Ecom Agroindustrial Corp Ltd v Mosharaf Composite Textile Mill Ltd

Where foreign proceedings are commenced in breach of a broadly worded arbitration agreement, the court will ordinarily grant an anti-suit injunction unless the party in breach establishes strong reasons to refuse relief. The court need not exercise special caution before granting such an injunction. A foreign court’s anti-suit injunction does not prevent relief where obtaining it itself breached the parties’ arbitration agreement and interfered with contractual rights. In an appropriate case, the injunction may be mandatory and require discontinuance of the foreign proceedings. The separability principle means that an allegation that the underlying contract is frustrated or invalid does not, under English law, deprive the arbitration agreement of effect. Declaratory relief may also be granted where it assists enforcement of the arbitration agreement and any resulting award.

The claimant sold Brazilian raw cotton to the defendant under a contract incorporating the International Cotton Association Rules and By-laws. The contract provided that all disputes would be referred to ICA arbitration and resolved under English law. The defendant failed to open the required letter of credit, declined to participate in the arbitration commenced by the claimant, and brought proceedings in Bangladesh seeking declarations that the contract was void or frustrated and an injunction restraining the claimant from pursuing arbitration.

The Bangladeshi court granted an interim anti-suit injunction. The claimant applied in the Commercial Court for final anti-suit injunctive relief, including an order requiring discontinuance of the Bangladeshi proceedings, and declarations concerning the arbitration agreement, jurisdictional challenges and breach of contract.

1. Anti-suit injunction. Section 37(1) of the Senior Courts Act 1981 gives the court power to grant a final injunction where it is just and convenient. Where foreign proceedings breach an arbitration agreement, an injunction will ordinarily be granted unless the party in breach shows strong reasons to refuse it. The burden lies on that party.
2. Scope of the arbitration agreement. The natural and ordinary meaning of the references to “all disputes” and “any dispute” covered the underlying dispute. The contractual reference to “any technical or quality dispute” had to be read with the ICA Rules and By-laws, under which disputes were categorised as quality disputes or technical disputes. It therefore covered all disputes arising under the contract.
3. Separability. Under section 7 of the Arbitration Act 1996, the arbitration agreement was treated as separate from the underlying contract. Arguments that the contract was frustrated, illegal or otherwise invalid did not prevent the dispute from falling within the arbitration agreement.
4. Strong reasons. The defendant could not rely on the Bangladeshi court as the more appropriate forum when it had agreed to arbitration under English law. The claimant’s delay, its appeal in Bangladesh and the existence of the Bangladeshi injunction did not constitute strong reasons against relief. The Bangladeshi injunction was itself obtained in breach of the contractual arbitration rights and was of little weight.
5. Mandatory relief. A mandatory order requiring discontinuance was appropriate because there was an established breach, an exclusive arbitral forum, an egregious attempt to prevent arbitration, and an existing Bangladeshi injunction. Mandatory relief was necessary to make the order practically effective.
6. Declarations and disposition. The court had jurisdiction and discretion to grant declarations. The defendant was obliged to arbitrate all disputes under the contract, challenges to the tribunal’s substantive jurisdiction had to be brought before the tribunal or the supervisory court, and the Bangladeshi proceedings breached the arbitration clause. The injunctions, declarations and costs were granted.

First-instance decision. No earlier appellate decision is stated in the judgment.