as a matter of jurisdiction, it might nevertheless also be possible to interpret his reasoning as depending on a principled exercise of discretion: for ultimately it appears primarily to reflect his view of section 1(c) of the AA 1996, which he acknowledges is not mandatory: see para 52. It is perhaps to this reservation that he is referring in his conclusion at para 60. Secondly, Vale do Rio did not consider the tension between section 44 of the AA 1996 and section 37 of the SCA 1981, for no injunction was sought in that case. Thirdly, and connected with this last point, the owner did have it in mind to commence an arbitration against the charterer, but wished to have the court decide the issue of a binding contract or not in advance of arbitrating, thereby avoiding the issue of substantive jurisdiction which would have arisen under sections 30/32. Fourthly, however, the purpose for which the owner in the present appeal cites this authority is to support the submission that it is wrong in principle to go to court to clarify the existence of a binding agreement to arbitrate when it is open to the claimant to proceed to arbitration and there ask the arbitrators, even in the absence of a recalcitrant respondent, to rule on the question of their substantive jurisdiction.
- There are a small number of cases prior to Vale do Rio to which I will next refer.
- The Channel Tunnel Group Ltd v. Balfour Beatty Construction Ltd [1992] QB 656 was decided under the Arbitration Act 1950. Section 12(6) of the 1950 Act was the predecessor of section 44 of the AA 1996 in giving the court "for the purpose of and in relation to a reference, the same power of making orders in respect of" a similar list to the matters listed now in section 44(2) "as it has for the purpose of and in relation to an action"; but section 12(6) was not limited by the other provisions now in section 44 designed to restrict the role of the court to circumstances either of urgency or where the application to the court was with the agreement of the parties or the permission of the tribunal. In particular section 12(6)(h) listed "interim injunctions or the appointment of a receiver" (see now section 44(2)(e)). In Channel Tunnel the plaintiff employer sought to injunct the defendant contractor under section 37 of the SCA 1981 from suspending work. The contractor sought a stay for arbitration under section 1 of the Arbitration Act 1975. The court held that at any rate as a matter of judicial restraint it lacked jurisdiction under section 37: (i) in circumstances where the seat of arbitration was in Brussels so that section 12(6)(h) did not cover the case; (ii) when section 25 of the 1982 Act had not as yet been extended to cover foreign arbitration; and (iii) when a stay was mandatory under section 1 of the 1975 Act. Mr White emphasised the reasoning dependent on point (i).
- Staughton LJ, with whom Neill and Woolf LJJ agreed, said (at 676E):
- In that case the defendant contractor was seeking a stay for arbitration, so arbitration was certainly in prospect. Moreover, the defendant was an English company within the jurisdiction, so there was no difficulty about exercising an exorbitant jurisdiction over someone abroad. However, the arbitration in prospect was a foreign arbitration, and section 12(6) could not apply. In the circumstances, this court, either as a matter of jurisdiction or at least as a principled exercise of its discretion was not willing to exercise any jurisdiction it may have had within section 37. The result was upheld in the House of Lords, [1983] AC 334, but on different grounds: in particular the decision there was provided expressly as a matter of discretion, not jurisdiction (see at 366D). On the point for which Mr White cites the decision in the court of appeal, Lord Mustill, with whose speech the other members of the House agree, put the matter somewhat differently from Staughton LJ (at 364 D/E). He said:
- Sokana v. Freyre [1994] 2 Lloyd's Rep was also concerned with the 1950 Act and its section 12(6)(h). The defendant had commenced an arbitration in which it claimed damages under the parties' contract. The parties tried to settle their dispute but disagreed on whether a settlement had been reached. The parties tried to agree a procedure for debating that dispute within the arbitration, but the arbitration became deadlocked. So the defendant commenced proceedings in Florida, claiming inter alia a declaration that a settlement had been reached. The plaintiff then sought in England to serve out an originating summons against the defendant in which it claimed a final anti-suit injunction against the Florida proceedings and damages for breach of the arbitration agreement. The injunction claim was made both under section 37 of the SCA 1981 and under section 12(6)(h).
- Colman J decided the case on the basis that in the circumstances he lacked jurisdiction over the claim under section 12(6), and for the rest declined leave to serve out as a matter of discretion. This was because the proceedings were not in aid of the arbitration, but in aid of a separate cause of action for breach of the arbitration agreement, a matter which was not within the current reference to arbitration. Therefore, section 12(6) could not be utilised to support even an interim injunction, had one been sought, since such an injunction would not be parasitic on an existing or anticipated reference; and a fortiori it could not support a final injunction. Colman J went on to consider in general the question of the grant of an injunction to restrain foreign proceedings on the basis of an English arbitration agreement. He did not expressly refer to section 37 at this stage of his judgment, but, having rejected section 12(6) as the source of his jurisdiction, it would seem that he must have had section 37, which had been invoked by the plaintiff, in mind. However, he rejected such a claim on the basis of discretion. This was before The Angelic Grace (Aggeliki Charis Compania Maritima SA v. Pagnan SpA) [1994] 1 Lloyd's Rep 168, [1995] 1 Lloyd's Rep 87 (CA) had liberalised the grant of anti-suit injunctions in support of arbitration agreements.
- It may be observed that Colman J cited the Channel Tunnel case, but not for the proposition that if section 12(6) did not avail the plaintiff, then section 37 could not do so either. So he must have considered that the Channel Tunnel case turned on the special factor that in that case the arbitration agreement was for foreign arbitration. Although an injunction was refused on the ground of discretion, and the connection between section 12(6) and section 37 was not explored, it is possible to see in Sokana some support for separate reliance on section 37 for the jurisdiction to make an anti-suit injunction.
- The Angelic Grace followed soon after. In that case no question of jurisdiction arose. The parties disputed in English proceedings the scope of their English arbitration agreement: Did it cover the Italian proceedings commenced by the defendant? If it did, would the court grant an anti-suit injunction against the defendant to curtail the Italian proceedings? The answer given to both questions was, Yes. There was no discussion of the statutory basis of such an injunction, rather the jurisprudential underpinnings of it were traced back to Pena Copper Mines Ltd v. Rio Tinto Co (1911) 105 LT 161. It is difficult to think, however, that section 37 of the SCA 1981 was not the modern basis of such an injunction. Mr White on the other hand submits that its proper basis was section 12(6) of the 1950 Act. I doubt that, however. It is true that arbitration proceedings in London had already been commenced. However, what was being sought was a final injunction, rather than an interim injunction in support of the arbitration. Moreover, The Sokana, which admittedly appears not to have been cited in The Angelic Grace (possibly because it had only recently been decided at the time of the commercial court hearing in The Angelic Grace; but it had been reported by the time of the appeal), had decided that section 12(6)(h) was not available in such circumstances.
- The current appeal in effect raises the question whether, if The Angelic Grace had occurred in the era of the AA 1996, its claimant could not have come to court, but would have had to raise the question of the scope of the arbitration clause in the arbitration proceedings themselves, while possibly going to the court for an interim injunction under section 44(2)(h).
- ABB Lummus Global Ltd v. Keppel Fels Ltd [1999] 2 Lloyd's Rep 24 is the first of the authorities cited to us which falls under the AA 1996. The applicant had commenced an arbitration in London and also actions in both England and Singapore in support of its rights to payment under a contract containing an English arbitration agreement. The respondent/defendant to all these proceedings alleged that the English and Singapore actions had repudiated the arbitration agreement. Clarke J held that he had no jurisdiction to deal with the applicant's application for a declaration that there had been no such repudiation, as that was a matter going to the substantive jurisdiction of the arbitral tribunal which was for it to determine under section 30 of the AA 1996, and the conditions for that question to be determined by the English court had not arisen under section 32. Mr Eder submits, however, that as an arbitration was already on foot there, the case is of no relevance here. Nor did any question of an injunction arise there.
- It was at this stage that Thomas J decided Vale do Rio.
- XL Insurance Ltd v. Owens Corning [2000] 2 Lloyd's Rep 500 was decided a few months after Vale do Rio, but there is no sign that that authority was cited to the court. XL was the defendant's insurer. The claimant insurer said that the insurance policy incorporated an English arbitration agreement. The defendant insured sued XL and other insurers in Delaware. XL sued in England for an anti-suit injunction in support of London arbitration. The defendant argued that the policy was governed by Delaware law and that in Delaware the arbitration clause would not be recognised as effective; that the proper law of the arbitration agreement was New York law under which it was properly arguable that the agreement was ineffective because not set out in writing; and that it was more convenient for its claim to be litigated against all its insurers, including XL in Delaware. Toulson J stated his firm view that a valid arbitration agreement had been agreed between the parties and that the defendant's suit in Delaware was a breach of its agreement. He cited The Angelic Grace. There is no express reference to section 44 of the AA 1996 or to section 37 of the SCA 1981, but there is to section 32 of the former Act, so that Toulson J had in mind the implications of the relevant sections regarding kompetenz kompetenz. It seems that an arbitration was in prospect in London. Toulson J said (at 509):
- It would seem (a) that while Toulson J was expressing a firm view about the existence of an arbitration agreement between the parties, he was not deciding that that was so. He framed the relevant issue as "Was there an apparent agreement" between the parties (at 506). And (b) that the injunction granted was an interim injunction. There does not seem to have been an express issue as to the court's jurisdiction.
- In Welex AG v. Rosa Maritime Limited (The Epsilon Rosa) [2003] EWCA Civ 938, [2003] 2 Lloyd's Rep 509 a shipowner commenced arbitration against its consignee under a bill of lading. The consignee disputed the incorporation of an arbitration clause in the bill of lading, took no part in the arbitration, and arrested the shipowner's vessel in Lisbon, claiming cargo damage. It also commenced proceedings against the shipowner in Poland. In the English proceedings, the consignee claimed a declaration that no arbitration agreement had been incorporated into the bill of lading, which the shipowner disputed and counterclaimed an anti-suit injunction against the foreign proceedings. The consignee failed and the shipowner succeeded.
- Following the grant by David Steel J in the commercial court of a final injunction, the shipowner conceded potential liability for cargo damage in the arbitration, but there was an outstanding dispute as to quantum. The consignee continued to fear arbitration in London because it was concerned not to forfeit the security it had gained by its arrest of the vessel in Lisbon. It therefore appealed against the grant of the injunction. The shipowner riposted by submitting that the court lacked jurisdiction to hear the consignee's appeal: on the ground that the commercial judge had refused permission to appeal. Leave was subsequently granted by this court, but under the AA 1996, the commercial judge's refusal would have been final. Therefore it became crucial to decide what the jurisdictional basis of the judge's grant of an injunction had been. The judge's judgment had been silent as to that, but the shipowner submitted that it must have derived from the court's powers under either section 32 or section 45 (determination of a preliminary point of law by the court). It was common ground that it could not have derived from section 44, since that gave no power to grant a final injunction The consignee had come to court to challenge the arbitrators' jurisdiction under section 72 of the AA 1996 (as a party who had taken no part in the arbitration) and the arbitrators appear to have consented to the proceedings in court (see at 516, left hand column). Therefore there was no problem in going to the commercial court under section 32 in that case. However, this court held that none of these sections gave the court power to grant a final injunction, and that David Steel J must therefore have acted under the general power given in section 37 of the SCA 1981 (see para 40). On that basis, there was nothing to prevent an appeal to this court, which went on to hold that the injunction had been rightly granted.
- That is therefore a decision of this court that section 37 can be invoked where power under the AA 1996 to grant a final injunction is lacking. Subject to the fact that there was no problem in that case arising from any limitation within section 32, it would appear that the case is contrary to Mr White's submission that the power under section 37 should not, as a matter of principle, be used where power would have been lacking within the AA 1996 itself. However, that precise point does not appear to have been raised in Welex v. Rosa. In the present case a final injunction has also been granted, so that Welex v. Rosa would seem to apply.
- In Through Transport Mutual Insurance Association (Eurasia) Limited v. New India Assurance Co Ltd (The Hari Blum) [2004] EWCA Civ 1598, [2005] 1 Lloyd's Rep 67 the insurer of a bankrupt shipowner, the claimant "Club", was sued in Finland by (subrogated insurers of) cargo owners under a Finnish statute which permitted direct suit against insurers of a party liable. The Club responded by seeking in England a declaration and injunction that cargo was bound to arbitrate under an arbitration agreement contained in the Club's rules, since cargo was seeking to enforce the shipowner's rights against its Club. At first instance, [2003] EWHC 3158 (Comm), [2004] 1 Lloyd's Rep 206, Moore-Bick J granted both a declaration and an injunction, but on appeal, this court was willing only to grant a declaration, but not the injunction. This was not because this court thought it lacked jurisdiction to do so, but simply as a matter of discretion. The court was acting under section 37 of the SCA 1981 (see para 97). The court referred to the recent history of the anti-suit injunction as developed in The Angelic Grace, Donohue v. Armco Inc [2001] UKHL 64, [2002] 1 Lloyd's Rep 425 and Turner v. Grovit [2001] UKHL 65, [2002] 1 WLR 107, where the new doctrine was confirmed in the House of Lords, and Welex v. Rosa. The essence of the reasoning is that the anti-suit injunction is brought to protect the party claiming the injunction against breach of its arbitration agreement in circumstances where damages would be an uncertain and unsatisfactory remedy. In many of such cases there may have been no challenge to the applicability of the arbitration agreement: but in The Angelic Grace and Welex v. Rosa there had been.
- Although the matter may not have been highlighted in the Through Transport decisions just cited, it is recorded subsequently in Through Transport (No 2) [2005] EWHC 455 (Comm), [2005] 2 Lloyd's Rep 378 (Moore-Bick J) that an arbitration had been commenced by the Club all along: see at para 29. Thus, although the present point may not have been alive in that litigation, no one considered that the commencement of that arbitration removed the court's jurisdiction under section 37.
- Cetelem v. Roust is the leading case on section 44 of the AA 1996. In that case the arbitration clause in the parties' contract was not in dispute, but the parties were in dispute about their agreed sale of shares. The sale had to be approved by the Russian Central Bank. If it was not so approved by 31 January 2005, the sale was to be null and void. For that deadline to be met, the documents had to be submitted to the Russian Central Bank by 10 December 2004. The claimant sought an interim mandatory injunction to require the defendant to submit the documents to the Bank by that deadline under section 44(3). No arbitration had been commenced as yet. It was held that there was jurisdiction to make the order under section 44(3), on the basis that it was to preserve assets pending an arbitration (at para 16: see the reference to "proposed party" in section 44(3)). However, section 44(3) was given a narrow role: the court is only entitled to act on its own (without the agreement of the parties or the permission of the arbitral tribunal (see section 44(4)) where it is necessary for the purpose of preserving evidence or assets, and not for any wider purposes (see paras 43/47). Thus Clarke LJ accepted the submission that the Act provides "only a very limited role for the court" (at para 35) and that a central and important purpose of the Act was "to restrict the role of the courts in the arbitral process" (at para 61). He stressed that the power remained one only to grant an interim injunction (at para 64). If necessary, the court would have to ensure, by obtaining appropriate undertakings from a claimant eg to commence an arbitration, that the substantive rights of the parties would ultimately be resolved by arbitration (at paras 67 and 71). It was in this context that Clarke LJ left over for another occasion the tension between section 44 and section 37 of the SCA 1981 (see at para 43 above). It is not clear to me therefore what Cetelem adds to the debate, other than to stress the narrowness of the gateway to court action left by section 44(3).
- In Law Debenture Trust Corporation Plc v. Elektrim Finance BV [2005] EWHC 1412 (Ch), [2005] 2 Lloyd's Rep 755 the claimant was a trustee for bondholders issued by the defendant and was suing to enforce defaults under the trust deed, which contained an arbitration clause. The defendant commenced an arbitration disputing the alleged defaults, but the trustee stood aloof. The trustee commenced court proceedings seeking a declaration that the bonds were due and owing. The defendant contended that the court lacked jurisdiction and that the arbitrators should resolve any issue as to the effectiveness of the arbitration agreement. The claimant then amended its claim to seek a determination under section 72 as to whether there was a valid arbitration agreement and a declaration that the court had jurisdiction. The defendant counterclaimed for a preliminary ruling as to whether an arbitration agreement had been concluded and for a stay. An essential question was whether the court or the arbitrators should decide the jurisdiction issue. The defendant said it was for the arbitrators. The trustee said it was for the court, and that in any event it was entitled to bring the issue before the court under section 72.
- Mann J held that under section 72 the trustee was entitled to bring the question of jurisdiction before the court. Therefore a stay was rejected, subject to the court finding that the trustee was bound to arbitrate. On the merits of the jurisdictional issue the judge found that the trust deed's arbitration agreement gave the trustee the option to arbitrate or litigate.
- In the course of his judgment Mann J considered what Thomas J had said in Vale do Rio, but distinguished the case of a claimant (as in Vale do Rio) who seeks to affirm arbitration and a claimant (as in the case of the trustee) who does not. He said (at para 12):
- Thus Mann J recognises the approach of Thomas J in Vale do Rio, but distinguishes it. Mr White relies on Law Debenture for that recognition.
- Elektrim v. Vivendi Universal SA (No 2) [2007] EWHC 571 (Comm), [2007] 2 Lloyd's Rep 8 concerned two separate arbitrations pursuant to two separate arbitration agreements. One agreement was contained in a share investment contract (the "TIA"), and provided for arbitration in London under LCIA rules. The other agreement was contained in an alleged settlement agreement of disputes under the TIA, and provided for arbitration in Geneva under ICC rules. The parties disputed whether the settlement agreement was binding. Elektrim sought a final injunction from the English court under section 37 of the SCA 1981 to restrain Vivendi from pursuing the LCIA arbitration until the determination of the ICC arbitration. As such the application was novel, and amounted to a request to interfere with current arbitrations on something like a case management basis.
- Aikens J refused the injunction for a variety of reasons. As for the interrelationship of section 37 and the AA 1996, he said:
- Starlight Shipping Co v. Tai Ping Insurance Co Ltd (The Alexandros T) [2007] EWHC 1893, [2008] 1 All ER (Comm) 593 concerned a charter with an English arbitration clause and a bill of lading which incorporated the charter's arbitration clause. In the course of the voyage the vessel and her cargo were lost. The insurers of the cargo obtained relief in Chinese proceedings against the owner of the vessel. The owner objected to jurisdiction in China and commenced arbitration in London against the cargo owner under the bill of lading. The owner also sought an interim anti-suit injunction in English proceedings against the cargo owner restraining them from taking any steps in the Chinese proceedings as having been brought in breach of the arbitration agreement contained in the bill of lading. An issue arose as to the relationship between section 37 of the SCA 1981 and section 44 of the AA 1996.
