Comity Central: English Commercial Court emphasises importance of comity in refusing to grant anti-suit injunction restraining Malaysian proceedings

In Euronav Shipping NV v Black Swan Petroleum DMCC [2024] EWHC 986 (Comm), the English Commercial Court (the Commercial Court) refused an anti-suit injunction application brought by Euronav Shipping NV (Euronav) to restrain the enforcement of a Malaysian anti-arbitration injunction (the AAI) obtained by Black Swan Petroleum DMCC (BSP).

In exercise of the Commercial Court's discretion, Euronav's application was refused, even though Euronav proved that there was a high probability that an arbitration clause existed that had been breached by BSP. The Commercial Court emphasised how the anti-suit injunction sought would impact the comity between the English and Malaysian courts, in view of a determination by the Malaysian High Court that Euronav had submitted to its jurisdiction.

Background

The dispute between Euronav and BSP arose in connection with a storage agreement between Euronav and Silk Straits SDN BHD (Silk Straits) (the Storage Agreement). Pursuant to the Storage Agreement, storage tanks in a tanker owned by Euronav (the Vessel) were made available to Silk Straits for the storage of crude oil or fuel. The Storage Agreement prohibited, amongst other things, the storage of cargo subject to US sanctions, and gave Euronav an immediate termination right should Silk Straits commit an irremediable breach of any of its terms. The Vessel was anchored in Malaysian waters.

After concluding the Storage Agreement, Silk Straits entered into a separate agreement with BSP (the BSP Agreement), under which BSP could store crude oil or fuel in the Vessel's storage tanks allocated to Silk Straits under the Storage Agreement. BSP subsequently transferred a cargo of crude oil (the Cargo) onto the Vessel.

Euronav subsequently surrendered the Cargo to the US Department of Justice after it was served with a seizure warrant, and terminated the Storage Agreement on the basis that the Cargo constituted sanctioned cargo.

The Malaysian Proceedings and the Arbitration

As a result, BSP started proceedings against Euronav in the Malaysian High Court (the Malaysian Proceedings), alleging that Euronav, as sub-bailee of the Cargo, unlawfully converted the Cargo by surrendering possession. Subsequently, Euronav began arbitration proceedings under the London Maritime Arbitrators Association (LMAA) against BSP (the Arbitration), arguing that BSP breached the terms of the sub-bailment. Euronav relied on a London-seated arbitration agreement it said had been incorporated into the Storage Agreement, and to which it said BSP had consented to be bound.

Pointing to the Arbitration, Euronav applied to the Malaysian High Court to stay or strike out the Malaysian Proceedings. However, this was refused. Significantly, the Malaysian High Court concluded that Euronav's strike out application constituted a step in the Malaysian Proceedings, meaning Euronav had submitted to the Malaysian High Court's jurisdiction. Although Euronav filed to appeal this decision, BSP then successfully obtained an anti-arbitration injunction (the AAI) from the Malaysian High Court, restraining Euronav from continuing the Arbitration until its appeal was determined by the Malaysian Court of Appeal.

The Commercial Court's approach

Euronav turned to the English Commercial Court, applying for an anti-suit injunction restraining BSP from enforcing the AAI and requiring BSP to seek to set the AAI aside. Euronav argued that the AAI was sought in breach of an arbitration agreement between Euronav and BSP. In the alternative, Euronav argued that the anti-suit injunction should be granted because BSP's pursuit of the AAI was vexatious and oppressive.

Contractual anti-suit injunctions and the "high degree of probability" test

The Commercial Court began by reaffirming that applicants for contractual anti-suit injunctions must prove to a "high degree of probability" the existence of a binding arbitration agreement governing their dispute. In such circumstances, an anti-suit injunction will ordinarily be granted to restrain proceedings in breach of the arbitration agreement "unless the defendant can prove strong reasons to refuse the relief sought".

The Commercial Court held that Euronav had satisfied the high degree of probability test, as there was a high probability that Euronav would persuade the tribunal in the Arbitration that: (i) an arbitration agreement had been validly incorporated by Euronav and Silk Straits into the Storage Agreement, and (ii) the bailment relationship between Euronav and BSP was governed by the Storage Agreement as varied.

