West Tankers applies, so the Commercial Court points to other options in Nori Holdings Ltd v Bank Otkritie [2018] EWHC 1343 (Comm)

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1 Maritime Bulletin Issue 8 West Tankers applies, s the Cmmercial Curt pints t ther ptins in Nri Hldings Ltd v Bank Otkritie [2018] EWHC 1343 (Cmm) Clarity has been restred fllwing the High Curt s recent decisin in Nri Hldings Ltd & Ors v Public Jint-Stck Cmpany Bank Otkritie Financial Crpratin [2018] EWHC 1343 (Cmm) ( Nri Hldings ), which mst imprtantly cnfirms the psitin in West Tankers Inc. v Allianz SpA [2009] AC 1138 ( West Tankers ) cntinues t apply: i.e. the English Curt will nt grant an anti-suit injunctin t restrain prceedings in anther EU member state in breach f an arbitratin agreement. The decisin is f interest fllwing the dubt which was swn after the intrductin f the (recast) Brussels I Regulatin n jurisdictin and the recgnitin and enfrcement f judgments in civil and cmmercial matters (Regulatin (EU) N 1215/2012) ( Brussels 1 Recast ). Nri Hldings is the first reprted decisin by the English curts cnsidering this questin since the intrductin f Brussels 1 Recast. The dispute The dispute between the parties arse ut f the fllwing facts: The defendant Russian bank laned mnies under agreements gverned by Russian law and subject t the jurisdictin f the Russian curt. Thse lans were secured by a series f Cyprit law share pledge agreements, each cntaining an arbitratin clause. The arbitratin clause prvided that Lndn was t be the seat f any arbitratin arising frm any dispute regarding the pledge agreements. The defendant purchased bnds and terminated the lans and the share pledge agreements were als terminated (by way f agreements incrprating the share pledge agreements arbitratin clauses). Senir Clerks Carl Wall and Stewart Gibbs 4 Pump Curt, Temple, Lndn EC4Y 7AN Pump Curt Internatinal

2 The defendant cmmenced prceedings in the Russian and Cyprit curts, in essence alleging it was the victim f a fraud whereby the secured lans were replaced with wrthless bnds. The Russian prceedings while the defendant was under temprary administratin by its administratr, and invlved an inslvency claim. In respnse: the claimants applied t the English Cmmercial Curt fr an anti-suit injunctin t restrain the curt prceedings initiated by the defendant; and, they cmmenced a series f arbitratins, seeking inter alia declaratins that the share pledge agreements were validly terminated and als anti-suit injunctins. The issues fr Mr Justice Males The defendant cntended that n injunctins shuld be granted by the English Curt fr five reasns (see [30]): (1) Any applicatin fr anti-suit relief shuld be made t the arbitral tribunal nw that it has been cnstituted and the curt shuld nt intervene; (2) The Russian prceedings are nt in breach f the arbitratin agreements because (a) the arbitratin clauses shuld be cnstrued as nt extending t an inslvency claim t set aside a transactin at an undervalue which is within the exclusive jurisdictin f the Mscw Arbitrazh Curt and/r (b) such claims are nt arbitrable; (3) There can be n injunctin t restrain prceedings in Cyprus, an EU member state fllwing the West Tankers case; (4) There are strng reasns why n injunctin shuld be granted, in particular because the Russian and Cyprus prceedings will cntinue in any event and thse jurisdictins cmprise the natural frums in which t determine the dispute. (5) As a matter f discretin there shuld be n injunctin t restrain the Russian prceedings because the claimants have delayed in making this applicatin. The decisin There are a number f pints f nte frm the decisin: First and fremst, the claimant s applicatin fr an anti-suit injunctin against the Cyprit curt prceedings was unsuccessful. In ding s Mr Justice Males held that there was nthing Senir Clerks Carl Wall and Stewart Gibbs 4 Pump Curt, Temple, Lndn EC4Y 7AN Pump Curt Internatinal

