In Sabbagh v Khoury, the Court of Appeal confirmed the court’s jurisdiction to grant an anti-arbitration injunction (AAI) in exceptional cases where it would be vexatious and oppressive because of proceedings in England. Additionally, it held that it was not necessary for the exercise of that jurisdiction to show that England was forum conveniens.
This blog briefly considers the implications of that judgment for parties seeking an AAI in the future and international progress towards harmonisation of the lex arbitri.
Must there have been a prior determination of the scope of the arbitration agreement before an AAI can be granted?
Two claims were advanced in the Lebanese arbitration in Sabbagh, a “share claim” and an “assets claim”. The court held the share claim was within the scope of an arbitration agreement. As to the asset claim, the court had previously determined on the defendant’s stay application that it was not within the scope of the arbitration agreement notwithstanding the arbitrators’ decision to the contrary.
Having found that the share claim was within the scope of the arbitration agreement, the court found that it had no jurisdiction to grant an AAI in relation to that claim. The appropriate test was to consider whether if such a claim had been brought in English proceedings, the court would be required to stay those proceedings under section 9 of the Arbitration Act 1996 (AA 1996). If so, the court had no jurisdiction to grant an AAI.
More specifically, a stay must be granted where the claim is in respect of a matter which, under the agreement, is to be referred to arbitration unless the agreement is null and void, inoperative, or incapable of being performed. The correct characterisation of a “matter” was set out by Popplewell J in Sodzawiczny v Ruhan at paragraph 43: the court should treat as a “matter” any issue which is capable of constituting a dispute or difference which may fall within the scope of an arbitration agreement.
Sabbagh is authority, then, for the proposition that an AAI will not be granted to the extent that the issues under consideration in the arbitration are issues which are capable of constituting a dispute or difference which may fall within the scope of the agreement, so long as the agreement is not null and void, inoperative, or incapable of being performed.
This wide wording is likely to be a difficult threshold for future applicants to cross. Consequently, it will only be in exceptional cases that an AAI could not be resisted on those grounds.
However, it appears that it is not the inverse of that test that is required before an AAI could in principle be granted, subject to the discretionary factors. In that regard, Richards LJ cited Andrew Smith J’s comments in AmTrust Europe Ltd v Trust Risk Group SpA. There must be “no room for argument… either because it is common ground between the parties or because of a previous determination”.
Richards LJ then concluded, at paragraph 113, that given the prior consideration of that issue on the stay application, it was within Andrew Smith J’s “category of a previous determination” and there could be no objection in principle to an AAI being granted in relation to the asset claim.
Where does this leave a party who applies for an AAI, but where there has been no previous determination as to validity or scope of the arbitration agreement? Richards LJ considered that this was “a difficult question” (paragraph 111).
Difficult, perhaps, but surely important as it goes to the heart of how jurisdictions honour the principle of kompetenz-kompetenz. It is also one which the English court, post-Sabbagh, is likely to grapple with sooner rather than later.
If the AAI applicant asserts that there simply was no agreement at all, then it may be that, as in a stay application, the court will determine the issue of whether there was such an agreement (Dallah Real Estate v Ministry of Religious Affairs of the Government of Pakistan). Whether the court will determine scope is less clear. It is hard to imagine that, in the clearest of cases, it would refuse to do so.
How does the approach in Sabbagh compare internationally?
Despite the New York Convention and Model Law making some progress towards international harmonisation of arbitral law, and the international application of the kompetenz-kompetenz principle, the absence of explicit provision in either for or against AAIs has promulgated a disparity of approach internationally. Sabbagh does not reverse that trend.
Hamblen J, as he then was, granted the first AAI, which relied, at least partly, on grounds of vexatious and oppressive conduct, in Claxton Engineering v TXM. In doing so, he noted that the issue of AAIs was a matter of “great international debate and controversy”. Controversial, perhaps, because of the disputed incursion into the kompetenz-kompetenz principle.
The English position is now clear: the arbitral regime introduced by the New York Convention and, domestically, the AA 1996, did not explicitly or impliedly displace the underlying jurisdiction under section 37 of the Senior Courts Act 1981. For that reason, in exceptional cases, an AAI can be granted.
However, it is notable that in considering whether the AA 1996 precluded the court’s power to grant an AAI, Richards LJ, at paragraph 57, drew particular attention to the deliberate substitution of “should” for “shall” in section 1(c) of the AA 1996 which adopted Article 5 of the UNCITRAL Model Law (the principle of non-intervention). The intention was not to preclude intervention but to ensure caution.
This appears to solidify an English divergence from jurisdictions where the kompetenz-kompetenz principle and more stringent UNCITRAL regime have been adopted. For example, in France, the Civil Procedure Code provides that a court shall decline jurisdiction when a dispute subject to an arbitration agreement is brought before a court, except if an arbitral tribunal has not yet been seized of the dispute and if the arbitration agreement is manifestly void or not applicable. In other jurisdictions, such as the USA, the position remains unclear.
For the moment, at least, any move towards reducing differences of national arbitral procedural law will continue to struggle with AAI jurisdiction.