A tool that French law does not like: English Court refuses to grant anti-suit injunction in support of French-seated ICC arbitration

The English Court has refused to grant an anti-suit injunction (ASI) in support of an ICC arbitration seated in France.

The decision in SQD v QYP [2023] EWHC 2145 (Comm) underlines that parties should ensure that arbitrations are seated in England or another jurisdiction that issues ASIs in order to mitigate the risk that a party may commence parallel proceedings in a state court.

We are aware of another recent judgment with similar facts in which the English Court took the contrary view and granted an ant-suit injunction in relation to an ICC arbitration seated in France.  But in that case no arbitration was yet on foot. This is an evolving area that is ripe for clarification by the Court of Appeal.

The facts

SQD and QYP entered into a contract relating to a project overseas (the Agreement). The Agreement was governed by English law but provided for ICC arbitration seated in Paris.

QYP commenced court proceedings in its own country, seeking payment of the sum covered by the Agreement. 

SQD responded by issuing a request for arbitration pursuant to the arbitration clause in the Agreement. The relief sought included orders that QYP must discontinue the proceedings in that country and must not enforce any decisions of those courts.

SQD also issued an arbitration claim form and application notice in the English Court. It sought interim anti-suit and anti-enforcement injunctions under s. 44 of the Arbitration Act 1996 (the AA) or, alternatively, under s. 37(1) of the Senior Courts Act 1981 (the SCA).

SQD's position

The application was made without notice to QYP, which was therefore not represented.  SQD made two main points:

1. The agreement to arbitrate was subject to English law and the English courts have an interest in securing the performance of contracts that are subject to English law.
2. The fact that an ASI cannot be obtained in France made the English Court the proper forum. 

The judge, Mr Justice Bright, considered these points in reaching his decision.

The Court's reasoning

Applying Lord Mance's dictum in Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP [2013] UKSC 35, the judge held that SQD's application could only be brought under s. 37(1) of the SCA and not under s. 44 of the AA.  However, the judge found that it made no real difference in this case.

The judge noted that it is well established that ASIs can be granted to restrain the breach of an agreement to arbitrate. In The Angelic Grace [1995] 1 Lloyds Rep. 87, Lord Millet had made clear that as long as the application is made promptly and there are no exceptional circumstances, an ASI will be granted as a matter of course.

The judge was concerned, however, as to why SQD had not applied for an ASI in France. He asked SQD's counsel why this was the case and indicated that it was likely to be relevant to know whether it was possible for SQD to obtain an interim ASI from the French court and, if not, why not.  

Overnight, SQD adduced a short statement from a French professor in civil law and procedure.  That evidence showed that it was legally impossible for a French judge to issue an ASI for two reasons:

1. French judges do not have the relevant procedural power.  
2. Under French law, an ASI would breach the fundamental principle of freedom of legal action as well as the constitutionally recognised limitation on the general powers of the judge.  

On the basis of this evidence, the judge noted that French law "has a philosophical objection to ASIs" and that ASIs "are a tool that French law does not like".  The judge also rejected submissions by SQD that French law has no objection to foreign judges granting ASIs on the basis that French judges will issue an anti-ASI, i.e. an injunction that seeks to strike down or restrain an ASI granted by a foreign court.

SQD had also relied on Rule 29.7 of the ICC Rules, which provides that: "The Emergency Arbitrator Provisions are not intended to prevent any party from seeking urgent interim or conservatory measures from a competent judicial authority at any time prior to making an application for such measures, and in appropriate circumstances even thereafter, pursuant to the Rules".

SQD contended that this provision, and the parties' agreement to ICC arbitration, indicated that they had agreed that either of them might apply to the English Court for an ASI. The judge disagreed, holding that while Rule 29.7 accepted that there may be an application to a "competent judicial authority", that did not confer judicial competence on the English Courts.  It was implicit in Rule 29.7 that the courts of the seat will be competent and have the necessary jurisdiction.

In view of the above matters, the judge rejected SQD's two main points:

1. Although the judge accepted in principle that the English Courts have an interest in securing the performance of contracts that are subject to English law, the English Court will not act in every such case.  This was obvious (i) from the fact that the Civil Procedural Rules did not give the English Courts jurisdiction in every case concerning a contract subject to English law and (ii) the key authority on ASIs in support of arbitration, The Angelic Grace, acknowledges that there may be exceptional cases where an ASI should not be granted even though there are foreign proceedings that are a breach of the arbitration agreement.
2. The fact that an ASI cannot be obtained in France did not make the English Court the appropriate forum.  This was for two reasons in particular: (i) To grant an interim ASI would be inconsistent with the approach of the courts of the seat of arbitration and (therefore) with the curial law that applies. The English Court should have deference to the approach of French law. (ii) The English Court should also have deference to the objective intention of the parties. The parties deliberately chose Paris as the seat of the arbitration.  They must be taken to have done so knowing that the French Courts will not grant ASIs.

SQD's application for an ASI was dismissed.

Commentary

This helpful decision underlines a key advantage of seating an arbitration in England.  

If a party to an arbitration commences parallel proceedings in a state court in another jurisdiction, there is a risk that the court may issue a conflicting court judgment that may ultimately frustrate the enforcement of any arbitral award.  ASIs are a key tool to deal with this issue. When drafting arbitration agreements, parties are therefore well advised to choose an arbitral seat such as England where the courts issue ASIs.     

However, the position as to the availability of ASIs in support of arbitrations seated outside England may continue to evolve. It has been reported that in another recent judgment with similar facts handed down on 21 August 2023, Mr Justice Knowles granted an ant-suit injunction in relation to an arbitration seated in France, although in that case no arbitration was yet on foot. This is an area that is ripe for clarification by the Court of Appeal.