Out-Law News | 15 Aug 2017 | 11:48 am | 7 min. read
The Singapore courts’ application of anti-suit injunctions in this context is a relatively recent development, but is now well established.
Taking steps to stop, or prevent, the breach of arbitration agreements is of course consistent with both the Singapore courts’ well-established reputation for giving primacy to and upholding arbitration agreements, and Singapore’s reputation as an international arbitration hub. However, some commentators have suggested that while it is clear the Singapore courts have the power to issue anti-suit injunctions in this context on an interim basis, they may not have the power to issue permanent anti-suit injunctions. Others continue to question the legitimacy of anti-suit injunctions which restrain foreign court proceedings more generally.
While the latest case is unlikely to silence all detractors, it helpfully provides further confirmation and clarity regarding the Singapore courts’ position that they have the power to grant both interim and permanent anti-suit injunctions to restrain foreign court proceedings brought in breach of arbitration agreements, and the source of that power.
Here, we consider the sources of the Singapore courts’ power to grant anti-suit injunctions under Singapore law where there is an arbitration agreement in the light of the BC Andaman v Xie Ning case. We also consider some of the arguments against their application.
Anti-suit injunctions: the basics
A valid arbitration agreement imposes a contractual obligation on the parties to arbitrate disputes in respect of matters governed by the agreement; and, in turn, to refrain from commencing proceedings in any other forum.
When a party breaches that agreement by commencing foreign court proceedings, a court or tribunal may grant an anti-suit injunction to prevent the party from commencing or continuing those proceedings. An interim injunction – usually sought where there is great urgency – is, of course, temporary and subject to final determination by the court or tribunal. A permanent injunction is final.
Whether interim or permanent, an anti-suit injunction in this context does not restrain the foreign court from hearing the proceedings. Rather, it restrains the party pursuing the foreign court proceedings from doing so, or continuing to do so.
The test for granting an anti-suit injunction
The BC Andaman case confirms that the test applied to the granting of anti-suit injunctions, whether interim or permanent, differs from the test applicable to interim injunctions generally.
The court will consider various factors, including:
However, the courts will generally grant an anti-suit injunction to restrain a party from pursing foreign court proceedings if it can be established that doing so is in breach of a valid arbitration agreement. In the 2013 Maldives Airport v GMR Male International Airport case, the Singapore Court of Appeal followed the approach previously taken by the English Court of Appeal. It ruled that an injunction to restrain foreign court proceedings is justified “on the clear and simple ground that the defendant has promised not to bring them”.
Source of the Singapore courts’ power to grant anti-suit injunctions
The Singapore High Court first granted an interim anti-suit injunction to prevent the breach of an arbitration agreement in 2002. However, it was not until the Maldives Airport case in 2013 that the Singapore courts considered the granting of a permanent anti-suit injunction in this context.
The Court of Appeal in the Maldives Airport case gave a clear nod to the practice. Chief Justice Menon noted that the right to resolve disputes under an arbitration agreement could “rightfully be protected by way of an anti-suit injunction, whether on a final or an interim basis”.
The Court of Appeal finally granted a permanent anti-suit injunction in 2014, restraining Swiss court proceedings on the basis that the parties had an agreement to arbitrate in Singapore. The court did not address the existence and source of its power to grant a permanent anti-suit injunction in its judgment in the case. However, these issues had been considered in the decision at first instance, albeit on an ‘obiter’ basis.
In the High Court below, Mrs Justice Prakash, as she then was, noted that the court has the power to grant a permanent anti-suit injunction to prevent a breach of an arbitration agreement and that this power emanated from section 4(10) of the Civil Law Act. She also noted that clear words would be needed to abrogate this general power, and that the International Arbitration Act does not contain such language.
In the BC Andaman case, Mr Justice Loh noted the “well-established” principles governing the granting of permanent anti-suit injunctions and their statutory recognition. He cited section 4(10) of the Civil Law Act, as Mrs Justice Prakash had done, but also relied on the court’s inherent jurisdiction as per paragraph 14 of the First Schedule of the Supreme Court of Judicature Act. This states that the High Court has the power to “grant all reliefs and remedies at law and in equity, including damages in addition to, or in substitution for, an injunction or specific performance”.
