By: Dhriti Mehta (Campus Law Centre, University of Delhi)
The anti-arbitration injunctions in international arbitrations are injunctive orders issued by courts of one state, restraining a party from initiating or proceeding with the arbitration taking place in another state, or by an arbitral institution. Concomitant with the rise of international arbitrations, anti-arbitration injunctions are becoming increasingly popular as a tactical strategy. But the courts in many jurisdictions are adopting a pro-arbitration stance and are exercising the power to grant anti-arbitration injunctions very sparingly.
The Arbitration and Conciliation Act, 1996 (“the Act”) does not contain any specific provision in relation to anti-arbitration injunctions. However, Section 45 of the Act provides certain powers to the court to interfere with proceeding in foreign arbitrations if the arbitration agreement between the parties is null and void or inoperative or incapable of being performed.
In India, the issue concerning the grant of anti-arbitration injunction has seen divergent decisions from the Supreme Court. Consequently, disparate opinions are being proffered by the different High Court of the country. However, from the various decisions, two lines of thoughts can be isolated- the narrow approach and the moderate approach. The narrow approach suggests that a civil court in India has no jurisdiction at all to entertain suits seeking grant of anti-arbitration injunctions, whereas the moderate approach suggests that an anti-arbitration injunction can be granted by a civil court under limited or exceptional circumstances.
- The Narrow Approach
In Kvanver Cementation India Limited v. Bajranglal Agawrawal (“Kvanver Cementations”), the Supreme Court held that a civil court has no jurisdiction to grant anti-arbitration injunction bearing in mind the very object of the Act and Section 16 of the Act which enshrines the principle of kompetenz-kompetenz.
Similarly, in National Aluminium Company Ltd. v. Subhash Infra Engineers Private Ltd. (“National Aluminium”), the Supreme Court relied upon Kvanver Cementation and held that any objection with regard to the existence or validity of an arbitration agreement may be raised before the arbitrator but a suit for declaration or injunction cannot be maintained for such an objection.
Both Kvanver Cementation and National Aluminium have been relied upon by different High Courts in the catena of cases. But one of the most recent decisions is of the Delhi High Court in Bina Modi and Ors. v. Lalit Modi (“Bina Modi”). In Bina Modi, the Delhi High Court, speaking through Rajiv Sahai Endlaw J., held that a civil court ought not to restrain an arbitral tribunal from exercising its statutory jurisdiction under Section 16 of the Arbitration Act. In view thereof, the Court held that anti-arbitration injunction suits are not maintainable.
- The Moderate Approach
Subsequent to Kvanver Cementation, the Supreme Court and different High Courts have affirmed the jurisdiction to civil courts to grant anti-arbitration injunctions. In Chatterjee Petrocham Company and Anr. v. Haldia (“Chatterjee“), the Supreme Court affirmed the jurisdiction of civil courts to grant anti-arbitration injunctions. While ultimately, the Supreme Court declined to grant an anti-arbitration injunction, such a decision was based on facts.
Soon after the decision in Chatterjee was delivered, on 24 January 2014, the Supreme Court in World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte Ltd., held that Section 9 of the Code of Civil Procedure, 1908 gives a right to parties to file a suit before a civil court, unless expressly or impliedly barred by the law, and in the absence of any such bar on the maintainability of anti-arbitration suit, such the suit is indeed maintainable.
In McDonald’s India Private Limited v. Vikram Bakshi and Ors., a division bench of the Delhi High Court relied on the decision in World Sport Group and held that civil courts have jurisdiction to grant anti-arbitration injunctions if it is proved that an arbitration agreement is “null, void, inoperative or incapable of being performed.” However, on the facts, the court refused to grant an anti-arbitration injunction.
In a similar vein, the Delhi High Court in Union of India v. Vodafone Group PLC United also held that there is no unqualified or indefeasible right to arbitrate and that civil courts do have the jurisdiction to restrain arbitrations under limited circumstances.
But a reading of the aforementioned decisions would reveal that both the Supreme Court and the High Courts have recognised the jurisdiction of civil courts to grant anti-arbitration injunctions only in the following circumstances:
- If the arbitration agreement is null and void, inoperative, or incapable of being performed.
- If continuation of foreign arbitration proceedings is oppressive or vexatious or unconscionable
- If abuse of legal process is caused by the reason of initiation of arbitral proceedings.
As discussed above, the Indian jurisprudence on the anti-arbitration injunction remains hazy due to divergent stands by the Supreme Court and accordingly by the High Courts. However, it prima facie appears that the national courts exercise restraint and caution in granting anti-arbitration injunction, and grant it only in “compelling circumstances” discussed above.