- Cooke J held that section 37 and section 44 gave independent rights to relief, even if section 44 was limited by its own terms, and the use of section 37 involved elements of discretion which were affected by considerations deriving from section 44. However, in the circumstances there was good reason to grant an interim injunction under both sections: under section 44, to hold the ring until the arbitrators could make their award seeing that urgency and the inability of the arbitrators to act sufficiently quickly fulfilled the requirements of section 44(3) and section 44(5); and under section 37 because the defendants claimed the arbitration clause was ineffective, so that sooner or later the issue of the arbitrators' jurisdiction would return to the court under section 67.
- As for section 44, Cooke J reasoned that the arbitrators would themselves be asked to make a final anti-suit injunction against the pursuit of the Chinese proceedings, but that there was no power in the LMAA Rules for them to make an interim injunction (see section 39(4) of the AA 1996). The right to an anti-suit injunction derived from the contractual right to arbitrate, which was an asset which needed preserving. Therefore, the court must act with urgency to fill the gap until the arbitrators could formulate their final award.
- Thus Cooke J reasoned as follows:
- I would respectfully observe that I find this judgment illuminating: first, because of its approach to section 44 and section 37, to the effect that each must be considered on its own terms but that the one may influence the application of the other; and secondly, because of its consciousness that the court may have to look further into the future than just the next step in an arbitration.
- In Dallah Real Estate and Tourism Co v. Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46, [2010] 3 WLR 1472, Lord Collins of Mapesbury (with whose judgment Lord Hope of Craighead, Lord Saville of Newdigate and Lord Clarke of Stone-cum-Ebony agreed), in an important passage all of which will repay study, discussed the principle of kompetenz kompetenz both as it occurs generally and as it occurs in the 1996 Act (see at paras 79ff). The principle is that a tribunal has power to consider its own jurisdiction, but that principle does not in itself answer a further question as to whether, and in what way, a tribunal's determination of its own jurisdiction is subject to review. As Lord Collins said of the principle of kompetenz kompetenz in international commercial arbitration (at para 84):
- Thus, Lord Collins shows that the French practice where judicial proceedings are brought in alleged breach of an arbitration agreement is to abstain from exercising jurisdiction unless the jurisdiction agreement is manifestly a nullity: but only until the arbitral tribunal has ruled on its jurisdiction, after which the French court has the widest power to investigate the facts (at paras 88/89). Lord Collins also cited (at para 92) from the "illuminating discussion" of the US court of appeals for the Third Circuit in China Minmetals Materials Import and Export Co Ltd v Chi Mei Corpn 334 F 3d 274 and its comment –
- Turning to the position in England, Lord Collins cites from the DTI Departmental Advisory Committee in its February 1994 report on a draft Arbitration Bill (the "Saville Report"), records the statutory position now accomplished (principally by sections 30, 32 and 67), and continues:
- This analysis, in my respectful opinion, usefully underscores the wider picture about the autonomy of the parties and the jurisdiction of arbitrators with power to investigate their own jurisdiction: namely that, sooner or later, the question of substantive jurisdiction is likely to come before the court. Where parties differ as to a matter as fundamental as whether they have agreed any contract, or any contract containing an arbitration clause, it is most unlikely that one or other of them will rest content with the decision of arbitrators as to either their jurisdiction or as to the parties' rights. For one or other party is saying that there is simply no agreement that arbitrators can resolve their disputes. In such circumstances, the issue of jurisdiction is likely to come before the courts sooner or later, and when it does, it will have to be decided by the court from first principles and in the light of facts which, whatever the investigation by the arbitrators, are yet to be determined on the evidence by the court. That is the learning of Azov Shipping, approved by the Supreme Court in Dallah, where I said this:
- Thus, a question of jurisdiction may come before the court in a number of different situations. It might arise where one party goes to court with a claim and the defendant seeks a stay for arbitration: the claimant may say there is no contract or no arbitration agreement, and the court will have to investigate that question for the purpose of dealing with the application to stay. Or a party may commence an arbitration, and the other party may say there is no agreement or no agreement to arbitrate, in which case the matter is prima facie for the arbitrators to decide in the first instance pursuant to section 30. In a plain case, the arbitrators may proceed to determine their own jurisdiction, but equally the parties may agree to come straight to court to determine the question, or the arbitrators may give permission for the issue to be taken to court and the court may agree to accept the issue at that stage. Or the respondent in the arbitration may stand aloof, and come to court under section 72, or, following an award, under section 67. Or, a party may start proceedings in another country and the defendant there then comes to the English court to ask it to uphold their arbitration agreement by granting an anti-suit injunction. That is the equivalent of a party seeking a stay where an action is begun in England. Where the action in breach or alleged breach of an arbitration agreement is begun in a foreign country, the respondent may or may not seek a stay there, but here he may ask for an anti-suit injunction.
- There are further variations thrown up by the cases. In some cases, it is reasonably plain that an arbitration agreement has been made, but there may be an issue as to its scope, or as to whether there has been a repudiation of it, or, as here, as to its surviving effectiveness. In other cases, there is a factual dispute as to whether any agreement has ever been made in the first place, or a legal dispute as to whether an arbitration clause has been incorporated into the parties' contract. Moreover in some cases, what is sought from the court is an interim injunction, which is among the subject-matters of section 44, and in other cases what is sought is a final injunction, which is not within section 44 but, subject to contrary agreement by the parties, may be within the powers of an arbitral tribunal in a final award (see section 48 of the AA 1996).
- Moreover, a distinction may have to be made between a declaration as to the existence or effectiveness of an arbitration agreement about which parties are in dispute, which is a form of final relief as to the parties' legal rights, and an anti-suit injunction which, at any rate in its interim form, is only intended to hold the ring until some tribunal, whether it is the court itself at some later date, or an arbitral tribunal, can grapple with the merits of the parties' dispute.
- This variety of situations suggests to my mind that it is not possible to be dogmatic about where the principle in section 1(c) of the AA 1996 leads. It is also relevant to observe that the Saville Report has nothing to say about anti-suit injunctions, even though it was written in February 1996, which is comfortably after The Angelic Grace had been decided in this court, and even though the Report's discussion of section 44 (see at para 214) includes a reference to Mareva or Anton Piller relief.
- Mr White submits that where statute, in the form of section 44, provides for the (limited) circumstances in which the court can exercise powers, here in support of the arbitral process, it should be taken to restrict the theoretically broad powers of section 37, so that any exercise of such powers, even if theoretically available, should in principle be regarded as curtailed by the more specific statute. On this basis, if section 44 is not here available to the operator, as is now common ground, section 37 should not be used in order to go beyond section 44's curtailed area for intervention, an application of the maxim generalia specialibus non derogant, in other words the maxim that general powers must make way for special powers and their limitations. Mr White submits that this maxim has often been applied to section 37 of the SCA 1981, as for instance in Parker v. Camden London Borough Council [1986] Ch 173 at 176, 179, or Richards v. Richards [1984] AC 174 (HL) at 199H/200B; and he refers to the Channel Tunnel case in this court, cited above, for an application of this principle in the context of arbitration. He also submits that, at the very least, the limitations of section 44 must be regarded as relevant to any invocation of section 37 powers, as Cooke J held in Starlight Shipping.
- If, therefore, section 44 was not available, section 37 should be regarded as unavailable in principle as well. As for any declaration as to the effectiveness of the arbitration agreement, that was a matter for arbitrators, not for the courts: see section 1(c) and section 30 of the AA 1996 and Vale do Rio.
- Mr White also submitted that an anti-suit injunction was unavailable as a matter of the fundamental principles upon which jurisdiction to grant such injunctions exist: first, because there were no existing English proceedings to protect, since the operator had not commenced and did not intend to commence any arbitration in London under the arbitration agreement; and secondly, because, for the same reason, there was no substantive right which was being pursued, for breach of the arbitration clause.
- In support of the first submission, he relied on my observation in OT Africa Line Ltd v. Magic Sportswear Corporation [2005] EWCA Civ 710, [2005] 2 Lloyd's Rep 170 at para 63, in discussing the principles governing the grant of an anti-suit injunction, that –
- In support of his second submission, Mr White cited The Siskina [1979] AC 210 to rely on its principle that an injunction can only be claimed in support of some legal or equitable right. The Siskina was concerned with a Mareva injunction. However, it is plain from the leading authorities on anti-suit injunctions that such a legal or equitable right can be found in an arbitration agreement which is breached by foreign proceedings. There is nothing in this point.
- Mr White's difficulty in all of these submissions is that he does not wish to descend into the arena of discretionary arguments. To do so, he considers, is to risk submitting to the jurisdiction of this court. Therefore his opposition to the judge's order is entirely directed to arguments of jurisdiction as a matter of broad principle.
- In my judgment, however, there is no jurisdictional or principled lack of power in these courts to make the orders made by the judge.
- The essential question raised by all of Mr White's submissions is to my mind this: Is a litigant who asserts that he and his contractual counterparty are parties to an arbitration agreement, but who has no current dispute with his counterparty on the substantive merits of their contractual relations, and has no claim to make against or defend in opposition to his counterparty, other than a long grumbling dispute as to the validity of their arbitration agreement itself, obliged, if he wishes to resolve that dispute, to proceed to arbitration; or can he come to the English court to pronounce on the validity of his arbitration agreement, and in connection with that issue seek an interim or final anti-suit injunction to prevent his counterparty from using foreign court proceedings against him, being proceedings otherwise than in accordance with the arbitration agreement which he asserts to bind them?
- The answer to that question, in my judgment, is that although there might be much to argue about the exercise of the court's discretion in such circumstances, either to grant a declaration, which is always a discretionary remedy, or to grant an injunction, as to which the same applies, there is no statutory or principled objection to the jurisdiction of this court.
- First, the international jurisdiction of this court depends on the question of a jurisdictional gateway, which is a separate question discussed below under issue 2.
- Secondly, in circumstances where section 44 applies, it would I think be true to say that it would be wrong as a matter of principle to utilise section 37 to get round the limitations of section 44. Thus, for instance, if an arbitration were afoot or a proposed arbitration were close to being commenced, and some remedy were needed for which there was no urgency, so that it did not matter in the slightest whether or not the applicant waited for the arbitral tribunal to exercise its own powers, on the hypothesis that it possessed them (see section 38 of the AA 1996), it would be wrong for this court to intervene superfluously, under its section 37 powers, in a dispute which the parties had already referred or were shortly to be referring to arbitration. But it is only subsections 44(5) and (6) which limit the court's powers.
- Thirdly, however, where there is no arbitration in being and none realistically in prospect, a situation which is in this case now a matter of common ground, section 44 simply does not apply. Section 44 is headed "Court powers exercisable in support of arbitral proceedings". Section 44(1) begins – "the court has for the purposes of and in relation to arbitral proceedings the same power…". Where there are and will be no such arbitral proceedings, the context of section 44 simply does not arise.
- Fourthly, it seems to me to be going too far to say that because an arbitral tribunal "may rule on its own substantive jurisdiction" (emphasis added), therefore the court ought always to regard the position as though there is an obligation on the parties and/or on the arbitrators for the arbitrators to rule on any dispute about their substantive jurisdiction. Anything may happen. The potential dispute may not be pressed. The disputing party may stand aloof and come to court. The parties may join issue in the arbitration, but agree to go to court for a preliminary issue on jurisdiction. The parties may not be able to agree on such a preliminary issue, but an application may be made to the court with the permission of the arbitrators for such a preliminary issue. The court may or may not accept such an application.
- In such circumstances, I do not with respect agree with an interpretation of Vale do Rio which regards it as laying down a rule of jurisdiction that it is in all circumstances necessary for a party who wishes to raise with the court an issue of the effectiveness of an arbitration clause first to commence an arbitration and go through the procedures and provisions of sections 30-32 and/or section 67 and/or section 72. If, however, that is what Thomas J was saying in Vale do Rio, then I would not with respect agree with that view. In any event, since the alleged party to the charter and the arbitration agreement in that case was not as yet a party to the court proceedings (not having been served) and only a non-party (the brokers) were involved in the court proceedings, I would not regard any view expressed there as other than obiter. Thomas J did not in any event there consider the role of section 37 of the SCA 1981. In my judgment, at any rate in a case where no arbitration has been commenced and none is intended to be commenced, but a party goes to court to ask it to protect its interest in a right to have its disputes settled in accordance with its arbitration agreement, it is open to the court to consider whether, and how best, if at all, to protect such a right to arbitrate. Whether it will assist a claimant at all, and if so, how, is a matter for its discretion: but it would to my mind be an error of principle and good sense for the court to rule that as a matter of jurisdiction, or even as a matter of the principled exercise of its discretion, it has no possible role in the protection and support of arbitration agreements in such a context.
- Thus I do not consider that section 1(c) of the AA 1996, which in any event is a general principle intended to assist in the construction of the Act (see the opening words of section 1) rather than a legal rule which binds the court even in terms of another statute, assists much in answering the question which is before the court in this case. First, the principle in section 1(c) necessitates the asking of the question: "[S]hould not intervene" in what? In the conduct of an arbitration? That would seem to be the essential purpose of such a principle. In the conduct of litigation, here or abroad, which threatens the safety of an arbitration agreement or any possible arbitration pursuant to it? There seems no reason in principle why the court might not want to intervene in such a case, so as to support arbitration and not to interfere in it. Therefore it seems to me that section 1(c) does not drive the answer to the issue in our case. Secondly, section 1(c) is only one of three principles stated in section 1. The first two principles are (a) that "the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense" and (b) that "the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest". As for the first of these (section 1(a)), it is not really concerned with a dispute of substantive jurisdiction which arises from a fundamental disagreement as to whether the parties have ever agreed to arbitrate at all. For if they have not agreed to arbitrate, then the arbitral tribunal can have no proper, and certainly no definitive role in resolving their disputes; and whether they have agreed to arbitrate or not, that issue of substantive jurisdiction can only ultimately (if the issue is alive, and taken and not lost by any procedural bar) be resolved by the court, and not by any arbitral tribunal. Moreover, I have already explored above (at para 81) the issue of "unnecessary delay and expense" in this context, which may well push in favour of a preliminary issue in the courts even where an arbitration reference is itself up and running. As for the second of these principles (section 1(b)), where parties may have agreed an arbitration agreement but are in dispute as to whether they have done so, the principle of party autonomy suggests that the court should be prepared to assist in finding ways for that dispute to be resolved. Thus a consideration of all three of these principles may well suggest that a balancing exercise has to be performed in which the private and public interests involved, and the purposes of the AA 1996, might well weigh in favour of the court playing a necessary role.
- Such a conclusion seems to me moreover to reflect the numerous cases, both before and after the AA 1996, in which the court has been prepared to use or to recognise the use of section 37 to support arbitration by requiring parties to refer their disputes to arbitration, rather than to allow one party to pre-empt the issue of arbitral jurisdiction by use of foreign courts: see, for instance, The Angelic Grace, XL v. Owens Corning, Welex v. Rosa Maritime, Through Transport, Elektrim v. Vivendi (No 2), and Starlight Shipping.
- There is nothing in the Saville Report to suggest that use of the anti-suit injunction, at that time so recently and so importantly highlighted in The Angelic Grace, in support of arbitration was unjustified or inconsistent with the principles of the new bill.
- I would also refer to treatise discussion of the issue as follows. In Merkin, Arbitration Law, 2010, Vale do Rio is cited at length, but the text continues (at para 9.33):
- Raphael, The Anti-Suit Injunction, 2008, has a good discussion of many of the cases (at paras 15.06/07), and concludes in terms which raise the issue of the current litigation:
- In my judgment, a court asked to protect an agreement to arbitrate by granting declarations or injunctions in respect of it has to steer a careful path between: on the one hand adequate support for the parties' agreement, without which support that agreement may be effectively nullified by foreign proceedings taken in breach of it; and on the other hand a proper concern not to intervene in an arbitration or prospective arbitration, or to usurp the role of arbitrators, which is definitive in respect of the merits of a dispute under any underlying contract but is likely to be only preliminary in respect of a dispute about substantive jurisdiction. The cases discussed above demonstrate the great variety of situations in which this problem may arise, and it is to my mind impossible to anticipate every variety of situation and foolish to try to do so. However, I have already given reasons for stating my view that the issue is unlikely to be one of the court's jurisdiction, as distinct from the exercise of its powers of discretion.
- Moreover, the present case is marked by the following features. There is no arbitration in being, even in its very earliest stages. There is no arbitration in prospect. Both parties abjure any intention to arbitrate. There is currently no issue between them, other than a difference as to the effectiveness of the arbitration agreement by reason of Kazakhstan public policy and the decisions of the Kazakhstan courts referred to above. That in turn raises an issue of substantive jurisdiction, albeit without reference to any current dispute under the concession contract. That issue of substantive jurisdiction is primarily concerned with whether the decisions of the Kazakhstan courts are to be recognised or enforced in the United Kingdom. The relevant English statute in that respect, sections 32 and 33 of the 1982 Act, is directed primarily for present relevant purposes to the rule in section 32(3) that "a court in the United Kingdom shall not be bound by any decision of the overseas court relating to any of the matters mentioned in subsection (1) or (2)" (emphasis added). There is otherwise no current submission on this appeal that, as a matter of English law, the proper law of the arbitration agreement, the concession contract's arbitration agreement was not made between the parties, or does not prima facie bind the parties, or does not prima facie exclude tariff disputes, which are to be dealt with under clauses 17.8 and 17.9 of the concession contract by reference to an expert "who shall act as an expert and not as an arbitrator". Thus subject to the rulings of the Kazakhstan courts, there would otherwise be no issue between the parties as to the effectiveness of what is acknowledged as the parties' agreement for arbitration.
