Anti-enforcement injunctions – the second bite at the cherry?

Summary

The relief generally sought for breach of an exclusive jurisdiction clause by parties who litigate in England or are engaged in arbitration with a seat in England is an anti-suit injunction. This restrains the party in breach of the exclusive jurisdiction clause from starting or continuing parallel proceedings in foreign courts. English courts have power to grant anti-suit injunctions where foreign proceedings are in a non-EU Member State (Senior Courts Act 1981, section 37).

In Bank St Petersburg v Vitaly, the Court of Appeal may have now given parties who want to uphold exclusive jurisdiction clauses the possibility of a "second bite at the cherry" by holding that an injunction preventing the breakers of an exclusive jurisdiction agreement from enforcing judgments obtained in Russia in various jurisdictions can be granted by English courts.

The facts

Bank St Petersburg OJSC & Anor v Vitaly Arkhangelsky & Ors [2014] EWCA Civ 593

Bank St Petersburg OJSC and its chairman, and Mr and Mrs Arkhangelsky and a company controlled by them, Oslo Marine Group Ports LLC, were embroiled in a dispute over control of the Oslo Marine group of companies, which were majority owned by the Arkhangelskys.

The group owed substantial debt to the bank. The bank had secured a number of judgments in its favour in the Russian courts, which the Arkhangelskys alleged were obtained by fraud and the result of a conspiracy to take over their assets. The Arkhangelskys commenced proceedings against the Bank in the British Virgin Islands and Cyprus, alleging conspiracy, deceit, duress and intimidation.

The parties had subsequently entered into an exclusive jurisdiction agreement providing that the English court would have exclusive jurisdiction to determine the substantive disputes between them. Proceedings in English courts were commenced by both parties. In the meantime, the bank sought to enforce the Russian judgments in Russia, France and Bulgaria. The Arkhangelskys applied to the English court to seek an injunction preventing these enforcement proceedings.

The judgment

The English trial judge at first instance refused the anti-enforcement injunction on the grounds that the exclusive jurisdiction agreement did not expressly refer to or deal with stay of pending enforcement proceedings; and that granting such injunction would interfere in the process of the foreign court where enforcement was sought.

The appeal

The Court of Appeal, however, unanimously ruled that the trial judge had misinterpreted the jurisdiction agreement and found that to allow enforcement proceedings to continue would be against "both the terms and the spirit" of the exclusive jurisdiction agreement.

In reaching that decision, the Court of Appeal seems to have taken particular note of the bank’s and its chairman’s admission that, if they lost the English proceedings, they would consider themselves entitled to continue their enforcement efforts in Bulgaria and France or "wherever they could find assets". The court viewed this behaviour as inconsistent with the exclusive jurisdiction agreement, which accordingly, needed to be restrained by an interim injunction, pending resolution of the dispute in England.

The Court of Appeal decided that there would be no unwarranted interference with the French or Bulgarian court processes because the injunction would (temporarily) affect the bank and its chairman, who were parties to the exclusive jurisdiction agreement, and not the foreign courts.

Comment

Anti-enforcement injunctions are not routinely granted by English courts. The last reported case, in 1928 (Ellerman Lines v Read [1928] 2 KB 144), was cited as an example of the "exceptional nature" of antienforcement injunctions. However, the English courts may see more applications for anti-enforcement injunctions following the Bank St Petersburg decision.

An anti-enforcement injunction has arguably the same practical effect as an anti-suit injunction. So, where a party wishes to rely on an exclusive jurisdiction agreement and has, for whatever reason, not applied for or been unable to obtain an anti-suit injunction, it may now have a second bite at the cherry in applying for an anti-enforcement injunction.

Furthermore, the occasional reluctance of English courts to grant anti-suit injunctions for fear of interfering in foreign courts’ jurisdiction, may not be a consideration when an antienforcement injunction is sought. The Court of Appeal made it quite clear that anti-enforcement injunctions are intended to restrain a party subject to their jurisdiction – not undermine the jurisdiction of foreign courts.

The timing of the application may be crucial. If, in Bank St Petersburg, the French or Bulgarian courts had already been petitioned to grant, or had granted, an enforcement order, the English courts might have been reluctant to interfere in ongoing foreign enforcement proceedings and the outcome of the case may have been different.

That said, the Bank St Petersburg case has not laid down any tests for the exercise of the English courts’ discretion in granting anti-enforcement injunctions, and at present it is difficult to predict whether it would be harder or easier to meet than the test of "vexatious and oppressive" foreign proceedings applied for anti-suit injunctions.