An article recently published in Legal Week (London arbitrators await crucial ECJ verdict, 17 May) predicted that London’s popularity as a seat for international arbitration may suffer if the European Court of Justice (ECJ) prevents English courts from restraining proceedings commenced elsewhere in Europe in breach of an arbitration agreement. The concern is that the ECJ, in neutering the English courts’ power to issue anti-suit injunctions, will trigger a loss of arbitration work to non-European venues.
London’s loss will be
New York’s gain.
That is the thesis. But it is a flawed thesis. New York should not be counting its chickens, and London should certainly not despair. The ECJ’s capacity to injure England — at least on this occasion — is grossly overstated. Moreover, the focus on anti-suit injunctions is an unhelpful distraction from the real problem: the European Union (EU) rules on civil jurisdiction. Fix those and there is no need for anti-suit injunctions within the EU.
First, however, some background. Until recently, the received wisdom was that if parties had agreed by contract to litigate exclusively in, for example, England, then the English courts would hold them to that bargain. Forum shoppers starting non-English proceedings (in breach of contract) would be prevented (by means of an anti-suit injunction) from taking any further steps in the ‘illegal’ proceedings.
English anti-suiting tendencies began to unravel as the EU grew — both juridically and geographically. Anti-suit injunctions were perceived as ‘un-European’ and incompatible with the notion (underpinning the 1968 Brussels Convention on recognition and enforcement of civil judgments) that all European state courts are equally well-equipped to determine which court has jurisdiction to determine a particular case. The idea that English courts could prevent, for example, French or German courts from even considering who had jurisdiction over a case offended pan-European attempts to harmonise rules on jurisdiction.
In Gasser GmbH v MISAT Srl [2003] the ECJ ruled that a court of an EU member state on which exclusive jurisdiction is conferred by contract must suspend its proceedings in favour of another (first seised) EU member state’s court to allow that first seised court to rule on jurisdiction. In Turner v Grovit [2004] the ECJ held that member state courts cannot issue anti-suit injunctions, even if a party has deliberately (and in bad faith) issued proceedings in the ‘wrong’ EU member state’s courts.
That is the current state of play in European civil litigation. The blind spot on the legal landscape is arbitration. The relevant EU regulation (Regulation 44/2001), successor of the 1968 Convention, simply states that it “shall not apply to …arbitration”. English lawyers have argued that those words mean what they say and say what they mean. That was the view of Lord Hoffman in West Tankers — that the regulation simply has no role to play in relation to arbitration proceedings. Lord Hoffman is clearly right, and the ECJ ought to apply the plain language of the regulation rather than extend the folly that is Gasser.
However, let us assume that the ECJ disagrees with Lord Hoffman and bans English courts from granting antitrust injunctions in support of English arbitrations. Is this really (as has been suggested) a disaster for London as an arbitration centre? There are several reasons why it ought not to make the blindest bit of difference.
First, it is by no means apparent that contracting parties choose their arbitral seat by reference to whether its courts issue, or do not issue, anti-suit injunctions. French and Swedish courts have never granted anti-suit relief, and yet Paris and Stockholm are important European arbitration venues. There is no evidence that they suffered from the inability of French or Swedish courts to enjoin proceedings commenced in breach of French or Swedish arbitration clauses. Just as Gasser and Turner v Grovit did not increase London’s slice of the EU arbitration pie, there is no reason why London should suffer from the loss of a power which its EU rivals never enjoyed. At worst, London would join a level European playing field.
Secondly, let us not exaggerate the geographic impact of West Tankers. The implications are confined to the EU. Even if the ECJ finds against England, the English courts will still be able to anti-suit proceedings brought in breach of contract in non-EU states. That means that 170 odd states (including the US, Japan and the economies of Brazil, Russia, India and China) are still within the injunctive range of the English courts.
Thirdly, we must not lose sight of why parties choose to arbitrate in London. Is it because of the availability of anti-suit injunctions? Hardly. As noted above, Paris has not suffered from the French courts’ failure to grant such relief. The reasons for London’s prominence as an arbitration venue are varied and complex: the importance of English law as a product of choice in key business sectors; the perceived quality of London-based counsel and arbitrators in those sectors; the emphasis (enshrined in the Arbitration Act 1996) on party autonomy; and the fact that London is geographically accessible and cosmopolitan. None of these attractions is diminished by the probable result in West Tankers. Indeed, it is the English courts’ reputation for non-intervention which appeals to parties contemplating arbitrating their differences in London.
Fourthly, English anti-suit injunctions directed at EU proceedings have been in a state of terminal decline for several years. West Tankers — if answered negatively by the ECJ — will merely confirm the trend initiated by Gasser. As such, the probable outcome in West Tankers has been priced into parties’ strategic/commercial thinking for some time. It is not credible to imagine that parties will suddenly shift arbitration offshore.
Finally, the focus on anti-suit injunctions within Europe is unhelpful in the longer term. It is a focus on symptoms rather than the disease. The disease is forum shopping — alive and well within the EU because of 27 different civil procedure systems and the fiction (underpinning Regulation 44/2001) that each system uniformly approaches timing and procedure. Practitioners know this to be pure fantasy. An English jurisdiction challenge is determined within three months with no likely appeals. By contrast, jurisdiction disputes in Continental jurisdictions may last years and involve at least two appeals. Moreover, several EU states merge the jurisdiction challenge with the case on merits, thereby adding further delay and complexity.
We are preoccupied with anti-suit injunctions within Europe only because Regulation 44/2001 is not working. Fix this regulation and we will not need anti-suit jurisdictions within the EU. The response may be that the regulation is off limits and impervious to reform. This is not so. Regulation 44/2001 is currently being scrutinised by a committee appointed by the European Parliament, and is the subject of increasingly vocal representations by member states and trade bodies. The Regulation is not beyond reform, and the political/economic pressure for reform is mounting.
It might be objected that reforming Regulation 44/2001 will take time and patience. So, too, will waiting for the ECJ’s ruling in West Tankers. In the meantime, London practitioners should not despair about the implications of a negative ruling by the ECJ. London’s place in the arbitration world is anchored in merits far more secure and profound than the availability (or otherwise) of anti-suit injunctions.
Tom Lidstrom is a partner in Linklaters’ litigation and international arbitration practice.
