Donohue v Armco Inc and Others

The House of Lords considered whether an anti-suit injunction should restrain New York proceedings and whether a number of third parties (potential co-claimants) could be joined to an English action so as to benefit from English exclusive jurisdiction clauses contained in sale and transfer agreements. The court confirmed the established principles governing anti-suit relief and exclusive jurisdiction clauses: such clauses are ordinarily enforced between contracting parties unless there are strong reasons not to do so, and anti-suit injunctions will be granted only where foreign proceedings would be vexatious or oppressive or otherwise contrary to the ends of justice.

The Lords held that the four non-contracting potential co-claimants (Messrs Rossi and Stinson and their respective companies) could not be joined because they had no independent basis to found proceedings in England or to seek anti-suit relief. They further held that, although some of Armco's New York claims fell within the scope of the exclusive jurisdiction clauses (and thus gave Mr Donohue a strong prima facie right to be sued in England), the overall interests of justice favoured a single comprehensive trial in New York to avoid the real risk of inconsistent findings across jurisdictions. The appeal was therefore allowed on the basis that Armco give an undertaking not to enforce any multiple or punitive damages awarded in New York (including RICO trebled damages) against Mr Donohue, Wingfield or CISHL.

Background and parties:

• Mr Donohue (respondent) sought an injunction in England restraining the Armco group (appellants) from pursuing New York litigation arising out of the 1991 disposal of Armco's British National Insurance Group. The Armco plaintiffs in New York alleged an extensive fraudulent conspiracy involving four executives (Donohue, Atkins, Rossi, Stinson) and pleaded, among other heads, claims under the US RICO statute (18 USC §1962(c)).
• The contractual documentation (transfer agreements and a sale and purchase agreement) contained English choice of law clauses and exclusive jurisdiction clauses. Some Armco companies were parties to those agreements; several alleged co-conspirators and related companies were not.

Procedural history: At first instance Aikens J refused an injunction and disallowed service on certain Armco companies. The Court of Appeal (majority) reversed, granted a limited anti-suit injunction in favour of Mr Donohue and ordered joinder of certain potential co-claimants; Brooke LJ dissented on some points. The House of Lords heard the appeal.

Nature of the application and issues:

• (i) Whether four potential co-claimants who were not parties to the agreements could be joined to the English action and obtain anti-suit relief.
• (ii) Whether an anti-suit injunction should be granted to enforce the exclusive jurisdiction clauses against the Armco companies so as to restrain New York proceedings (in whole or in part) or whether strong reasons existed to refuse such relief.
• (iii) Ancillary issues included the construction of the exclusive jurisdiction clauses, the scope of claims caught by them (including whether RICO claims are within their scope), and procedural availability of service out of jurisdiction.

Reasoning:

• The Lords reiterated established principles: exclusive jurisdiction clauses are ordinarily enforced; anti-suit injunctions are discretionary, exercised to serve the ends of justice, and will only restrain proceedings against a defendant amenable to the court's jurisdiction. The court must take account of hardship to both sides and of comity with foreign courts.
• On joinder, the four non-contracting PCCs had no independent basis to sue in England (no arguable route for service out) and could not use Mr Donohue's action as a vehicle to gain jurisdiction; to permit joinder would circumvent the territorial limits of English jurisdiction and risk permitting claims that could not otherwise be brought in England. The Court of Appeal was wrong to order their joinder.
• On the injunction, although Mr Donohue had a strong prima facie right to have claims within the clause litigated in England, the litigation as a whole raised a real risk of fragmentation and inconsistent findings if parts were tried in England and parts in New York. Many material issues (including the honesty and motives of the alleged conspirators) were common to claims inside and outside the clause. Moreover, RICO causes of action could not be pursued in England; those claims were not within the intended scope of the English exclusive jurisdiction clause. Taking the whole procedural and substantive matrix into account, the Lords concluded that strong reasons existed to displace the usual enforcement of the clause and to permit the New York litigation to proceed as a single composite forum, subject to an undertaking limiting enforcement of multiple or punitive awards against Donohue, Wingfield and CISHL.

Remedy sought: anti-suit injunction restraining New York proceedings; joinder of PCCs to the English action.

Disposition: the House allowed the appeal, set aside the Court of Appeal orders joining the PCCs and granting the injunction, and accepted an undertaking from Armco that it would not enforce multiple or punitive damages (including RICO trebled damages) awarded in New York against Mr Donohue, Wingfield or CISHL.

This was an appeal allowed. The House of Lords held that the Court of Appeal had erred in joining four non-contracting potential co-claimants (Rossi, Stinson and their companies) and in the exercise of discretion in granting the anti-suit injunction without properly accounting for the likelihood of fragmented parallel proceedings and inconsistent findings. Although Mr Donohue had a prima facie right to have claims within the exclusive jurisdiction clauses tried in England, the interests of justice favoured permitting a single comprehensive trial in New York. The appeal was allowed on condition of an undertaking by Armco not to enforce multiple or punitive awards (including RICO trebled damages) in New York against Mr Donohue, Wingfield or CISHL.

High Court (Aikens J) — injunction refused; service on APL and NNIC set aside ([1999] 2 Lloyd's Rep 649). Court of Appeal — majority allowed injunction and ordered joinder of certain PCCs; Brooke LJ dissenting ([2000] 1 Lloyd's Rep 579). House of Lords — appeal allowed on terms, orders of Court of Appeal set aside ([2001] UKHL 64).