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Helen_Laver_phOn 1 and 2 May 2013, the Supreme Court heard an appeal against the Court of Appeal’s decision in AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2011] EWCA Civ 647 in which it upheld a Commercial Court judgment that the English courts do have jurisdiction to grant a final injunction in order to restrain foreign proceedings brought in breach of an arbitration agreement, where there is no existing or prospective arbitration.  

Facts

The case involves a contract between the owner of a hydroelectric plant in Kazakhstan, Ust-Kamenogorsk Hydropower Plant JSC, and the operator of a hydroelectric plant in Kazakhstan, AES Ust-Kamenogorsk Hydropower Plant LLP. The contract was governed by Kazakhstan law, with the exception of the arbitration clause which was governed by English law. In 2004 the Kazakhstan Supreme Court ruled that the arbitration clause was invalid as it was contrary to public policy.

In response to the owner commencing proceedings over the contract in the Kazakhstan courts, the operator successfully applied for an anti-suit injunction against the owner in the Commercial Court in London. The owner responded claiming that the English court did not have jurisdiction to hear the case, and they should decline to exercise any jurisdiction they might have. By the time the Commercial Court heard the case there was no arbitration actually in existence and neither party had any desire to commence arbitration proceedings.

The decisions of the Commercial Court and Court of Appeal

The arguments over jurisdiction centred the Arbitration Act 1996, s 44 and the Senior Courts Act 1981, s 37, both of which give the courts the power to grant anti-suit injunctions.

The judge at first instance, Burton J, stated that s 44 of the 1996 Act did not apply here, as it only applied to actual or potential arbitrations, and here there was neither arbitration nor the possibility of any. On appeal to the Court of Appeal the two parties agreed that s 44 could not be used to give the court jurisdiction in this case. However, the operator claimed that s 37 of the 1981 Act nevertheless conferred on the Court the necessary jurisdiction. This was in contrast to the owner’s claims that because the 1996 Act exclusively governed the court’s jurisdiction to grant injunctive relief in such circumstances, and s 44 of the 1996 Act did not apply here, the court had no power to intervene. The court could not use s 37 of the 1981 Act to go beyond the limits set out in s 44 of the 1996 Act, as s 1(c) of the 1996 Act read that the courts “should not intervene except as provided by this part“.

Rix LJ, delivering the Court of Appeal’s judgment, disagreed with the owner’s claims. He stated that the phrase “should not intervene” begged the question “should not intervene in what?”  The answer was: arbitration. As there was no existing or potential arbitration in this case, these limitations did not apply.  Rix LJ stated that although when s 44 of the 1996 Act applied s 37 of the 1981 Act could not be used to sidestep it, it was not the case that simply because s 44 of the 1996 Act did not apply that s 37 of the 1981 Act was excluded.  In the circumstances, the Court retained jurisdiction under s 37 of the 1981 Act and it was appropriate to exercise that jurisdiction to grant the order sought.

Supreme Court Appeal

The Supreme Court decision will be crucial for clarifying the relationship between s 44 of the 1996 Act and s 37 of the 1981 Act. It will determine the scope of the English courts’ jurisdiction to intervene and grant injunctive relief in order to restrain foreign proceedings brought ostensibly in breach of an arbitration agreement, where there is no existing or prospective arbitration.