The Brussels I Regulation was adopted by the European Union in 2000 in order to minimize the impact of differences between national rules governing jurisdiction[1] and facilitate the recognition and enforcement of judgments in civil and commercial matters across the EU. The Recast Regulation[2], adopted 12 years later, was enacted in order to clarify certain fine points and generally improve the Brussels I Regulation. However, just as with its predecessor, it wasn’t clear if the Recast Regulation also excluded arbitration from its ambit [3].
The decision of the English Court of Appeal in Nori Holdings Ltd v Bank Otkritie Financial Corporation[4] revisited the question of whether the court of one EU Member State can grant an anti-suit injunction where one of the parties has started legal proceedings in another EU Member State in disregard of an existing arbitration agreement between the parties.
In Nori Holdings, the Claimants in the anti-suit proceeding, which were companies incorporated in Cyprus and BVI that owned real state in Russia, had entered into several loan agreements with a Russian bank, the Defendant, which were secured by pledges of shares. While the loan agreements were governed by the laws of Russia, the share pledge agreements were governed by the laws of Cyprus. Moreover, most of the referred agreements included an arbitration clause that provided for disputes to be resolved by arbitration in London.
In August 2017, as a consequence of new arrangements, the Bank’s short-term secured loans were replaced with long-term unsecured bonds. Despite the Claimants’ argument that the new arrangements were a legitimate commercial restructuring, the bank started legal procedures against the borrowers both in Russia and Cyprus for civil fraud and insolvency. The borrowers/claimants sought to enforce the arbitration clause in the agreements between the parties by applying to the English court for an anti-suit injunction aiming to prevent the Defendant from moving on with its claims.[5]
The claimants argued that in light of the arbitration clause contained in the agreements entered into by the parties, the bank should not be permitted to proceed with its legal claims in Russia and Cyprus. The English court in Nori Holdings reaffirmed the validity of the decision of the European Court of Justice in West Tankers Inc. v Allianz SPA[6] (see our previous article “Lawsuits in the European Union: disarming the “Italian Torpedo” with the Recast Brussels Regulation”) by refusing to grant an anti-suit injunction against the Russian bank. In so doing, the English court clarified that the Recast Regulation adopts the same position as its predecessor, which rejects the grant of anti-suit injunctions to enforce arbitration clauses between parties in the European Union.
However, since the Recast Regulation prohibits lis pendens (parallel legal procedures with the same cause of action and the same parties commenced in different courts), the court ordered the discontinuance of the Russian procedures (Russia is not a member of the European Union and is thus not within the purview of the West Tankers principle) and expressly prohibited the parties from starting new claims in other European courts; the Cyprus proceeding was allowed to continue.
The decision in Nori Holdings upholds the European courts’ position in the West Tankers decision that an EU court’s ability to determine its own jurisdiction where it is seized of a dispute potentially subject to an arbitration clause trumps the enforcement of the said clause by another EU court. That being so, where an arbitral tribunal is constituted, a party seeking to restrain an EU court proceeding in breach of an arbitration clause might want to look to the arbitral tribunal itself for an anti-suit remedy.
Hazlo Law’s International Business Law department can assist you if you wish to enter into a commercial agreement that is subject to European Union regulations such as the one described in this article.
[1] Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. Online > https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2001:012:0001:0023:EN:PDF
[2] Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters
[3]Refer to our previous article “Arbitrate this: the applicability of arbitration exclusion in the Recast Brussels Regulation”, online at: https://hazlolaw1.wpengine.com/articles/arbitrate-this-the-applicability-of-arbitration-exclusion-in-the-recast-brussels-regulation/
[4] Nori Holdings Ltd & Ors v Public Joint-Stock Company ‘Bank Otkritie Financial Corporation’, Court of Appeal – Commercial Court, June 06, 2018, [2018] EWHC 1343 (Comm),[2018] WLR(D) 343
[5] It’s not clear what gives the English court jurisdiction to entertain these sorts of injunction but it may be a combination of the fact that England is often the seat of arbitration and it seems to be the only EU jurisdiction that actually issues anti-suit injunctions. This may change with Brexit.
[6] Allianz SpA and Generali Assicurazioni Generali SpA v West Tankers Inc, Case C‑185/07, [2009] ECR. I-663