Anti-suit Injunctions within the EU: AG Wathelet delivers his Opinion in Gazprom

The Advocate General Wathelet (the AG) has delivered his much awaited Opinion in the reference to the Court of Justice of the European Union (CJEU) by the Lithuanian Supreme Court in the case of Gazprom (C-536/13). The Lithuanian Court referred to the CJEU three questions pertaining to the effect of the Brussels I Regulation (EC) No 44/2001 (the Regulation). The Regulation determines the member state courts' jurisdiction and excludes arbitration from its scope. However, the exception has gradually been eroded by the CJEU in decisions such as West Tankers.

The Reference in the present case related to a request to enforce an arbitral award which has a similar effect to an anti-suit injunction and has therefore been of considerable interest to the arbitration community. The background to the reference is more fully explained in our blog post [here]. In his Opinion, AG Wathelet also considered in detail the effect of the Recast Brussels I Regulation (the Recast Regulation), which comes into force on 10 January 2015. This opinion is the first that considers its terms, and, if adopted by the CJEU, would set down a marker for the interpretation of the arbitration exception within the Recast Regulation, with the effect that an anti-suit injunction issued by an arbitral tribunal would be recognisable and enforceable by member state courts.

AG Wathelet concluded that:

• the Regulation does not require the court of a member state to refuse to recognise and enforce an anti-suit injunction issued by an arbitral tribunal; and
• the fact that an award contains an anti-suit injunction is not a sufficient ground for refusing to recognise and enforce it on the basis of Article V(2)(b) of the 1958 Convention because the Regulation is not a matter of public policy.

The Opinion holds great interest for its discussion of the implications of the Recast Regulation (even though it was the current Regulation that was in issue). In the AG's view, the Recast Regulation aims to correct the boundary which the ECJ (now the CJEU) had traced between the application of the Regulation and arbitration in the West Tankers (Case C-185/07). The decision in West Tankers was seen by many as signifying the death of the anti-suit injunction in Europe. In the AG's view, it is clear from its legislative history that the Recast Regulation seeks to reinstate the position in which the consideration of the validity of an arbitration agreement as an incidental question falls outside the scope of the Recast Regulation.

The AG also opined on what it means for a court to be seised on the question of the validity of an arbitration agreement in the context of the Recast Regulation. He noted that while a court may be seised on the incidental question of validity of an arbitration agreement, this falls outside the scope of the Recast Regulation. A court is not seised on the substance of the dispute (proceedings which do fall within the scope of the Recast Regulation), until it has decided the issue of the validity of the arbitration agreement.

AG Wathelet also observed that an anti-suit injunction issued by an arbitral tribunal could not be considered in the same way as that issued by a member state court.

Whilst it remains to be seen whether the AG's opinion will be adopted by the CJEU, his interpretation of the effects of Recital 12 of the Recast Regulation offers hope that a party will be able to protect an arbitration agreement by virtue of an anti-suit injunction, even when parallel proceedings are threatened or brought within the EU.

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Background

Gazprom commenced arbitral proceedings in Sweden, prior to which the Ministry of Energy of Lithuania (the Ministry) had brought court proceedings in Lithuania. The arbitral tribunal found that, in part, the Lithuanian proceedings breached the arbitral agreement and ordered that the Ministry withdraw some of those requests. When Gazprom then sought recognition of the award in Lithuania, the Supreme Court of Lithuania (the Supreme Court) made a preliminary reference to the CJEU to determine whether the Brussels I Regulation prevented it from enforcing the part of the award which prohibited the Ministry from bringing certain claims before the Lithuanian court.

The Opinion

AG Wathelet considered a number of preliminary questions before turning to the questions submitted by the Lithuanian Supreme Court. Amongst those preliminary points, he confirmed that notwithstanding certain differences between the remedy granted by the tribunal and an anti-suit injunction, the award was nonetheless capable of undermining the practical effect of the Regulation.

AG Wathelet dealt with the three questions posed by the Supreme Court, as follows:

Question 1: Where a tribunal issues an anti-suit injunction prohibiting a party from bringing certain claims before a court of a Member State, which under the rules on jurisdiction in the Brussels I Regulation has jurisdiction to hear the civil case as to the substance, does the court of a Member State have the right to refuse to recognise such award of the tribunal because it restricts the court’s right to determine itself whether it has jurisdiction to hear the case under the rules on jurisdiction in the Brussels I Regulation?

The AG concluded that this question should be answered in the negative.

The AG rejected the Lithuanian Court's reliance on Article 71(2) of the Regulation. Article 71(2) deals, among other things, with application of the provisions of the Regulation which concern the procedure for recognition and enforcement of judgments, where there is a convention between the Member State where a judgment originated and the Member State in which it is sought to be enforced, which lays down conditions for the recognition and enforcement of judgments. The provision was not applicable as the arbitral award was not a "judgment" within the definition in the Regulation. Furthermore, arbitration was clearly excluded from the scope of the Regulation. Recognition and enforcement of the award should be governed by the 1958 Convention alone.