- In those circumstances, it is hard, in my judgment, to see any reason why, as a matter of jurisdiction, there should be any difficulty about the English court providing a remedy to preserve and support the right of the operator to arbitrate. It is common ground that section 44 is not applicable. There is no present prospect that section 32 is applicable, although it is always feasible that it might become so at some time in the future. The demand that the operator commence an arbitration solely in order to put before an arbitral tribunal an issue of substantive jurisdiction which it is to be presumed the owner would repudiate, very probably by standing aloof from the arbitration, and which, in all practical terms, could only be definitively settled by the court, seems to me to be far-fetched and unrealistic, to be creative of unnecessary expense and delay, and to put the operator under unnecessary risk that further proceedings in the Kazakhstan courts would be to its prejudice, as well as to the prejudice of the agreed process of arbitration. None of that promotes any of the principles upon which the AA 1996 is founded, as set out in its section 1. It would seem to me to be the antithesis of the principles of that Act for this court, in such circumstances, to refuse, as a matter of jurisdiction or principle, a request for assistance in the form of an anti-suit injunction. The question of discretion is a different matter, because, for instance, it might be said that comity should dictate caution where the Kazakhstan courts' decisions are already in the past and there is no current dispute. However, on this appeal we are not concerned with such matters of discretion.
- I recognise that, even in such circumstances, it may possibly be said that a declaration that the arbitration agreement is binding on the parties may unacceptably trespass on even the theoretical possibility that at some time in the future an arbitral tribunal will have to grapple with that very issue. For myself I do not think that it would so unacceptably trespass. There are other situations in which a court may have to form not only a view about such things, even a decisive view, for instance where a stay for arbitration is requested (see section 9(4): "the court shall grant a stay unless satisfied that the arbitration is null and void, inoperative, or incapable of being performed", language reflective of the New York Convention).[3] However, I need not decide that question here, for the judge has been cautious not to give such a declaration and the operator as respondent in this appeal has not sought to go further than the judge has gone.
- Thus Burton J reasoned below as follows:
- Burton J went on to conclude as follows:
- In these circumstances, I would dismiss the owner's appeal on this first issue, the jurisdiction issue.
- In a sense this is the logically first issue: but the parties were content to argue it second, recognising that their first issue raised the most fundamental arguments, whereas the gateway issue raised arguments of a more technical and procedural nature (albeit of course of high significance where the English court is asked to exercise long-arm jurisdiction over foreign parties).
- I refer to para 37 above, where this issue is outlined. The operator relied on four gateways: (i) CPR 62.5(1)(b); (ii) CPR 62.5(1)(c); (iii) CPR 6.36 and Practice Direction B, para 3.1(20); and (iv) by retrospective amendment, after the initial permission had been granted by Andrew Smith J, CPR 6.36 and Practice Direction B, para 3.1(6)(c). The judge rejected (i), upheld (ii) and, if necessary, (iii), and rejected (iv). On appeal, the owner submits that the judge was right about (i) and (iv) and wrong about (ii) and (iii). The operator submits that the judge was right about (ii) and (iii) and wrong about (iv). It no longer argues for (i).
- (i) and (ii) CPR 62.5(1)(b) and (c). CPR 62.5 falls under Section I of Part 62. Section I is headed "Claims under the 1996 Act". Rule 62.2(1) provides:
- Rule 62.4 provides:
- That is the background to rules 62.5(1)(b) and (c), which provide, within CPR 62.5, as follows:
- Thus the operator no longer relies on rule 62.5(1)(b) with its reference to section 44, but maintains that the judge was right to permit service out under rule 62.5(1)(c) with its alternative reference to "a question to be decided by the court affecting…an arbitration agreement". The owner, however, submits that the whole context requires the claim to be premised on some section of the AA 1996.
- The owner also relies on what Thomas J said about this gateway in Vale do Rio. The more or less equivalent provisions were then contained in Part I of CPR PD49G (see at paras 21/22 of Vale do Rio). In particular para 2.1 of CPR PD49G is almost exactly reproduced now by rule CPR 62.2(1). Thomas J said this:
- Mr White submits that subsequent re-enactment of CPR 62.2(1) in its almost identical form is a reaffirmation of the correctness of this passage. He also relies on the CPR 62.4(1)(d) which requires a claimant to "specify under which section of the 1996 Act the claim is made", and on the CPR form of the arbitration claim form, which refers to "the matter of an [intended] arbitration between…"; and on 62PD 2.1 which says that "An arbitration claim under the 1996 Act…must be started… by the issue of an arbitration claim form" (emphasis added).
- I confess, with respect, that I do not find the owner's submissions or the explanation given by Thomas J to be compelling. Without an a priori hypothesis that any application to the court about an arbitration agreement must be grounded in some section of the Act, it is unnatural to read what is now rule 62.2(1)(a) as containing the sole decisive rule, and everything else, viz sub-rules (b), (c) and (d) as being mere exegesis and exemplification of the terms of the AA 1996, or, as Thomas J puts it, "to spell out the terms of the Act". The contrasting language of "(a) any application to the court under the 1996 Act" and "(d) any other application…" is particularly striking. Moreover, Thomas J nowhere considered the role of section 37 of the SCA 1981 and the anti-suit injunction. In the circumstances, I would regard rule 62.2(1)(a) as applicable merely where it is applicable, and not where it is not. There is no rubric on the designated arbitration claim form which requires in terms a section of the AA 1996 to be specified. As for 62PD 2.1, ("An arbitration claim under the 1996 Act"), that cannot prevail over the CPR rule and in any event does not state in terms that no arbitration claim can exist other than a claim "under the 1996 Act". As for the reference on the form to "an [intended] arbitration", I do not see why that may not simply be struck out where it is irrelevant. 62PD 2.2 says only that an arbitration claim form must be "substantially" in the form appendixed.
- It is true that, to the extent that there may be room for relevant gateways to be found under gateways (iii) and/or (iv), there is the less need for any interpretation of gateway (ii) to go wider than Thomas J considered that it did: but that is simply an incidental of the wider structure of the arguments presented in this appeal. The fact is that this is an unusual claim where, although there is no arbitration in being or prospect, the parties have a need, in an ongoing long-term concession contract, to know where they stand with respect to proceedings in Kazakhstan. It is entirely understandable that claims regarding arbitration in general should be canalised under CPR 62 in the way in which that Part and its Practice Direction seek to do.
- I would therefore dismiss the owner's appeal as to this gateway, but I continue with a consideration of gateways (iii) and (iv), if necessary.
- (iii) CPR 6.36 and Practice Direction 6B, para 3.1(20). Para 3.1(20) provides:
- Mr White submits that this paragraph is not intended to cover enactments for which other rules provide specific jurisdictional gateways. In the case of the AA 1996 and section 37 of the SCA 1981 if available in an arbitration context, specific provision is made by CPR 62.5. Para 3.1(20)(a) is not intended to cover such a situation, but to replace its predecessor CPR 6.20(18) which listed 11 separate statutes which allowed proceedings to be brought, but for which no other rule provided a jurisdictional gateway.
- Since, contrary to Mr White's submission, I have held a section 37 claim for an anti-suit injunction to be within CPR 62.5(1)(c), it is not only unnecessary to decide this further issue, but, for the same reason, a section 37 claim for an anti-suit injunction to protect an arbitration agreement cannot come within para 3.1(20). In the circumstances, I would not wish to decide this further point, even on any alternative basis.
- I would merely observe that, although the words of para 3.1(20) appear to have deliberately eschewed the former rule's particularity and opted for a catch-all provision, there must be a serious argument that section 37 of the 1981 Act is not an enactment "which allows proceedings to be brought" but more simply provides for a particular remedy within proceedings whose legal basis has to be found elsewhere. However, I have not sought to investigate whether such a distinction would fit with the statutes which were formerly the subject matter of the predecessor CPR 6.20(18) (and which covered topics such as immigration, drug trafficking, nuclear power, agriculture, social security and financial regulation).
- (iv) CPR 6.36 and Practice Direction 6B, para 3.1(6). This provides:
- The owner's opposition in the context of this gateway is not as to its applicability, but on the ground that it was not originally specified in the application which came ex parte before Andrew Smith J, and was first relied upon, retrospectively, to validate service out which had already occurred, before Burton J inter partes. The judge agreed with that submission.
- Mr White (and the judge) relied for these purposes on the rule in Parker v. Schuller (1901) 17 TLR 299 (CA). However, as Mr White came to accept during argument, that authority on its own terms depended on there being a new cause of action raised retrospectively, not a new rule relied on retrospectively. Thus permission had been obtained under RSC Order XI, rule 1(e) on the ground that failure to deliver goods sold cif Liverpool was a breach of contract to be performed within the jurisdiction. By the time the claim got to this court however it was recognised that such a contract did not require the delivery of goods in England, and therefore that alleged breach of contract was abandoned. Instead, and seeking to rely on the same sub-rule (e), the plaintiff now sought to amend and to specify a breach by failure to deliver documents (not goods) within the jurisdiction. This court was unwilling to consider the validity of this claim, and contented itself with ruling that the plaintiff failed in his application for leave to serve out because "that was not the cause of action endorsed on the writ" (per A L Smith MR at 300). Collins LJ said that the plaintiff had "tied himself, by the affidavit…to the cause of action for non-delivery of the goods at Liverpool", and Romer LJ said he ought not to be allowed "to set up another and distinct cause of action which was not before the Judge upon the original application" (ibid).
- In these circumstances, Mr White sought to widen his submission, to apply a Parker v. Schuller type approach to retrospective reliance on a new gateway, even if the factual and legal basis of the claim, namely breach of an arbitration agreement governed by English law and providing for arbitration in London, remained what it had always been. For this purpose he relied on Metall und Rohstoff AG v. Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391. There the plaintiff had relied for leave to serve out on the gateway within RSC Order 11, rule 1(1)(f) ("the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdicition"). Originally the cause of action in tort which had been pleaded and alleged was in conspiracy. By the time service had been effected and the parties had come before the court for argument, however, the plaintiff was seeking to rely on the same gateway (f) but for a different cause of action, namely the malicious institution of legal proceedings, and the cause of action in conspiracy had gone (there were legal difficulties with it). It was suggested that this could be done because the material facts had been stated in the pleading, even if the new legal analysis of them had not as yet been formulated. As in Parker v. Schuller, which was before this court although not cited in its judgment, this court did not delve into the validity of the new cause of action relied upon.
- The judgment of the court was given by Slade LJ. At 436D/F he said this:
- Slade LJ also said this at 478D/E:
- Mr White also relies in this connection on Dicey, Morris and Collins, The Conflict of Laws, 14th ed, 2006, at para 11-154, where the following is found:
- Mr White relies on the fact that Parker v. Schuller and Metall & Rohstoff are there cited for separate principles. In my judgment, however, Dicey, Morris and Collins goes no further than those authorities: and although in the latter authority Slade LJ uses the language of "legal basis" rather than "cause of action", I do not consider that he was there intending to speak about jurisdictional gateways rather than pleaded and evidenced claims. In essence, the situation in Metall & Rohstoff was the same as in Parker v. Schuller. Slade LJ possibly eschewed the language of cause of action because of the submission that in pleading terms a cause of action is stated by pleading the material facts, not the legal result (see at 436). What is quite clear is that in Metall & Rohstoff, just as in Parker v. Schuller, the plaintiff was relying on the same gateway at all times. It was Slade LJ who speculated, not the plantiff who claimed, that a new cause of action and a new gateway might have been appropriate (at 478 D/E).
- Mr White also relies on the recent case of NML Capital Ltd v. Republic of Argentina [2010] EWCA Civ 41, [2010] 3 WLR 874, where it appears to have been common ground that the identification of a new gateway at the inter partes stage is in exactly the same position as the pleading of a new cause of action at that stage, albeit it was allowed that the claimant "could make a new application": see at paras 39 and 62. That, however, was not the ratio of the case, which turned on special factors relating to state immunity. However, no authority is given concerning the analogy of new cause of action and new gateway: citation is given only for the new cause of action principle, see footnote 8 (at 901), where the origin of it is traced to Parker v. Schuller and citation is also made of Youell v. Kara Shipping Co Ltd [2000] 2 Lloyd's Rep 102 at para 79 (per Aikens J) referring to Schiffartsgesellschaft Detlev Von Appen GmbH v. Voest Alpine Intertrading GmbH [1997] 2 Lloyd's Rep 279 at 290 (per Hobhouse LJ). There is nothing in those authorities, however, to take the matter beyond the doctrine of Parker v. Schuller. It is also interesting to note that in DVA v. Voest Alpine Hobhouse LJ treated Metall & Rohstoff as an example of the doctrine relating to new causes of action (or "new basis of claim"). No authority (other than NML) has been cited for the new gateway analogy. Nor can I find reference to the analogy at para 11-154 of Dicey, Morris and Collins (see above) or in its citations (eg to Donohue v. Armco [2002] 1 Lloyd's Rep 425 at 432, where again the "new cause of action" doctrine is discussed).
- In these circumstances we are, as I believe, not bound by NML, but I am concerned by the confidence with which the new gateway principle is there stated (described at para 39 by Aikens LJ as a "well-known principle"). I can understand an argument based on the analogy between new cause of action and new gateway, but I am uncertain how far it could be taken. A new cause of action is fundamental, but an alternative gateway for the same cause of action is more a matter of procedure. Of course, in many cases where a new cause of action is relied on, the gateway would also have to be changed. Where, however, the cause of action remains the same and a new application is made inter partes to rely on a new gateway, if that application is properly made and causes no injustice to the defendant, why should the court require the expense and inconvenience of fresh service? In FFSB v. Seward & Kissel LLP (PC, 13 March 2007, Privy Council Appeal No 71 of 2005) the claimant had relied only on RSC Order 11, rule 1(1)(j) ("necessary or proper party") in respect of a cause of action in tort where the tort gateway (rule 1(1)(h)) had not been expressly relied on in seeking leave for service out, but the affidavit had clearly alleged that the relevant defendant had committed a tort within the jurisdiction. Lord Hoffmann distinguished Parker v. Schuller, saying:
- So far, I have set out material which the parties deployed. However, the importance of the issue has caused me to look further into the question. It appears that in Briggs and Rees, Civil Jurisdiction and Judgments, 5th ed, 2009 at para 4.54 it is said that a claimant will not generally be permitted to rely upon a different gateway when permission has not originally been sought on that particular basis (at 494). (The text uses the expression "Ground" rather than gateway, but this expression has been defined by the authors to refer to gateways under para 3.1 of Practice Direction 3B, see at 492.) Metall & Rohstoff and DVA are cited for this proposition at footnote 3, but I have already stated my view that these authorities do not support it. The authors also point out that CPR 6.37(1)(a) expressly requires that an application for permission under rule 6.36 "must set out" the gateway on which reliance is placed. It is suggested that this is a new requirement, albeit that it was considered good practice under the old RSC Order 11, rule 1(1) without however being strictly necessary: citing Newtherapeutics Ltd v. Katz [1991] Ch 226 at 251 (Knox J). However, the authors go on to observe that although the modern CPR rule is expressed to be mandatory, a failure to comply can be cured under CPR 3.10, in the absence of prejudice. I do not myself believe that there is any essential difference in the two regimes. RSC Order 11, rule 4(1)(a) itself said that an application "must" be supported by an affidavit stating "the grounds on which the application is made". It is simply that Knox J accepted that that provision "does not necessarily mean that an application will fail if no paragraph is in terms identified as governing the case". That I think remains the position. Clearly, however, it would be contrary to the rules, both under the RSC and under the CPR not to state the gateway(s) relied on.
- Further research premised on Metall & Rohstoff has also brought to light the decision of this court in Walton Insurance Limited v. Deutsche Ruck (UK) Reinsurance Company Limited (CA, 28 November 1990, unreported, on appeal from Steyn J), on which the parties were invited to make submissions. There the reinsurer plaintiff claimed against both its reinsured (the first defendant) and the reinsured's placing broker (the second defendant). The broker was out of the jurisdiction and therefore there was need of an RSC gateway to establish jurisdiction against it in England. The writ claimed rescission of the reinsurance contract against the reinsurer and damages in tort for negligent misrepresentation against both defendants. Leave to serve out on the broker was obtained on the basis of "necessary or proper party" (RSC Order 11, rule 1(1)(c)). The basis of reliance on that gateway was the anticipation that the reinsurer would dispute the authority of the broker (presumably for the purpose of a claim in contract for breach of warranty of authority), but as it turned out the reinsurer did not. There was in any event no claim against the broker for breach of warranty of authority. It was therefore accepted at the inter partes hearing that the original basis on which the "necessary or proper party" gateway had been put had gone. Nevertheless, the reinsurer sought to rely on that gateway anew in the context of the tortious claims contained in the writ which had always been advanced against the broker. Thus, strictly speaking this was neither a case of a new cause of action nor of a new gateway, but of a new way of relying on the same cause of action and the same gateway. That new reliance was disputed. Mr White noted the observations of Steyn J, Nourse LJ and Leggatt LJ that the gateway had remained unchanged. That is part of the factual basis of the authority, but there was no suggestion that a change of gateway (without more) would have made a critical difference. On the contrary, the authority stresses that the Parker v. Schuller principle is a limited one and is not to be extended.
- Nourse LJ said:
- In Spargos Mining NL v. Atlantic Coal Corporation (24 November 1995, unreported) Colman J referred to Walton Insurance, correctly in my judgment, for the following proposition:
- In sum, it seems to me that there is no authority which anyone has been able so far to find that has decided that a new gateway cannot, within the court's discretion, be relied on to support the earlier ex parte grant of permission to serve out of the jurisdiction. There is the authority of this court that the principle of Parker v. Schuller does not extend, and is not to be extended, beyond new causes of action; and that Metall & Rohstoff does not do so. Although Walton Insurance does not formally concern a new gateway, it is concerned with the same gateway deployed for very different purposes. The Privy Council case in FFSB is however a case concerned with a new gateway. It may be that it is only a minority of gateways which could be deployed in this way, since most gateways are concerned with different causes of action. Thus both Walton Insurance and FFSB were concerned with the "necessary or proper party" gateway. We are concerned with the "governed by English law" gateway. Although that gateway had not previously been invoked by the operator, nevertheless it was at all times absolutely plain that the very essence of the operator's claim was its reliance on an arbitration agreement covered by English law. Unless therefore there is a formal rule preventing reliance on any new gateway, the discretionary arguments in favour of allowing the service, already permitted, to stand are formidable.
- Burton J below rejected the operator's reliance on this gateway (iv), basing himself on Parker v. Schuller and subsequent authority in that line, naming Metall & Rohstoff and ED & F Man Sugar Ltd v. Lendoudis [2007] EWHC 2268 (Comm), [2007] 2 Lloyd's Rep 579 (at paras 16 and 25 of the judgment below). I have already referred to the former two cases; Lendoudis (Christopher Clarke J) was again concerned with a new cause of action and referred back to Metall & Rohstoff. In my judgment the judge was wrong to consider that he was bound by this line of authority, when what he was concerned with was a new gateway but the same cause of action. Therefore the question of discretion arises anew in this court.