This is a helpful clarification, as reliance on the Civil Law Act alone is potentially problematic given that it appears on its face to be limited to the court’s power to grant interim, or interlocutory, rather than permanent injunctions.
Arguments against validity of anti-suit injunctions
International Arbitration Act
The Singapore courts have previously recognised the International Arbitration Act as expressly granting it the power to grant interim anti-suit injunctions, but not permanent anti-suit injunctions. See, for example, Mrs Justice Prakash’s comments in the R1 International Pte Ltd v Lonstroff AG case.
In turn, it has been suggested that article 5 of the Model Law, which under section 3(1) of the International Arbitration Act, has the force of law, precludes the courts from granting permanent anti-suit injunctions given the absence of an express power to do so. It provides that “in matters governed by this law, no court shall intervene except where so provided in this law”. However, as above, the Singapore courts have identified a different legislative source of their power to grant permanent anti-suit injunctions which does not rely on the International Arbitration Act.
Further, this objection assumes that the Model Law exhaustively governs all matters relating to the enforcement of arbitration agreements, and that this must therefore include permanent anti-suit injunctions. However, records of negotiations about the Model Law suggests that this is not the case, indicating that the Model Law does not govern all enforcement-related matters – including, for example, the impact of state immunity and the parties’ capacity to conclude an arbitration agreement.
The ‘kompetenz-kompetenz’ principle refers to the power of a court or tribunal to rule on its own jurisdiction. Another argument against the court’s power to grant a permanent anti-suit injunction arises in the specific scenario where the injunction is sought before the tribunal decides on its jurisdiction, thus offending this principle.
However, this is an academic argument given, if the anti-suit injunction is granted, the tribunal would still have the opportunity to rule on its jurisdiction. On the other hand, if the anti-suit injunction was not granted in these circumstances and the foreign court accepted jurisdiction, this would arguably represent a far more serious breach of the principle given that the foreign court would effectively be deciding that the arbitration agreement does not apply and the arbitral tribunal should not have jurisdiction.
New York Convention
A related argument arises under Article II of the New York Convention, which obliges courts of signatory countries to stay court proceedings brought in breach of arbitration agreements. If an anti-suit injunction deprives the foreign court of this opportunity, this arguably offends the New York Convention.
However, as the Singapore High Court noted in the WSG Nimbus case in 2001, the New York Convention “obliges state parties to uphold arbitration agreements and awards”. Anti-suit injunctions to restrain foreign court proceedings commenced in breach of arbitration agreements are, in principle, entirely consistent with this objective. Further, the practical reality is that not all signatories fully honour their obligations under the New York Convention.
The alternative would arguably represent a far more serious breach of the New York Convention: that is, if an anti-suit injunction is not granted on this basis and the foreign court accepts jurisdiction but does not then stay the court proceedings.
Arguments to resist anti-suit injunctions, whether interim or permanent, on the grounds of international comity are probably as old as the remedy itself. However, it is well established under English law that any affront to comity is minimal where an anti-suit injunction is sought to enforce a party’s contractual agreement to arbitrate, and there has been no departure from this under Singapore law.
The Singapore Court of Appeal approved the 1995 findings of the English Court of Appeal in the leading case, Angelic Grace, in the Maldives Airport case cited above. The judge in Angelic Grace said that he could not accept “the proposition that any court would be offended by the grant of an injunction to restrain a party from invoking a jurisdiction which he had promised not to invoke and which it was its own duty to decline”.
The Singapore legislation, New York Convention and these legal doctrines do leave some, limited room for arguments that the Singapore courts do not have the power to grant anti-suit injunctions, particularly permanent anti-suit injunctions. However, although no doubt of interest to legal commentators, these arguments are unlikely to be of any practical application before the Singapore courts when considered in the full context of the Singapore legislation and the New York Convention.
Sean Hardy and Raman Kaur are international arbitration experts at Pinsent Masons MPillay, the Singapore joint law venture partner of Pinsent Masons, the law firm behind Out-Law.com.