Neither was the Regulation applicable by virtue of the ECJ's judgment in West Tankers. The Lithuanian Court is arguably in a position comparable to that of the House of Lords in West Tankers, since it is seised of a matter – the enforcement of an arbitral award – which is outside the scope of the Regulation. Similarly, it is also in a position comparable to that of the Italian Court, in the sense that it was seised of a matter within the scope of the Regulation. However, the AG felt that it did not follow that the same conclusion should be reached, ergo that the anti-suit relief it was asked to enforce in the award was contrary to the Regulation.

In the AG’s view, Recital 12 of the Recast Regulation acts in the manner of "retroactive interpretive law", which sheds light on how the exclusion of arbitration must be and should have been interpreted.   Reviewing the legislative history surrounding the Recital, the AG noted how the Court in West Tankers had departed from the earlier approach in Rich (subsequently confirmed in Van Uden (C-391/95)). In Rich it was held that only the subject-matter of the dispute in the main proceedings should be taken into account. In West Tankers, the ECJ examined the applicability of the Regulation by reference to the subject matter of the dispute in the Italian proceedings. The AG concluded that, had the dispute in West Tankers been brought in light of the Recast Regulation, the Italian court's consideration of the validity of the arbitration agreement would have been excluded as an "incidental question" (by reference to Paragraph 2 of Recital 12): it would only have been seised on the substance of the case after it had found the arbitration agreement to be invalid. The anti-suit injunction forming the subject matter of the dispute would not have been held to be incompatible with the Brussels regime.

The AG highlighted in particular Paragraph 4 of Recital 12, which excludes “ancillary proceedings relating to, in particular, …the conduct of an arbitration procedure or any other aspects of such a procedure, nor to… the… the recognition or enforcement of an arbitral award” from the scope of Brussels I Regulation. He viewed "ancillary proceedings" as extending to anti-suit injunctions issued by national courts in support of arbitration.

He noted that his interpretation does not undermine the effectiveness of the Regulation, because, by virtue of Articles V(1)(a) and (c) and V(2)(a) of the 1958 Convention, a court can still ascertain whether the arbitral tribunal had jurisdiction, or, based on its own law, whether the dispute before the arbitral tribunal is capable of settlement by arbitration.

Further, the AG considered that, even if the CJEU decides not to take into account the Recast Regulation, the West Tankers decision is nevertheless inapplicable in the present case. Since recognition and enforcement of an anti-suit injunction in an arbitral award fall within the scope of the 1958 Convention, not the Regulation, he argued that arbitral tribunals consequently cannot be bound by the principle of mutual trust in the Regulation.

Question 2: If so, can an EU member state court governed by the Brussels I Regulation refuse to enforce an arbitral award that contains an anti-suit injunction if it requires the parties to limit their claims in the court of another member state governed by the Brussels I Regulation?

Having answered the first question in the negative, the AG saw no need to answer the second question. He incidentally noted that the question was not relevant in the present case, given that it envisages a situation in which the anti-suit injunction were issued in a dispute pending before the courts of a member state other than Lithuania, which is not the case in Gazprom.

Question 3: Can an EU member state court "for the purpose of ensuring the supremacy of EU law and the full effectiveness of the Brussels I Regulation" refuse to enforce an award that limits the right of a national court to rule on its own jurisdiction?

The AG understood the third question as asking whether a member state court must interpret the concept of public policy enshrined in Article V(2)(b) of the 1958 Convention in such a way as not to recognise and enforce an arbitral award containing an anti-suit injunction, in so far as that injunction limits the court's right to decide on its own jurisdiction.

The AG considered the concept of public policy for the purposes of the 1958 Convention and concluded that an arbitral award containing an anti-suit injunction was not sufficient to refuse to enforce it on the public policy ground in Article V(2)(b), since he did not view the provisions of the Regulation to be sufficiently fundamental or essential provisions of EU law (within the meaning of its case law) to warrant elevation to the status of public policy provisions. Also, he noted that the non-mandatory nature of the Regulation provisions also pointed against such status.

Commentary

This is an interesting interpretation of Recital 12 of the Recast. The AG's Opinion is not binding and the CJEU is free to derogate from it (albeit unusual for it to do so).

In particular, there may arguably be some tension between the AG's interpretation of Paragraph 4 of Recital 12 and Paragraph 1 of Recital 12, the latter of which provides that "Nothing in this Regulation should prevent the courts of a Member State, when seised of an action in a matter in respect of which the parties have entered into an arbitration agreement from examining whether the arbitration agreement is null and void, inoperative or incapable of being performed, in accordance with their national law".

Interpreting Paragraph 4 of Recital 12 as permitting an anti-suit injunction would arguably cut across the protection given in Paragraph 1 to each Member State court's right to examine the validity of an arbitration agreement. It would effectively give the courts of the seat of the putative arbitration agreement the final say on its validity by the back door (that is, at least, if and until the court of another member state is asked to recognise and enforce any resulting award). Such an approach was rejected in the development of the Recast Regulation.

Finally, it bears emphasis that the AG queried whether the questions posted by the Lithuanian Court were even admissible, and proceeded on the basis that the CJEU would deem them so. Indeed, the CJEU may well determine that the Lithuanian Court is able to answer the questions by reference to the 1958 Convention and thus a preliminary reference was not necessary in the first place.

For further information, please contact Christian Leathley, Partner, or your usual Herbert Smith Freehills contact.

–London