The sanctity of the arbitration agreement is well known. Parties can only refer their dispute to an arbitral tribunal if the parties have agreed to resolve their dispute through arbitration. This agreement can either take the form of an arbitration clause incorporated within a contract between the parties, or it may take the form of a submission agreement which is concluded between the parties after the dispute has arisen. And the courts will, except in very limited circumstances, hold the parties to their agreement to arbitrate.
In Ecom Agroindustrial Corp Ltd v Mosharaf Composite Textile Mill Ltd  EWHC 1276 (Comm), the court considered whether to grant injunctive relief against a party who had issued proceedings outside the EU in breach of an arbitration agreement.
The legal principles
The jurisdiction to grant a final injunction to prevent the breach of an arbitration clause is provided by section 37(1) of the Senior Courts Act 1981, which confers upon the court a general power to grant injunctions ‘in all cases in which it appears to the court to be just and convenient to do so’ (see The Epsilon Rosa  2 Lloyd’s Rep 509 (CA), and more recently AES Ust-Kamenogorsk Hydropower Plant v Ust-Kamenogorsk Hydropower Plant JSC  1 WLR 920 (CA)).
Where foreign proceedings are brought in breach of an arbitration clause, the court will ordinarily grant an anti-suit injunction to restrain those proceedings unless there are strong reasons not to do so. The burden of proof is on the party in breach of the arbitration clause to show that there are strong reasons why an injunction should not be granted. Where, as in the present case, the foreign defendant is itself seeking (or has obtained) an anti-suit injunction, and thus the court is asked to grant an anti-anti-suit injunction, caution is called for (see General Star International Indemnity v Stirling Brown  Lloyd’s Rep IR 719). However, where the foreign proceedings are brought in breach of an exclusive jurisdiction or arbitration clause, anti-anti-suit injunctions are frequently granted (see, for example, Sabah Shipyard v Government of Pakistan  2 Lloyd’s Rep 571).
Ecom Agroindustrial Corp Ltd
The dispute concerned the sale of Brazilian raw cotton from the claimant to the defendant. Pursuant to the contract, which contained an arbitration agreement, the defendant was required, but failed, to open a letter of credit for the first shipment of cotton by 20 June 2011. The reason given by the defendant was that the price of cotton had fallen since the conclusion of the contract, and it was therefore unable to fulfil its commitments.
The claimant commenced arbitral proceedings against the defendant. The defendant responded by issuing proceedings in Dhaka, Bangladesh, in which it contended that the contract was illegal and void. The defendant also applied for and obtained an interim anti-suit injunction from the Bangladeshi court to restrain the claimant from pursuing any claim in relation to the contract. The claimant launched an appeal to the higher courts in Bangladesh but at the same time also applied to the English Commercial Court for, inter alia, an injunction to prohibit the defendant from taking any further steps in the Bangladeshi proceedings. The defendant did not appear in the English proceedings.
The first question for Hamblen J was whether the Bangladeshi proceedings were in breach of the arbitration agreement between the parties. Hamblen J noted that the wording of the agreement was wide enough to include ‘any dispute’ which existed between the parties and that the agreement was clear that disputes would be resolved with reference to the ‘bylaws of the International Cotton Association Limited’. In the judge’s opinion, it was clear that the underlying dispute between the parties was subject to the arbitration agreement in the contract, and the commencement of the Bangladeshi proceedings amounted to a breach of the contract by the defendant.
Did strong reasons exist for not granting the anti-suit injunction? Although the burden of showing that strong reasons did exist was on the defendant, the claimant nevertheless raised the following possible arguments which might have been raised by the defendant, and Hamblen J considered these in turn.
The first point that might have been taken by the defendant is that the injunction should be refused on the basis that the Bangladeshi court is the more appropriate forum to hear the dispute, because of the nature of the arguments run by the defendant in Bangladesh, which raise principles of Bangladeshi law and public policy. However, in Hamblen J’s opinion, that would not be a good reason to refuse to grant the injunction in circumstances where the defendant has agreed that all disputes under the contract should be submitted to arbitration, under English law.
Second, the defendant might have contended that the claimant should have applied for an anti-suit injunction earlier. There were good reasons for the claimant’s delay, namely that it thought it might be able to deal with the Bangladeshi proceedings more quickly and efficiently in the Bangladeshi courts by appealing the order for an interim injunction. Third, it might be said that the claimant has submitted to the jurisdiction in Bangladesh by filing its appeal against the interim injunction. However, the basis of the appeal was that the injunction should never have been granted, and indeed the Bangladeshi proceedings should never have commenced, since the dispute is manifestly governed by an arbitration clause.
The claimant in any event contended that even if it had submitted to the jurisdiction in Bangladesh by filing its appeal, that would still not amount to a strong reason against the grant of the present injunction (see Bank of New York v GV Films  1 Lloyd’s Rep 365). Fourth, the defendant may have argued whether comity requires that the English court refuse to grant the injunction in the present case, in circumstances where the Bangladeshi court has already granted an anti-suit injunction against the claimant which arguably extends to the present proceedings.
This issue was considered by the Court of Appeal in Sabah v GOP  2 Lloyd’s Rep 571, paragraph 40, where Waller LJ said: ‘If there was an injunction in place that would clearly be a relevant matter and the English Court would clearly prefer not to be thought to be aiding a contemnor. But where the obtaining of the injunction was itself a breach of contract, and was seeking to prevent a party exercising its contractual right to bring proceedings in the English court, the English court must at least allow the proceedings to be commenced in its courts. It does not necessarily follow that the English court should grant an injunction to prevent proceedings in the foreign court, but again the existence of the foreign injunction should not prevent it doing so, if the very obtaining of that injunction can be seen to have abused the rights of the litigant with the contractual right to come to England.’
The present case was stronger than the Sabah case, since it contains an exclusive forum clause, whereas the English jurisdiction clause in Sabah was a non-exclusive one. In circumstances where the defendant is bound by an arbitration clause, it is an egregious breach of contract for the defendant not only to commence proceedings in a non-contractual jurisdiction, but to obtain an injunction from that non-contractual forum to prevent the claimant from itself vindicating the rights granted to it under the arbitration clause.
Finally, the defendant may have contended that even if the test for an injunction is otherwise satisfied, it should only be prohibitive in its form, not mandatory. In other words, it should be limited to ordering the defendant not to take any further steps in the arbitration, but should not go as far as to order the defendant to discontinue those proceedings. However, while a court should be more cautious before ordering a mandatory injunction, there is no doubt that the court is entitled to make such an order in appropriate cases.
Masood Ahmed, University of Leicester