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

An arbitration agreement contains both a positive promise to arbitrate and a fundamental negative promise not to pursue covered claims elsewhere. The negative promise is independently enforceable even when no arbitration is current or proposed.

For an arbitration seated in England, the High Court may use Senior Courts Act 1981, section 37, to restrain foreign proceedings outside the Brussels and Lugano régime. The power may support interim or final relief. Its source is section 37, not section 44 of the Arbitration Act 1996.

The 1996 Act is not an exhaustive code. Its restriction on court intervention requires caution rather than imposing an absolute prohibition. The section 37 power must nevertheless be exercised sensitively and with due regard to the Act where arbitration is current or proposed.

Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP concerned a concession agreement governed by Kazakh law and containing an English-law arbitration clause providing for ICC arbitration in London. Kazakh courts had treated the clause as invalid and entertained proceedings falling within it.

The respondent obtained a final declaration and anti-suit injunction from Burton J, although it had neither commenced nor intended to commence an arbitration. The Court of Appeal dismissed the appellant’s appeal: [2011] EWCA Civ 647; [2012] 1 WLR 920.

The central issue was whether an English court could declare that the claims belonged in arbitration and restrain proceedings in a foreign jurisdiction outside the Brussels and Lugano régime when no arbitration was current or proposed.

1. Appeal dismissed unanimously. Lord Mance delivered the judgment, with which Lord Neuberger, Lord Clarke, Lord Sumption and Lord Toulson agreed. Burton J had jurisdiction to grant the final declaration and injunction, and his exercise of that power disclosed no error of principle.

2. An agreement to arbitrate contains a positive obligation to pursue covered relief in arbitration and an equally fundamental negative obligation not to pursue it elsewhere. The negative obligation does not depend upon the existence or imminence of arbitral proceedings. Its breach invades a contractual right capable of protection by an injunction.

3. The relevant power derives from section 37 of the Senior Courts Act 1981. It permits the High Court, subject to the applicable jurisdictional limits and its discretion, to restrain the commencement or continuation of foreign proceedings brought in breach of an arbitration agreement. The power may be exercised on an interim or final basis, whether or not arbitration is current or proposed. It is unavailable against proceedings within the Brussels and Lugano régime because of West Tankers Inc v Allianz SpA, Case C-185/07, [2009] 1 AC 1138.

4. The Arbitration Act 1996 did not expressly or by implication abrogate that established power. The Act is not an exhaustive code. Section 1(c), by providing that the court “should” not intervene in matters governed by Part I except as provided, requires caution rather than imposing an absolute prohibition. Section 81 also preserves consistent common-law rules.

5. The competence of an arbitral tribunal to rule initially upon its jurisdiction under section 30 does not make its ruling conclusive or confer jurisdiction that it lacks. Sections 30, 32, 44 and 72 had no application where no arbitration existed or was contemplated. Authorities restricting declaratory proceedings brought by parties to actual or proposed arbitrations were therefore distinguishable.

6. Section 44 was not the source of the anti-suit power. It concerns interim assistance for the purposes of and in relation to actual or proposed arbitral proceedings. An injunction enforcing the negative promise not to litigate abroad protects an independently enforceable contractual right and falls under section 37 of the 1981 Act.

7. The section 37 discretion must be exercised sensitively, particularly where an arbitration is current or proposed. A court may sometimes leave the foreign court to enforce the agreed forum. Intervention was justified here because the foreign court had refused to recognise the agreement on grounds unsustainable under the English law governing it.

• United Kingdom Supreme Court: Dismissed the appeal unanimously and affirmed the final declaration and injunction: [2013] UKSC 35 .
• Court of Appeal: Dismissed the appeal from Burton J: [2011] EWCA Civ 647 ; [2012] 1 WLR 920 .
• Commercial Court: Burton J granted a final declaration and injunction restraining claims covered by the arbitration agreement from being brought otherwise than through ICC arbitration in London: [2010] 2 All ER (Comm) 1033.