Econet Wireless Ltd v Vee Networks Ltd & Ors

Interim injunctive relief should not ordinarily be granted without notice in a substantial commercial transaction unless there is a proper evidential and procedural basis for doing so. Where the relevant arbitration is seated abroad, the English court must have a proper jurisdictional basis for granting relief under section 44 of the Arbitration Act 1996; the mere possibility that an English arbitration clause may apply is insufficient. The court should also preserve the parties’ agreed arbitral process and require prompt constitution of the tribunal. Relief will be refused where the applicant lacks a good arguable case, seeks to imply unsupported contractual terms, or has materially misstated its ability to perform the underlying transaction.

Langley J granted a without-notice injunction on 15 May 2006 to restrain shareholders and others in a Nigerian company from completing a proposed share sale and subscription transaction. The injunction supported Econet’s intended arbitration proceedings and was obtained before any arbitral tribunal had been constituted.

The respondents applied to discharge the injunction. The dispute concerned the operation of pre-emption rights under a shareholders’ agreement governed by Nigerian law, and whether later transaction documents containing London arbitration clauses governed the dispute. The court also considered the adequacy of notice, the alleged contractual duties concerning transaction documents and co-operation, and Econet’s evidence concerning its available funding.

1. The injunction was discharged. There was no proper basis for proceeding without notice. The application concerned a substantial commercial transaction involving the target company, vendors and a rival purchaser. There was sufficient time to give notice and obtain an urgent hearing before a judge who had adequate time to consider the papers.
2. The dispute concerned the management and operation of pre-emption rights conferred by the shareholders’ agreement. That agreement was governed by Nigerian law and provided for arbitration in Nigeria. The later transaction documents did not govern the dispute before completion, and their London arbitration clauses did not provide a good arguable basis for invoking the English court’s powers.
3. Section 44 of the Arbitration Act 1996 enables the court to preserve the position pending constitution of an arbitral tribunal. It does not, without more, justify intervention in support of a Nigerian arbitration where the parties, dispute and assets have no sufficient connection with England. The natural forum for interim relief was the court of the seat of arbitration. If section 44 relief had been appropriate, the order should have required Econet to procure the prompt formation of the LCIA tribunal.
4. Econet had no good arguable case that the respondents had breached express or implied terms concerning co-operation or the provision of transaction documents. There was little room for the proposed implied terms; at most, the circumstances might support a duty to act in good faith, but bad faith was neither alleged nor established. Econet had unconditionally accepted the offer, including the identification of First Bank as escrow agent.
5. The evidence concerning Econet’s access to funds materially misstated the position. The funding was conditional and insufficiently committed. That non-disclosure was critical to the grant of relief and seriously undermined the without-notice application.
6. The court therefore held that the injunction should never have been sought or granted.

High Court (Commercial Court): On 15 May 2006 Langley J granted a without-notice injunction. On 25 May 2006 Morison J ordered that the injunction be lifted and gave these reasons.