Originally published in BLG Marine, Energy and Trade notes, January 2008
International contracts often provide for claims to be resolved by London arbitration. There may, however, be advantages to a claimant if the claim is brought in another forum. In the case of cargo claims this is often before the court where the cargo was discharged and where the claimant is based.
It is a well established principle of English law that, where a claim is brought in contravention of a London arbitration clause, the defendant may obtain an English court anti-suit injunction restraining the claimant from bringing or maintaining proceedings elsewhere. If the claimant fails to comply with the injunction it will be in contempt of court with the consequence that its directors may be subject to arrest/fine and/or assets sequestered. The claimant may also be exposed to a claim for damages for breach of the arbitration clause.
The prospect of forcing a claimant to bring its claim in the agreed forum and of obtaining compliance with an anti-suit injunction may be increased if the injunction is obtained against insurers as well as the claimant. This is an increasing trend which is borne out by the recent decisions in the "ALEXANDROS T" and the "KALLANG".
Exercising Subrogated Rights
Where insurers are exercising subrogated rights, either in their own name, or in the name of the insured, they are bound by the contract terms. The court in the "ALEXANDROS T", therefore, injuncted the insurers from maintaining a subrogated claim in China in circumstances where the contract was subject to London arbitration.
Directing Or Controlling The Claim
A more difficult proposition is where insurers are not exercising subrogated rights but may be otherwise controlling or directing the claim. In the "KALLANG" the insurers were "calling the shots" in relation to the conduct of the claim and the court injuncted them on the basis that they had induced a breach of contract on the part of the claimant. It is obviously a question of evidence whether insurers are controlling or directing the claim. In practice, the involvement of insurers will often be unclear with the appointed solicitors or claim consultants not revealing their involvement. It may, therefore, be difficult to obtain an injunction against insurers in those circumstances.
Insurers should be aware that if they initiate or support a claim brought in a foreign court in breach of an arbitration agreement they may be the subject of an anti-suit injunction. If the foreign proceedings are not withdrawn, this can potentially result in the sequestration of assets or arrest of board directors.
If the foreign proceedings are withdrawn, any security already obtained may be lost and it may be difficult to obtain fresh security for the arbitration. However, in some cases the injunction has been conditional on the existing security being substituted with fresh security in the arbitration.
Therefore, before initiating or supporting foreign proceedings, insurers should give careful consideration to the risk that the defendant will be able to obtain an injunction against them as well as the insured.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