- In these circumstances, and despite the concern engendered by NML, I would if necessary conclude that the operator could rely on the new gateway (iv) at the inter partes stage, encouraged inter alia by Lord Hoffmann's and the Privy Council's view of the matter in FFSB. There would be no unfairness to the owner in this conclusion.
- In sum, for one reason or another, I would dismiss the owner's appeal in relation to issue 2. The operator was entitled to service out of his claim form.
- For the purposes of this issue and issue 4 (below), it will be necessary, given the numerical coincidence, for the reader not to confuse clause 32 (the arbitration clause) and section 32 (of the 1982 Act).
- The judge did not recognise or enforce the decisions of the Kazakhstan courts. He reasoned that under section 32(3) of the 1982 Act he was not bound by the Kazakhstan courts' decision that the parties' arbitration agreement was illegal, void or ineffective by reason of Kazakhstan public policy. In considering therefore whether he should nevertheless recognise or enforce those decisions (see also section 32(3)), he took into account that the reason why the Kazakhstan courts came to the view that the arbitration agreement (clause 32 of the concession contract) offended Kazakhstan public policy was because they had misconstrued clause 32 in order to conclude that tariff disputes were within it. Properly construed, however, it was clear that tariff disputes were to be dealt with by an expert outside clause 32, by reason of the proviso in favour of clauses 17.8/9. On that basis there was no question of there being any offence to English public policy in the enforcement of clause 32: on the contrary English public policy favoured the enforcement of arbitration clauses. On the same basis, there was no offence to Kazakhstan public policy either. He would not therefore recognise or enforce the Kazakhstan courts' decision (see para 41).
- For the purpose of this issue Mr White submits, however, that the judgment of the Kazakhstan courts should have been recognised. He acknowledges that the wording of section 32(3) of the 1982 Act is such that the English court "may recognise the judgment but is not bound to do so". He says that the judge ought nevertheless to have recognised the judgments because they are based on anti-monopoly legislation, which reflects important public policy in Kazakhstan by regulating prices chargeable by natural monopolies within the borders of Kazakhstan: such as the operator, a company incorporated in Kazakhstan which operates there and has no connections with England.
- The relationship of issues 3 and 4 was not exposed in the submissions before us. In the judgment below and in the skeleton arguments on appeal the issues were presented as independent points. The judge decided both issues in the operator's favour, so from his standpoint their relationship may not have mattered.
- I should therefore state my view, for the present uninstructed by authority, that the structure of sections 32 and 33 of the 1982 Act is as follows. (i) Section 32(1)(a) states the general rule that a judgment of a foreign court in proceedings brought contrary to an agreement under which the dispute in question was to be settled otherwise than in the courts of that country "shall not be recognised or enforced in the United Kingdom". Thus the general rule is that a judgment of a foreign court in proceedings which ought instead to have been brought in arbitration in London shall not be recognised or enforced here. (ii) That general rule, however, is subject to the special provision that it does not apply where the person against whom the judgment is given has submitted to the jurisdiction of the foreign court (section 32(1)(b) and (c)). In such a case, it would seem to follow that the judgment of the foreign court may be recognised or enforced, and the question becomes whether it "should" be. (iii) The general rule is subject to another special provision, contained in section 32(2), to the effect that the section 32(1) general rule "does not apply" where the agreement for the settling of the dispute otherwise than by proceedings in the courts of the foreign country whose judgment is in question was "illegal, void or unenforceable or…incapable of being performed for reasons not attributable to the fault of the party bringing the proceedings". The merits of that exception appear to speak for themselves. In such a case it would again appear to follow that the judgment of the foreign court may be recognised or enforced here, and the question is whether they should be.
- (iv) The statute next addresses the question as to which court, namely the foreign court or the English court, should have the decisive say as to whether any of the factors which are relevant to the general rule or its exceptions obtain or not. For instance, is there an agreement for the settling of the relevant dispute otherwise than in the courts of the foreign country? Has the person against whom the judgment was given submitted? Is the agreement illegal, void, unenforceable etc? In respect to that question as to which court has the decisive say, section 32(3) states that the UK court "shall not be bound" by the decision of the foreign court. It appears to follow that the UK court can make up its own mind about such issues, presumably applying relevant and applicable principles of conflicts of law. For these purposes, it appears to be irrelevant to the rule that the UK court "shall not be bound", that the person against whom the foreign judgment has been given may have submitted to the foreign court or may in any event have been subject to the jurisdiction of the foreign court (and see (ix) below). Thus the statute does not say that the UK court is bound if that person had submitted to, or was otherwise within the jurisdiction of, the foreign court. However, it would seem to be reasonable to suppose that on either basis the foreign court's jurisdiction over that person would be relevant to the question whether the UK court "should" recognise or enforce the foreign court's judgment. (v) In this connection section 32(3) also states that in such a case, ie in a case where the general rule does not apply – for where it does the rule is that the foreign judgment "shall not" be recognised or enforced – it is for the UK court to decide "whether a judgment given by a court of an overseas country should be recognised or enforced". It was common ground before the judge, and it has been common ground in this court, that section 32(3) gives to the English court a discretion whether to recognise or enforce in circumstances where the general rule does not apply. I am not sure that discretion is the right concept here; it may be that it would be better to say that whether the foreign judgment should be recognised or enforced is a matter for evaluative judgment. I will revert to this below.
- (vi) Section 33 then gives to the UK court further guidance on the question of submission to the foreign court. It states that certain matters which might otherwise be thought of as amounting to a submission, for instance appearing in the foreign court for the purpose only of contesting its jurisdiction, "shall not be regarded" as a submission. (vii) Section 33 also picks up and repeats the opening language of section 32(3): "For the purposes of determining whether a judgment should be recognised or enforced…" Therefore, if, applying section 33, there is no submission to the foreign court, then, unless the section 32(2) exception applies, the UK court "shall not" recognise or enforce the foreign judgment. If, on the other hand, there has been a submission, then it would seem that the UK court may recognise or enforce it and perhaps should do so, but is not bound to do so. For section 32(3) says that the decisions of the foreign court on the specified matters do not bind the court. (viii) Nothing in sections 32 or 33 tells the UK court that in certain circumstances it is bound to recognise or enforce the foreign judgment. Nothing states that, if there has been a submission to the foreign court, the English court is bound to recognise or enforce the foreign judgment. I suppose that in circumstances where the UK court is not bound not to recognise or enforce the foreign judgment, it will be guided by general principles relating to the recognition or enforcement of foreign judgments. (ix) It is not at all clear to me how the special provisions of sections 32/33 concerning submission to the jurisdiction of the foreign court relate to the underlying question of the territorial jurisdiction of such a court. Thus, in the present case, the operator was a Kazakhstan company present in Kazakhstan and at all times within the "domestic" jurisdiction of the Kazakhstan courts. Moreover, since such jurisdiction based on presence would normally be recognised internationally, it might also be said that the operator was within the "international" jurisdiction of those courts. On the other hand, section 32 would seem to indicate that where jurisdiction and arbitration clauses are concerned, English public policy exerts a view about such "international" jurisdiction to the effect that it can only be established in accordance with the autonomous choice of the parties. Thus section 32(3)'s "shall not be bound by any decision of the overseas court relating to any of the matters mentioned in subsection (1) or (2)" is stated without qualification as to any matter of the foreign court's jurisdiction.
- I turn next to consider the authorities in this field which have been cited to us.
- In Akai Pty Ltd v. People's Insurance Co Ltd [1998] 1 Lloyd's Rep 90, the plaintiff, Akai, had entered into a contract with the defendant, PIC, an insurer. Akai was incorporated in New South Wales, and PIC in Singapore. Their contract contained an English law and exclusive jurisdiction clause. Akai commenced claims in both Australia and England against PIC under their policy contract. PIC filed a motion in New South Wales for a stay pending determination of the English action. The motion was granted at first instance, and upheld on appeal, but on further appeal to the High Court of Australia (HCA) the stay was refused on the ground that the Australian Insurance Contracts Act 1984 overrode the agreed proper law of the contract, gave to the contract a proper law of New South Wales law, and rendered the English law and jurisdiction clause void. In England PIC counterclaimed for an anti-suit injunction against Akai's Australian action, and Akai sought to disengage itself from its English action by seeking leave to discontinue.
- In the result Thomas J held: (i) that PIC had not submitted to the jurisdiction of the Australian courts; (ii) that the decision of the HCA as to the law and jurisdiction clause would not be recognised; and (iii) that PIC would be granted an anti-suit injunction against Akai's Australian proceedings.
- As to Thomas J's holding (i), the details of it are not relevant to the present issue 3, but it is clear nevertheless that the argument before Thomas J proceeded on the basis that if PIC had submitted to the jurisdiction of the Australian court then its judgment ought to be recognised. That is implicit in the very wording of issue 1 stated by Thomas J at page 95 (right hand column). As it is, Thomas J decided that PIC had not submitted, so that the implicit acceptance of the consequence of a submission was never explored. I bear that in mind for consideration below under issue (4) and its consequences.
- As for Thomas J's holding (ii), he reasoned that as between giving effect to the public policy of Australia or to the parties' agreement for English law and jurisdiction, it was the latter which should prevail: see Re Missouri Steamship Co (1889) 42 Ch D 321 and Vita Food Products Inc v. Unus Shipping Co Ltd [1939] AC 277. He concluded (at 100) that –
- A similar result in favour of English law and jurisdiction or arbitration clauses was achieved in Through Transport [2004] 1 Lloyd's Rep 206 (Moore-Bick J), and [2005] 1 Lloyd's Rep 67 (CA), OT Africa Ltd v. Magic Sportswear Corporation [2005] 2 Lloyd's Rep 170 (CA), and Tamil Nadu Electricity Board v. ST-CMS Electric Co [2008] 1 Lloyd's Rep 93 (Cooke J) (cf National Navigation Co v. Endesa Generacion SA (The Wadi Sudr) [2010] 1 Lloyd's Rep 193 (CA) where special factors relating to the Judgments Regulation in EU Law applied).
- In Through Transport there had been a Finnish court decision to the effect that the English arbitration clause was not binding on the same parties in Finland (see para 7 of the judgment of Moore-Bick J). There was no express consideration of the 1982 Act or of the question of submission in the Finnish court, but Moore-Bick J and this court applied familiar law in concluding that the arbitration clause was binding on the parties in the proceedings here, despite Finnish legislation to different effect. As Moore-Bick J concluded at his para 20:
- In OT Africa there had been a Canadian court decision that the English jurisdiction clause in the parties' contract did not have binding effect in Canadian litigation, pursuant to a Canadian statute to that effect. As in Through Transport there was no express consideration of the 1982 Act or of the question of submission in the Canadian court. This court applied familiar principles, including Akai, to the problem (at paras 27/28; see also paras 58/59). Albeit in the subsequent context of whether to grant an anti-suit injunction, Longmore LJ said (at 32):
- Tamil Nadu had a factual background not unlike the position in this case, save that there was no foreign court decision involved. Both parties were Indian companies in the business of electricity supply. They contracted for Indian law save for an arbitration agreement for London arbitration under ICC Rules and English law. The parties fell into dispute about tariff rates. The claimant contended that under Indian law the rates were to be fixed by a local Electricity Regulatory Commission. No question of the recognition or enforcement of an Indian court decision arose, but the question of whether Indian law was relevant as a matter of English private international law did. Cooke J referred to Akai and OT Africa (at para 35) and concluded:
- In The Wadi Sudr there was a dispute between Egyptian shipowners and Spanish cargo receivers under a bill of lading said by the shipowners to incorporate a London arbitration clause. Proceedings were commenced in both Spain by the receivers, and in England by the shipowners. The Spanish court decided that the arbitration clause was not incorporated in the bill of lading, but stayed the receivers' action under article 27 of the Judgments Regulation as the court second seised. The issue was whether the Spanish court decision should be recognised in England under the Judgments Regulation, ie the issue not grasped (or reached) in Through Transport (see at para 51 of the judgment of Waller LJ and at paras 120/121 of the judgment of Moore-Bick LJ). This court held that it should. That was a decision under article 33(1) of the Judgments Regulation, rather than under sections 32/33 of the 1982 Act, however there was also contrasting reference to the latter, to which I will refer below under issue 4. In the context of the former, the English court was bound by article 33(1) to recognise the Spanish judgment ("A judgment given in a State shall be recognised…") subject to the public policy exception in article 34(1) (which provides that a judgment "shall not be recognised" where it is "manifestly contrary to public policy" in the state in which recognition is sought). It was argued that English public policy in favour of enforcing arbitration clauses was so strong as to come within the article 34(1) exception. That argument was rejected (see at paras 62 and 125/6). Mr White relied on that rejection, but I do not find much assistance in it for present purposes. The argument attempted to raise the status of a policy in favour of the autonomous choice of jurisdiction and arbitration clauses to the level of ordre public, in the face of a general rule that judgments of member states are to be recognised. In the context of section 32(1) of the 1982 Act, however, and in the specific context of jurisdiction and arbitration clauses, the policy of the English law is expressly stated in the entirely contrary direction. That is why section 32(4) of the 1982 Act had to make an exception for judgments under the Brussels Convention, now the Judgments Regulation.
- Mr White also relied on Philip Alexander Securities and Futures Limited v. Bamberger, Theele, Kefer, Riedel, Franz and Gilhaus [1997] 1 L Pr 73 (Waller J and CA). In that case the English court granted anti-suit injunctions against German consumers, restraining them from pursuing court proceedings in Germany in breach of a London arbitration agreement. The anti-suit injunctions were ignored by the German courts, which ruled that they were invalid or inapplicable under German law. The injunctions were ultimately set aside by Waller J whose decision was upheld by this court. However, many special considerations applied in that case: among them were this country's own Consumer Arbitration Agreements Act 1988, and the ramifications of what was then the Brussels Convention. The passages relied on by Mr White (see at paras [47]-[48] and [82]-[83] per Waller J and paras [4] and [47]-[48] per Leggatt LJ) are in any event directed towards the question of anti-suit injunctions (and in particular anti-suit injunctions in the context of proceedings in other member states of the European Union) rather than the question of recognition or enforcement. As it is, The Front Comor [2009] 1 Lloyd's Rep 413 (ECJ) has now developed decisively, from the ECJ perspective, the special dispensation which applies in that context, but does not apply here. Like the judge, I am not much assisted by Philip Alexander.
- These authorities do not cast a great deal of light on the application of section 32 of the 1982 Act to the present circumstances. However, subject to the question of submission to the foreign court, with which I will deal below under issue 4, it is clear that the English courts have not hesitated to prefer the parties' choice of English jurisdiction and arbitration clauses to even the public policy requirements of foreign law as expressed in foreign statute and/or applied in the decisions of foreign courts. This court is not bound by the Kazakhstan courts' construction of the English law arbitration agreement (subject to any question of submission) or by its view that it is contrary to Kazakhstan public policy. Above all, in circumstances where it is completely plain that the Kazakhstan Supreme Court was simply mistaken in thinking that clause 32 covered, rather than excluded, clause 17.8/9 tariff disputes, so that on a proper construction of the arbitration agreement there is in fact no relevant matter of concern for or impact upon Kazakhstan public policy, I can see no reason why the Kazakhstan courts' judgments should be recognised or enforced. On this issue, as it has been argued before us, separate from the question of submission, I would uphold the judge's decision and state my conclusion that the Kazakhstan judgments should not be recognised or enforced in this country.
- That makes it unnecessary to consider the submission of Mr Eder that in any event the express prohibition of section 32(1) of the 1982 Act is conclusive provided that as a matter of its true construction (any decision of the foreign court within section 32(3) not being binding on the English court) the bringing of the foreign proceedings was in breach of an arbitration agreement for arbitration in London.
- It may be that issue 3 and the issue under section 32(3) have been addressed as matters of discretion because the owner has been keen to argue that concerns by the English court for public policy of Kazakhstan, in a dispute between two Kazakh parties owning or operating a utility resource in Kazakhstan, and in such a context concern by the English court for comity with the courts of a foreign nation, should lead the English court to recognise the Kazakhstan court's decision although not bound to do so. It may be for the same reason that the interrelationship between issues 3 and 4 have not been clearly addressed in the submissions before us. Thus the owner may have thought that what it might lose on the issue 4 swing it might win on the issue 3 roundabout: and it may have considered that issue 3 was a better point than issue 4 – hence the order in which the issues have been argued. For myself, however, I would prefer to put it as a matter of evaluative judgment: see European Civil Practice, 2nd ed, 2004, at paras 41.034/5.
- This issue raises a question of fact, and a question of the significance of the fact. The question of fact is: Did the operator submit by joining issue on the merits, having lost the jurisdiction argument, pending renewing its jurisdictional challenge at the appeal stage? The question of law is: if the operator did submit, is that conclusive for the recognition of the Kazakhstan judgments?
- Mr White argued that by pleading its Response on the merits after the Economic Court had issued its ruling on jurisdiction (on 28 July 2009) and/or by participating in the hearing of 5 August 2009, after the Economic Court had rejected its motion to suspend the owner's proceedings in the light of its arguments as to jurisdiction and of the ex parte injunction of Andrew Smith J which it had brought to the attention of the Court, the operator had submitted to its jurisdiction. Mr Eder argued on the other side that at all times the operator maintained its challenge to the Court's jurisdiction; that the Response was filed strictly without prejudice to its right to enforce the arbitration agreement; and that in Kazakhstan an appeal on such a challenge could only be filed after a decision on the merits, giving the operator no realistic option but to participate in the court hearing in order to pave the way to an appeal.
- The judge favoured the operator's interpretation of the facts over those of the owner and made findings as follows:
- The three passages referred to from Dicey, Morris and Collins are at paras 14-063ff, where the learned authors discuss the question of submission to the jurisdiction of a foreign court and the change that section 33 of the 1982 Act has wrought on the previous position at common law: cf, for instance, Henry Geoprosco International Ltd [1976] QB 726 (CA). Thus the following is found:
- The position in this case is complicated by the facts that (a) the operator, as a Kazakh company incorporated and operating in Kazakhstan, was in any event within the jurisdiction of the Kazakhstan courts; (b) although the operator did plead to and participate in a hearing on the merits, that was always under a reservation as to jurisdiction based on its reliance on the arbitration agreement, and latterly under the protection and assertion of the English court's (albeit ex parte) anti-suit injunction; and (c) on the expert evidence of Kazakhstan law and practice, accepted by the judge, at any rate for the purposes of the hearing below, the operator "de facto has no other choice than to participate in the hearing of the substance of the dispute and to appeal a decision on jurisdiction…only after the decision on the merits has been reached…"
- Is any light thrown on these circumstances in English jurisprudence?
