ANTI -ARBITRATION INJUNCTION: JURISDICTION AND DISCRETION

Khushi Mishra & Rajeev Dadhich  , Institute of Law, Nirma University.

Introduction

The approach of the Indian courts in dealing with the anti-arbitration injunction has been disjunctive and imbalanced. On 12th Aug 2020, the Calcutta High court in Balasore Alloys Limited v. Medima LLC attempted to clarify the position of the Indian courts to grant an anti-arbitration injunction in a foreign seated arbitration. It held that the Indian courts have inherent power to grant anti-arbitration injunction, subject to a higher degree of the threshold. Anti-arbitration injunctions are often viewed as a challenge to the arbitral tribunals’ power to determine its own jurisdictions, generally regarded as the Kompetenz- kompetenz principle, which is perceived to be the pillar of the arbitration framework.

Against this backdrop, the article aims to discuss and critically analyze the stake of Indian jurisprudence in determining the jurisdiction to grant anti-arbitration injunction in a foreign seated arbitration, while extending an analysis through international jurisprudence.

Judicial pronouncements in Indian jurisdiction

The courts have often adopted an asymmetric approach while dealing with the issue of jurisdiction and enforcement of anti-arbitration injunctions. The Delhi High court in Bina Modi and Ors. v. Lalit Modi and Ors. held that civil courts do not have any jurisdiction to grant an anti-arbitration injunction in a foreign seated arbitration. Reliance was placed on the decision of a three-judge bench of Supreme Court in Kvaerner Cementation India Ltd v. Bajranglal Agarwal and Anr.(Kvaerner’) in which the Supreme Court relied on the object of the Arbitration Act and held that Civil courts do not have any jurisdiction to declare the invalidity of an arbitration agreement. Similarly, in Devi Resources Ltd. v. Ambo Exports Ltd the Calcutta High Court held that before granting an anti-arbitration injunction the court has to exercise extreme caution and circumspection and it cannot be issued against a foreign arbitral tribunal.

Contrary to this, there are numerous cases where the courts have refused to recognize such an interpretation. The Supreme Court in Modi entertainment network v. W.S.G. Cricket set out grounds for granting an anti-arbitration injunction which includes: (i) the defendant is amenable to the personal jurisdiction of the court, (ii) the end of justice would be served by granting an injunction, (iii) the principle of comity to be borne in mind, (iv) availability of multiple forums available and (v) the forum conveniens for bringing the action. Based on these grounds and factual circumstances of the case, the Supreme Court did not allow anti-arbitration injunction.  Further, in SBP & Co. v. Patel Engineering limited, the Supreme Court rejected the argument presented in Kvaerner that an arbitral tribunal solely has the competence to the complete exclusion of civil courts to determine its own jurisdiction. Therefore, in SBP & Co, Supreme Court impliedly overruled the dictum presented in Kvaerner Cementation.

Similarly, in Balasore Alloys Limited v. Medima LLC the Calcutta High Court, relying on Devi Resources Ltd. v. Ambo Exports Ltd held that Indian courts have the jurisdiction to grant anti-arbitration injunctions in foreign seated arbitrations. However, such a power should be used sparingly and with utmost caution. In Balasore Alloy Limited, the dispute arose on the jurisdictional conflict between India and International Chamber of Commerce (‘ICC’). While it was contended by Medima that the ICC would have the jurisdiction according to the clause in the 2018 Agency Agreement, Balasore contended the terms and conditions in purchase orders required the application of Indian Arbitration and Conciliation Act with Kolkata as the venue. Relying on the principles laid down in Modi Entertainment network, the ad-interim order for an anti-arbitration injunction was denied by observing that Balasore did not completely discharge the duty of proving that the ICC is non-conveniens forum or that the proceedings before it vexatious or oppressive. Therefore, it was held that multiple proceeding is not an adequate ground to render an arbitration agreement invalid if it is not coupled with a plea of non-conveniens or vexatious or oppressive proceedings. In the Balasore Alloy Limited case Calcutta High Court upheld the ratio decidendi set out in SBP & Co. and delivered its judgment against the views of three judge bench of Supreme Court in Kvaerner Case.

In the backdrop of Indian jurisprudence regarding the grant of anti-arbitration injunction, it is  still unclear that the Indian Courts have jurisdiction to grant an anti-arbitration injunction. However, Balasore Alloy limited to a certain extent solved the dilemma but there is still an asymmetry in approach in regard to the grant of an anti-arbitration injunction against foreign seated arbitration.

