English Commercial Court grants a final anti-suit injunction despite 13 month delay

In Africa Finance Corp and others v Aiteo Eastern E&P Company Ltd [2022] EWHC 768 (Comm), the English Commercial Court ruled that a 13 month delay in seeking an anti-suit injunction was not unreasonable given that the parties were engaged in negotiations during that period and the foreign proceedings in Nigeria had not advanced to a significant extent (in part due to the coronavirus pandemic). Although parties should continue to seek anti-suit injunctions as promptly as possible, this decision shows that courts are willing to show a degree of flexibility in determining whether delays are reasonable and therefore whether an anti-suit injunction should be granted.

Background

The claimants (nine lenders, eight of them based in Nigeria and one in the Bahamas) lent around US$2bn to a Nigerian company in 2014 under two facility agreements, both of which included arbitration clauses. In October 2019, following alleged breaches of the facility agreements by the respondent, the claimants sent a demand asking for repayment of the sum due. In response, the respondent commenced proceedings in the Nigerian High Court seeking a declaration that the respondent was not liable to pay those sums. The Nigerian High Court granted an interim injunction restraining the claimants from taking steps to enforce their demand letter.

The following month, in November 2019, the claimants appealed the decision to the Nigerian Court of Appeal, noting that the Nigerian High Court lacked jurisdiction to make the order on the basis of the arbitration clauses in the facility agreements. Over a year later, following several interim application proceedings and court closures as a result of the coronavirus pandemic, the Nigerian Court of Appeal held in February 2022 that the matter had to be submitted to arbitration.

In the period between November 2019 and the ruling in February 2022, the parties had engaged in commercial negotiations to solve the dispute. It became apparent to the claimants in November 2020 that the negotiations would not be fruitful, and thus they commenced an arbitration under the facility agreements in December 2020. Concurrently, they requested an anti-suit injunction from the English Commercial Court with the goal of stopping the Nigerian proceedings started by the respondent (who has now filed an appeal to the Nigerian Supreme Court following the Nigerian Court of Appeal's decision to uphold the arbitration clauses).

Decision

Under English law, applications for anti-suit injunctions should be filed promptly and before the foreign proceedings have advanced significantly, although the court has considerable discretion to decide whether the period of delay is reasonable. In this case, the Nigerian proceedings were commenced by the respondent in October 2019, yet the claimants did not apply for the anti-suit injunction from the English Commercial Court until December 2020. Consequently, Teare J had to decide whether this delay was reasonable.

Teare J noted that in cases where an arbitration agreement has been breached, a court will grant such an injunction unless there are strong reasons not to do so. An unreasonable delay would constitute a strong reason, and the question of what is reasonable should be determined objectively. In this case, Teare J held that the fact that the parties were engaged in negotiations for most of the period of delay with a view to restructuring the agreements and thus resolving the dispute made the delay a reasonable one. Although he noted that "it is incontestable that there was a very substantial delay" and that "by negotiating rather than applying to this court promptly for an anti-suit injunction, the Lenders ran the risk that by the time they did seek such relief the circumstances would be such that relief would be refused," he nonetheless stated that "that does not make the desire to resolve matters by negotiation and agreement unreasonable."

In addition to deciding whether negotiations made the delay reasonable, Teare J also had to address whether the Nigerian proceedings had been sufficiently prolonged that it would not be "good curial practice" to grant the injunction. He held that the closure of the Nigerian courts due to the coronavirus pandemic as well as the various adjournments and gaps between the proceedings meant that the Nigerian proceedings were "frozen" for most of the delay period, such that there was no significant expenditure of time and costs in the Nigerian courts.

Finally, in granting the injunction, Teare J rejected the respondent's argument that the claimant's decision to appeal the Nigerian High Court decision to the Nigerian Court of Appeal was a submission to the jurisdiction of the Nigerian Courts and a waiver of the right to arbitrate, noting that this appeal was based on the applicability of the arbitration agreements.

Comment

This decision highlights the degree of discretion that courts have in determining whether it would be just and reasonable to grant an anti-suit injunction. Even a "very substantial" period of delay might not be fatal for parties seeking an anti-suit injunction if there are good reasons for it. Relevant factors include the length of the delay and the extent to which the foreign proceedings have progressed during that delay.

Nonetheless, parties should be careful not to assume that they can delay seeking an injunction while they are engaged in negotiations. Each case will be assessed on its own facts and it remains good practice to apply for an injunction as soon as practicable.

For more information, please contact Chris Parker QC, Partner, Liz Kantor, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.

The author would like to thank Derek Lee for his assistance with the article.