- Tracomin SA v. Sudan Oil Seeds Co Ltd [1983] 1 Lloyd's Rep 560 (Staughton J), [1983] 2 Lloyd's Rep 384 (CA) was not separately cited to us, but was discussed in The Wadi Sudr at 203 (right hand column). The synopsis of it there given by Waller LJ is a helpful introduction to it:
- Marc Rich & Co AG v. Societa Italiana Impiant PA (The Atlantic Emperor, No 2) [1992] 1 Lloyd's Rep 624 (CA) concerned the decision of an Italian court. An argument that section 32 of the 1982 was not in play because the Italian judgment in question came within the exclusion of section 32(4)(a) was put on one side, because it was held to be unnecessary to decide it in the light of Marc Rich's ultimate submission to the Italian Court. The issue was framed as depending entirely on whether Marc Rich had submitted to the jurisdiction of the Italian trial court in Genoa. Marc Rich had objected to the jurisdiction of that court on the ground of an English arbitration clause, but had also pleaded in the alternative to the merits of the claim against it (indeed, on the hypothesis that its challenge to jurisdiction failed, it counterclaimed damages): this was called the "first defence". The issue of jurisdiction was lost but Marc Rich appealed to the Corte di Cassazione on that issue, but lost in that court too. That was the end of the road on the jurisdiction issue, for the Corte di Cassazione is Italy's supreme court. Following that ultimate defeat on jurisdiction, Marc Rich then put in a further defence in Genoa which solely addressed the substantive merits of the claim against it (the "second defence"), and did so without any further reservations.
- In these circumstances, the English court of appeal held that section 33 "should not be construed too narrowly" and that it did not matter that the alternative plea on the merits (made in "the first defence") was "not necessary", when the primary purpose of the defence was to challenge jurisdiction. In doing so, it applied the learning of the European Court of Justice in Elefanten Schuh GmbH v. Pierre Jacqmain Case 150/80 [1981] ECR 1671 and said that that learning was an additional reason for interpreting section 33 "in a broad sense", ie so as not too easily to find a submission. However, the "second defence" was not concerned with the challenge to the jurisdiction but "was a plain and unequivocal submission to the jurisdiction of the Italian court to deal with the merits of the claim". It was argued that this was at most a submission on the merits and not a retrospective submission to the court on the issue of the arbitration clause and thus of the court's jurisdiction. That argument was rejected. Neill LJ said:
- Mr White relies on this authority, for obvious reasons. However, Neill LJ's reasoning does not explain why there was no issue under section 32(3). It seems to have been assumed that if the case was not within section 32(1) because of the proviso of section 32(1)(c), it became irrelevant to ask the question raised by section 32(1)(a) and section 32(3) as to whether the foreign proceedings had been brought contrary to the parties' agreement as to jurisdiction. Moreover, it is not clear what answer should be given to the question of submission, applying section 33 broadly, where a second pleading continued to reserve the question of jurisdiction, pending an appeal. For these reasons, I am inclined to regard Marc Rich as not being determinative on either of the two questions posed at the beginning of this section of my judgment.
- I am supported in that view of Marc Rich by two other authorities which followed it. The first is Akai, where Thomas J said, with reference to the factual question of submission (at 98, left hand column):
- The second is Harada Limited (t/a Chequepoint) v. Turner (No 2) [2003] EWCA 1695 (2 December 2003, unreported) which is cited in Briggs and Rees, Civil Jurisdiction and Judgments, 5th ed, 2009, at para 7-51 footnote 2 at 735, and on which the parties were invited to make submissions. Albeit this was only a decision on permission to appeal (which was refused), it had been referred to the full court and was decided on a question of law (as well as fact). It should be said that the respondent did not appear (although the application was presumably to be followed by an appeal, had permission been granted). Even so, the applicant was represented and put the issue which is presently before this court in full, and Simon Brown LJ said (at para 38):
- Harada concerned a claim by an employee against his employer for unfair dismissal, which began life in the Employment Tribunal. The employer, Harada, raised an issue of jurisdiction in the Tribunal (based on the allegation that the employee ordinarily worked for it outside Great Britain). A preliminary point was ordered on the question of jurisdiction. The Tribunal decided that issue against Harada (in its absence). There was an appeal to the EAT on the question of jurisdiction (and bias). Pending the hearing of that appeal, the employee's substantive claims came on for decision before the Tribunal. Harada's attempts to postpone that hearing until after the hearing of its appeal came to nothing. The employee's claims were heard in Harada's absence, and succeeded. Subsequently the jurisdiction appeal to the EAT failed, but succeeded in the court of appeal on the question of bias. The question then arose whether Harada was entitled to have the ET's decision on jurisdiction revisited. The ET decided that that was unnecessary, because Harada could have appeared to dispute the merits, under cover of its reservations as to jurisdiction, and had deliberately decided to absent itself. The issue in the court of appeal, on appeal from the EAT, was whether that was correct. This court decided that it was, the critical question being whether there was any real risk of being found to have submitted if Harada had addressed the merits of the case in the Tribunal. Article 18 of the Brussels Convention applied and provided that "This rule shall not apply where appearance was entered solely to contest the jurisdiction…" Thus, although the issue arose under article 18 rather than section 33, it was essentially the same issue, especially in the light of Marc Rich's adoption of the test in Elefanten Schuh outside the context of EU law.
- The main judgment was given by Simon Brown LJ (sitting with Mummery and Mance LJJ). Simon Brown LJ referred to Elefanten Schuh and said:
- It was in this context that Simon Brown addressed Marc Rich, which Harada relied on to submit that it was at risk of being found to have submitted if it had appeared to contest the merits. Simon Brown LJ said:
- A more general discussion of the context of sections 32/33 is contained in the judgment of Moore-Bick LJ in The Wadi Sudr at 215. It will be recalled that the foreign judgment in that case was issued by a court of a member state of the European Union and for that reason the exclusion in section 32(4)(a) applied and the judgment had to be recognised unless it was "manifestly contrary to public policy". That led Moore-Bick LJ (with whose judgment Carnwath LJ agreed) to say this (at 215/6):
- That discussion demonstrates that section 32 is designed to set aside the common law rules relating to the recognition and enforcement of foreign judgments relating to jurisdiction and arbitration clauses. For these purposes the English court is not bound by the foreign court's decision relating to the existence or validity or applicability or breach of such clauses, or as to the question of submission to the jurisdiction of the foreign court. That is a strong provision, but it is necessary if the English court's freedom to decide on such matters for itself is to be preserved. Unlike the position within the member states of the European Union, there is no doctrine of first seisin or a requirement of recognition. On the contrary the basic rule of section 32(1) is that in this context judgments of foreign courts "shall not be recognised or enforced". That leads on to section 33(1), which refers back to the question of whether a judgment of a foreign court should be recognised. Moreover, section 33 does not say what amounts to a submission, but what shall not be regarded as a submission. It does not follow that matters not listed in section 33 result in the conclusion that a party has submitted.
- In the context of section 32 itself, then, how should the provisions of section 33(1) be applied where a defendant in a foreign court, otherwise within the domestic jurisdiction of that court, as would be recognised by English conflict of laws rules, nevertheless challenges its jurisdiction on the ground of a jurisdiction or arbitration agreement? And what if it argues the substance of a claim under the reserves of that challenge? It cannot stand aloof, because the court has jurisdiction over it, unless it declines that jurisdiction. Such a defendant therefore has no realistic option but to argue the merits if the court is unwilling to decline jurisdiction. Has a party in such circumstances "submitted" to the jurisdiction? And in particular should he be regarded as having "submitted" on the issue of jurisdictional challenge?
- Under the AA 1996 itself, there is a clear answer to such questions. A party who argues the merits, having challenged the arbitrators' jurisdiction and lost, has not lost his chance to challenge the arbitrators' jurisdiction as long as he complies with the requirements of section 67 and/or section 73 of the Act. This is an alternative to simply taking no part in the arbitration (section 72). That is not a complete analogy, for the arbitrators' jurisdiction can only be constituted consensually, and that is not the case of the jurisdiction of courts. However, it is a fair analogy, as it seems to me, because in the specific context of jurisdiction and arbitration clauses (albeit not outside that context) the doctrine of section 32 is that the parties' agreement is the critical thing and remains so, (at any rate in the absence of submission), whatever the foreign court decides.
- The proviso of section 32(1)(b) and (c) is instructive here. It specifies three cases: first, where the party resisting recognition and enforcement actively invokes the jurisdiction of the foreign court by bringing proceedings there; secondly, where that party does the equivalent by means of a counterclaim; and thirdly where that party "otherwise submit[s]". In this context, what is being looked for is a waiver of its jurisdictional challenge: see Dicey, Morris and Collins at para 14-066 cited above, and the extensive discussion in Akai at 96-98, which concludes –
- In these circumstances, I have ultimately come to the conclusion that it would not be right for this court to reverse the careful decision of the judge that there was at least a good arguable case that what occurred in the Kazakhstan Economic Court between 28 July and 5 August (the judge refers to 4 August at one point) did not amount to a submission to its jurisdiction. It was obvious from beginning to end that the operator was presenting and preserving its challenge to the Court's jurisdiction on the ground of the parties' arbitration agreement, if necessary by way of appeal. All that was done was subject to that challenge and in reliance on it. As a Kazakhstan party there was nothing that the operator could otherwise do to distance itself from the court's domestic jurisdiction. It is plain on the basis of Marc Rich that the alternative pleading on the merits in the operator's Response would not have been a submission, at any rate where there had not as yet been any decision relating to clause 32. It is plain from the Response, even after the decision of 28 July, that the operator was not waiving its right to rely on arbitration. It specifically stated that it was not recognising the jurisdiction of the Court over its dispute. On 4 August 2009, it brought the anti-suit injunction of Andrew Smith J to the attention of the Economic Court and moved a motion to suspend the proceedings. In those circumstances, its participation in the hearing of 5 August seems to me to have gone no further than its Response. Burton J remarked (in his para 8(iii)) that "there is a dispute between the parties as to precisely what occurred [at that hearing], which I am not in a position to resolve". There was at any rate a single judgment on all matters on 5 August, when the Court decided both that clause 32 did not avail the operator and that the claim for information should be upheld (ibid). In those circumstances, the operator did not fail on jurisdiction and then "go on" to defend on the merits, as Burton J himself observed (at para 51). In as much as Dicey, Morris and Collins suggest that going on to defend on the merits after losing on jurisdiction is a submission, it seems to me that those comments (which are not referenced to authority at paras 14-063 or 14-064) are probably to be taken as a reference to Marc Rich which is dealt with at para 14-066 (and para 14-091). However, in that case there was a plain waiver, without any suggestion of a reservation.
- The decision of this court in Harada is consistent with and supportive of this analysis, and perhaps decisive of it. In that case, defending on the merits after a decision on jurisdiction which will still be challenged, was held not to be a submission. The observations in Harada and Akai support my view of Marc Rich as an authority which can properly be distinguished here.
- Moreover, what occurred on 4 and 5 August occurred in the context of the anti-suit injunction which Andrew Smith J had granted a few days earlier and which the operator had deployed on 4 August in its motion to suspend the proceedings. In those circumstances the judgment of this court in Philip Alexander would suggest that the English court should not recognise a judgment obtained abroad in breach of an English court's injunction: see per Leggatt LJ at [43].
- If I am wrong in this conclusion so far, ultimately the question would be: whether in all these circumstances, including all the facts relating to the alleged submission, and even on the hypothesis that those facts, contrary to my view, amounted to a submission, the judgment of the Economic Court "should be recognised" in the United Kingdom. I can find nothing in sections 32 or 33 which requires that it should be. We are not concerned with a judgment concerning the request for information, because that is no longer in issue. What we are concerned with is the Economic Court's judgment as to clause 32, the arbitration agreement. On the assumption of a submission, there is admittedly no rule that the Economic Court's judgment "shall not be recognised". However, the Kazakhstan court's judgment as to the scope and validity of the arbitration agreement is not in any event binding on the English court. It is plain to the English court that clause 32 does not encompass tariff disputes under clauses 17.8/9. It is therefore similarly plain to the English court that there can be no public policy reason in Kazakhstan for invalidating the arbitration agreement. In any event the parties' autonomy in choosing an English law arbitration agreement would, on English conflict of laws principles, prevail. It is also clear that, even though the operator may have, according to the present assumption, submitted to the Economic Court, despite its best endeavours not to do so, it plainly never recognised the Economic Court as having international jurisdiction over it, and plainly reserved the question of the effectiveness of its arbitration agreement.
- I am conscious of the assumption in Akai that submission entails the necessary consequence of the recognition of the foreign judgment even in the context of jurisdiction and arbitration clauses; and of the decision in this court in Marc Rich that submission on the merits entails that the foreign decision on the issue as to the effectiveness of an alleged arbitration agreement also becomes binding on the parties (noted in Dicey, Morris and Collins at para 14-91). However, it seems to me that that is not what section 32(3) says ("shall not be bound"), and that I am entitled to distinguish Marc Rich where, first, the point which I am now considering ("whether a judgment…should be recognised") does not appear to have been in issue; and secondly, the factual position in Marc Rich involved a complete waiver of the right to rely on an arbitration clause, which on any view, even on my present assumption, is not the case here. In my judgment, section 32 is a special case (see Moore-Bick LJ in The Wadi Sudr), reflecting a statutory insistence that ultimately issues as to the effectiveness of arbitration and other jurisdiction clauses, and as to the virtues of recognition or enforcement of foreign judgments as to the effectiveness of such clauses, are to be settled here (unless there has been no submission and no judgment that such a clause was illegal (etc), in which case the simple and plain rule in the United Kingdom is that foreign judgments given in proceedings brought in breach of such clauses "shall not be recognised or enforced").
- Therefore, I would reject all of the owner's grounds of appeal, and dismiss its appeal.
- Subject to the nuance of difference between them as to the effect of Para 3.1(20)(a) of Practice Direction 6B supplementary to Part 6 of the CPR, I agree with both judgments. In respect of that difference, I consider that the argument that a claim for an injunction under s.37 of the Act of 1981 falls outside the subparagraph is not (as Rix LJ suggests at [126]) merely "serious" but (as Stanley Burnton LJ in effect suggests at [207]) patently correct.
- I gratefully adopt Lord Justice Rix's statement of the facts of this case, and, subject to one minor point, I agree with his encyclopaedic judgment. I shall give my own brief reasons for agreeing with his conclusions on the first, second and fourth issues identified by him in paragraphs 36 to 40.
- There are a number of reasons why contracting parties include arbitration or jurisdiction clauses in the contracts. One is the perceived need to protect one party against litigation before the courts of the country of the other party which are thought to be less than objective and unbiased in their decisions.
- The decision of the Court of Appeal in Henry v. Geoprosco International Ltd [1976] QB 726 was a reminder of the vulnerability of the protection afforded by arbitration and jurisdiction agreements. The plaintiff, a Canadian, had entered into a service agreement with a UK company for employment in the Middle East. The agreement was subject to English law and included a mandatory arbitration clause. He brought proceedings in the Canadian courts claiming damages for wrongful dismissal. The employer objected to the jurisdiction of the Canadian courts. Faced with the unenviable choice between ignoring the Canadian proceedings, in which case there would be a judgment against it, and protesting to the jurisdiction, it applied to set aside the service of the Canadian proceedings on it in the UK. Under Canadian procedural law, the court had a discretion whether or not to set aside service. Following the earlier and notorious decision of the Court of Appeal in Harris v. Taylor [1915] 2 KB 580, the Court held that the employer, by asking the Canadian court to exercise a discretion, had submitted to the jurisdiction, and was therefore bound by the Canadian court's judgment. It followed that the employer had lost the protection of the arbitration agreement.
- The Court of Appeal left open the question whether an appearance in a foreign court solely to protest against the jurisdiction of that court amounts to a voluntary submission to its jurisdiction. It followed that a company or person sued in a foreign jurisdiction, to which he was not subject, in breach of an arbitration or jurisdiction agreement, could not safely protest its jurisdiction. If he failed in his protest, he might be held to have submitted to a jurisdiction which our courts would not otherwise recognise as having jurisdiction over him. Moreover, if the company or person appeared in the foreign court, and it held that the arbitration agreement (or agreement to submit disputes to the jurisdiction of the High Court in this country) was for any reason unenforceable, the defendant in the foreign proceedings that sought to bring arbitration proceedings in this country might be met with the argument that the invalidity of the arbitration agreement was res judicata or the subject of issue estoppel.
- Sections 32 and 33 of the 1982 Act were intended to reverse Henry v. Geoprosco and to meet the concerns to which I have referred. If there is a valid arbitration agreement under English law, by reason of section 32(3), unless the defendant in the foreign court who would not otherwise be subject to its jurisdiction submitted to its jurisdiction, the finding of the foreign court that the arbitration agreement was illegal, void, unenforceable or incapable of being performed cannot create an issue estoppel and is not res judicata. It also follows from that subsection that it is our courts, not the foreign court, that decides whether the defendant in the foreign proceedings submitted to the jurisdiction of that court.
- Did the respondent in the present appeal submit to the jurisdiction of the Kazakhstan Court? This is in part an issue of fact. On one view, the present case raises the issue whether a party who protests the jurisdiction of a foreign court, and while maintaining its objection, proceeds to argue the merits, submits to that jurisdiction. As long ago as 1880, Lord Selborne L.C. in Hamlyn v. Betteley (1880) 6 Q.B.D. 63 , said, at p. 65:
- Sections 31 and 32 of the 1996 Act are not inconsistent with this principle. Does it apply to foreign litigation? It may be unsafe to apply a rule applicable to arbitral proceedings, in which jurisdiction is based on consent, to litigation before the courts, whose jurisdiction is not generally consensual. However, where the defendant or the particular dispute is not otherwise subject to the jurisdiction of the foreign court, it is his voluntary act in contesting the merits after a failed attempt to protest the jurisdiction that may give the foreign court jurisdiction in the eyes of the courts of this country.
- As Lord Justice Rix has pointed out, this case differs from many in that the operator is subject to the territorial jurisdiction of the courts of Kazakhstan. There is Kazakhstan legal evidence that it had no real option but to act as it did. Given that evidence, which is disputed, and the authorities to which Lord Justice Rix refers at paragraphs 172 to 180 of his judgment, I agree that there is a triable issue as to whether, on the particular facts of this case, the operator submitted to the jurisdiction of the courts of Kazakhstan.