- United Kingdom
The English Courts have generally followed the ruling in Weissfisch v, Julius, wherein it was stated that the grant of an anti-arbitration injunction would be inconsistent with the doctrine of kompetenz-kompetenz and that it is only in “exceptional circumstances” where the existence of valid an arbitration agreement is under challenge, the court would grant such injunction with respect to foreign-seated arbitration.
French Courts follow a very strict policy for non-interference with arbitration proceedings. Two cases illustrate the reluctance of French Courts to grant anti-arbitration injunctions. In S.A. Elf Aquitaine and Total v. Mattei, the Tribunal de Grande Instance Paris held that:
notwithstanding the irregular designation of two or three of the arbitrators, the question of the existence of this arbitral tribunal or of the regularity of its constitution falls exclusively within the jurisdiction of the tribunal.
Consequently, the anti-arbitration injunction sought by Elf Aquitaine was rejected.
Similarly, in Republic of Equatorial Guinea v. Fitzpatrick Equatorial Guinea, the Tribunal de Grande Instance Paris ruled that the French Courts do not recognise anti-arbitration injunction as any such injunction would amount to interference to arbitral proceedings.
For the Swiss jurisdiction, the Geneva Court of the first instance held in AIR (PTY) Ltd v. International Air Transport, that Swizz courts do not issue anti-arbitration injunctions nor enforce anti-arbitration injunctions.
The common thread that has evolved through judicial dicta of India, England, France, and Switzerland is that the courts either prohibit the grant of anti-arbitration injunctions or are extremely cautious to grant such injunctions. It is, therefore, imperative to analyse the reasons behind the reluctance of the courts to grant anti-arbitration injunctions.
DECODING RELUCTANCE OF THE COURTS TO GRANT ANTI-ARBITRATION INJUNCTIONS
The courts exercise restraint in granting anti-arbitration injunctions due to the following implications of anti-arbitration injunctions:-
- The issuance of an anti-arbitration injunction is considered inconsistent with the obligations of state under the New York Convention
The issuance of an anti-arbitration injunction which has the effect of intercepting arbitral proceedings is seen as being inconsistent with the obligation of the contracting states under the New York Convention. In this context, Judge Stephen M. Schwebel held [Gary B Born, International Commercial Arbitration, Vol 1, (Kluwer Law International 2009) 1052-1053]:
When a domestic court acts, it acts as an organ of the state for the whole actions that state is internationally responsible. When a domestic court issues an anti-arbitration injunction blocking the international arbitration agreed to in the contract, the Court fails “to refer the parties to arbitration” (Article II(3)). In substance, it fails anticipatorily to “recognise arbitral awards as binding and enforce them (Article III) and it preemptively refuses recognition and enforcement on the grounds that do not, or may not, fall within the bounds of Article V of New York Convention.
- Anti-arbitration injunction is considered contrary to the fundamental principle of kompetenz-kompetenz
The grant of an anti-arbitration injunction is considered contrary to the fundamental principle of international arbitration i.e. kompetenz-kompetenz. Article 16 of the UNCITRAL Model Law embodies the kompetenz-kompetenz principle, which empowers the arbitral tribunal to rule on its own jurisdiction and decide any issue regarding the existence and validity of the arbitration agreement.
By issuing an anti-arbitration injunction, the court of the state effectively pre-empt the arbitral tribunal to rule on its own jurisdiction. Therefore, the issuance of such an injunction is considered inconsistent with Article 16 of the Model Law.
- Anti-Arbitration injunction is considered as a breach of treaty obligation
A party to the treaty is bound under international law as codified in the Vienna Convention on the Law of Treaties, to perform in good faith (Article 27). Where a state is a party to a bilateral investment treaty, such treaties provide a foreign investor the right to arbitration with the government of the host state arising out of its investment. The issuance of an anti-arbitration injunction is considered a breach of the host state’s treaty obligation and violation of general international law.
From the above analysis, it can be deduced that anti-arbitral injunctions are considered as being violative of customary international law, international public policy and fundamental principles of international arbitration. Since the principles of kompetenz-kompetenz and the autonomy of the arbitral process have developed in many jurisdictions and have now become fundamental to the fabric of international arbitration, the national courts, as well as the court in international fora, are exercising restraint in granting anti-arbitration injunction, so that a frivolous and unsubstantiated plea is not used to thwart arbitral proceedings.