AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC

A party entitled to enforce an arbitration clause may seek declaratory and anti-suit injunctive relief in the English courts even though no arbitration has begun and the party does not intend to commence one. The claim is an arbitration claim under the Civil Procedure Rules, and the court may grant relief where the contractual arbitration clause gives the claimant a legitimate interest in avoiding foreign proceedings.

The court must, however, avoid usurping the arbitral process. Relief should be limited to restraining proceedings which fall within the arbitration agreement and directing that such disputes be pursued in the agreed arbitration. A third party entitled to enforce the contractual term may rely on sections 1 and 8 of the Contracts (Rights of Third Parties) Act 1999.

The claimant and defendant were Kazakhstan companies connected with a 20-year concession to operate hydroelectric facilities. The concession agreement contained an arbitration clause governed by English law, providing for ICC arbitration in London.

The defendant commenced proceedings in Kazakhstan seeking information about concession assets. The claimant challenged those proceedings by reference to the arbitration clause and obtained an interim anti-suit injunction in the Commercial Court. The defendant then challenged the English court’s jurisdiction, arguing that there was no arbitration claim, that the claimant was not entitled to enforce the clause, that the Kazakhstan proceedings fell outside its scope, that the clause was invalid under Kazakhstan law, and that the claimant had submitted to the Kazakhstan jurisdiction.

The central issues were whether the English court had jurisdiction to grant declaratory and injunctive relief without an existing or intended arbitration, and whether the claimant had a good arguable case on the validity, scope and enforceability of the arbitration agreement.

1. Jurisdiction and gateways. The jurisdiction challenge was dismissed. Section 44 of the Arbitration Act 1996 was unavailable because it permits orders on the application of a party or proposed party to arbitral proceedings, and no arbitration was pending or intended. Section 37 of the Senior Courts Act 1981, however, was available.
2. A party relying on a contractual right not to be sued in a foreign country because of an arbitration clause has a legitimate interest in enforcing that right. It may therefore seek a declaration and anti-suit injunction even where no arbitration has begun and it does not intend to commence one. The claim fell within CPR 62.2 and the gateway in CPR 62.5(1)(c). The alternative gateway under Practice Direction B paragraph 3.1(20)(a) was also available if necessary.
3. The court must not usurp the arbitral process. The appropriate relief was limited to declaring that disputes arising out of or connected with the concession agreement had to be brought in ICC arbitration in London, and restraining the defendant from pursuing the Kazakhstan proceedings or bringing other such claims otherwise than in that arbitration.
4. The claimant had a good arguable case that it could enforce the arbitration clause under sections 1 and 8 of the Contracts (Rights of Third Parties) Act 1999, despite not being an original party to the concession agreement. The clause conferred a benefit on it and the applicable English law allowed declaratory and injunctive relief.
5. The defendant’s claim for information was sufficiently connected with the concession agreement to fall within the wide scope of the arbitration clause. The Kazakhstan Supreme Court’s contrary construction was wrong under the English law governing the clause. Under section 32 of the Civil Jurisdiction and Judgments Act 1982, the English court was not bound by the overseas court’s decision on validity and would not recognise or enforce it.
6. The claimant had not submitted to the Kazakhstan jurisdiction. Its defence on the merits was made while continuing to challenge jurisdiction, relying on the English injunction and preserving its arbitration position. The omission from the ex parte application of evidence concerning inconsistent statements by related companies was immaterial.
7. Final declaratory and injunctive relief was granted in the limited form identified above. Any remaining issue concerning arbitral jurisdiction or the applicability of the arbitration clause could be addressed in the ICC arbitration or through the statutory court procedures.