Sabbagh v Khoury & Ors

An interim anti-arbitration injunction may be granted where continuation of a foreign arbitration is vexatious and oppressive. The court should exercise the power under Senior Courts Act 1981, section 37(1), cautiously, particularly where the arbitration has a foreign seat and supervisory court. A high degree of probability that the conduct is vexatious or oppressive is sufficient at the interim stage. Where the parties have litigated and lost the issue of whether an arbitration agreement binds the applicant, continuing the arbitration in pursuit of an award may be unjust and oppressive. The court may grant relief even though it is not the supervisory court, where the arbitration agreement does not bind the applicant and the foreign arbitration has no proper jurisdiction.

The claimant sought an interim injunction restraining the defendants from prosecuting a Lebanese arbitration, taking steps to stay it, or seeking recognition or enforcement of any award. The arbitration concerned claims which substantially corresponded to two claims already being litigated in England: alleged misappropriation of assets and alleged deprivation of shares.

The defendants relied on an arbitration clause in the articles of association of a Lebanese company. The Court of Appeal had held that the claimant was not bound by that clause in respect of either claim and that the claims were outside its scope: [2017] EWCA Civ 1120. Permission to appeal to the Supreme Court was refused. The central issue was whether continuation of the Lebanese arbitration was vexatious and oppressive and whether an injunction was just and convenient.

1. The court had power under section 37(1) of the Senior Courts Act 1981 to grant an injunction where it was just and convenient. Because the injunction would restrain a foreign-seated arbitration, the jurisdiction required caution and, in the circumstances, exceptional considerations.

2. For an interim injunction, principle supported requiring vexation or oppression to be shown to a high degree of probability rather than finally established. Nothing turned on the distinction in this case.

3. The Court of Appeal’s decision established that the claimant was not bound by the arbitration clause. The claims were not based on the articles of association and were not brought on behalf of the claimant’s father as shareholder. That conclusion gave rise to an issue estoppel against the defendants. The Court of Appeal’s additional conclusions that the claims were outside the scope of the clause were obiter, but were accepted as correct.

4. The defendants had argued the arbitration clause before the English courts and had lost. In those circumstances, continuation of the Lebanese arbitration, with a view to obtaining and enforcing an award, was vexatious and oppressive. The fact that the Lebanese court was the court of the seat did not justify allowing the arbitration to continue. The English court treated the Court of Appeal’s conclusions as correct conclusions of Lebanese law and found that no useful application could be made to the Lebanese court at that stage.

5. There was no material delay by the claimant after the Court of Appeal’s decision. The age of the arbitration, expenditure incurred, and the fact that the tribunal was close to deciding the merits did not outweigh the injustice and waste that would result from continuation.

6. It was a plain and compelling case for relief. The interim injunction was granted in the terms sought, including restraint on prosecution of the arbitration and on recognition or enforcement of any award.

The judgment describes earlier appellate proceedings concerning whether the claimant was bound by the arbitration clause.

• Court of Appeal of England & Wales held that the claimant was not bound by the clause and that the two claims were outside its scope: [2017] EWCA Civ 1120.
• Supreme Court of the United Kingdom refused permission to appeal on 12 March 2018.