Claxton Engineering Services Ltd v TXM Olaj-Es Gazkutato KTF

An English court may restrain an arbitration seated in another EU Member State where the arbitration falls outside the scope of the jurisdiction regime and the injunction does not interfere with another Member State court determining its own jurisdiction.

An anti-arbitration injunction remains an exceptional remedy. It may be justified where the English court has already determined that the parties agreed an exclusive English jurisdiction clause and that no arbitration agreement exists. In those circumstances continuation of the arbitration may breach contractual rights and be vexatious or oppressive.

The claimant sought an injunction restraining arbitration commenced by the defendant before the Court of Arbitration of the Hungarian Chamber of Commerce. The arbitration concerned disputes arising from contracts for the manufacture and delivery of oil well equipment.

Gloster J had previously held that, save for one invoice, the parties agreed an exclusive English jurisdiction clause and that no Hungarian arbitration agreement existed. Permission to appeal had been refused on paper, although renewal was pending. The defendant nevertheless commenced the Hungarian arbitration and relied on Council Regulation (EC) No 44/2001 and the decision in West Tankers.

The issues were whether the court had jurisdiction to grant an anti-arbitration injunction and whether the circumstances justified exercising that jurisdiction.

1. The application was granted. The court had jurisdiction under section 37 of the Supreme Court Act 1981 to grant an injunction where it was just and convenient to do so.

2. The decision in West Tankers concerned court proceedings within the scope of Council Regulation (EC) No 44/2001. Arbitration was excluded from that scope by article 1(2)(d). An injunction restraining arbitration therefore did not prevent a court of another Member State from determining its own jurisdiction under the Regulation.

3. The grant of an anti-arbitration injunction was exceptional. Relevant considerations included the claimant’s legal or equitable rights, whether continuation would be vexatious, oppressive or unconscionable, the policy of respecting the supervisory court at the seat, and the principles of kompetenz-kompetenz.

4. The circumstances were exceptional. The English court had already determined that the contract contained an exclusive English jurisdiction clause and that there was no arbitration agreement. Continuing the Hungarian arbitration would breach the claimant’s contractual rights, duplicate the proceedings and impose needless expense on a jurisdictional basis already rejected by the English court.

5. The New York Convention did not require referral to arbitration. Article II(3) applied where the parties had made an arbitration agreement, subject to the stated exceptions. Here, the court had determined that no such agreement existed, so there was no merely prima facie or arguable agreement requiring referral.

6. The application had not been made too late. The arbitration was at an early stage, and the claimant had acted reasonably in attempting to prevent it progressing pending the appeal. An injunction was therefore granted. The position would change if the defendant succeeded in its pending appeal.

The judgment records that Gloster J had rejected the defendant’s jurisdictional challenge on 15 October 2010. Longmore LJ refused permission to appeal on paper on 16 December 2010, although an oral renewal was pending. The present court granted an anti-arbitration injunction while recognising that the position would change if the appeal succeeded.