ENGLISH COURT REJECTS INTERIM INJUNCTION APPLICATION FOR LACK OF URGENCY

In JOL and JWL v JPM [2023] EWHC 2486 (Comm), the English High Court has dismissed an application for interim injunctions, finding the requirement of urgency under s44(3) of the Arbitration Act 1996 (the Act) had not been met.

The decision illustrates that the Court will exercise caution in granting s44(3) orders to enforce disputed contractual rights which are the subject of an arbitration agreement.  However, it also suggests that the Court's intervention in the arbitral process may be more readily available where an application is sought with the arbitral tribunal's consent under s44(4) of the Act.

Background

The underlying dispute arose out of bareboat charterparties (the Head BBCPs) entered into between the Claimants (the Owners) and the Respondents (the Charterers) in respect of two vessels (the Vessels).  The Charterers then chartered the Vessels to sub-charterers, who in turn chartered the Vessels to sub-sub-charterers, who time-chartered the Vessels to two other parties.

The Head BBCPs contained a list of "Termination Events".  If one of these events occurred, the Owners were entitled to terminate by notice with immediate effect and to require the Charterers to redeliver the Vessels.

The parties agree that by 2 September 2023, a Termination Event had occurred.  The Owners say that they served a valid Termination Notice on 5 September 2023, and that they therefore have a contractual right to redelivery of the Vessels.  The Charterers disputed the termination and the Owners referred the dispute to arbitration under the rules of the London Maritime Arbitrators Association (LMAA).

An arbitral tribunal has been constituted but it does not have powers to grant interim injunctions under the LMAA rules. Accordingly, the Owners applied to the Court for urgent interim injunctions seeking to compel the Charterers to re-deliver the Vessels to the Owners immediately, or to take "all and any steps" to do so.

Decision

The Court's decision focussed on s44(3) of the Act, which provides: "If the case is one of urgency, the court may […] make such orders as it thinks necessary for the purpose of preserving evidence or assets."

The judge, Foxton J, began by noting that, although s44(3) limits the Court's powers to making orders "for the purpose of preserving evidence or assets", this does not mean the Court can only issue freezing orders or search orders.  He noted that previous cases have established that: (i) it is sufficient that the order is for the purpose of preserving evidence or assets (it does not itself need to be a preservation order); and (ii) "assets" include contractual rights.  It is possible therefore for the Court to grant an interim mandatory injunction to enforce a disputed contractual right.  However, Foxton J also noted that there is a tension between the Court exercising this power and giving effect to the principle that the parties' dispute should be resolved by arbitration and not the Court.

Foxton J then considered whether the requirement of "urgency" was met, and concluded that it was not.  He held that it was not sufficient that obtaining relief from the arbitral tribunal would involve some delay, during which time the Owners would be deprived of their alleged right to immediate redelivery of the Vessels and the Vessels would be exposed to risks.  In particular, Foxton J considered that a tribunal could deliver an award within six to eight weeks, in which time there was no significant risk of physical deterioration or damage to the Vessels.  He weighed this against the consequences of the proposed order, which would be that the Court would determine issues which the parties had intended to be resolved by an arbitral tribunal – namely, whether the Owners' right to redelivery of the Vessels had been engaged.  The injunctions sought would "effectively be final in nature", and would bring the sub-charters to an end, which could not be reversed if the arbitral tribunal reached a different decision in its final award.  Foxton J emphasised that "considerable caution" should be exercised in these circumstances before any s44(3) order is made.

Foxton J left open the possibility that, if the arbitral tribunal considers that a final determination will take significantly longer than six to eight weeks, the tribunal could give the Owners permission to apply to the Court for interim injunctions under s44(4), which applies where the urgency requirement is not met.  He noted that while this would still involve the Court effectively resolving the dispute, it would at least be with the tribunal's consent and a tribunal could also explain its reasons for granting permission, which would be of assistance to the Court in deciding whether to grant the relief.

Comment

This decision is another example of the English Court's pro-arbitration approach, demonstrating its reluctance to intervene in matters which are the subject of an arbitration agreement, particularly where the intervention would effectively be final in nature.  Parties seeking interim relief from the English Court in support of arbitration proceedings should carefully assess whether their case meets the high threshold of urgency under s44(3), or otherwise consider seeking permission from the arbitral tribunal to bring an application under s44(4).

Foxton J's comments also suggest that an application for specific performance of an ancillary obligation, which would leave the substantive dispute to be resolved by the arbitral tribunal, may have better chances of success.  Parties should therefore consider whether there is indirect relief of this kind that would be of assistance or whether it would be more effective to seek final relief from the arbitral tribunal on an expedited basis.

It is worth noting that while in the present case the LMAA rules did not permit the arbitral tribunal to grant interim injunctions, other institutional arbitration rules provide various options by which relief can be obtained directly from an arbitral tribunal on an expedited or interim basis (such as procedures for the appointment of an emergency arbitrator and express powers for the tribunal to grant interim injunctions).  Such institutional rules and their relationship to s44 orders will give rise to a different set of factors for the Court to consider, including the requirement under s44(5) that the Court shall only act if or to the extent that the arbitral tribunal has no power or "is unable for the time being to act effectively".

For more information, please contact Mike McClure KC, Partner, Joel Halliday, Senior Associate, Vanessa Naish, Professional Support Consultant, Liz Kantor, Professional Support Lawyer or your usual HSF contact.

The authors would like to thank Gloria Schiavo for her assistance in drafting this post.