- I add that in my judgment it would be unfortunate if the principles applied by our courts on the question whether a litigant has submitted to the jurisdiction of a foreign court in non-EU cases were to differ from the principles applied by the Court of Justice and therefore our courts in cases under the Brussels and Lugano Conventions and now the Judgments Regulation.
- Sections 32 and 33 of the 1982 Act reflect a legislative intention to protect parties to mandatory arbitration agreements, and agreements to submit disputes to an agreed jurisdiction from judgments of foreign courts in proceedings begun in breach of such agreements. Accordingly, I should be reluctant to conclude that our courts cannot, in an appropriate case, grant injunctive relief to protect a contractual right to arbitration or to litigation in an agreed jurisdiction.
- Section 1(c) of the 1996 Act, which Lord Justice Rix has set out, begs the question: intervene in what? I should have thought that the obvious answer is: in the arbitration proceedings. It refers to intervention, not to orders of the court that are not intervention. This approach is supported by what was said in the Departmental Advisory Committee Report on the Arbitration Bill. Referring to what became section 44:
- This interpretation of section 1(c) is borne out by section 44. It is headed "Court powers exercisable in support of arbitral proceedings", and the matters listed in subsection (2) relate to actual or impending arbitration proceedings. Section 44(5) supports my view. Furthermore, it would be absurd if the Court may grant an interlocutory injunction under subsection 44(2)(c) to restrain a party to an arbitration from bringing or continuing foreign litigation in breach of its agreement, but could not make that injunction final when the claimant obtains final judgment. I therefore see no reason to read it, or section 1(c), as restricting the power of the Court to grant an injunction under section 37 of the Senior Courts Act 1981 to protect a party's contractual right to arbitration in circumstances in which arbitral proceedings are not pending or impending.
- Furthermore, I do not regard the fact that the 1996 Act contains provisions, referred to by Thomas J in Vale do Rio at paragraph 50, relating to the powers of the Court that can be exercised before the appointment of the arbitral tribunal, as inconsistent with my view. The right to a mandatory stay of court proceedings, under section 9, required legislation, particularly since it varied the position under previous legislation. The power of the Court under section 12 to extend time for beginning arbitral proceedings also required to be included in legislation. However, the power of the Court to grant injunctive relief did not require legislation in the 1996 Act: it had already been conferred by the 1981 Act and its predecessors.
- On this issue, I would say only that, unless binding authority compels a different conclusion, I do not consider that the inflexible rule in Parker v. Schuller should be extended beyond the proposition for which it is authority, which is confined to attempts to rely on new causes of action that were not relied upon when the claimant sought permission to serve out of the jurisdiction. As Lord Justice Rix has demonstrated, there is no such binding authority.
- Lastly, in my judgment section 37 of the Senior Courts Act 1981, which confers power to grant injunctions in proceedings properly within the jurisdiction, is not "an enactment which allows proceedings to be brought" within paragraph 3(20)(a) of Practice Direction 6B. In the absence of another basis for jurisdiction, it is only if there is such an enactment that the Court has the power conferred by section 37. Indeed, if it were otherwise, The Siskina [1979] AC 210 would now be decided differently.
Lord Justice Rix :
"2. The [owner] cannot bring the claim, the subject matter of the proceedings before the Specialized Inter-District Economic Court of the Eastern Kazakhstan Region commenced by the [owner] against the [operator] on 12 June 2009 ("the Kazakhstan Proceedings"), or any other claim arising out of or in connection with any matter or thing in relation to the provisions of the Concession Agreement dated 23 July 2007 (as amended), save only in those claims or matters which fall to be determined in accordance with Clauses 17.8 and 17.9 of the Concession Agreement, otherwise than by commencing arbitration proceedings in the International Chamber of Commerce in London and pursuant to its Rules.
3. The [owner] is restrained from bringing the claim, the subject matter of the Kazakhstan Proceedings, or any other claim arising out of or in connection with any matter or thing in relation to the provisions of the Concession Agreement dated 23 July 1997 (as amended), save only for those claims or matters which fall to be determined in accordance with Clauses 17.8 and 17.9 of the Concession Agreement, otherwise than by commencing proceedings in the International Chamber of Commerce in London and pursuant to its Rules."
The exception within clauses 17.8 and 17.9 was for tariff issues and will be referred to below.
The arbitration clause
"17.8 Expert
17.8.1 If, in its reasonable opinion, the Company and/or the Concession Company believes that the Tariffs and the level of payment defaults by its Customers makes it impracticable to carry out all or any of the Investment Programme or other Commitments the Company and/or the Concession Company will be entitled to refer the matter to the Republic by Notice with a view to agreeing to:
17.8.2 an appropriate immediate adjustment of the Tariffs; or
17.8.3 an adjustment of the level or terms of the Commitments in which case the Company's obligations will be suspended or adjusted until resolution of these matters; or
17.8.4 agreements are reached in writing between the Parties as to off-sets or other mutually acceptable methods of achieving resolution of all such matters.
17.9 If no agreement can be reached, the Republic and the Company will refer the matter to an independent Expert (not being a national of Kazakhstan or the US) agreed by the Parties, or in default of agreement, to one (1) Expert appointed by the President or Vice-President for the time being of the International Chamber of Commerce of London who shall act as an expert, but not as an arbitrator, and whose Costs (in an amount and manner agreed by both Parties) shall be borne by the Company and whose decision shall be binding on all Parties…
32. Dispute Resolution
32.1 Subject to the provisions contained in Clauses 17.8 and 17.9, should any dispute or difference arise out of or in connection with any matter or thing in relation to the provisions of this Agreement and the transactions contemplated by the Parties, then the Party or Parties shall issue a Notice to the other Party or Parties, and shall supply full details of the dispute or difference.
32.2 In the event of any such dispute or difference being notified pursuant to Clause 32.1, the Authorised Persons of each of the Parties shall promptly meet together and negotiate in good faith and take all practicable steps in order to try and resolve the same as quickly and economically as possible.
32.3 Should the Parties not have resolved the dispute or difference at the expiry of a period of one (1) month (unless otherwise extended by agreement of the Parties in writing) from the date of any Notice issued in accordance with Clause 32.1 such dispute or difference shall be settled by arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce in force at the relevant time.
32.4 In accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce ("Rules"), the Parties have agreed that there shall only be one (1) arbitrator who shall be appointed by mutual agreement between the Parties. If the Parties fail to reach agreement as to the identity of the arbitrator to be appointed within thirty (30) Days of the expiry of the one (1) month period referred to in Clause 32, the arbitrator shall be appointed upon the application of any party to the dispute or difference by the President or Vice-President for the time being of the International Chamber of Commerce of London and the arbitration shall be commenced and carried out as soon as is possible.
32.5 The arbitration shall be carried out and conducted in London, England and shall be in the English language.
32.6 The finding of the arbitration shall be final and binding on the Parties and by way of appeal or otherwise no dispute or difference shall be referred to the courts or to arbitration (other than in compliance with the requirements of this Clause 32 in the case of arbitration). Only the arbitrator shall have the power to terminate the contract, in accordance with the powers granted to him or her under the Rules, in which case the provisions in Schedule 2 shall apply.
32.7 Each of the Parties hereby represents and warrants that it can validly and unconditionally consent under Kazakhstan Legislation to the referral of matters as set out in this Agreement to an Expert, to the arbitration agreement contained in Clause 32, as well as the other dispute resolution mechanisms referred to in this Agreement.
32.8 The Parties hereto agree to exclude any right of application or appeal to any court which would otherwise have jurisdiction in the matter in connection with any question of law arising in the course of the Expert or arbitration reference or out of the award. However, the Parties may make an application to any court for enforcement of any Expert decision or arbitral award (including execution of any judgement), including enforcement of any such decision or award granting interlocutory relief against a Party, and for the obtaining of any evidence (whether by discovery of documents, interrogatories, affidavits or testimony of witnesses or whatsoever) which the Expert or arbitrators shall direct shall be admitted in the Expert or arbitral proceedings."
The Kazakhstan Supreme Court decision and the Kazakhstan Proceedings
"a ruling of the court to dismiss a petition on lack of jurisdiction…is classified as a ruling that may not be appealed in a court appeal separately from the decision of the court on the substance of the dispute…Accordingly, if the court dismisses an application objecting to jurisdiction, the defendant de facto has no other choice than to participate in the court hearing of the substance of the dispute and to appeal a decision of the court on jurisdiction in accordance with Article 344 of the Civil Procedural Code only after the decision on the merits has been reached. I would also note that [the operator] took part in the hearing of the substance of the dispute, subject to the unequivocal and unambiguous reservation of its right to arbitrate."
The Civil Jurisdiction and Judgments Act 1982
"32.–(1) Subject to the following provisions of this section, a judgment given by a court of an overseas country in any proceedings shall not be recognised or enforced in the United Kingdom if –
(a) the bringing of those proceedings was contrary to an agreement under which the dispute in question was to be settled otherwise than by proceedings in the courts of that country; and
(b) those proceedings were not brought in that court by, or with the agreement of the person against whom the judgment was given; and
(c) that person did not counterclaim in the proceedings or otherwise submit to the jurisdiction of that court.
(2) Subsection (1) does not apply where the agreement referred to in paragraph (a) of that subsection was illegal, void or unenforceable or was incapable of being performed for reasons not attributable to the fault of the party bringing the proceedings in which the judgment was given.
(3) In determining whether a judgment given by a court of an overseas country should be recognised or enforced in the United Kingdom, a court in the United Kingdom shall not be bound by any decision of the overseas court relating to any of the matters mentioned in subsection (1) or (2).
(4) Nothing in subsection (1) shall affect the recognition or enforcement in the United Kingdom of –
(a) a judgment which is required to be recognised or enforced there under the 1968 Convention…"
33.–(1) For the purposes of determining whether a judgment given by a court of an overseas country should be recognised or enforced in England and Wales or Northern Ireland, the person against whom the judgment was given shall not be regarded as having submitted to the jurisdiction of the court by reason only of the fact that he appeared (conditionally or otherwise) in the proceedings for any one or more of the following purposes, namely –
(a) to contest the jurisdiction of the court;
(b) to ask the court to dismiss or stay the proceedings on the ground that the dispute in question should be submitted to arbitration or to the determination of the courts of another country;
(c) to protect, or to obtain the release of, property seized or threatened with seizure in the proceedings…"
The Arbitration Act 1996
"The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and equitable to do so."
"1. The provisions of this Part are founded on the following principles, and shall be construed accordingly –
(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;
(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;
(c) in matters governed by this Part the court should not intervene except as provided by this Part."
"This Part" of the AA 1996 there referred to is Part I, which is headed "Arbitration pursuant to an arbitration agreement". The question is raised by the submissions before the court as to whether section 1(c)'s principle, when stating that "the court should not intervene", is referring to intervention in "arbitration", "arbitration agreement", or "arbitration proceedings".
"(1) Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction, that is, as to –
(a) whether there is a valid arbitration agreement,
(b) whether the tribunal is properly constituted, and
(c) what matters have been submitted to arbitration in accordance with the arbitration agreement.
(2) Any such ruling may be challenged by any available arbitral process of appeal or review or in accordance with the provisions of this Part."
"(1) A person alleged to be a party to arbitral proceedings but who takes no part in the proceedings may question –
(a) whether there is a valid arbitration agreement,
(b) whether the tribunal is properly constituted, or
(c) what matters have been submitted to arbitration in accordance with the arbitration agreement,
by proceedings in the court for a declaration or injunction or other appropriate relief.
(2) He also has the same right as a party to the arbitral proceedings to challenge an award –
(a) by an application under section 67 on the ground of lack of substantive jurisdiction in relation to him, or
(b) by an application under section 68 on the ground of serious irregularity (within the meaning of that section) affecting him;
and section 70(2) (duty to exhaust arbitral procedures) does not apply in his case."
"The tribunal may in any case, and shall if the parties so agree, stay proceedings whilst an application is made to the court under section 32 (determination of a preliminary point of jurisdiction)."
"(1) Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for the purposes of and in relation to legal proceedings.
(2) Those matters are –
(a) the taking of the evidence of witnesses;
(b) the preservation of evidence;
(c) making orders relating to property which is the subject of the proceedings -…
(d) the sale of any goods the subject of the proceedings;
(e) the grant of an interim injunction or the appointment of a receiver.
(3) If the case is one of urgency, the court may, on the application of a party or proposed party to the proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets.
(4) If the case is not one of urgency, the court shall act only on the application of a party to the arbitral proceedings (upon notice to the other parties and to the tribunal) made with the permission of the tribunal or the agreement in writing of the other parties.
(5) In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively."
The proceedings
"(a) under Civil Procedure Rule 62.5(1)(b), because [the operator] seeks an order under section 44 of the Arbitration Act 1996; or in the alternative;
(b) under Civil Procedure Rule 62.5(1)(c), because [the operator] requires a question to be decided by the Court under section 37 of the Supreme Court 1981 affecting an arbitration, and the seat of the arbitration is within the jurisdiction of the English Courts; and
(c) under Civil Procedure Rule 6.36, Practice Direction B, paragraph 3.1(20), because [the operator] seeks an order under section 44 of the Arbitration Act 1996 or, alternatively, under section 37 of the Supreme Court Act 1981."
The issues
The first issue: the jurisdiction issue
"I therefore say nothing about section 37 except this. The relationship between the powers of the court under section 37 of the SCA and section 44 of the 1996 Act will at some stage require detailed consideration because there is a tension (to put it no higher) between the apparently wide powers conferred on the court by section 37 and the much narrower powers conferred on the court by section 44. The resolution of that tension must await another day."
"47. The issue raised by the application to the Court in the arbitration claim form in these proceedings is clearly a question as to the substantive jurisdiction of the arbitrators within the meaning of s. 30 (see the definition in s. 82(1)). If the owners had appointed an arbitrator, it is also clear, as was accepted by the owners, that the Court would not have had jurisdiction to determine the issue, as the conditions in s.32(2) were not satisfied. The owners, however, contended that the conditions contained in s. 32(2) were not applicable to these proceedings because they have not appointed an arbitrator, and they are not a party to arbitral proceedings. They are therefore entitled to bring the arbitration application.
48. I do not accept the submission. The Court is given guidance as to the circumstances in which it should intervene in relation to arbitration by the terms of s. 1 in Part I of the Act… "(c) in matters governed by this Part the court should not intervene except as provided by this Part."
49. It is clear from the DAC Report that this principle was included because of international criticism that the Courts of England and Wales intervened more than it was thought they should in the arbitral process, and this was a discouragement to the selection of London as a forum for arbitration.
50. The provisions of Part I of the Act regulate all matters not only after constitution of the tribunal by the appointment of an arbitrator but prior to that; see for example s. 9, s. 12 and s. 44(5) which all relate to the powers to be exercised prior to the appointment of the arbitral tribunal.
51. In my view therefore the present application for the determination of whether there is an arbitral agreement is a matter regulated by Part I of the Act and in accordance with s. 1(c), the Court must approach the application on the basis it should not intervene except in the circumstances specified in that part of the Act.
52. I accept the owners' submission that the use of the word "should" as opposed to the word "shall" shows that an absolute prohibition on intervention by the Court in circumstances other than those specified in Part I was not intended. That submission seems to me to have force as the view is expressed in the DAC Report that a mandatory prohibition in terms similar to art. 5 of the Model Law was inapposite. However it is clear that the general intention was that the Courts should usually not intervene outside the general circumstances specified in Part I of the Act.
53. The circumstances in this case which the owners say are ones in which the Court should intervene cannot have been unanticipated by the draftsmen of the Act. It is very uncommon for a person who is alleged to be a party to an arbitration agreement but denies that he is, to make his position clear before an arbitrator is appointed by the person contending that there is a binding arbitration agreement. Thus the argument of the owners must be premised on the assumption that the draftsmen of the Act intended to allow a party to an arbitration agreement recourse to the Courts without any conditions, if he took that step prior to the appointment of an arbitrator, but imposed the conditions in s. 32 if he had appointed an arbitrator. If the owners are right, then the parties to an arbitration agreement which is disputed can obtain the decision of the Courts without being subject to the restrictions by the simple step of not appointing an arbitrator.
54. I do not consider that this can have been the intention. The Act sets out in very clear terms the steps that a party who contends that there is another party to an arbitration agreement should take. First he should appoint an arbitrator. If the other party appoints an arbitrator, then s. 31(1) makes it clear that his appointment of an arbitrator does not prevent him challenging the substantive jurisdiction of the tribunal. If the other party does not appoint an arbitrator, then the default provisions (s. 17) or failure of appointment procedures (s. 18) apply. Once the arbitral tribunal is constituted, then in accordance with the policy of the Act it is for that tribunal to rule on its own jurisdiction, save in the circumstances specified in s. 32. Any award made can then be changed [sc challenged] under s. 67. The rights of the party who challenges the existence of the arbitration agreement and takes no part are protected by s. 72; he is given the right of recourse to the Courts in the circumstances set out. Those provisions, in my view, provide a clear and workable set of rules which the owners should have followed in this case. I can see no reason which would justify the Court intervening in the circumstances of this particular case, as it is no different from many others.
55. The owners contended that it would be in the overall interest of justice for the Court to hear this application because it would generally be convenient to do so and that the argument over the validity of the arbitration agreement was bound to arise at a later stage. However this argument fails to take into account one of the underlying principles of the Act that the parties should resolve their dispute by the methods they have chosen and the Court's intervention should be limited…
60. Thus, subject to the reservation I have made, I conclude that for this still further reason the Court has no jurisdiction to allow this arbitration application against the brokers."
"Where the specific power most appropriate to the grant of an injunction pending an arbitration is not available by the rules of private international law, it seems to me that, if only as a matter of judicial restraint, such an injunction should not be granted under the more general power…But the Channel Tunnel contract involves a delicate balance of power between the municipal law of two sovereign States. We should be careful not to exercise jurisdiction except where to do so is within the spirit as well as the letter of our laws."
Staughton LJ also said (at 676G):
"In the result I conclude that, whether or not there is jurisdiction, at least as a matter of judicial restraint an interim injunction should not be granted under s. 37 of the Supreme Court Act when the parties have agreed to arbitrate in some place outside England and Wales, and there is an arbitrable dispute."
