"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well." -Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Thursday, March 4, 2010

Arbitration and Anti-suit Injunctions in the EU

One of the recent landmarks in international commercial arbitration is the decision of the ECJ in Allianz SpA v. West Tankers wherein the ECJ had held that issuing anti-suit injunctions was against the EC Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters. The decision has invited  a great deal of commentary. One of such is a note  in the Cornell Law Review by Daniel Rainer titled "The Impact of West Tankers on Parties' Choice Of a Sea of Arbitration". The note can be found here.

I recommend readers to read the note. It is well researched and the main arguments are extremely convincing. The note also analyses the law on anti-suit injunctions in UK and USA.But for those who do not want to, I will try to briefly analyse the note.

The fundamental idea that Mr. Rainer tries to convey is this:
Anti-suit injunctions are effective tools in encouraging settlement of commercial disputes by arbitration. Anti-suit injunctions effectively make parties settle commercial disputes by arbitration instead of going to courts. The ECJ decision in West Tankers has considerably reduced the power (jurisdiction) of an EU court to issue anti-suit injunction. As a consequence, parties who generally chose an EU destination (like, say, France or London) as the forum for arbitration would now go for non-EU fora for the fear that anti-suit injunctions may no longer be available and that they might have to litigate the same disputes in multiple fora (which would, for obvious reasons, be costly). The author therefore advises, after analysing the US law (which is pro-anti-suit injunctions) that parties ought to choose US as their seat for arbitration so that the option of anti-suit injunctions would be available to the parties.

It must be noted, as Mr. Rainer rightly points out, that the ECJ decision would not affect the  power of the English courts to issue anti-suit injunctions enjoining parties from approaching a non-EU country court (See Shashoua v. Sharma). Anti-suit injunctions can be issued by the English courts enjoining parties from initiating/pursuing suits in non-EU courts. Hence, if an Indian party and, say, an English party enter into a contract and choose London as the forum of arbitration, and if there is a dispute between them, the English party can approach the English courts for obtaining an anti-suit injunction if the Indian party seeks to initiate proceedings with respect to the dispute in India.

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