3 in Brussels 1 Recast (in particular, Recital (12)) t cast dubt n the cntinuing validity f the West Tankers decisin [90 & 99]. In a careful sectin f the judgment (at [91-98]). He respectfully disagreed with the cntrary pinin f Advcate General Wathelet in Gazprm OAO (Case C-536/13). The effect is that Member States will nt grant an anti-suit injunctin preventing curt prceedings in anther Member State, even where there is an arbitratin clause. The decisin brings int relief the difference in apprach between Members States and nn-member States. Hwever, practitiners shuld nte that there may well be alternative surces f relief. Mr Justice Males highlighted (at [ ]) that: The Cyprit Curt may stay the prceedings itself pursuant t Article II(3) f the New Yrk Cnventin; The arbitratrs may issue an rder restraining the further pursuit f the Cyprit prceedings and, if s (as the Gazprm case shws), such an award will be entitled t recgnitin and enfrcement under the New Yrk Cnventin even in EU member states; The claimants had an alternative claim fr a declaratin that they are entitled t an indemnity against: (1) any csts incurred by them in cnnectin with the Cyprit prceedings; and (2) any liability they are held t we in thse prceedings. While Mr Justice Males deferred any decisin n the alternative claim, he plainly viewed it psitively as a result f The Alexandrs T [2014] EWCA Civ 1010 at [15] t [17], a judgment by Mr Justice Flaux in West Tankers itself [2012] EWHC 854 (Cmm), and Gazprm. The claimant was entitled t an injunctin in respect f the Russian prceedings. The ther issues raised by the defendant were dismissed: Mr Justice Males held that, in circumstances where n stay f the English prceedings had been sught by the defendant (pursuant t s. 9 f the Arbitratin Act 1996), the availability f anti-suit relief frm the arbitratrs was nt a reasn fr the Curt t refuse an injunctin [40-42]; There was n presumptin that arbitratin clauses d nt extend t transactins made in a liquidatin (cf. the Singaprean Curt f Appeal in Larsn Oil) [61]. He cnsidered there was n reasn t imply such an exclusin int the (bradly drafted) arbitratin Senir Clerks Carl Wall and Stewart Gibbs 4 Pump Curt, Temple, Lndn EC4Y 7AN Pump Curt Internatinal

4 clause because it is unnecessary [60]. When cnsidering whether the claim was arbitrable (see in particular [62-63]), it was irrelevant whether the claim is prperly characterised as an inslvency claim under Russian law. It is necessary t fcus n the nature f the particular claim (i.e. substance rather than frm) and t cnsider whether that claim is capable f being determined in arbitratin. Mr Justice Males fund that regardless f legal label this was a straightfrward factual dispute as t whether the later transactins cnstitute a fraud against the defendant t replace valuable secured lans with wrthless bnds. That was a dispute which arbitratrs can determine; The defendant failed t discharge the burden f shwing there were strng reasns t refuse an injunctin in respect f the Russian prceedings. In circumstances where it is nt pssible t achieve submissin f the whle dispute t a single frum, the parties' agreement t arbitrate was the decisive factr [113]; and, On the facts, the fur-mnths between Russian prceedings being cmmenced and bringing the applicatin fr the anti-suit injunctin did nt cnstitute a real delay and, even it had, wuld have been utweighed by the claimants entitlement t rely n their right t arbitratin [118]. (The defendant has als realistically acknwledged that delay was unlikely t succeed as an independent grund fr refusing the injunctin against the Russian prceedings [115].) There has been n appeal against Mr Justice Males decisin n the Cyprit prceedings. Permissin t appeal was refused by the Curt f Appeal in respect f the Russian prceedings (see Nri Hldings Ltd & Ors v Public Jint-Stck Cmpany Bank Otkritie Financial Crpratin [2018] EWHC 1642 (Cmm) at [1]). Final wrd The decisin ffers clarity fllwing the intrductin f Brussels 1 Recast and reaffirms West Tankers, and useful cmmentary n sme bstacles raised defendants t anti-suit injunctin. Hwever, the West Tankers psitin will f curse have t be reassessed as the UK lms clser t March 2019 and its departure frm the EU. Subject t the precise terms f an agreement between the EU and the UK, the clarity ffered by Nri Hldings may be shrt-lived. Senir Clerks Carl Wall and Stewart Gibbs 4 Pump Curt, Temple, Lndn EC4Y 7AN Pump Curt Internatinal

5 In any event, practitiners shuld bear in mind the pssibility f alternative tw-step surces f relief (first by the tribunal then by lcal curts). In this regard: They shuld bear in mind that Mr Justice Males cmments will be persuasive but are biter; In rder t reduce enfrcement issues, parties shuld be seeking an award, rather than a prcedural rder frm the tribunal; and, There is a pssible enfrcement risk (n public plicy) in civil jurisdictins, as the anti-suit injunctin is a prduct f the cmmn law (althugh Advcate General Wathelet ffered psitive cmments abut this in Gazprm). Please nte that this is a bulletin and des nt prvide legal advice. Whilst every care has been taken in the preparatin f this dcument, we cannt accept any liability fr any lss r damage, whether caused by negligence r therwise, t any persn using this dcument Senir Clerks Carl Wall and Stewart Gibbs 4 Pump Curt, Temple, Lndn EC4Y 7AN Pump Curt Internatinal