Summary
In Star Hydro Power Limited v National Transmission and Despatch Company Limited [2024] EWHC 3258 (Comm), the English Court of Appeal overturned the decision of Judge Dias in the High Court by granting an anti-suit injunction to restrain National Transmission and Despatch Company Limited (NTDC) from bringing pre-emptive proceedings aimed at obtaining partial recognition of an arbitration award in the Lahore High Court in Pakistan under the New York Convention 1958 (the Convention).
NTDC originally sought recognition of a single paragraph of the award and a declaration of enforceability of other parts. The High Court held that this was not an attack on the substance of the award and refused to grant an anti-suit injunction. However, the Court of Appeal found that that the substance of the proceedings in Pakistan amounted to a challenge against the Award. As such, the English Courts had exclusive jurisdiction over such challenges. The Court of Appeal therefore granted an anti-suit injunction against NTDC.
Background
Star Hydro is a Pakistani hydropower company and NTDC is a Pakistani government-owned power transmitter operating Pakistan’s electricity network. Star Hydro commenced a London-seated arbitration against NTDC when it curtailed power from the hydropower project and refused to pay the contractual tariff in relation to the construction, operation and maintenance of a new hydro-electric power plant. Star Hydro was successful and the award was rendered on 7 May 2024.
NTDC then applied to the Pakistani courts under the Convention for partial recognition of the award and a declaration of non-enforceability of part of the award under Article V of the Convention. Article V sets out the grounds on which recognition and enforcement of a foreign arbitral award may be refused. Unusually, it did so before Star Hydro tried to seek recognition or enforcement of the Award in Pakistan or any other Convention state.
Star Hydro applied for an anti-suit injunction in the English High Court arguing that NTDC’s application under the Convention was in fact an attempt to challenge the substance of the award. It argued that such a challenge should have been brought before the English courts given that the arbitration was seated in London and governed by English procedural law, with the English courts having supervisory jurisdiction. Star Hydro also argued that the Defendant was not entitled pre-emptively to challenge the award under the Convention before the winning party exercised its own right to seek recognition or enforcement.
The High Court decision provided that, although England and Wales was the supervisory jurisdiction in relation to the arbitration, NTDC was entitled to pre-emptively apply for the partial recognition and enforcement of the award in Pakistan. Judge Dias found that there is a substantive right under the Convention for the award, or parts of the award, not to be recognised or enforced on the grounds set out in Article V, and that English courts have no “policing” role in this respect. Judge Dias also noted that she was satisfied this was not a case of vexatious or oppressive behaviour by NTDC.
Star Hydro was granted permission to appeal on the question of whether:
- a pre-emptive application may be made under the Convention; and
- Whether the Lahore proceedings were brought in breach of the arbitration agreement between NTDC and Star Hydro to undermine the Award.
Decision
In a unanimous decision, the Court of Appeal overturned the judgment of the lower court in favour of Star Hydro granting an anti-suit injunction against NTDC. Lord Justice Phillips, with Lady Justice Andrews and Lord Justice Peter Jackson concurring, overturned the High Court’s decision on the following grounds:
- The English courts have exclusive supervisory jurisdiction over London-seated arbitrations.
- The practical consequence of this exclusive jurisdiction is that any challenge to the award must be brought in England and Wales, not a foreign jurisdiction.
- Pre-emptive “challenges” to the Award under the Convention are limited – the Convention is intended as a “shield” against applications for recognition and/or enforcement only, not a “sword” to pre-emptively attack the substance of the award.
- The Convention permits partial recognition and enforcement of the award.
- Supervisory Role of English Courts
The Court of Appeal upheld the principle in C v D that the parties’ decision to agree a London-seated arbitration means that the English courts have the exclusive supervisory jurisdiction in relation to proceedings to challenge the award. In this case, while the application was made under the New York Convention to the courts in Lahore, the application was in breach of the arbitration agreement and the exclusive jurisdiction of the English courts. Lord Justice Phillips rejected the High Court’s finding that doing so would amount to the supervisory court taking on a “policing” role which exercises power or control over the foreign court and would constitute a breach of international comity holding that, if the English courts were unable to exercise their jurisdiction, this would undermine the supervisory role of the courts and also allow parties to rely on domestic provisions in foreign jurisdictions which may interfere with the award.
- Pre-emptive challenge of Award under the Convention
As the English courts have exclusive jurisdiction over challenges to the award under sections 67 to 69 of the Arbitration Act 1996, the Convention is only concerned with applications for recognition and/or enforcement of the award – not with pre-emptive challenges. The grounds set out in Article V of the Convention can only be relied on in defence to an application to recognise and/or enforce arbitral awards in foreign jurisdictions. Therefore, “challenges” to an award under the Convention are intended as a “shield” against applications for recognition and/or enforcement, not a “sword” to pre-emptively attack the validity of the award. The Court of Appeal considered that NTDC’s proceedings in Lahore clearly fall into the latter category, constituting a pre-emptive challenge to the London award.
- Recognition and enforcement of part of the Award
The substance of NTDC’s claim in Lahore was concerned with challenging the award, not seeking recognition and/or enforcement of the award. The application made the express assertion that the tribunal did not have jurisdiction. In addition, the sole enforcement order sought by NTDC was the standard “catch all” dismissal of other claims for relief. The effect of the application was to seek an injunction which would prevent Star Hydro from issuing invoices for more than determined by the National Electric Power Regulator, which was the position advanced by NTDC and rejected by the Arbitrator in the arbitration.
Key Takeaway
The Court of Appeal’s decision should give confidence to commercial parties who choose London as the seat for their arbitration proceedings that challenges to the arbitral award may only be heard by the English courts, which will use the powerful tools at their disposal to uphold integrity of their supervisory jurisdiction and ensure that enforcement proceedings in Convention states cannot used as a means to challenge the substance of the award.
