English Court confirms power to grant anti-enforcement injunction but application fails due to unnecessary delay

The English Commercial Court (the Court) in Ecobank Transnational Inc v Tanoh [2015] EWHC 1874 (Comm) refused to restrain the enforcement of two foreign judgments because of unnecessary delay. The application was made on the basis that the subject matter of both judgments fell within the scope of an arbitration agreement.

Although the Court dismissed the request, the judgment confirms the English courts' jurisdiction to grant injunctive relief post-judgment (in relation to judgments of non-EU countries at least). It also gives helpful guidance on what factors the English courts will take into account in exercising their discretion to grant an anti-enforcement injunction.

The judgment confirms the risks of letting foreign proceedings play out and seeking to neutralise any unfavourable judgment at the enforcement stage only. The Court highlighted that where the applicant does not apply, pre-judgment, for an anti-suit injunction in relation to the substantive proceedings it will need to provide a good reason for the delay. Anti-enforcement injunctions are not therefore to be considered an 'after the event' alternative to anti-suit relief.

Background

The English courts will not directly enforce or recognise a judgment given by a foreign court if the proceedings in question were brought in breach of a valid arbitration agreement (s32 Civil Jurisdiction and Judgments Act 1982).

However, the English courts also have the power to grant injunctions restraining one or more parties from continuing foreign proceedings brought in breach of an arbitration agreement (s37 of the Senior Courts Act 1981 (SCA)). This power can be exercised where the proceedings in question are brought in a jurisdiction not covered by the Brussels Regulation and Lugano Convention regimes. The position in relation to States within the Brussels and Lugano regimes is not settled after the amendments to the Brussels Regulation in January 2015 (see here).

Although such injunctions are generally sought before judgment is given by the foreign court or tribunal (in which case they are referred to as "anti-suit injunctions"), the English court can also intervene post-judgment to restrain enforcement ("anti-enforcement injunctions"). Both of these types of injunction bind the party in question (not the foreign court or tribunal). The effect of such injunctions extends, therefore, beyond the jurisdictions of England and Wales.

Facts

Mr Tanoh (T) was employed by Ecobank pursuant to an Executive Employment Agreement (EEA). The EEA provided for disputes to be referred to arbitration in London, under the UNCITRAL rules.

Ecobank terminated T's employment in March 2014, following which T commenced proceedings before the Labour Tribunal of Lome in the Togolese Republic for unlawful dismissal in April 2014 and before the Adidjan Commercial Court in Cote d'Ivoire for defamation in May 2014.

Ecobank unsuccessfully challenged jurisdiction in both sets of proceedings.

T was successful in his claims and was awarded approx. USD11m by the labour tribunal and approx. USD12.8m by the Ivorian court. Ecobank's appeal before the labour tribunal is pending and a stay of execution has been granted. Ecobank also appealed the Ivorian judgment but the appeal was dismissed. At the time of writing, Ecobank intends to bring a further appeal to the Court of the Organisation pour l‘Harmonisation en Afrique du Droit des Affaires (OHADA).

At no time in relation to the Togolese or Ivorian proceedings did Ecobank seek an anti-suit injunction before the English courts to try to stop T from continuing the proceedings brought in breach of the arbitration agreement.

Ecobank commenced arbitration against T in December 2014. Its claims in the arbitration overlapped with the matters dealt with in the Togolese proceedings but did not include the defamation dispute in the Ivorian proceedings.

Ecobank sought a worldwide anti-enforcement injunction in relation to the Togolese and Ivorian judgments. The injunction was granted on an interim basis (without notice) pending a full hearing of the application. The matter then came back before the Court.

Decision

The Court rejected Ecobank's application and refused to extend the interim injunction. The decision was based, primarily, on the fact that Ecobank delayed in seeking to stop the foreign proceedings before judgment was given and in commencing arbitration.

T is therefore free to enforce the Ivorian and Togolese judgments wherever he sees fit (subject always to Ecobank's right to challenge enforcement in any given jurisdiction).

Although the injunction was refused on the facts, the judgment confirms the court's power to grant anti-enforcement injunctions and provides a helpful summary of the factors the court will take into account in exercising its discretion to grant an injunction.

