ENGLISH HIGH COURT ALLOWS SHAREHOLDERS TO SERVE OUT APPLICATION TO JOIN JUDGMENT FOR THE ENFORCEMENT OF AN ARBITRAL AWARD

In Devas Multimedia America Inc and others v Antrix Corporation Ltd [2021] EWHC 1944 (Comm), the English High Court considered whether it has the power to allow parties to serve out of the jurisdiction an application to join third parties to an existing court judgment for the enforcement of an arbitral award. That award was between a claimant, in whose favour the award had been rendered, and an Indian state-owned entity.

The Court permitted the claimant (as the beneficiary of the arbitral award) to serve out the joinder application so as to join to the judgment four of its associated companies. The Court found that those companies were interested parties in the award and, in view of steps taken by India to render the award ineffective, it was prima facie necessary for them to be joined to the judgment to enable its proper enforcement. There was therefore a serious issue to be tried. The Court also found that service out of the jurisdiction was appropriate in the circumstances.

At first glance, the Devas judgment appears to clash with the position in VTB v JSC Antipinsky [2021] EWHC 1758 (Comm). The Court, which handed down the VTB decision one week before Devas, had not permitted the joinder of two parties to an arbitration claim in that earlier decision. The Court in Devas distinguished certain obiter comments in VTB, holding that there was a prima facie basis to join the third parties in this instance as the Court had already recognised the validity of the arbitral award which was the subject of the enforcement judgment, and it was necessary to add the third parties for the preservation of that award through its recognition and enforcement.

Background

Devas Multimedia has been attempting to enforce a $1.3 billion arbitral award against Antrix Corp., an Indian Government-owned space company, since 2015. Devas Multimedia was placed into liquidation in India in 2021, creating practical difficulties for it to enforce the award itself. Four of the shareholders in Devas Multimedia consequently sought to be joined to that enforcement judgment.

Devas Multimedia and those shareholders applied to the English High Court to serve on India, out of the jurisdiction, an application to join those shareholders to the enforcement judgment so as to allow them to enforce the arbitral award on behalf of Devas Multimedia. The applicants argued that the liquidator assigned to Devas Multimedia was in fact "doing India's bidding", making it impossible for Devas Multimedia to enforce the arbitral award itself.

The question for the Court was whether it has the power to allow parties to serve such a joinder application out of the jurisdiction in these circumstances, including whether there was a serious issue to be tried in respect of the underlying joinder application.

Decision

Mr Justice Waksman held that to allow the serving out of the joinder application, he needed to be satisfied that there was a "serious issue to be tried". He found that there was such a serious issue. Given the liquidation of Devas Multimedia, the shareholders needed to be added to the enforcement judgment for the judgment's preservation and the award's proper enforcement.

Distinguishing VTB v JSC Antipinsky

In VTB, the claimant sought to join two parties against whom it sought to bring a conspiracy and fraud claim within ongoing proceedings of a Part 8 arbitration claim. In deciding on the joinder application, Mrs Justice Cockerill made obiter comments to the effect that she had considerable doubt whether the Court has the power to add parties under Part 20 of the Civil Procedure Rules (Counterclaims and other additional claims) to an existing arbitration claim.

Mr Justice Waksman distinguished Mrs Justice Cockerill's comments. In VTB, the application in question was to introduce an additional claim unrelated to the arbitration to be brought against two parties who otherwise had no role in the arbitration. The additional claims of conspiracy and fraud were sufficiently different to the existing basis of the arbitration, making it inappropriate to join those parties in the same proceedings.

In contrast, in Devas, the four applicants were investors in the existing beneficiary of the arbitral award, and were seeking to enforce the same arbitral award as that beneficiary. As the applicants were sufficiently related to the beneficiary, and the joinder application was necessary to the enforcement of the judgment, the Court found it to meet the threshold for a serious issue to be tried.

The Court consequently granted permission to serve the application out of the jurisdiction, to allow it to be served in India, holding that it was authorised to do so through both the service provisions under the Arbitration Act, Rule 62.18.4 of the Civil Procedure Rules and Practice Direction 6B. It also permitted alternative service in the form of service by email, in view of the urgency of the matter, the practical challenges created by the Covid-19 pandemic, and the conduct of the Indian authorities.

Comment

While the Court did not ultimately rule on the joinder application in the Devas decision, dealing only with the application to serve out of the jurisdiction, Mr Justice Waksman nevertheless gave some useful indications of the circumstances which will be relevant and influential to the Court when considering applications for joinder in the context of arbitration. It also offered some helpful nuance to the comments in the VTB case on the Court's scope to join parties in the context of an arbitration claim. In particular, where the Court has previously handed down a judgment recognising the validity of an arbitral award, it may be inclined to allow parties to be joined to ensure the preservation of that judgment.

For more information, please contact Craig Tevendale, Partner, Louise Barber, Senior Associate, or your usual Herbert Smith Freehills contact.