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Anti-suits revisited: a welcome reminder of the applicable principles

Insights / / London

ZHD v. SQO (Precious Sky) [2021] EWHC 1262 (Comm)

In the latest in a series of shipping disputes involving anti-suit injunctions, the Court has once again granted an interim anti-suit injunction restraining a cargo claimant from continuing proceedings, this time in the Vietnamese courts, in breach of a London arbitration agreement in a bill of lading. The decision provides a welcome reminder of the applicable principles, particularly relating to delay, that the Court will consider in deciding whether to grant an injunction.

The background facts

The case concerned a cargo of corn carried on the Owners’ vessel under a bill of lading on the standard Congenbill 1994 form with the customary conditions of carriage on the reverse. Clause 1 of the conditions stipulated: "All terms and conditions, liberties and exceptions of the charterparty dated as overleaf, including the law and arbitration clause, are herewith incorporated." The bill of lading referred on its face to a sub-charter dated 18 April 2019 between O and M. This sub-charter provided for English law and London arbitration in accordance with the English Arbitration Act 1996.

On arrival at the Vietnamese discharge port in September 2019, issues with the cargo were identified by cargo surveyors and SQO, the notify party under the bill of lading, applied to the Vietnamese Court for the arrest of the Vessel. The Vessel was released on 11 October 2019, after the Owners procured the issuance of a bank guarantee as security for SQO’s claim.

The Vietnamese proceedings

The Owners were concerned that SQO might seek to issue substantive proceedings before the Vietnamese Court. As a pre-emptive measure they, therefore, submitted an ‘opinion’ to the Vietnamese Court on 30 October 2019, drawing the Court's attention to the likely existence of the London arbitration agreement and arguing that the Court should refuse to ‘enrol’ SQO’s statement of case or reject it if already enrolled.  As a matter of Vietnamese procedural law, ‘enrolling’ is to accept the claim without definitively accepting jurisdiction.

SQO in fact issued its statement of claim against the Owners on 20 August 2020, nearly a year later. The case was enrolled by the Vietnamese Court in November 2020 and served on the Owners in December 2020. The Owners immediately objected to the Vietnamese Court’s jurisdiction and were ordered by the Court to provide further information. Little had happened in the proceedings since then, save for the Owners applying for an extension of time to provide such evidence.  On 20 April 2021, the Owners provided the Vietnamese Court with an opinion setting out the text of the arbitration clause from the sub-charter.

Around the same time, Owners commenced London arbitration proceedings against SQO in respect of the dispute arising under the bill of lading and, on 29 April 2021, applied to the English Court for an anti-suit injunction.

The Commercial Court decision

In considering whether it should grant an anti-suit injunction, the Court had to be satisfied that, on a balance of probabilities, SQO had breached the agreement to arbitrate.

The three relevant questions were:

  1. Could the Owners show to a high degree of probability that there was an arbitration clause binding on SQO, of which SQO was in breach by pursuing the Vietnamese action?
  2. If so, had the application been made promptly and before the foreign proceedings are too far advanced? And
  3. Were there strong reasons not to grant the anti-suit injunction?

The answer to the first two questions was yes. Furthermore, there were no strong reasons not to grant the injunction.

As to (1), SQO was held to be bound by the English law and arbitration clause in the sub-charter as incorporated into the bill of lading. As the lawful holder of the bill of lading, and having taken delivery of the cargo and made a claim in respect of it, SQO was subject to the original contracting party's liabilities which included the obligation to resolve any disputes covered by the arbitration agreement by way of arbitration. Furthermore, the claim brought in Vietnam by reference to the bill of lading and to the Owners' carriage of the cargo under the bill of lading was covered by the wide wording of the London arbitration clause ("any dispute arising out of").

On (2), applications for injunctive relief must be made promptly, both in the interests of fairness to the respondent and in the interests of comity toward the overseas court. Although the Owners did not seek interim anti-suit injunctive relief immediately in December 2020 and instead chose to contest jurisdiction, they had not engaged in the proceedings on the merits. The four month delay in making the application was said to be of less importance than the extent to which the Vietnamese proceedings had progressed in that time. The granting of the injunction would lead to little waste of judicial resources in the Vietnamese Court and there was no prejudice to SQO as a result of the application then being made. As such, the delay would not be a reason to refuse injunctive relief.

As to (3), the Court found that the Vietnamese Court had not yet accepted jurisdiction but even if it had, this would not necessarily bar the injunctive relief. The Court also accepted that the Owners had not submitted to the Vietnamese Court’s jurisdiction. The most significant consideration was whether SQO could take a point on limitation on the basis that their claim in London arbitration would now be time-barred because of the one year Hague Rules time limit. However, the Court stated that the time bar was the product of SQO's own unreasonable decision not to commence arbitration proceedings in time. Further, even if the Owners had applied for the anti-suit injunction immediately after they were served with the Vietnamese proceedings in December 2020, SQO would still have been time-barred. Therefore, this was no reason not to grant the interim anti-suit injunction.

Comment

Although the general rule is that applications for injunctive relief must be made promptly, this case demonstrates that the significance of any delay will depend on all the circumstances of a particular case. Here the Court was willing to be more flexible in considering a delay in circumstances where the injunction would produce little interference with the Vietnamese proceedings and no unfair prejudice would be suffered by the respondent. These circumstances were perhaps unusual and the most prudent course of action for any shipowner faced with foreign proceedings brought in breach of a London arbitration agreement remains to apply promptly for an anti-suit injunction.

Paul Crane

Paul Crane Partner

Sophie Henniker-Major

Sophie Henniker-Major Managing Associate

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Injunctions / Cargo claims

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