Sabbagh v Khoury & Ors

An English court retains its power under section 37 to restrain a foreign-seated arbitration where its pursuit is vexatious and oppressive. Neither the Arbitration Act 1996 nor the New York Convention removes that power. The remedy is exceptional and requires great caution.

An injunction cannot restrain a claim that falls within a valid arbitration agreement. The mandatory-stay principle in section 9 then requires the court to respect the parties’ agreement to arbitrate. England need not be the natural forum before an injunction may restrain an arbitration concerning a claim plainly outside the arbitration agreement. That requirement is directed to comity in anti-suit cases and does not govern anti-arbitration injunctions.

Sana Sabbagh brought English proceedings alleging that members of her family and associated companies had conspired to misappropriate assets of her late father and to deprive her of an inheritance in shares in Consolidated Contractors Group SAL. The defendants later commenced a Lebanese arbitration under article 45 of the company’s articles of association.

In earlier jurisdiction and stay litigation, Carr J had decided part of the jurisdiction challenge at [2014] EWHC 3233 (Comm). The Court of Appeal’s 2017 judgment, cited as [EWCA Civ 1120], held that the two English claims were not subject to article 45. Robin Knowles J then enjoined the appellants from continuing the Lebanese arbitration.

The appeal concerned whether the English court could restrain a foreign arbitration as vexatious and oppressive, whether the arbitration’s shares claim was within article 45, and whether England had to be the natural forum.

1. Appeal allowed in part. The injunction was discharged insofar as it restrained the Lebanese arbitration’s shares claim. It remained in force insofar as it restrained the assets claim.

2. The court’s general injunctive power under section 37 of the Senior Courts Act 1981 was not implicitly removed by the Arbitration Act 1996 or the New York Convention. Section 1(c) of the 1996 Act called for caution, rather than an absolute prohibition, and principally governed United Kingdom-seated arbitrations. The court could therefore restrain a foreign arbitration whose pursuit was vexatious and oppressive, but only in exceptional circumstances and with particular restraint because the court at the seat ordinarily supervises the arbitration.

3. The shares claim sought a determination that Sana had no entitlement, as her father’s heir, to shares in CCG. At the time arbitration began, she had advanced a claim to be recognised as a shareholder. Such a claim fell within article 45. The later abandonment of proprietary relief in the English proceedings did not make the live arbitration claim fall outside article 45. The earlier Court of Appeal decision had decided only that Sana’s English damages claim was not subject to arbitration.

4. An injunction against the shares claim would contradict the fundamental statutory and Convention principle that valid arbitration agreements must be given effect. If that claim had been brought in England, section 9 of the Arbitration Act 1996 would have required a stay. The injunction could not therefore stand in respect of that claim.

5. The assets claim was, by the binding effect of the 2017 judgment in the English courts, outside article 45. The appellants did not challenge the discretionary conclusion that its continued pursuit was vexatious and oppressive. The court therefore upheld the injunction in that respect.

6. England’s status as the natural forum was not a precondition. That requirement limits anti-suit injunctions because of their indirect interference with foreign courts. An anti-arbitration injunction instead turns on whether the arbitration agreement covers the dispute. Where it plainly does not, lack of natural-forum status does not bar relief.

• Court of Appeal (Civil Division): Allowed the appeal in part. The injunction granted by Robin Knowles J was discharged as to the Lebanese arbitration’s shares claim and upheld as to its assets claim.
• Commercial Court: Robin Knowles J granted an injunction restraining continuation of the Lebanese arbitration.
• Court of Appeal (Civil Division): In the earlier stay appeal, cited as [EWCA Civ 1120], held that the two claims brought in the English proceedings did not fall within article 45.
• Commercial Court: Carr J determined part of the defendants’ jurisdiction challenges at [2014] EWHC 3233 (Comm).