English Court reiterates warning not to delay application for anti-suit injunction, regardless of jurisdictional challenge in the foreign proceedings

In ADM Asia-Pacific Trading PTE Ltd v PT Budi Semesta Satria [2016] EWHC 1427, the English Commercial Court rejected an application for an anti-suit injunction on the basis of undue delay.

This decision mirrors the Court's approach in Ecobank v Tanoh and Essar v Bank of China, which we previously covered here and here. It also reiterates that the Court's discretion to reject an application for an anti-suit injunction is not limited to instances where the delay is unconscionable or has caused prejudice to the respondent.

The judgment confirms, once again, that parties facing foreign proceedings commenced in breach of an arbitration agreement should bring an anti-suit injunction application as soon as possible after receiving notice of the foreign proceedings, regardless of any jurisdictional challenge in the foreign proceedings.

Background

PT Budi Semesta Satria ("BSS") alleged that soybeans supplied by ADM Asia-Pacific Trading PTE Ltd ("ADM") were of unsatisfactory quality and withheld a portion of the price payable under the contract. The contract included an arbitration clause referring disputes to FOSFA arbitration in London (Federation of Oils, Seeds and Fats Associations Ltd).

Contrary to that clause, BSS commenced proceedings in the Indonesian courts in May 2013 (having previously threatened to do so in correspondence). In September 2014, ADM challenged the jurisdiction of the Indonesian courts in parallel to filing its substantive defence (pursuant to an order of the Indonesian court following procedural hearings in June and August 2014). BSS and ADM respectively filed reply submissions in September and October 2014. In December 2014, the Indonesian District Court upheld ADM's jurisdictional challenge.

BSS appealed that decision and ADM submitted a counter-memorandum on appeal in July 2015 (after the High Court had already granted BSS's appeal). ADM subsequently challenged the High Court's decision in September 2015 and filed an appellate submission in October 2015.

In parallel, ADM commenced arbitration in June 2013, seeking damages for breach of the sales contract but also for BSS's alleged breach of the arbitration agreement in commencing proceedings in Indonesia. The parties made submissions in the ordinary way and the tribunal reached a First Tier award under the FOSFA rules in May 2015. BSS appealed the award under the appeal procedure set out in the FOSFA rules.

ADM filed its application in the English court for an anti-suit injunction on 11 September 2015, shortly after it learnt that BSS's appeal had been granted by the Indonesian High Court. BSS resisted the application for the anti-suit injunction primarily on the grounds of delay, accepting that there was at least an arguable case that the Indonesian proceedings were brought in breach of the arbitration agreement.

Decision

The Court reiterated that where foreign proceedings are brought in a jurisdiction outside the Brussels or Lugano regimes, the English Court "will ordinarily grant an anti-suit injunction to restrain the foreign proceeding […] unless the respondent can show strong reasons for suing in the foreign court".

ADM's counsel submitted that mere delay in applying for an anti-suit injunction did not represent a "strong reason" unless that delay was unconscionable and had caused prejudice to the respondent.

Citing Ecobank and Essar (among others), the Court rejected this argument and reiterated the "clear and authoritative state[ment] in The Angelic Grace, that applications for anti-suit injunctions must be brought promptly once the applicant knows of the breach." Applying the reasoning in Essar, the Court rejected the contention that a party to an arbitration agreement is entitled "first" to challenge the foreign court's jurisdiction, without prejudicing its position in relation to an application for an anti-suit injunction:

"The task of the Court is not to look at periods of delay and attribute blame for them, but to consider whether the application was made promptly and how far and with what consequences the foreign proceedings have progressed."

Applying these principles, the Court held that "whilst ADM was plainly entitled to challenge the jurisdiction in Indonesia, doing so did not remove the need to apply promptly for an anti-suit injunction, if one was to be sought at all". Instead, ADM had sought "to have the best of all worlds, litigating in Indonesia on the basis that it would claim the costs as damages, and then resorting to [the English] court" when the outcome was not what ADM hoped for.

The Court suggested that it would have reached a similar outcome by applying the principle of comity, as it said ADM's approach could not be a sensible method of conducting curial business. The proceedings in Indonesia had got to a stage which would make it inappropriate for the English court to intervene.

Comment

This case reiterates that, even when it is not disputed that the dispute falls within the scope of a valid arbitration agreement, an applicant who delays in seeking an anti-suit injunction may find its application denied by the English court. Anyone facing proceedings in jurisdictions outside the Brussels and Lugano regimes which are brought in breach of an arbitration agreement is well advised to seek an anti-suit injunction as soon as the breach becomes known.

The tribunal appointed in the FOSFA arbitration has already rendered an award to resolve the parties' dispute in accordance with the arbitration agreement (thereby accepting the validity of the arbitration agreement and the tribunal's jurisdiction thereunder). This award remains subject to the outcome of BSS's appeal, however. In the absence of an anti-suit injunction, the Indonesian courts may now decide to hear BSS's substantive claim, even though this is contrary to the parties' arbitration agreement. In those circumstances, the parties could face conflicting decisions between the tribunal and the Indonesian courts, resulting in issues upon enforcement.

For further information, please contact Paula Hodges QC, Partner, Charlie Morgan, Associate or your usual Herbert Smith Freehills contact.