Bringing Foreign Court Proceedings in Breach of a London Arbitration Agreement

In the recent case of UAU v HVB [2021] EWHC 1548 (Comm), the court explored what happens when foreign proceedings are brought in breach of an arbitration agreement arranged in London.

In this case, the English Commercial Court granted final prohibitory and mandatory anti-suit injunctions in order to restrain the commencement of court proceedings in Equatorial Guinea, as well as declarations that the defendant had breached its contractual obligation to arbitrate.

Powers of the UK Courts

There are several remedies available via the English courts when court proceedings are started in breach of an arbitration agreement.

Anti-suit injunctions

Under section 37 of the Senior Courts Act 1981 (SCA 1981), the UK courts have powers to grant an anti-suit injunction in circumstances where it is just and convenient to do so. An anti-suit injunction is an order which orders a party not to commence or not to take any further steps to pursue proceedings in another jurisdiction.

In order to make a successful application for an anti-suit injunction, an applicant will need to satisfy the following:

1.            There is an arbitration agreement governing the dispute.

2.            Proceedings have commenced in breach of the arbitration agreement.

3.            The English court has personal jurisdiction over the respondent.

4.            The English court has a sufficient interest in the proceedings to justify restraining foreign proceedings.

5.            An appropriate ground for obtaining relief can be made out.

6.            It is appropriate to grant the injunction as a matter of discretion.

7.            The application has been made promptly and before the foreign proceedings are too far advanced

Declaratory relief

The English courts have a discretionary power to grant declaratory relief – this being, a declaration from the court as to a state of affairs.  A benefit of declaratory relief is that it can assist in preventing further argument and in enabling settlement. 

Background to the case

The dispute concerned an agreement between UAU (the claimant) and HVB (the defendant) relating to the parties' involvement in an oil and gas field offshore from Equatorial Guinea. The agreement contained a clause requiring arbitration to take place in London, under the London Court of International Arbitration (LCIA) rules, in the case of a dispute.

In November 2020, a dispute arose between the parties and the defendant brought proceedings in Equatorial Guinea for damages and other interim relief, following an alleged breach of contract.

Following unsuccessful appeals on jurisdiction to the courts in Equatorial Guinea, the claimant made the following applications to the English court against the defendant, pursuant to section 37 of the SCA 1981:

* Prohibitory injunction to prevent the defendant continuing the Equatorial Guinea proceedings or commencing any further proceedings, other than by way of arbitration in London.

* Mandatory injunction to require the defendant to discontinue the Equatorial Guinea proceedings.

* Declaration that the defendant was obliged to arbitrate all disputes relating to the agreements in accordance with the arbitration agreement.

* Declaration that the Equatorial Guinea proceedings constituted a breach of the arbitration agreement.

In the case, the court considered the following issues:

1.            Are the proceedings in Equatorial Guinea a breach of the agreement?

2.            Are there strong reasons why the injunctive relief sought should not be granted?

3.            Does the time taken by the claimant in bringing this application justify refusing an injunction, notwithstanding the existence of an English forum arbitration clause?

4.            Should the court in its discretion grant a mandatory anti-suit injunction requiring the defendant to discontinue its proceedings in Equatorial Guinea?

5.            Should the court in its discretion grant the declaratory relief sought?

On consideration of these issues, the judge granted the declaratory and injunctive relief sought by the claimant.

Conclusion

This is a case that demonstrates the wide powers the courts possess when it comes to remedying breaches of contract and, in particular, arbitration agreements. This case is noteworthy in the field of arbitration as the judgment recognises the respondent’s obligation to arbitration through the declaratory relief granted, potentially forming the basis of a damages claim in ensuing arbitration.