Posted: 16/05/2024
The English courts have been busy recently resolving disputes about dispute resolution clauses. When parties have expressly agreed with each other how to determine a dispute, they expect the courts to uphold that agreement. But what happens when two contracts provide for two different dispute resolution processes? And if a party breaches a dispute resolution clause, when will the English courts grant an anti-suit injunction to restrain proceedings? This article considers the key principles under English law by reference to recent cases.
Parties in complex commercial relationships can often find that they have, unknowingly, agreed inconsistent dispute resolution procedures. This can be within a single document or between multiple contracts governing the relationship. The latter is a particular hazard in large-scale projects, finance agreements and re-insurance arrangements.
The English courts follow a well-trodden path when interpreting contracts. When considering competing jurisdiction clauses, however, some additional and specific doctrines apply. The first is the presumption in favour of ‘one-stop’ adjudication, arising from the House of Lords decision in Fiona Trust v Privalov [2007]. Where there are inconsistent dispute resolution clauses, the courts will presume that the parties intended their disputes to be decided by the same court or tribunal, unless clear language indicates otherwise. This is principally because (as some unlucky litigants know!) parallel disputes in different countries and courts cause major problems not least in terms of time, complexity, and cost.
The second doctrine applies where the parties have agreed to different dispute resolution procedures in entirely different (but related) contracts. While the ‘one stop’ presumption may still apply, the courts will also consider what the ‘centre of gravity’ of the dispute is. The court will try to ascertain the parties’ objective intentions from the words used and the context. It will then look at the nature of the dispute and its provenance and determine which dispute resolution clause is likely to apply.
In Tyson International Company Ltd v Partner Reinsurance Europe SE [2024] EWCA Civ 363, the Court of Appeal considered competing jurisdiction clauses in two contracts entered into within eight days of each other. The first contract contained a clause providing for the exclusive jurisdiction of the English courts and English law, the second for arbitration in New York and New York law.
In this instance, the court could not apply either of the jurisdictional ‘doctrines’. The clauses were ‘pathological’ in the sense that both contracts covered precisely the same legal relationship. The question for the court was whether one supplanted the other and, consequently, whether an anti-suit injunction should be granted to restrain Partner Re’s arbitration in New York, or whether a mandatory stay of Tyson’s claim in England should be granted in favour of the arbitration.
Tyson Foods, an insurer, and Partner Re, a reinsurer, entered into a ‘Market Reform Contract’ (MRC) governed by English law and jurisdiction. Eight days later, at Tyson’s request, Partner Re issued a ‘Market Uniform Reinsurance Agreement’ (MURA), governed by New York law and providing for arbitration in New York. The MURA covered the same risks as the MRC. Following a fire, Tyson brought proceedings in England, and the next day Partner Re commenced arbitration in New York. Although the MURA was entered into later in time, Tyson argued it was issued for administrative purposes and did not supersede the underlying MRC and its dispute resolution clause.
At first instance, the court held that however ‘unlikely or unusual’ it was for the parties to replace one agreement with another within a week, there was nothing to prohibit them doing so and no ‘commercial absurdity’. The court determined that the MURA was intended to – and did – replace the MRC.
The Court of Appeal agreed. It undertook an objective assessment of the parties’ relationship and representations and decided that the intention was for the MURA to supersede the MRC as the operative agreement, rather than a document issued for mere administrative purposes. There was otherwise no business sense or purpose in the subsequent agreement.
A number of factors weighed in Partner Re’s favour, including the following:
In light of the court’s conclusion, Tyson’s application for an injunction to restrain Partner Re from pursuing the New York arbitration did not arise and its claim continued to be stayed under s9 Arbitration Act 1996.
While Partner Re’s application for a stay of Tyson’s claim was issued in May 2023, Tyson’s application for an anti-suit injunction was not issued until November, some six months’ later. At first instance, the court observed that even if it had found in favour of Tyson on the substantive issue, it would not have granted an anti-suit injunction because of this delay.
However, on appeal, the court disagreed. It held that any difficulty caused by the delay was substantially outweighed by the adverse consequence of allowing both the English proceedings and the New York arbitration to proceed concurrently. This would have led to a race to judgment, a real risk of conflicting (and potentially unenforceable) decisions, and the ‘worst of all worlds’. While not required to decide the point, it seems clear that the Court of Appeal would have been prepared to grant an anti-suit injunction restraining the New York arbitration had it been necessary, notwithstanding the delay in applying.
The English courts’ willingness to grant anti-suit injunctions has been further reinforced recently by the Supreme Court’s decision in UniCredit Bank GmbH v RusChemAlliance LLC. RusChemAlliance (RCA) brought proceedings against UniCredit Bank GmbH in the Russian courts seeking recovery of €448 million under bonds issued by UniCredit. The bonds each included a clause stating that: ‘This Bond and all non-contractual or other obligations arising out of or in connection with it shall be construed under and governed by English law’. They also included a clause stating that disputes are to be resolved by an International Chamber of Commerce arbitration seated in Paris.
UniCredit subsequently brought an anti-suit application in England on the basis of the choice of English law within the bonds (and because anti-suit injunctions are not available in France). The High Court initially granted UniCredit an interim injunction restraining the Russian arbitration but following trial, it declared that it had no jurisdiction to hear the claim on the grounds that:
The Court of Appeal reversed that decision and granted an injunction requiring RCA to discontinue the Russian proceedings. It held that the arbitration agreements were governed by English law and that England was the proper place for the claim because of the real risk that justice (in the form of an anti-suit injunction) would be unobtainable in France.
Whilst the Supreme Court has not yet handed down its judgment, in view of the urgency of the point, Lord Reed recently announced the court’s decision to dismiss the appeal by RCA. This is a significant decision confirming that parties can – in some circumstances – obtain anti-suit relief from the English courts to uphold arbitration agreements, even where the seat of the arbitration is elsewhere.
Outside the sphere of arbitration, the courts have also recently granted anti-suit injunctions against EU member states, an action prohibited pre-Brexit. In Ebury Partners Belgium NV/SA v Grossiste Francochine SarL [2023] EWHC 3396, the court granted an injunction restraining proceedings in France, notwithstanding evidence that under French law, an exclusive jurisdiction clause in favour of the English courts might not have been upheld.
The court emphasised that the English courts will always seek to uphold the parties’ choice of law and that ‘the existence of mandatory provisions of foreign law, applicable in the foreign court and which override the contractual choice of jurisdiction, is not a strong reason to refuse an anti-suit injunction’.
These recent decisions demonstrate that the English courts will enforce clearly worded dispute resolution clauses both by permitting proceedings in the courts of England and Wales and restraining proceedings elsewhere. They are also, however, a stark reminder of the importance of clear and careful drafting.
Where multiple documents govern a contractual relationship, it is crucial to specify which terms take precedence and to carefully document any amendments, including (where possible) documenting the rationale for the departure from the first contract.
The decision in Tyson also raises an interesting point in relation to a party’s delay in bringing an anti-suit application – whilst this type of application must be brought promptly, the court may consider the overarching consequences of dismissing an application for delay alone. Whilst delay is a significant factor, it is not in itself determinative.
All three cases above provide useful analysis as to the court’s approach to competing jurisdictions and the availability of anti-suit injunctions in England – a factor which may sway parties towards including an English law and forum clause in contracts going forward.
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