Cetelem SA v Roust Holdings Ltd

In an urgent arbitral case, section 44(3) of the Arbitration Act 1996 confines the court to orders it considers necessary to preserve evidence or assets. The court may use any section 44 power, including an interim mandatory injunction, where that purpose is met. Assets include contractual choses in action, including a conditional contractual right to acquire shares. Relief must remain interim and preserve the substantive dispute for arbitration. Section 44(7) does not bar an appeal from an order outside the court’s statutory jurisdiction. It does bar appellate review without leave where the order was within that jurisdiction.

Cetelem SA agreed to acquire a 50% interest in a company from Roust Holdings Ltd under an English-law share purchase agreement containing an ICC arbitration clause. Completion depended upon approval by the Russian Central Bank.

Cetelem obtained a without-notice freezing order and then an interim mandatory injunction requiring Roust Holdings to procure delivery of documents needed for the regulatory application. Beatson J continued the freezing order and granted the injunction: [2004] EWHC 3175 (Comm).

Roust Holdings sought permission to appeal. The principal issues were whether section 44(7) of the Arbitration Act 1996 barred the appeal, and whether section 44(3) empowered the court in an urgent case to grant the mandatory injunction.

1. Leave to appeal was granted, but the appeal was dismissed. A decision made outside the jurisdiction conferred by section 44 is not a decision made “under” that section for section 44(7). The Court of Appeal could therefore determine whether Beatson J had acted within the statutory jurisdiction despite his refusal of permission to appeal.

2. The court rejected the broad construction of section 44(3) adopted in Hiscox Underwriting Ltd v Dixon [2004] EWHC 479 (Comm). In an urgent case, section 44(3) permits only orders which the court thinks necessary to preserve evidence or assets. The statutory language was capable of more than one reading, but the Departmental Advisory Committee Report showed that urgent judicial intervention was intended to be confined in that way.

3. The limitation concerns the purpose of the order, rather than its form. The court may make any order otherwise available under section 44(1) and (2), including an interim mandatory injunction, if it is necessary to preserve evidence or assets. An order does not fall outside the jurisdiction merely because it requires a preliminary view of contractual rights or requires a party to take a contractual step.

4. “Assets” includes choses in action and is not confined to assets of the defendant or to assets available for enforcement of an award. Cetelem’s conditional contractual right to purchase the shares was an asset. The mandatory injunction was capable of preserving that right by preventing its loss through failure to complete the administrative steps needed for regulatory approval.

5. The power is interim only. The court must avoid usurping the arbitral tribunal and should require suitable undertakings so that the parties’ substantive rights remain for arbitration. Although the judge had proceeded on an impermissibly broad basis, he would have granted the same order on the correct, narrower basis. The order was consequently within section 44(3), so section 44(7) prevented a further merits appeal.

• Court of Appeal (Civil Division): Leave to appeal was granted on the jurisdictional issue, but the appeal was dismissed: [2005] EWCA Civ 618.

• High Court, Commercial Court: Beatson J continued a freezing order and granted an interim mandatory injunction under section 44 of the Arbitration Act 1996: [2004] EWHC 3175 (Comm).