Despite the language "whether or not there is jurisdiction", Staughton LJ had so far dealt with the issues under the heading of "jurisdiction".
"The fact that the specialist powers conferred by the Arbitration Acts are not available in a case such as the present does not entail that the general powers of the court can never be deployed: although, again, this is undoubtedly a powerful reason why the courts should approach their use with great caution".
Therefore, I do not consider that Channel Tunnel assists Mr White in the present case on the question of jurisdiction.
"I can see no good reason not to exercise the [Angelic Grace] jurisdiction in this case. I recognize the inconvenience to Owens Corning of not being able to sue all their insurers in the same proceedings, but that is a consequence of having different contracts with them. It is not a good reason for depriving XL of its contractual rights…
Under the arbitration clause and the provisions of the Act, it will be for the arbitration tribunal to rule on the validity of the arbitration agreement, if Owens Corning challenges its jurisdiction on that ground, unless the matter is referred to the Court for determination under s. 32. I am satisfied that in the meantime justice requires that an injunction should be granted restraining Owens Corning from continuing with its litigation against XL in Delaware."
"It is important to bear in mind that the judge [Thomas J] was faced with the propriety of an action brought by a person who was seeking to assert that there was an arbitration agreement, and that the alleged counterparty[2] was a party to that agreement. He held that the proper course for the claimant in his case (a party asserting there was an agreement) was not to commence court proceedings but was to commence the arbitration and utilise the arbitration procedure, if necessary invoking section 30. It was in that context that he reinforced the principle that the arbitration mechanism was to be respected. However, in the course of his judgment he said two things which are particularly germane to the present case. The first was in para 52:
52. I accept the owners' submission that the use of the word "should" [in section 1(c), quoted above] as opposed to the word "shall" shows that an absolute prohibition on intervention by the court in circumstances other than those specified in Part I was not intended.
That demonstrates that I cannot treat section 1(c) as imposing some sort of absolute bar, a point which becomes important when considering the question of a stay under section 9.
13. The second was in para 54. In that paragraph he sets out:
…the steps that a party who contends that there is another party to an arbitration agreement should take.
He describes the appointment of an arbitrator, and subsequent steps. He points out that the arbitral tribunal can then determine its jurisdiction, and then refers to two safeguards available to the other party (who is, presumably, challenging the jurisdiction). The first is to challenge the award under section 67. Then:
The rights of the party who challenges the existence of the arbitration agreement and takes no part are protected by section 72; he is given the right of recourse to the courts in the circumstances set out.
It is plain, therefore, that what he has said about the primacy of the arbitral process does not apply to such a challenge. They are obviously intended to apply to positive claims that there is an arbitration agreement."
"51. I do not intend to explore generally the question of whether the court has any jurisdiction at all under section 37 of the SCA to grant either interim or final injunctions to restrain arbitrations that are subject to the 1996 Act. I must assume that there is such a jurisdiction, given the comments of the court of appeal in the cases of Cetelem SA v Roust Ltd [2005] 2 Lloyd's Rep 494 at para 74 per Clarke LJ; and Weissfisch v Julius [2006] 1 Lloyd's Rep 716 at para 33(v) at page 722 per Lord Phillips CJ. Nevertheless, I must consider whether the jurisdiction is wide enough to provide a base on which an injunction might be granted on the facts of this case.
52. There is no dispute of course that the court has jurisdiction to invoke section 37 to grant an injunction to restrain a party from engaging in court proceedings in another jurisdiction, in breach of an English arbitration clause in a contract by which the parties are bound [citing The Angelic Grace]. But in this case Mr Millett urges the court to use section 37 for a very different purpose. It is to grant a final injunction to restrain an arbitration whose seat is in England…
68. In my view the whole structure of Part 1 also suggests that the scope for the court to intervene by injunction before an award is made by arbitrators is very limited. First, section 44(2)(e), is the only express provision in Part 1 giving the courts the power to grant interim injunctions in aid of an arbitration, but the scope for obtaining one is limited…
69. Secondly, the only other express reference to the court granting an injunction is in section 72…
70. Thirdly, Part 1 of the Act contemplates that once matters are referred to arbitration, it is the arbitral tribunal that will generally deal with issues of their jurisdiction and the procedure in the arbitration up to an award…"
"[19] I too must work on the same basis as Aikens J [in Elektrim] that s 37 remains available to the court in a situation such as the present, whether or not s 44 of the later Act could also be brought into play. In exercising any discretion under s 37 of the earlier Act, I would have regard to matters which arise under s 44 of the 1996 Act…
[21] By virtue of the decision in the Cetelem case at [57] – [64], the court, on a proper construction of s 44 of the 1996 Act, can grant an interim injunction, '[i]f the case is one of urgency', 'for the purpose of preserving…assets'. The Court of Appeal held this to include the preservation of a contractual right, as a chose in action. That must include the contractual right to have disputes referred to arbitration…
[27] The question therefore is simply whether or not the arbitrators could within the relevant timescale produce a final award on the subject…In these circumstances, the requirement of urgency is plainly made out for the purpose of s 44(3). The injunction is plainly necessary to preserve the owners' right to arbitrate the dispute with the cargo owners and the insurers. Furthermore, the arbitral tribunal are unable for the time being to act effectively so that the requirements of s 44(5) are also met. In these circumstances, where other discretionary requirements are satisfied and there is no strong reason not to make the interim order, the court will do so, to cover the position up to such time when the arbitration tribunal can itself determine this matter and make a final award in relation to the restraining orders sought…
[29] While the ability or otherwise of the arbitrators to deal with the dispute and to make a final order is a relevant consideration in the context of the discretion under s 37, it does not appear to me to govern the position under s 37 in the way that it operates under s 44. In circumstances where the cargo owners and the insurers both maintain that the arbitration clause is ineffective in the bill of lading, so far as they are concerned, and the insurers have commenced proceedings in China on the substantive claim under the bill, it does not lie in their mouths to contend that the court should refuse to exercise its s 37 jurisdiction in favour of allowing the arbitrators to do so. The likelihood must be that, if the arbitrators did make an award against the cargo owners and the insurers, an objection would then be taken to the arbitrators' jurisdiction and an application would then be made to this court under s 67 of the 1996 Act.
[30] Given that the situation is straightforward with regard to the ambit of the arbitration clause, there is therefore every reason for this court to exercise its jurisdiction now and thus avoid unnecessary further proceedings before the arbitrator and later here again."
"So also the principle that a tribunal in an international commercial arbitration has the power to consider its own jurisdiction is no doubt a general principle of law. It is a principle which is connected with, but not dependant upon, the principle that the arbitration agreement is separate from the contract of which it is normally a part. But it does not follow that the tribunal has the exclusive power to determine its own jurisdiction, nor does it follow that the court of the seat may not determine whether the tribunal has jurisdiction before the tribunal has ruled on it. Nor does it follow that the question of jurisdiction may not be re-examined by the supervisory court of the seat in a challenge to the tribunal's ruling on jurisdiction…"
"After all, a contract cannot give an arbitral body any power, much less the power to determine its own jurisdiction, if the parties never entered into it."
"96. The consistent practice of the courts in England has been that they will examine or re-examine for themselves the jurisdiction of arbitrators. This can arise in a variety of contexts, including a challenge to the tribunal's jurisdiction under section 67 of the 1996 Act, or in an application to stay judicial proceedings on the ground that the parties have agreed to arbitrate. Thus in Azov Shipping Co v Baltic Shipping Co [1999] 1 All ER 476 Rix J decided that where there was a substantial issue of fact as to whether a party had entered into an arbitration agreement, then even if there had already been a full hearing before the arbitrator the court, on a challenge under section 67, should not be in a worse position than the arbitrator for the purpose of determining challenge. This decision has been consistently applied at first instance (see, eg, Peterson Farms Inc v C & M Farming Ltd [2004] 1 Lloyd's Rep 603) and is plainly right.
97. Where there is an application to stay proceedings under section 9 of the 1996 Act, both in international and domestic cases, the court will examine the issue of whether there ever was an agreement to arbitrate: see Al-Naimi (trading as Buildmaster Construction Services) v Islamic Press agency Inc [2000] 1 Lloyd's Rep 522 (Court of Appeal: English arbitration) and Albon (trading as NA Carriage Co) v Naza Trading Sdn Bhd (No 4) [2008] 1 Lloyd's Rep 1 (Malaysian arbitration). So also where an injunction was refused restraining an arbitrator from ruling on his own jurisdiction in Geneva arbitration, the Court of Appeal recognised that the arbitrator could consider the question of his own jurisdiction, but that would only be a first step in determining that question, whether the subsequent steps took place in Switzerland or England: see Weissfisch v Julius [2006] 1 Lloyd's Rep 716, para 32."
"This was perhaps a case where the parties might well have come to Court, either by agreement or upon the application by one side or the other for the Court to determine the issues of jurisdiction, on the ground that it was likely to produce substantial savings in cost and that there was good reason why the matter should be decided by the Court. With hindsight it seems to me that even if the parties could not agree on that course, the Court would be persuaded to allow such a determination if, of course, the tribunal had given its own permission, which is a sine qua non in the absence of the agreement of the parties. It might be assumed that the arbitrator may have been the more willing to give his agreement inasmuch as the question of jurisdiction in this case involved the prior question of whether Azov had ever become a party to the agreement as a whole…
I can quite see that there is an interest in encouraging parties to put their arguments on jurisdiction before the arbitrator himself under s. 30. In many cases, and perhaps in the ordinary and normal case of such a challenge, where, for instance, there is simply an issue as to the width of an arbitration clause and no issue as to whether a party is bound to the relevant contract in the first place, the arbitrator's view may be accepted. If it is not, a challenge to the court is likely to be a limited affair raising, essentially, a point of construction on the clause and thus no problem arises. Where, however, there are substantial issues of fact as to whether a party has made the relevant agreement in the first place, then it seems to me that, even if there has been a full hearing before the arbitrators the Court, upon a challenge under s. 67, should not be placed in a worse position than the arbitrator for the purpose of determining that challenge…"
"Secondly, to reflect the interests of comity and in recognition of the possibility that an injunction, although directed against a respondent personally, may be regarded as an (albeit indirect) interference in the foreign proceedings, an injunction must be necessary to protect the applicant's legitimate interest in English proceedings."
Mr White submitted that without existing English proceedings to protect, one of the essential conditions for the grant of an anti-suit injunction was absent. Mr Eder submitted, on the other hand, that if that is what I was suggesting, then it was inconsistent with what Lord Hobhouse said in Turner v. Grovit [2002] 1 WLR 107 at paras 27/28. It is clear from the context of my remarks, however, that I was seeking to expound, rather than to depart from, Lord Hobhouse's analysis. Lord Hobhouse spoke of the requirement of a legitimate interest, which was to be found in either a contractual right not to be sued in the courts of a foreign country (by reason of an arbitration clause or an exclusive English jurisdiction clause) or unconscionable conduct in which case the "legitimate interest must be the existence of proceedings in this country which need to be protected". In the present case, the legitimate interest was to be found in the English arbitration agreement, and, Mr Eder submitted, there was no need for existing proceedings in England. It is always difficult for a judge to interpret his own remarks, but I believe that I was intending to remain faithful to Lord Hobhouse's analysis, and stressing the importance of "a legitimate interest in English proceedings" in the context of the interests of comity. It seems to me that in context my phrase was intended to cover both of Lord Hobhouse's alternatives, and that an English arbitration clause or exclusive jurisdiction clause plainly represents a "legitimate interest in English proceedings", which need not be current. I see nothing in Mr White's submission to suggest that there is any jurisdictional condition precedent which the operator is lacking in this case.
"The Vale do Rio decision is nevertheless without prejudice to the right of a person claiming to be party to an arbitration agreement to seek a declaration or an anti-suit injunction preventing another alleged party from pursuing judicial proceedings in some other jurisdiction, even if there is a dispute as to the jurisdiction of the arbitrators. In such a case the English court is not being required to determine the jurisdiction of the arbitrators, but rather is allowing the question of jurisdiction to be put to the arbitrators in accordance with the agreement of the parties"
citing XL v. Owens Corning.
"However, where foreign court proceedings are competing with English arbitration proceedings, the English courts have shown no hesitation in granting declarations as to the validity of English arbitration clauses, without reference to section 32, even after the Arbitration Act 1996 came into force. The argument that sections 1(c) and 32 of the Arbitration Act 1996 preclude the grant of such declarations outside the narrow confines of section 32 appears not to have been raised. In the circumstances, it is unclear whether the court's existing practice can be sustained, even though requiring section 32 to be complied with would produce impractical consequences, as it introduces delay and also cannot be triggered before the tribunal has been appointed.
It could be argued that a declaration as to the validity of an arbitration clause is distinguishable from a declaration as to the jurisdiction of a tribunal; but this argument is rather artificial. By declaring that an arbitration clause is binding and covers certain disputes the court will, in effect, be declaring that any arbitration tribunal appointed under the clause over those disputes will have jurisdiction. If, therefore the English courts wish to preserve the existing freedom with which declarations are granted to protect English arbitrations against foreign litigation, the current case law on the preclusive effect of section 32 of the Arbitration Act 1996 may need to be reviewed."
See also the end of footnote 17, where this is said:
"The better answer may be that, as is suggested elsewhere in relation to anti-suit injunctions, the court's ability to grant remedial measures, including declarations, in support of an arbitration is an implied exception to the preclusive scope of the arbitration clause: See Ch 7, §§7.36 to 7.38."
At paras 7.36 to 7.38 the author rejects the concept that an arbitration clause prevents access to the court for the purpose of obtaining an anti-suit injunction.
21. I am however concerned to underline the submission of Mr White, which Mr Eder fully accepted, and which lay behind the judgment of Thomas J in Vale do Rio, namely that there should not be usurpation or ouster of the very arbitration jurisdiction which [the operator] is anxious to enforce and engage. It is that to which, in my judgment, s 1(c) of the 1996 Act is primarily directed, together with such provisions as s 30 and s 32. I bear in mind particularly the warning of Clarke LJ in Cetelem at paragraph 71 that the court "must take great care not to usurp the arbitral process". The declaration to which [the operator's] claim should be limited, and which chimes with its intention, is that there be a declaration that [the owner] cannot bring the claim, the subject matter of the present Kazakhstan proceedings, or any other claim arising out of or in connection with any matter or thing in relation to the provisions of the Concession Agreement (as amended), otherwise than by commencing arbitration proceedings in the International Chamber of Commerce in London, and pursuant to its Rules: and that the injunction should be similarly directed to enjoining the present proceedings and the bringing of other claims, as above described, otherwise than in ICC Arbitration."
A party may commence arbitration, and thus be compelled to do so, without prejudice to that party's stance that the arbitral tribunal lacks substantive jurisdiction: see section 31(1).
"54. I therefore dismiss the jurisdiction challenge, but I have done so on the basis that the declaratory and injunctive relief should be limited as set out in paragraph 21 above…I am satisfied that there is, as I have said, at least a good arguable case that it is in an ICC arbitration (and if necessary by further reference, whether under s 32 or s 67) that any remaining issues can and should be canvassed, including any question going to the jurisdiction of the arbitrators.
55. It is in that context that I turn to consider the substantive claim, now in the notional absence of Mr White…the reality of the dispute between these parties does not relate to the present Kazakhstan proceedings, but relates to the forum in which any other outstanding disputes may fall to be resolved arising in respect of this 20-year concession. I am satisfied that any prima facie dispute falling within Clause 32 ought to be pursued by [the owner] in ICC Arbitration, and as I have said, in and during such arbitration there will be the opportunity, if so advised, for any proper challenge to be made to the jurisdiction of the arbitrators or the applicability of the arbitration clause. I am satisfied however that, on the facts before me, the relief should be granted, and on a final basis."
Issue 2: the gateway issue
"(1) In this Section of this Part "arbitration claim" means –
(a) any application to the court under the 1996 Act;
(b) a claim to determine –
(i) whether there is a valid arbitration agreement;
(ii) whether an arbitration is properly constituted; or what matters have been submitted to arbitration in accordance with an arbitration agreement;
(c) a claim to declare that an award by an arbitral tribunal is not binding on a party; and
(d) any other application affecting –
(i) arbitration proceedings (whether started or not); or
(ii) an arbitration agreement."
"(1) An arbitration claim form must –
…
(d) specify under which section of the 1996 Act the claim is made;…
(f) specify either –
(i) the persons on whom the arbitration claim form is to be served, stating their role in the arbitration and whether they are defendants; or
(ii) that the claim is made without notice under section 44(3) of the 1996 Act and the grounds relied on."
"(1) The court may give permission to serve an arbitration claim form out of the jurisdiction if –
(a) the claimant seeks to –
(i) challenge; or
(ii) appeal on a question of law arising out of,
an arbitration award made within the jurisdiction…
(b) the claim is for an order under section 44 of the 1996 Act; or
(c) the claimant –
(i) seeks some other remedy or requires a question to be decided by the court affecting an arbitration (whether started or not), an arbitration agreement or an arbitration award; and
(ii) the seat of the arbitration is or will be within the jurisdiction or the conditions in section 2(4) of the 1996 Act are satisfied."
"59. The owners also argued that the terms of par. 2.1 of CPR PD49G (set out at par. 21 of this judgment) supported their contention. That paragraph defines the term "arbitration application" as including not only an application to the Court under the Arbitration Act but proceedings to determine whether there is a valid arbitration agreement. They therefore submitted that the fact that the practice direction contemplated proceedings to determine whether there was a valid arbitration agreement as a separate category from an application to the Court under the Arbitration Act showed that it was contemplated by the draftsman of these provisions there would be applications such as the present which did not lie under the terms of the Act. I cannot accept that argument. The short answer to it is that the definition of an "arbitration application" was intended to be all embracing and no doubt the draftsman, out of an abundance of caution, included sub-par. 2 of par. 2.1 to spell out the terms of the Act (or just possibly to cater for an oral arbitration agreement). It cannot possibly affect the construction of the Act."
"3.1 The claimant may serve a claim form out of the jurisdiction with the permission of the court under rule 6.36 where -
…
(20) A claim is made
(a) under an enactment which allows proceedings to be brought and those proceedings are not covered by any of the other grounds referred to in this paragraph…"
"The claimant may serve a claim form out of the jurisdiction with the permission of the court under rule 6.36 where -
…
(6) A claim is made in respect of a contract where the contract –
…
(c) is governed by English law."