The Court's power to grant anti-enforcement injunctions

Extrapolating from Ust-Kamenogorsk [2013] 1 WLR 1889 (see here), the judgment confirmed that the Court has jurisdiction to grant anti-enforcement injunctions. It dismissed as irrelevant that few examples have been reported of such injunctions being granted and held that the power may be exercised where "necessary to hold a party to its contract".

Ordered at the Court's discretion

Delay

S37 of the SCA 1981 gives the court a discretion to grant an injunction. The Court acknowledged that the English courts consider the granting of an anti-enforcement injunction as a "very serious matter" (Mansri v CCI (UK) Ltd [2008] EWCA Civ 625).

The judgment described the typical scenario in which an English court might grant an anti-enforcement injunction as being where "a judgment was obtained too quickly or too secretly to allow an anti-suit injunction to be sought". The judgment suggested that the English courts may apply a higher threshold to the granting of an injunction "the more the foreign court or tribunal has spent time on the dispute and the more it has decided". To succeed in an application for an anti-enforcement injunction where no anti-suit injunction has been sought, an applicant will likely need to give good reason for its approach.

The Court dismissed Ecobank's argument that the requirement to apply for an injunction "promptly and before proceedings are too far advanced" should apply only after any jurisdictional challenge is brought and decided in the foreign proceedings. Time will run from the date the foreign proceedings start. In this case Ecobank waited as long as 8 months before approaching the English court and starting arbitration. In the meantime, it was engaging in the foreign proceedings (even if only to challenge jurisdiction).

The judgment also dismisses the argument that delay alone was insufficient to defeat an application but that there must have been some detrimental reliance on the delay. The English courts may take into account any detrimental reliance in deciding the application but this is not a mandatory pre-condition for refusing to grant the injunction.

Scope of the arbitration agreement

The Court also provided a helpful reminder of the requirement that there "must be a high degree of probability" that the subject matter of the dispute falls within the scope of the arbitration agreement before the court will exercise its discretion to grant an injunction.

The starting point will be that parties intended all disputes arising out of their relationship to be resolved in a single forum (Fiona Trust [2007] UKHL 40). However, this presumption has its limits. In this case, the Court did "not consider it is realistic to treat a claim for defamation […] as a claim "arising under or in connection with" the EEA".

Comment

Anti-enforcement injunctions are seen by some as a readily available alternative to anti-suit injunctions. Certain commentators have argued that anti-enforcement injunctions should be easier to obtain (in particular in civil law jurisdictions) and have the added benefit of allowing the applicant to consider the outcome of the foreign proceedings before seeking an injunction.

The judgment in Ecobank Transnational Inc v Tanoh [2015] EWHC 1874 (Comm), in line with earlier judgments such as Masri v CCI (see above), highlights the considerable risks associated with that approach. In fact, all other things being equal, this judgment implies that it will be harder to obtain an anti-enforcement injunction than it would have been to seek an anti-suit injunction before the foreign judgments were handed down.

This judgment suggests that good reason is needed to justify why the English courts were approached only after the foreign judgment was handed down. It also confirms that the English courts will look more favourably on an application brought promptly at the outset of the foreign proceedings. For this purpose, time will be deemed to run from the start of the foreign proceedings, even where the applicant is challenging jurisdiction in the foreign proceedings.

Parties seeking to protect their arbitration agreement should:

• Ensure that the arbitration agreement expressly covers all types of disputes intended to be referred to arbitration;
• If seeking an anti-suit injunction before the English courts, make the application sooner rather than later;
• Bring any application for an anti-suit injunction in parallel to any jurisdictional challenge in the foreign proceedings, not only after the foreign court or tribunal has accepted jurisdiction;
• Obtain an anti-suit injunction before a judgment is reached in the foreign proceedings. Consider whether to seek an anti-enforcement injunction in parallel to an anti-suit injunction, if there is a risk that the latter may have no effect on the relevant court or tribunal outside the jurisdiction.
• Do not delay in commencing arbitration in parallel to the foreign proceedings; and
• Where it is not possible in practice to bring an application for an anti-suit or anti-enforcement injunction before the judgment is given, apply for an anti-enforcement injunction as soon as possible after becoming aware of the foreign proceedings and/or judgment.

For further information, please contact Nicholas Peacock, Partner, Charlie Morgan, Associate or your usual Herbert Smith Freehills contact.