A recent decision by the Court of Justice of the European Union has held that anti-suit injunctions issued by arbitral tribunals are not covered or prohibited by EU Regulation 44/2001.
Anti-suit injunctions are orders directing a party not to initiate or pursue legal action in a different jurisdiction. These measures may be necessary to preclude litigation in fora other than the exclusive forum to which parties have agreed – for example, arbitration. International arbitrators are increasingly issuing anti-suit injunctions to prevent parties from having recourse to the courts in breach of their arbitration agreements. Recently, questions have arisen about the enforceability of such arbitral anti-suit injunctions, particularly in the European Union.
EU Regulation No 44/2001 (the Brussels I Regulation), governs the jurisdiction of EU Member State courts over civil and commercial matters and provides guidance on resolving conflicts of jurisdiction between courts of the various Member States. While it purports to exclude arbitration from its ambit, it was unclear whether the Brussels I Regulation covered or restricted anti-suit injunctions issued by arbitrators (as opposed to courts).
In a recent decision, the Court of Justice of the EU held that anti-suit injunctions issued by arbitral tribunals are not covered by the Brussels I Regulation. In Gazprom1, the Court of Justice determined that the Brussels I Regulation:
‘must be interpreted as not precluding a court of a Member State from recognising and enforcing, or from refusing to recognise and enforce, an arbitral award prohibiting a party from bringing certain claims before a court of that Member State, since that regulation does not govern the recognition and enforcement, in a Member State, of an arbitral award issued by an arbitral tribunal in another Member State.’
It said that arbitral anti-suit injunctions ‘are covered by the national and international law applicable in the Member State in which recognition and enforcement are sought’.
This is a decision that will be welcomed by the international arbitration community.
Facts underlying Gazprom
The Gazprom case arose out of a shareholder dispute between the Russian energy giant, Gazprom, and Lithuania’s energy ministry over the management of gas provider Lietuvos Dujos.
In 2012, Gazprom obtained an arbitration award against Lithuania’s energy ministry from a Stockholm Chamber of Commerce tribunal ordering the ministry to ‘withdraw or limit some of the claims’ pending before local courts. However, the Lithuanian courts refused to enforce this anti-suit award, leading to the Lithuanian Supreme Court’s referral of the matter to the Court of Justice in 2013.
In essence, the question put to the Court of Justice by the Lithuanian Supreme Court was whether the Brussels I Regulation ‘must be interpreted as precluding a court of a Member State from recognising and enforcing, or from refusing to recognise and enforce, an arbitral award prohibiting a party from bringing certain claims before a court of that Member State’.
Context for Gazprom
To set the case in context, it is necessary to understand two earlier events: the Court of Justice’s decision in Allianz SpA and Generali Assicurazioni Generali SpA v West Tankers Inc. (C-185/07); and efforts to reform the Brussels I Regulation, which culminated in a ‘recast’ Brussels I Regulation which came into force on January 10, 2015.
The Court’s decision in West Tankers
The Brussels I Regulation does not cover arbitration. Article 1(2)(d) states that ‘[t]he Regulation shall not apply to … arbitration.’
Despite this exclusion, in West Tankers the Court of Justice controversially ruled that a preliminary issue concerning the application of an arbitration agreement, including its validity, falls within the scope of the Brussels I Regulation if the main subject matter of the proceedings comes within scope. As a result, the Court of Justice held that it was incompatible with the Brussels I Regulation ‘for a court of a Member State to make an order to restrain a person from commencing or continuing proceedings before the courts of another Member State on the ground that such proceedings would be contrary to an arbitration agreement.’
This narrow interpretation of the arbitration exception had significant implications for arbitration in Europe. Many practitioners considered anti-suit injunctions in favour of arbitration to be an essential component of the supervisory authority of courts in the seat of arbitration. This led some commentators to postulate that parties could delay or frustrate an arbitration by commencing proceedings in their court of choice concerning the existence or validity of an arbitration agreement – so-called ‘torpedo’ actions.
However, in the West Tankers decision, the Court of Justice did not address the interaction between the Brussels I Regulation and the New York Convention, a treaty governing the recognition and enforcement of foreign arbitral awards to which all EU Member States are party.
Reforms to the Brussels I Regulation
In 2012, the Brussels I Regulation was ‘recast’ to provide unified rules on conflicts of jurisdiction in civil and commercial matters and to ensure the rapid recognition and enforcement of judgments given in Member States. The recast Brussels I Regulation came into effect on January 10, 2015, and includes revisions to the arbitration exception.