"In our judgment, if the draftsman of a pleading intended to be served out of the jurisdiction under Ord. 11, r. 1(1)(f) (or indeed any other sub-paragraph) can be reasonably understood as presenting a particular head of claim on one specific legal basis only, the plaintiff cannot thereafter, for the purpose of justifying his application under Ord. 11, r. 1(1)(f), be permitted to contend that that head of claim can also be justified on another legal basis (unless, perhaps, the alternative basis has been specifically referred to in his affidavit evidence, which it was not in the present case). With this possible exception, if he specifically states in his pleading the legal result of what he has pleaded, he is in our judgment limited to what he has pleaded, for the purpose of an Order 11 application. To permit him to take a different cause would be to encourage circumvention of the Order 11 procedure, which is designed to ensure that both the court is fully and clearly apprised as to the nature of the legal claim with which it is invited to deal on the ex parte application, and the defendant is likewise apprised as to the nature of the claim which he has to meet, if and when he seeks to discharge an order for service out of the jurisdiction."
"It may be that M & R's claims against one or both defendants could be framed in quasi-contract and might be brought within Ord. 11, r. 1(1)(d) or (e). However, no such claim has been pleaded or referred to in the evidence supporting M & R's claim for leave to serve out of the jurisdiction. It cannot in our judgment be relied on in this court for the reasons already stated and for the further reason that the application is based solely on Ord. 11, r. 1(1)(f)."
"But if proceedings fall within one or more of the clauses it is not permissible to litigate any other cause of action which does not fall within one of the clauses [of the text's Rule 27 ie gateways]. Where permission to serve out of the jurisdiction is based on one cause of action it cannot be treated as permission based on some other cause of action [citing Parker v. Schuller]. Nor, if a claim has been put forward on one legal basis, can the claimant subsequently justify permission on another legal basis, unless, perhaps, that other legal basis has been referred to in the evidence in support of the application [citing Metall & Rohstoff at 436]."
"18. The question of whether the case fell within paragraph (h) was fully debated before Small J and the Board has no doubt that if objection had been made, the judge would have given leave to amend the summons. The Board therefore considers that Small J was right to consider the application under both paragraphs."
See also The Ikarian Reefer (No 2) [1999] 2 Lloyd's Rep 621 at 630/1, upheld in this court at [2000] 1 WLR 603 at 616/7.
"…it is clear that Mr Justice Steyn thought that the question whether the service should be allowed to stand was a matter within his discretion, unless a line of authorities which were cited to him obliged him to set it aside. The judge was referred to the first three of those decisions, but since then there have been three more to which we were also referred. The full list is: Parker v. Schuller (1901) 17 TLR 299 (CA); In re Joggia [1988] 1 WLR 484; J H Rayner (Mincing Lane) Ltd v. Department of Trade and Industry 7th May 1987 (unreported CA); Metall & Rohstoff AG v. Donaldson Lufkin and Jenrette Inc [1990] 1 QB 391 (CA); Trafalgar Tours Limited v. Henry [1990] 2 Lloyd's Rep 298 (CA), and BSQ Property Co Ltd v. Lotus Cars Ltd, 27th June 1990 (unreported CA).
Having carefully considered the five most recent authorities since the case was before us last Thursday and notwithstanding Mr Tomlinson's claim that they have brought about a sea change, as he put it, in the court's approach, I think it clear that each has applied, while none has extended, the principle of Parker v. Schuller itself. The principle is that, where leave to serve out is obtained in respect of a claim based on one cause of action, it cannot be treated as leave in respect of a claim based on some other cause of action….
…I also agree that in a case where leave is sought under paragraph (c) of rule 11(1), the reason why it is said that the defendant out of the jurisdiction is a necessary or proper party to the action is part of the "grounds" on which the application is made for the purposes of rule 4(1)(a) and must be stated in the affidavit accordingly. But the principle of Parker v. Schuller does not apply to the substitution of one such reason for another and so to apply it would undoubtedly be to extend it…
In my view Mr Justice Steyn was entirely correct in holding that the principle of Parker v. Schuller ought not to be extended to cover this case and, on that footing, to allow the service of the writ to stand…The facts of this case well demonstrate that there may in many other cases be good reasons for allowing the leave to stand and not insisting on the application of some stricter principle."
Balcombe and Leggatt LJJ gave concurring judgments.
"The Court of Appeal upheld the judgment of Steyn J on the ground that the principle applied in the authorities such as Metall & Rohstoff and DSO Property Co Ltd as well as the earlier Court of Appeal decision in Parker v. Schuller, supra, was confined to changes in the cause of action and did not extend to other changes in the "grounds" under Ord 11, rule 4(1)(a) and (d)."
Issue 3: the validity issue.
"It is clear that the parties to the insurance policy bargained for English law. This Court should therefore give effect to that intention, unless it would be contrary to English public policy (which includes international public policy) to give effect to the enforcement of the jurisdiction clause which is otherwise valid.
Although the insurance policy has a very close connection with Australia, that is not a decisive factor in considering the particular question of public policy before the Court…
In my judgment therefore this Court should give effect to the bargain of the parties and their freely negotiated choice of law and jurisdiction. It should not, as a matter of comity, give effect to the decision of the High Court of Australia that overrode that bargain and that choice."
"20. The obligations of the Club under the contract of insurance are governed by English law and accordingly, Finnish legislation will not be recognized in this country as effective to modify them. It follows that if New India wishes to pursue a claim against the Club, it must do so in accordance with the terms of the contract under which it arises. That includes the arbitration clause. It follows that in my view the Court had jurisdiction in this case to give permission to serve the claim form out of the jurisdiction…and that it has jurisdiction to grant an injunction to prevent the continuation of proceedings contrary to the terms of the arbitration clause."
"Whatever country it is to the courts of which the parties have agreed to submit their disputes is the country to which comity is due. It is not a matter of an English court seeking to uphold and enforce references to its own courts; an English court will uphold and enforce references to the courts of whichever country the parties agree for the resolution of their disputes. This is to uphold party autonomy not to uphold the courts of any particular country."
"39…Payment of any sums ordered to be paid by the arbitrators would, in TNEB's submission, be illegal and give rise to offences in India punishable with penal sanctions falling on the directors as well as TNEB and ST-CMS.
40. The fallacy in this argument is that to which I have already referred. Whatever the changes in the substantive law of India, which constitutes the proper law of the PPA, and whatever Indian issues of policy inform those changes, that cannot effect the proper construction of the separate arbitration agreement which is governed by English law and which will take no account of such changes unless matters of English policy so require."
Issue 4: the submission issue
"43. The Economic Court went straight on to deal with the merits at the hearing on 5 August (which [the operator], armed with the benefit of Andrew Smith J's Order…sought unsuccessfully to adjourn). At the same time as presenting its application to this Court, [the operator] put in under protest…a defence on the merits. It is also common ground that at Kazakhstan law there is no such thing as a protest to the jurisdiction. The court will take no notice of it. [The owner's] second expert, Dr Mukhamedshin said in his report as follows:
"96…Kazakh law simply does not allow a defendant to not submit to the jurisdiction of a Kazakh court once the court finds it has the jurisdiction to adjudge the case.
97. It is the cornerstone principle of Kazakh law that a court judgment that comes into force must be complied with by all. The concept of reserving the right to arbitrate and thereby to disobey or disregard the judgment which declares the arbitration clause invalid is simply alien and non-existent in Kazakh law. The law in Kazakhstan simply does not allow the parties to reserve the right to arbitrate a dispute regardless of the outcome of the court case."
…
45. The conclusion of Professor Suleimonov, is:
"98. In my view, the actions of [the operator] described above clearly demonstrate that [the operator] did all it could to contest the jurisdiction of the Kazakhstani court with respect to this case at each stage of the judicial proceedings…
99…If the court dismisses an application objecting to jurisdiction, the defendant de facto has no other choice than to participate in the court hearing of the substance of the dispute and to appeal a decision on jurisdiction in accordance with Article 344 of the Civil Procedural Code only after the decision on the merits has been reached. I would also note that [the operator] took part in the hearing of the substance of the dispute subject to the unequivocal and unambiguous reservation of its right to arbitrate."...
49. Although there is no Kazakh law put in expressly on the point, Mr White suggests that [the operator] could have taken the course of not appearing at the merits hearing, instead of doing what they did…and still have been able thereafter to appeal, if not the merits then in any event the jurisdiction case. I have already set out in paragraph 45 Professor Suleimenov's opinion that [the operator] had de facto no other choice than to take the course it did. Mr White, while accepting that…
51. It is clear that even if Dr Mukhamedshin rather than Professor Suleimenov is right as to the effect in Kazakh law of what occurred, I am not bound by the characterisation by a Kazakh court (per Thomas J [in Akai at 96/97], quoted in paragraph 48 above). In my judgment the significant fact is the simultaneity and combination of the three steps referred to in paragraphs (i), (ii) and (iii) above [the launch of the English proceedings before Andrew Smith J, the Response prefaced by the continued reservation as to the Kazakh's court jurisdiction and its right to arbitrate in London, and the motion of 4 August to suspend the hearing in the light of the anti-suit injunction of Andrew Smith J], coupled with the fact that even the appearance at the merits hearing under cover of the purportive protest was accompanied by production of and reliance upon, Andrew Smith J's order. The purpose of all this was in my judgment still to continue to protest the jurisdiction, notwithstanding the defeat at what was then a first instance court. Mr White understandably described what occurred as [the operator] trying 'to have their cake and eat it', but in my judgment when they took the steps in question they were still pursuing arbitration, and the three passages referred to above in paragraph 47 from Dicey, Morris and Collins can be simply distinguished by reference to the fact that in this case [the operator] did not fail and then go on [my underlining] to defend the case on the merits". During the period 28 July to 4 August 2009 it was at all times still endeavouring to contest the jurisdiction, and its revelation of its case on the merits in the course of that, and prior to its unsuccessful appeal, did not in my judgment amount to a submission.
52. For the purposes of Mr White's challenge to the jurisdicition, there is the issue whether the relevant test is, as he submits, a good arguable case, or a serious issue to be tried (see paragraph 17(vi) above). Without resolving that issue, I am satisfied that Mr Eder has at least a good arguable case that there was no submission or waiver, and that [the operator] is still entitled to pursue its arbitration claim" (original emphasis).
"If his challenge to the jurisdiction of the foreign court is successful, no question of submission arises. If it is unsuccessful and he goes on to contest the case on the merits, he will have submitted to the jurisdiction of the foreign court" (at para 14-063).
"If the defendant in the foreign court fails on any of these issues, but nevertheless goes on to defend the case on the merits, he will be regarded as having submitted" (at para 14-064).
"Some systems of law require or allow a defendant to plead to the merits at the same time as, and as an alternative to, an objection to the jurisdiction...[That] should not now be so regarded [as a submission], provided at least that, having lost on the issue of jurisdiction, the defendant does not put forward his case on the merits…The House of Lords has held, in the context of submission to the jurisdiction of the English court, that a step in the proceedings only amounts to a submission when the defendant has taken some step which is only necessary or only useful if the objection to the jurisdiction has been waived…" (citing Williams & Glyn's Bank v. Astro Dinamico [1984] 1 WLR 438 (HL), applied in Akai)(at para 14-066).
"In that case the Swiss court held that an arbitration clause had not been incorporated, although by its applicable law, English law, the English court would have held otherwise. The judge said that the sellers had voluntarily appeared and argued the point and indeed appealed in Switzerland and the Swiss court had a jurisdiction that would be recognised by an English court. He held that it was clear beyond doubt that the Swiss court had held that the arbitration was not incorporated and the decision on that issue qualified for issue estoppel. He held the judgment on that issue was final and conclusive on the merits. He held that the fact that the decision was based on Swiss law (as opposed to the applicable law, English law) was no obstacle…The judge would have held the sellers estopped from challenging the question of incorporation but for the coming into force of the Civil Jurisdiction and Judgments Act 1982 and the application of section 32(1) and (3) and section 33."
That reasoning was left undisturbed in this court. Although the Swiss defendant there was a Sudanese party, the point that Swiss law otherwise had jurisdiction over it, and that, subject to the 1982 Act, that jurisdiction would have been recognised by an English court would appear to be in principle relevant to point (a) above, but was regarded as irrelevant to the application of sections 32/33. In that case, however, there was nothing similar to points (b) and (c) above.
"Counsel were unable to refer us to any authority on this point. Nevertheless the answer to the question seems to me to be quite clear. Once Marc Rich had submitted to the jurisdiction of the Italian Courts to try the merits of the case, the submission covered the whole proceedings. After submission Marc Rich could no longer have disputed any earlier interlocutory orders in the proceedings. Nor could they any longer challenge the validity or competence of any earlier decision in those proceedings.
It follows that in my view the judgment of the Corte di Cassazione was the judgment of a competent Court. Marc Rich must be regarded as having submitted to the jurisdiction of the Court. The condition in (c) in s. 32(1) cannot therefore be satisfied. Accordingly Marc Rich are bound by the decision that the contract did not contain an arbitration agreement."
Woolf and Scott LJJ agreed.
"It is clear from the decision of the Court of Appeal in The Atlantic Emperor (No. 2) (at p. 633 of the report) that if a party who has merely challenged the jurisdiction of a Court later takes steps that amount to a submission of the merits to the jurisdiction of that Court (without reserving the position on jurisdiction), then that submission will be a submission to the whole of the proceedings; that party cannot thereafter maintain his challenge to the jurisdiction" (emphasis added).
"Harada submits there is no clear authority to the effect that a party can participate in a full trial on the merits and still maintain his objection to the court's jurisdiction. Following Elefanten I find that unsurprising: it is surely obvious. If authority is needed, however, let this be it" (emphasis added).
And at para 45 Simon Brown LJ said that it did not matter whether permission to appeal was refused, or granted with the appeal being dismissed. Therefore, if the Practice Direction (Citation of Authorities) [2001] 1 WLR 1001 is relevant, it seems to me that Harada is within its permissive scope.
"29. In other words the court does not have jurisdiction even if the defendant makes submission on the merits provided only that the challenge to jurisdiction is made either before or at the same time as (and not merely after) the argument on the merits. There is nothing there to have given Harada cause for concern: it clearly has contested jurisdiction from the outset; it raised its jurisdictional objection in its very first appearance."
"34. I fail to see how Harada can derive the least comfort from that decision. True it is…that nothing overtly had been said in Marc Rich's second defence to constitute a submission to the jurisdiction. But it is equally clear that nothing can have been said to reserve Marc Rich's position with regard to their jurisdictional objection else the second pleading could not have been described as "a plain and unequivocal submission to the jurisdiction". The contrast with the facts of the present case could hardly be more striking. Here, of course, Harada had from first to last been urging and maintaining its objection to jurisdiction and, indeed, would only have been engaging in the merits because the courts had forced it to do so in the teeth of all its objections."
See also Mance LJ at para 51.
"125. In my view these are essentially three different ways of putting the same point, namely, that at common law it is contrary to public policy to recognise a foreign judgment given in proceedings which, in the eyes of English law, have been pursued in contravention of a valid arbitration agreement. Important though arbitration agreements undoubtedly are, I think that puts the matter rather too high. It is not, I think, contrary to public policy to recognise a judgment of a foreign court of competent jurisdiction simply on the grounds that that an English court would have come to a different decision. For example, if a foreign court purporting to apply English law to a contract with the aid of expert witnesses were to reach a conclusion that an English court would think wrong, it would not be contrary to public policy to enforce the judgment and it is difficult to see why for this purpose arbitration agreements should be given a status above other obligations. Whether a foreign judgment will be recognised depends primarily upon whether under English conflict of laws rules the court in question is regarded as having jurisdiction over the parties. In my view the question whether the courts of this country should recognise a foreign judgment given in proceedings taken in breach of an arbitration agreement is also essentially one of jurisdiction. There is apparently no common law authority on the point (see Dicey, Morris and Collins, para 14-091, but if the court in question is regarded as being of competent jurisdiction (for example, because both parties were resident within the jurisdiction) I do not think that it would be contrary to public policy to recognise the judgment, even if the English court would have held that the parties had agreed to refer the dispute to arbitration. Different considerations might arise if the judgment had been obtained through conscious wrongdoing, for example by pursuing proceedings in defiance of an injunction, but that is not this case.
126. It may be partly for these reasons that it was considered desirable to make specific provision in section 32 of the Civil Jurisdiction and Judgments Act 1982 in respect of the recognition of foreign judgments made in proceedings brought contrary to an agreement under which the dispute in question was to be settled otherwise than by proceedings in the courts of that country. These provisions protect both exclusive jurisdiction clauses and arbitration clauses and the ordinary rules relating to the recognition of foreign judgments are excluded by subsection 32(3). Provisions of that kind would not be necessary at all if there were a clearly established rule of public policy that foreign judgments obtained contrary to arbitration clauses were not to be enforced in this country…"
"A broad test is to be applied as to the purpose of the steps taken in the foreign Court and submission is not to be inferred from the fact that the defendant appeared in foreign proceedings in circumstances obviously and objectively inconsistent with a submission to the jurisdiction."
Conclusion
Lord Justice Wilson :
Lord Justice Stanley Burnton :
Sections 32 and 33 of the Civil Jurisdiction and Judgments Act 1982
"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 he has made."
Section 37 of the Senior Courts Act 1981 and sections 1 and 44 of the Arbitration Act 1996
"As part of the redefinition of the relationship between arbitration and the Court, … the powers we have given to the Court are intended to be used when the tribunal cannot act or act effectively …
… the philosophy behind these provisions [is]: if a given power could possibly be exercised by a tribunal, then it should be, and the parties should not be allowed to make unilateral applications to the Court. If, however, a given power could be exercised by the tribunal, but not as effectively, in circumstances where, for example, speed is necessary, then the Court should be able to step in."
This does not suggest that the Court should not be able to act when there is no arbitral tribunal and no reason for it to be established.
The gateway issue
Note 1 See C v. D [2007] EWCA 1282, [2008] Bus LR 843, where the underlying contract was governed by New York law, but the arbitration clause was governed by English law. [Back] Note 2 Albeit in Vale do Rio the alleged counterparty, the charterer, had not as yet been served. [Back] Note 3 However, as a matter of case management, the court may choose under its inherent jurisdiction to order a stay for arbitration pending the determination by the arbitrators of a factual issue which the court is unable to decide on affidavit. See Al-Naimi v. Islamic Press Agency Inc [2000] 1 Lloyd’s Rep 522 at 525 (right hand column), referred to by Lord Collins in Dallah at para 97 (cited at para 80 above). [Back]