Fiona Trust And Holding Corporation v Primalov

Pending an appeal, a court may grant an injunction to preserve the position where necessary to prevent prejudice if its order is reversed. In an arbitration context, section 1(1) of the Arbitration Act 1996 requires caution because court intervention should be confined to the Act. An applicant seeking to restrain arbitration must therefore show a strong case of potential prejudice. The assessment includes additional expense, duplication, distraction, the risk of conflicting timing, and the adequacy of safeguards such as undertakings, participation without prejudice and liberty to apply.

The Court of Appeal had previously refused injunctions restraining the arbitration, dismissed the respondents’ claims for declarations and relief under section 72 of the Arbitration Act 1996, and restrained the successful appellants from continuing the arbitration pending an application for permission to appeal. The House of Lords subsequently granted permission to appeal.

The respondents applied for the restraint to continue until the House of Lords had given judgment. They relied on the prospective costs, distraction, and risk that the arbitration would determine the bribery issue before the Commercial Court, despite the possibility that the arbitration clause might ultimately be held ineffective for that issue.

1. The application to continue the restraint on arbitration pending the House of Lords appeal was refused.
2. The court had jurisdiction to preserve the position by injunction where necessary to ensure that a party was not prejudiced if the court’s order were later reversed. That jurisdiction did not itself justify relief.
3. Section 1(1) of the Arbitration Act 1996, founded on the principle that the court should not intervene in arbitral matters except as provided by the Act, required caution in granting injunctive relief. The respondents therefore had to demonstrate a strong case of potential prejudice.
4. The asserted prejudice was insufficient. Additional arbitration costs were protected by the appellants’ undertaking and were unlikely to be excessive because the court proceedings covered much of the same ground. Any distraction was correspondingly limited. It was not established that the arbitration would reach the relevant issues first, and the respondents could ask the tribunal to stay consideration of bribery if appropriate.
5. Section 72 of the Arbitration Act 1996 entitled a claimant to relief only where the claimant had taken no part in the proceedings. The appellants undertook that participation by the respondents would be without prejudice to their section 72 rights. They also undertook to permit the respondents to appoint their own arbitrator and to bear additional costs incurred if the arbitration was ultimately held not to take place.
6. Liberty to apply remained available, and future applications were more appropriately made to a Commercial Court judge, save for matters concerning the consequences of the present order.

Lady Justice Arden agreed with Lord Justice Longmore. The application was refused on the stated undertakings.

• House of Lords — Permission to appeal from the Court of Appeal was granted on 29 March 2007.
• Court of Appeal (Civil Division) — On 24 January 2007, the court refused injunctions restraining the arbitration, dismissed the respondents’ claims for declarations and relief under section 72 of the Arbitration Act 1996, and imposed a temporary restraint pending the permission application.
• Court of Appeal (Civil Division) — The present application to extend the restraint pending the House of Lords appeal was refused.