International jurisprudence on anti-arbitration injunction

The foreign courts in common law and civil law countries have a mixed approach towards anti- arbitration injunction. In countries like Malaysia, United Kingdom and United States of America, anti- arbitration injunction is granted in rarest of the rare cases subjected to pertinent grounds discussed below. Therefore, jurisprudence of these countries becomes relevant in analysing Indian position on allowing anti-arbitration injunctions. The Malaysian High Court in Government of Malaysia v NurhimaKiramFornan& Ors, (2019) laid three grounds for granting anti-arbitration injunction. Firstly, if the parties have a non- binding arbitration agreement; Secondly, if the arbitration breaches sovereign immunity of the country and last, Malaysian court is a natural and proper forum to address the issue at hand. Sovereign immunity is regarded as customary international law and has wide range of practice on international forum. Malaysian High Court acknowledges the principle of sovereign immunity and has imbibed this principle in domestic law which is evident by various case laws.

India, in the context of investment arbitration, has yet not recognized sovereign immunity as a ground to grant anti- arbitration injunction.  This ground can act as a protection against claims brought by foreign stakeholders outside the ambit of commercial activity. Thus, sovereign immunity as a threshold will save Indian domestic entities against false claims, and will also not impact India’s pro-arbitration stance.

The United Kingdom courts in a plethora of cases have adjudicated that courts have both the power and jurisdiction to grant anti-arbitration injunction but subject to exceptional circumstances. Recently, in the case of Sana Ha ssib Sabbagh v Khoury and others (2019), the U.K. Court of Appeal addressed the issue of courts’ jurisdiction to grant anti- arbitration injunction and restrict the arbitration proceedings with an overseas seat. The court ruled out three essential grounds for granting an anti-arbitration injunction:(i) no power to grant an anti-arbitration injunction on the basis that the foreign arbitration is “vexatious and oppressive”,(ii)no injunction in cases where the arbitration agreement captures the dispute, i.e. a valid and binding agreement between the parties and,(iii)Natural forum, i.e. primary jurisdiction of the court prevails over the foreign seated court.

In the United States, Federal courts are empowered to issue an anti-arbitration injunction under the provisions of Federal Arbitration Act (FAA). In Société Géneralé de Surveillance, S.A. v. Raytheon European Management and Systems Co. (1981),theFirst Circuit Court of Appeal stated that nothing in the record affirms that the arbitration agreement between the parties is ‘null and void or inoperative or incapable of being performed’ therefore, held that courts have the authority to issue anti- arbitration injunction. In the Republic of Ecuador v. Chevron Corp. (2011),the Second Circuit Court upholding the position of Société Géneraléwent further to state that the decision with respect to the injunction was proper and based on the particular circumstances presented in the appeal. However, in Citigroup Global Markets Inc. v. VCG Special Opportunities Master Fund Ltd. (2010), the United State Court of Appeal set out four grounds to issue anti-arbitration injunction. Firstly, the case has a substantial likelihood of success on the merits, secondly, the parties will suffer irreplaceable damage if the injunction is not issued, thirdly, the threatened injury outweighs whatever damage the proposed injunction may cause to the opposing party and, last the injunction would not be adverse to the public interest. An inquiry on the standpoint of multiple jurisdictions makes it very much evident that majority of the countries reserve the jurisdictional rights to address the issue pertaining to anti-arbitration injunction but granting of the same is subjected to special circumstances which depend upon the facts of the case.

Critical Analysis

The grant of anti-arbitration injunction should be used with utmost caution and only in ‘rare circumstances’. The autonomy provided to arbitral proceedings should not deprive the applicant of the remedy to injunct the arbitration proceedings when he may have not consented to such an arbitral tribunal or where the proceedings have been rendered oppressive, vexatious, or non-conveniens. Under all these circumstances, Balasore Alloy limited to an extend shows a clear and balanced approach to the issue of granting an anti-arbitration injunction. The judgment sets out that if multiple proceedings arise out of parties’ knowledge or because of certain terms mentioned in the contract of which they were aware of, that fact alone cannot render the proceedings vexatious or oppressive especially when there is neutral foreign seated arbitration. The judgment grants jurisdiction to the Indian courts to issue an anti-arbitration injunction protecting the sovereign immunity of the state basing the issuance of such injunctions on high threshold limits.

Conclusion

In a nutshell, given the contentious existence of the anti-arbitration injunctions, it has arisen as one of the possible remedies in various jurisdictions. The Indian jurisprudence has by far reflected an unsettled position wherein high courts have dealt with the issue according to their whims and fancies. In the Balasore Alloy Limited, the Calcutta High Court attempted to settle the issue by allowing the Indian court’s jurisdiction to grant an anti-arbitration injunction on specific terms. The Indian courts must adopt certain principles to ensure a clear and balanced approach as to when honoring an arbitration agreement shall prevail over the challenge to such an agreement. Courts should follow a restrictive approach to grant anti-arbitration injunction and adopt a pro-arbitration stance which has been the motto of the government in recent times, also allowing for early disposal of disputes aiding India in making of an international arbitration hub.

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