Article 1 of the recast Brussels I Regulation continues to exclude arbitration from its scope. To address the issues raised by the West Tankers ruling, amongst others, the recast Brussels I Regulation clarifies (in its Recital 12) that there is an absolute exclusion of arbitration from its scope. It recognises ‘the competence of the courts of the Member States to decide on the recognition and enforcement of arbitral awards in accordance with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York on 10 June 1958 … which takes precedence over this Regulation’.
In the absence of an authoritative interpretation of the recast Brussels I Regulation, it is not clear whether the recast Brussels I Regulation prohibits anti-suit injunctions issued by Member State courts in support of arbitration.
The Gazprom decision
Many in the arbitral community hoped that the Court of Justice would use the Gazprom case to reconsider their position in West Tankers, especially in light of the recast Brussels I Regulation.
The Advocate General of the Court, Melchior Wathelet, issued his non-binding advisory opinion on December 4, 2014. He argued that the recast Brussels I Regulation overturned the West Tankers prohibition on intra-EU court anti-suit injunctions in support of arbitration.
The Advocate General’s opinion stated that there was nothing in the Brussels I Regulation requiring the Court of Justice to refuse to recognise the tribunal’s anti-suit award. In reaching this conclusion, he outlined two lines of reasoning:
- First, Recital 12 of the recast Brussels I Regulation showed how the arbitration exclusion must, and always should have been, interpreted. In Advocate General Wathelet’s view, Recital 12 makes clear that, contrary to the West Tankers decision, an EU court could grant an anti-suit injunction in support of arbitration against court proceedings elsewhere in the EU. This reasoning not only supports the power of an EU-seated arbitral tribunal to grant an anti-suit award against court proceedings elsewhere in the EU, but also permits a Member State court to do the same.
- His second line of reasoning expressed a more conventional view. He opined that, since arbitral tribunals are not bound by the Brussels I Regulation, the matters in dispute should be left to national arbitration law. The Advocate General concluded that the Brussels I Regulation does not require the court of a Member State to refuse to recognise and enforce an anti-suit injunction issued by an arbitral tribunal, and the fact that an award contains an anti-suit injunction is not sufficient grounds for refusing to recognise and enforce it.
“… The Gazprom judgment is positive for arbitrations seated in the EU.”
The Court of Justice only focused on the text of the Brussels I Regulation that was enacted in 2000, and did not interpret the recast Brussels I Regulation. The Court of Justice followed the Advocate General’s second line of reasoning, holding that the Brussels I Regulation does not preclude an EU court from giving effect to an anti-suit award made by an arbitral tribunal. Rather, this matter should be resolved under the national arbitration law applicable in the Member State in which enforcement is sought, such as the New York Convention. The Court of Justice therefore held that proceedings for the recognition and enforcement of an arbitral anti-suit award are covered by national and international law, such as the New York Convention, and not by the Brussels I Regulation.
The court in Gazprom did not however address the impact of the recast Brussels I Regulation on its earlier decision in West Tankers. The question as to whether the recast Brussels I Regulation permits anti-suit injunctions by Member State courts to protect arbitration agreements therefore remains unanswered.
The future of anti-suit injunctions in Europe
The Gazprom judgment is positive for arbitrations seated in the EU:
- It confirms that the original Brussels I Regulation does not tie an EU court’s hands in determining the effect to be given to an anti-suit award issued by an arbitral tribunal seated elsewhere in the EU.
- This conclusion endorses the primacy of the New York Convention regime to which all EU Member States (and more than 150 countries) are party. Moreover, the decision allows arbitrators greater power to protect the exclusive jurisdiction bestowed upon them by the parties.
- As a result of the Gazprom decision, however, it is conceivable that arbitral tribunals now have greater anti-suit powers than judges in EU Member State courts.
It still remains to be seen how the Brussels I Regulation will be interpreted and applied to arbitration matters. One outstanding issue after Gazprom is whether West Tankers will survive under the recast Brussels I Regulation. Unless West Tankers is overruled, parties with EU-centric disputes should consider obtaining any anti-suit injunctions from an arbitral tribunal by means of an award enforceable under the New York Convention, rather than going to the courts of the seat of the arbitration for an anti-suit injunction in support of the arbitration.
Lucy Greenwood is a foreign legal consultant in Norton Rose Fulbright’s Houston office and Mark Stadnyk an associate in New York.
Case C-536/13 Gazprom OAO v Lithuania.
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