ENGLISH HIGH COURT GRANTS INJUNCTION TO BLOCK JORDANIAN PROCEEDINGS SEEKING TO INVALIDATE AN ARBITRATION AGREEMENT

On 1 March 2019 the English court granted the claimant, ACT, a permanent anti-suit injunction against proceedings issued in  Jordan (the Jordanian Proceedings) by the defendant, Soletanche (in Aqaba Container Terminal (PVT) Co v Soletanche Bachy France SAS). The Court found that the subject matter of the Jordanian proceedings fell within the scope of an arbitration clause agreed between ACT and Soletanche. Soletanche had relied in the validity of that arbitration clause in earlier ICC proceedings to claim damages from ACT (albeit unsuccessfully). It was therefore just in all the circumstances to issue an anti-suit injunction to prevent breach by Soletanche of the agreement to arbitrate and to halt its efforts to invalidate that agreement through the Jordanian Proceedings.

Background

The parties entered into a Construction Contract in 2009 for Soletanche, a French contractor, to carry out development work at the Aqaba Container Terminal in Jordan. In February 2011, the owner of the terminal, ACT, gave notice to terminate the Construction Contract. Soletanche claimed this amounted to a repudiatory breach of the contract. After unsuccessfully attempting to resolve the matter before a dispute adjudication board, Soletanche commenced arbitration in October 2013, seeking a declaration that the termination was unlawful, together with payment for its work and damages. The arbitration agreement within the Construction Contract provided for ICC arbitration seated in London and covered "dispute[s] (of any kind) aris[ing] between the Parties in connection with or arising out of the [Construction Contract]". In 2017 the arbitral tribunal issued an award holding that ACT had validly terminated the Construction Contract and ordering Soletanche to pay ACT damages and costs.

The Jordanian Proceedings

After the award had been issued, Soletanche commenced the Jordanian Proceedings against ACT in July 2018. Soletanche claimed that a specific article of Jordanian law was unconstitutional and that contracts entered into pursuant to that law (which included the Construction Contract) were without legal basis, and therefore null and void.

Anti-suit relief sought by ACT in the Commercial Court in London

In response to the Jordanian Proceedings, ACT issued anti-suit proceedings against Soletanche in the Commercial Court in London. ACT sought:

1. a declaration that Soletanche had breached the arbitration agreement by seeking a declaration of the Construction Contract's invalidity in the Jordanian Proceedings;
2. an injunction restraining Soletanche from taking any further steps to obtain a declaration of the Construction Contract's invalidity; and
3. an injunction requiring that Soletanche withdraws, discontinues or brings to an end all steps it had taken so far to obtain a declaration of the Construction Contract's invalidity in the Jordanian Proceedings.

ACT accepted before the English court that whether or not a specific Jordanian law was or was not unconstitutional was not arbitrable as a matter of English law. However, ACT's position was that the arbitrability of the unconstitutionality of the Jordanian law and the arbitrability of a claim to invalidate the Construction Contract were two separate matters – the latter which could be decided in arbitration. Soletanche argued that a claim to invalidate the Construction Contract could not be separated from the matter of the Jordanian law's potential unconstitutionality, and thus neither could be determined in arbitration. Soletanche argued that as matter of Jordanian law in order to have standing to pursue the unconstitutionality claim in the Jordanian Proceedings Soletanche would need to first have a claim to invalidate the Construction Contract. As a consequence, Soletanche [argued that it] would lose any potential standing it might have had to pursue the Jordanian Proceedings if a permanent anti-suit injunction was granted.

The English Court held it was plain that "a claim to invalidate the Construction Contract" would fall "within the language of the Arbitration Agreement". The Court also agreed with ACT's position that a claim to invalidate the Construction Contract was arbitrable and could be separated from the constitutional claim to invalidate the Jordanian law – which was not an arbitrable matter.

The Court referred to the case of Dell Emerging Markets (EMEA) Ltd & Anor v IB Maroc.com SA[2017] EWHC 2397; [2017] 2 CLC 417, which stated that "anti-suit injunctions based upon an exclusive jurisdiction clause are granted unless there are strong reasons not to do so" and concluded that it could "find no strong reasons for not granting an injunction to prevent further breach by Soletanche of the agreement it made to arbitrate a claim to invalidate the Construction Agreement."

Soletanche's position throughout the proceedings remained that the result of an injunction would be to prevent it from advancing its constitutional claim in the Jordanian courts. The Court disagreed with this analysis, noting that "[i]f the result of agreeing not to bring a civil claim to invalidate the contract is that it is not possible to reach the benches of a constitutional court then that is the result of the agreement that Soletanche made, not of the injunction."

The Court concluded that, in all the circumstances, particularly where Soletanche itself had relied on the validity of the Arbitration Agreement and the Construction Contract in order to claim (albeit unsuccessfully) damages from ACT, "the just course is to grant a permanent anti-suit injunction."

Comment

This decision is a further example of the robust approach taken by the English courts when faced with breaches of arbitration agreements and provides useful reassurance that the courts will not permit arbitral awards to be circumvented by dissatisfied parties. It is clear that the court was influenced by the fact that Soletanche had previously commenced an arbitration under the Construction Contract and had only raised the arguments regarding the potential unconstitutionality of the Construction Contract after it had lost that arbitration. The Court also gave Soletanche's arguments regarding the impact of the anti-suit injunction short shrift, emphasising that it was the parties' agreement to arbitrate that prevented Soletanche from continuing the Jordanian Proceedings rather than the injunction per se.

For more information, please contact Chris Parker, Partner, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills contact.