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Anti-enforcement injunctions in international arbitration

Posted on 27 February 2019

Anti-enforcement injunctions in international arbitration

Anti-suit injunctions are often issued by some national courts in order to restrain a party to an arbitration agreement from pursuing in another forum a claim which should be brought in arbitration. On rare occasions those courts also issue anti-enforcement injunctions which prevent a party from enforcing a court judgment which has been obtained in breach of an arbitration agreement. An application for such an injunction has recently been considered by the Court of Appeal in Singapore.

Facts

Sun Travels & Tours Pvt Ltd v Hilton International Manage (Maldives) Pvt Ltd [2019] SGCA 10 concerned the Iru Fushi Beach & Spa Resort, a five-star hotel in the Maldives. Sun was the owner of the hotel and Hilton managed it between 2009 and 2013. Sun became dissatisfied with the operating profit of the hotel, which was substantially below Hilton's projections, so it terminated the management agreement with Hilton. Hilton said that the termination was a breach of contract and started arbitration in Singapore. The arbitral tribunal agreed with Hilton and in May 2015 awarded it over US$ 21 million in damages.

Hilton tried to enforce the award against Sun in the Maldives. Sun resisted enforcement, and at the same time started an action in the Maldives courts for breach of the management agreement by Hilton. Hilton objected to that action because the arbitral tribunal had already considered the arguments put forward by Sun as part of the arbitration in Singapore. Nonetheless, the Maldivian judge proceeded to find in favour of Sun and awarded almost US$ 17 million in damages. Shortly after, the Maldivian courts also refused enforcement of the arbitration award.

Hilton filed an appeal in the Maldives, and in July 2017 it applied to the Singapore High Court (being the court at the seat of the arbitration) for an injunction restraining Sun from enforcing the Maldivian judgment. The Singapore High Court granted that injunction and also issued declarations about the binding nature of the arbitration award and the jurisdiction of the arbitral tribunal to hear disputes arising from the management agreement. Sun appealed to the Singapore Court of Appeal.  

Anti-suit injunctions and delay

The Court of Appeal reviewed the authorities concerning anti-suit injunctions and noted that the approach to such injunctions in both Singapore and England has evolved over time. It would now be normal to grant such relief where there is an arbitration agreement or an exclusive jurisdiction clause unless there were strong reasons not to and provided that the application had been made promptly. The latter point (applying promptly) was particularly significant in the present case and the Court of Appeal considered it in some detail.

Anti-suit injunctions are a form of equitable relief so it is important for the court to consider all the circumstances. Passage of time can operate as a bar to an anti-suit injunction, but not by itself.  It would need to be coupled with knowledge on the part of the applicant (meaning the application for the injunction could have been made earlier) and/or prejudice or detriment to another party. That would include not only a party to the proceedings, but also a third party; and a foreign court can be a relevant third party for these purposes.

Even though an anti-suit injunction is addressed to a party and not to a foreign court, it does interfere with the foreign court proceedings. The longer the delay in the application for the anti-suit injunction, the further the foreign court proceedings will have advanced; and if an anti-suit injunction is then granted, it may mean that a considerable amount of the foreign court's resources (both time and money) will have been wasted. This would be a detriment to the foreign court and may therefore be a reason for not granting an anti-suit injunction.

Anti-enforcement injunctions

An anti-enforcement injunction is a type of anti-suit injunction. This is a situation where the foreign court proceedings have gone all the way through to a final judgment, and the losing party seeks to restrain the winning party from taking action to enforce the judgment. The Court of Appeal recognised that, while such injunctions are rare, there can be some exceptional circumstances where they would be granted. The English courts have granted an anti-enforcement injunction where a foreign court judgment has been obtained through fraud.  Another example where an anti-enforcement injunction may be enforced is where the defendant has had no notice of the court proceedings until after the judgment had been issued, and so could not have applied for an injunction earlier.

But the Court of Appeal recognised that the same principles apply here as to anti-suit injunctions as a whole; and the need for a prompt application in all the circumstances is particularly important. Otherwise, a party might wait to see what the outcome of the foreign court proceedings is before taking any action: if the result is favourable to that party, it would allow the judgment to stand; if the result is unfavourable, it would then apply for the anti-suit injunction (as well as appealing the judgment within the foreign court system). This could not be permitted.

Decision

The Court of Appeal overturned the anti-enforcement injunction because Hilton could have applied for the injunction at an earlier stage. Hilton had chosen not to, and instead had allowed the Maldivian court action to proceed. It was only after the Maldivian court judgment had been handed down that Hilton applied for an injunction in Singapore. This was reason enough to deny Hilton an injunction.

The Court of Appeal agreed, however, that the action in the Maldivian courts had been a breach of the arbitration agreement, and that the arbitral tribunal had already ruled on Sun's claims as part of their award. The Court of Appeal therefore upheld the High Court's declarations about the arbitration award. It did so because Hilton could then rely on those declarations in the appeal before the High Court of the Maldives.

Comment

Anti-suit injunctions are a significant feature of international arbitration in some countries, and may become even more important in England post-Brexit when the prohibition on anti-suit injunctions involving EU countries is likely to be lifted. The Singapore Court of Appeal's review of the authorities relating to anti-suit injunctions is useful, therefore.

More importantly perhaps, this is a rare example of an application for an anti-enforcement injunction and, although this particular application was unsuccessful, the Singapore Court of Appeal has provided important guidance on when such applications might succeed. The circumstances for a successful application would need to be exceptional and are likely to involve fraud or lack of notice of the relevant court proceedings.

This means that in most cases if a party is notified of a claim being brought in a national court after an arbitral tribunal has already ruled on the dispute, it should not wait for the court to give judgment, even if it has protested that the court has no jurisdiction, but should immediately apply for an injunction at the court of the seat of the arbitration (if the seat is in a country such as Singapore or England where anti-suit injunctions are made). Failing to do so may mean it loses its opportunity to obtain such relief.

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