The ECJ has recently given its judgment in Case C-185/07, Allianz SpA, formerly Riunione Adriatica di Sicurtà SpA, Generali Assicurazioni Generali SpA v West Tankers Inc. The case facts are centre on a shipping accident which took place in Italy in 2000 where a vessel owned by West Tankers Inc and chartered by Erg Petroli collided with Erg’s jetty in Syracuse. The charter party was governed by English law and contained a clause providing for arbitration in London.
Erg has claimed compensation from its insurer, Riunione Adriatica di Sicurtà SpA. Erg also commenced arbitration proceedings in London against West Tankers for the excess. In 2003, Allianz and Generali brought proceedings against West Tankers before the Tribunale di Siracusa in order to recover the sums they had paid to Erg. Then, West Tankers raised an objection of lack of jurisdiction on the basis of the existence of the arbitration agreement.
In 2004, West Tankers brought proceedings before the High Court of Justice of England and Wales, Queens Bench Division (Commercial Court), seeking an injunction restraining Allianz and Generali from pursuing any proceedings other than arbitration and requiring them to not continuing the proceedings commenced before the Tribunale di Siracusa.
In March 2005, the High Court granted the anti-suit injunction sought against Allianz and Generali. The latter appealed against that judgment to the House of Lords arguing that such injunction is contrary to Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I).
The House of Lords pointed out that arbitration is completely excluded from the scope of Regulation 44/2001. Consequently, according to the House of Lords, since all arbitration matters fall outside the scope of the Regulation an injunction against Allianz and Generali restraining them from having recourse to proceedings other than arbitration and from continuing proceedings before the Tribunale di Siracusa does not infringe the regulation. The House of Lords has stressed that the UK’s courts have been using for many years anti-suit injunctions. According to the House of Lords this practice is “(…) a valuable tool for the court of the seat of arbitration, exercising supervisory jurisdiction over the arbitration, as it promotes legal certainty and reduces the possibility of conflict between the arbitration award and the judgment of a national court.”
The House of Lords has referred the following question to the Court for a preliminary ruling: ‘Is it consistent with Regulation No 44/2001 for a court of a Member State to make an order to restrain a person from commencing or continuing proceedings in another Member State on the ground that such proceedings are in breach of an arbitration agreement?’
According to the UK Government such an injunction is not incompatible with Regulation 44/2001 because arbitration is excluded from its scope of application. However, the ECJ has held that the English courts' view is contrary to Community Law.
The ECJ stressed that Brussels I excludes arbitration from its scope. Therefore, the English proceedings subject matter fall outside the Regulation’s scope. Nevertheless, the Court found that the Regulation still controls.
According to the ECJ, even though the proceedings before the House of Lords do not fall within the scope of Regulation 44/2001 “(…) they may nevertheless have consequences which undermine its effectiveness, namely preventing the attainment of the objectives of unification of the rules of conflict of jurisdiction in civil and commercial matters and the free movement of decisions in those matters." Moreover, it added "This is so, inter alia, where such proceedings prevent a court of another Member State from exercising the jurisdiction conferred on it by Regulation No 44/2001.”
The Court has therefore considered whether the proceedings brought by Allianz and Generali against West Tankers before the Tribunale di Siracusa come within the scope of Regulation No 44/2001 as well the effects of the anti-suit injunction on those proceedings.
The Court considered that the civil proceedings brought before the Italian court concerning a claim for damages do come within the scope of the regulation. The Court concluded “(…) if, because of the subject-matter of the dispute, that is, the nature of the rights to be protected in proceedings, such as a claim for damages, those proceedings come within the scope of Regulation No 44/2001, a preliminary issue concerning the applicability of an arbitration agreement, including in particular its validity, also comes within its scope of application.” According to the ECJ the objection of lack of jurisdiction raised by West Tankers before the Italian Court based on the existence of an arbitration agreement, including the issue of the validity of that agreement, falls within the scope of Brussels I. Consequently, it is for the Italian Court, under the Regulation, to rule on its own jurisdiction in order to decide the substance of the dispute brought before it.
The ECJ has stressed that "(…) the use of an anti-suit injunction to prevent a court of a Member State, which normally has jurisdiction to resolve a dispute under Article 5(3) of Regulation No 44/2001, from ruling, in accordance with Article 1(2)(d) of that regulation, on the very applicability of the regulation to the dispute brought before it necessarily amounts to stripping that court of the power to rule on its own jurisdiction under Regulation No 44/2001.”
The ECJ found that the injunction sought in the UK would hamper a court of another Member State in the exercise of the powers conferred on it by Brussels I.
According to the ECJ the anti-suit injunction is contrary to the case-law general principles on the Brussels Convention under which every court seised itself decides, under the rules applicable to it, whether it has jurisdiction to resolve the dispute before it. The Court recalls that Regulation 44/2001 does not allow the jurisdiction of a court of a Member State to be reviewed by a court in another Member State. Moreover, such an injunction could weaken the trust which the Member States accord to one another’s legal systems and judicial institutions.
Furthermore, the Court found that if the Tribunale di Siracusa were prevented from deciding the preliminary issue of the validity or the applicability of the arbitration agreement, the applicant, which considers that the agreement is void or incapable of being performed, would be prevented from access to the court before which it brought proceedings under Brussels I and would consequently be deprived of a form of judicial protection to which it is entitled.
Hence, the Court ruled that it is incompatible with Council Regulation 44/2001 for a Member State’s court to make an order to restrain a person from commencing or continuing proceedings before another Member State’s court on the ground that such proceedings would be contrary to an arbitration agreement. An anti-suit injunction, is, therefore, incompatible with Regulation 44/2001.
The English Courts have been granting anti-suit injunctions for around 170 years. However, because of the ECJ ruling, the UK courts will no longer be able to use anti-suit injunctions to stop legal proceedings brought in other Member State in breach of arbitration agreements.
The ECJ held that the English proceedings to obtain an injunction fell outside the scope of the Regulation. In the other hand, the Italian proceeding which could be affected by the English proceeding fall within the scope of the Regulation. The Court ruled that the English proceeding although it does not come within the scope of the regulation is not compatible with it. Consequently, the Court ruling entails that all proceeding that might affect a proceeding within the scope of Brussels I must be scrutinize in order to decide of its compatibility with the Regulation.
This ruling might jeopardise London’s position as an international arbitration centre since anti-suit injunctions will no longer be available thus parties will avoid London as an arbitration centre in their contracts.
