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Brexit and Jurisdiction: The return of anti-suit injunctions

The anti-suit injunction is a permanent injunction that blocks a party from litigating in a foreign jurisdiction. In foreign court proceedings, an anti-suit injunction prohibits the infringing party from issuing or, as is more common, continuing with court proceedings.

An anti-suit injunction is legally binding on the respondent party against whom the injunction is granted. The injunction itself is not binding on the foreign court, however, the granting of an anti-suit injunction is likely to impact the decisions of the foreign court.

If a respondent party against whom the injunction is made, breaches the anti-suit injunction by issuing or continuing to bring proceedings in a foreign court, such breach is deemed contempt of court, sanctionable by imprisonment, asset seizure or fines.

Prior to the UK exiting the EU, the Brussels Convention and the Brussels Regulation (Recast) had prevented the English courts from issuing anti-suit injunctions in respect of proceedings taking place before the courts of EU member states.

Article 29(1) of the Brussels Regulation (Recast) provided that if a court of a Member State is seised first and the court of another Member State has been seised second, the latter court must of its own motion stay proceedings until such time as the jurisdiction of the court first seised is established.

Article 29(1) stamped out on the practise of bringing tactical proceedings issued in EU member states where delay is commonplace, and costs can escalate considerably. This is the case, for example in Italy, so much so that the practice of instigating proceedings in a foreign jurisdiction for dilatory purposes has been dubbed “Italian torpedo”.

On the other hand, Article 29(1) created a “race to seise first” and, with it, situations where the winner of such race would succeed by default in seising the court of a jurisdiction that possibly had a more tenuous link with the dispute than England. This would be a disadvantage for a defendant wanting to litigate in England. This would more often than not be the English litigant in a dispute with a foreign entity.

Since the 1st of January 2021, England is no longer bound by the Brussels Regulation (Recast) and the binding decisions of the CJEU such as Turner v Grovit (2004) and Allianz SpA v West Tankers (2009) which previously prevented the English courts from issuing anti-suit injunctions in proceedings of EU member states no longer apply.

From a legal standpoint, now the UK has withdrawn from the EU, the English courts should once again have authority to grant anti-suit injunctions. This authority is yet to be confirmed in a decision of the English court however, and may be subject to UK’s applied accession to the Lugano Convention. Switzerland, Norway and Iceland have all signalled their backing to the UK’s accession, but the EU has until 8th April 2021 to give its ruling.

What does the return of the anti-suit injunction mean for litigants?

The prospect of the returning anti-suit injunction to the English courts brings a number of implications for litigants involved in proceedings that straddle England and Member States..

There are many benefits to the applicant of pursuing an anti-suit injunction which will be revealed in this article, but it is important to note that the English courts can only grant an anti-suit injunction when an application has been brought by an English party on one of the two following grounds;

  • where an exclusive jurisdiction clause in a binding contract has been breached by proceedings being issued in a foreign court; and
  • where, in absence of a contract with an exclusive jurisdiction clause, the English applicant can show that proceedings have been issued overseas in an abusive, oppressive and vexatious manner.

Cases where a contractual right exists not to be sued abroad

One potential advantage applies in respect of cases where a party has a contractual right not to be sued in a foreign court, a right which is usually conferred by a contractually agreed exclusive jurisdiction provision in favour of the English court or by an arbitration agreement with seat in the United Kingdom.

Under the Brussels Regulation (Recast), the English courts did not have jurisdiction to issue an anti-suit injunction to prevent parties from litigating in an EU member state in contravention of such agreements.

Article 31(2) of the regulation had placed the onus on the foreign jurisdiction to stay its proceedings until the English Court had determined whether it had jurisdiction under the agreement.

This onus caused problems for the English parties, particularly in cases where the foreign party disputed the existence of an English jurisdiction agreement in the foreign court. Similarly, Article 31(2) provided no solution in cases where a foreign court’s decision to stay its proceedings was challenged or where a decision in the foreign jurisdiction was appealed once proceedings were stayed.

Consequently, parties endured considerable delay and expense in being forced to engage in a forum that was not the forum of choice. As such, parties to jurisdiction agreements had no certainty of protection from the risk of pre-emptive actions brought in an EU member state in contravention of an English jurisdiction agreement.

Today, with the UK no longer bound by the Brussels Regulation (Recast), in cases of exclusive jurisdiction agreements in favour of the English courts, the parties have certainty that if proceedings are brough outside of the English courts in breach of those agreements, issuing an anti-suit injunction is an effective remedy. This is the case provided that the case does not fall into a rare category of cases where a respondent can demonstrate strong reasons to oppose the injunction.

Cases where abusive, vexatious and oppressive proceedings in a foreign court have been issued

In cases where no exclusive jurisdiction or arbitration agreement in favour of the English courts exists,  an anti-suit injunction can be sought  where a party files proceedings in a foreign court in an abusive or oppressive manner in attempt to undermine the English proceedings. An example of this is where a party contractually submits to English court’s jurisdiction but subsequently issues proceedings in the courts of an EU member state. This is the “Italian torpedo” referred to above.