The Commercial Court held it was sufficiently likely that Euronav and Silk Straits had concluded an addendum to the Storage Agreement providing for disputes to be resolved exclusively through LMAA arbitration. Although the addendum was never signed, the Commercial Court accepted that the correspondence between Euronav and Silk Straits evidenced a strong probability that the addendum had become binding through their conduct.

Additionally, the circumstances meant the tribunal in the Arbitration was highly likely to regard BSP as having impliedly consented to Euronav holding the Cargo on the terms of the Storage Agreement, together with its arbitration agreement.

Breach of arbitration agreement

Assuming that Euronav and BSP were bound by the arbitration agreement, the Commercial Court held that BSP's AAI application constituted a breach. Straightforwardly, the AAI "prevent[ed] compliance by Euronav with the directions given by the arbitrators". In the absence of arguments from BSP that Euronav had waived, repudiated, or become estopped from exercising its right to rely on the arbitration agreement, the Commercial Court could not regard the Malaysian High Court's determination that Euronav had submitted to its jurisdiction as changing the position.

Refusal of anti-suit injunction through exercise of discretion

Crucially however, the Commercial Court exercised its discretion to refuse the anti-suit injunction sought by Euronav until after a ruling from the Malaysian Court of Appeal on Euronav's attempt to stay or strike out the Malaysian Proceedings. The Commercial Court outlined five reasons for its decision:

• First, the anti-suit injunction would inappropriately impact the comity between the English and Malaysian courts, a matter which the Commercial Court emphasised was "to be determined objectively by reference to the effect of the order sought from the English court". The Malaysian High Court's finding that Euronav had submitted to its jurisdiction meant that comity considerations were meaningfully engaged – this was not a case involving a mere "ritual incantation… of the doctrine of comity" (quoting Credit Suisse First Boston (Europe) v MLC (Bermuda) [1999] 1 Lloyds Rep 767). The AAI application was "necessary to protect or give full effect to the Malaysian High Court's conclusion".
• Second, the anti-suit injunction would result in duplicative proceedings. Euronav would seek an award from the Arbitration before the Malaysian Proceedings were decided, potentially leading to inconsistent decisions and enforcement issues.
• Third, the Commercial Court considered that it was Euronav's anti-suit injunction application that was vexatious and oppressive, as opposed to BSP's AAI application. The Malaysian High Court's determination that Euronav had submitted to its jurisdiction was binding unless overturned, and the anti-suit injunction would allow the Arbitration to proceed "at the same time and in relation to the same issues" as the Malaysian Proceedings.
• Fourthly, BSP was entitled to protect the Malaysian High Court's jurisdiction through the AAI and to otherwise rely on the progression of the Malaysian Proceedings, in light of Euronav's submission to jurisdiction.
• Finally, Euronav's anti-suit injunction application was delayed, having been submitted two days before the AAI application was heard before the Malaysian High Court, and over a month after BSP had submitted it. As a result of this delay, the Malaysian courts were "heavily engaged in the proceedings there both at first instance and appellate level".

The Commercial Court ordered that Euronav's anti-suit injunction application be adjourned pending the outcome of Euronav's appeal to the Malaysian Court of Appeal. The Commercial Court accepted that it may be appropriate to exercise its discretion differently should the Malaysian Court of Appeal decide that Euronav had not submitted to the Malaysian High Court's jurisdiction.

Comment

The Commercial Court's judgment highlights how comity considerations can be a decisive factor against the grant of an anti-suit injunction, even where the respondent is found to be in breach of an arbitration agreement.

Significant weight was placed in this case on the foreign court's determination that the anti-suit injunction applicant had submitted to the foreign court's jurisdiction. Parties facing foreign court proceedings in breach of arbitration agreements should carefully consider, with appropriate local law advice, how to avoid being held to have taken a substantive step in such proceedings. The judgment is also a reminder that delay is another discretionary factor which can harm the prospects of an anti-suit injunction application.

More generally, the judgment is a useful illustration of how the English courts apply the "high degree of probability" test. In the appropriate case, an English court will be prepared to find it highly probable that the parties have become bound to an arbitration agreement by conduct, notwithstanding the absence of signed documentation.

 

The authors would like to thank Wajih Jaroudi for his assistance in preparing this blog post.