As before 1 January 2021 when Brussels Regulation (Regulation) applied to the UK, the only real option available to a party subject to such abusive conduct was to seek a form of stay of proceedings before the foreign court.

Parties in England can now attempt to restrict such abuse of proceedings by applying for an anti-suit injunction in the England court. However, it should be noted that the threshold for granting an anti-suit injunction in such cases of abusive conduct is not as easily met as it is in exclusive jurisdiction and arbitration cases. The applicant will have to persuade the English courts that England is appropriate forum for resolution of the dispute. The applicant will also have to demonstrate that the ends of justice necessitate the issuing of the anti-suit injunction in the circumstances with particular regard to comity, a legal doctrine under which courts recognize and enforce each others’ legal decisions as a matter of courtesy, or based on the need for reciprocity (which is a foundation of international public law), but not necessarily as a matter of law.

The double-edged sword

On the one hand, the anti-suit injunction is the perfect defence for an English litigant – usually the plaintiff – against an “Italian torpedo” fired at it. On the other hand, the return of the anti-suit injunction presents the potential for a double-edged sword. When ‘Turner’ and ‘West Tankers’ applied to the UK, whilst the English Courts were prevented from issuing anti-suit injunctions against proceedings in other EU member states, EU member states were similarly prevented from issuing anti-suit injunctions in the English Courts. Now that the UK is no longer bound by Brussels Regulation (Recast) and Turner and Westers do not apply to the UK, there is now also the potential for an EU member state to issue an anti-suit injunction against proceedings in the English courts. This is a potential downside to English litigants to the return of anti-suit injunctions and something that English litigants should also be mindful of.

Possible effect of the Hague Choice of Court Convention on anti-suit injunctions

An important factor to be cognisant of is that along with all EU member states, Singapore, Mexico and Montenegro, the UK is now a contracting state of the Hague Convention on choice of court agreements.

The Hague Convention enforces exclusive jurisdiction agreements designating the courts of contracting states.

Although the Hague Convention is unlikely to have any effect on the granting of an anti-suit injunction, Article 6 of the Hague Convention lays down that proceedings issued in a contracting state which contravene an exclusive choice of court agreement in favour of another contracting state will be dismissed unless the choice of court agreement is unenforceable, or its outcome would be contrary to the public policy of the state of the court seized.

Although it is possible that the Hague Convention may request that the English courts do not exercise their discretion in granting the application of an anti-suit injunction in relation to proceedings brought before the courts of a contracting state, Article 7 of the convention explicitly states that nothing in its articles ought to stop a contracting state from granting protective interim measures. As such, it is somewhat improbable that the English courts would determine anti-suit injunctions as incompatible with the Hague Conventions which contains no articles to that effect.

The future of the anti-suit injunction

While the UK awaits the EU’s decision next month on its proposed accession to the Lugano Convention, the potential effect of the UK’s accession to the Lugano Convention places the future of anti-suit injunctions being granted in the English courts in respect of proceedings in EU member states in a situation of uncertainty.

It may be the case that the UK’s accession to the Lugano Convention eradicates all prospects of the anti-suit injunction remaining an option for the English courts as ‘Turner’ and ‘West Tankers’ are binding on counties subject to the Lugano Convention. The Lugano Convention contains no rules with the effect of staying proceedings issued in Lugano countries where proceedings have breached an exclusive jurisdiction agreement. The potential ramification to English parties in the event of proceedings issued in Lugano countries is that there would be no protection to English parties against proceedings brought in an oppressive and vexatious manner.

However, it is also a possibility that the UK’s accession to the Lugano Convention as a non-EU state would mean that the English courts are not bound by the decisions of the CJEU such as ‘Turner’ and ‘West Tankers’ and would only be required to acknowledge the CJEU’s case law with no mandatory obligations.

The impact of the Lugano Convention on the English courts’ authority to grant anti-suit injunctions remains to be seen, although the answer may soon be on the horizon.

For now it is worth being aware of the potential advantages that the protection of anti-suit injunctions may bring to English litigants whilst the future is pending. In summary, these advantages may be:

  • Ensuring that a contract setting out exclusive jurisdiction of English courts cannot be circumvented or undermined.
  • Preventing abusive and vexatious proceedings from being issued or continued in a foreign court.
  • The substantive and procedural advantages to the applicant of litigating in the English Courts.
  • Avoiding the substantive and procedural disadvantages of litigating abroad.
  • Avoiding the extensive time and costs associated with litigating abroad.
  • Enabling a pre-emptive strategic move of preventing enforcement of an overseas judgement.

This article was published on 20 March 2021. The law may change after that date and we may or may not revise this article to reflect such changes. This article does not in any way constitute legal advice and the reader should nor rely on it as such. If you need advice in relation to any of the issues dealt with by this article please contact Avv. Luca Salerno on ls@hanoverbondlaw.com or on +44 (0)20 3031 6647. Luca has co-authored this article with Anthony Buswell of the London office of Hanover Bond Law.