Out-Law / Your Daily Need-To-Know

No anti-suit injunction against arbitration-related proceedings in Germany

Out-Law News | 22 May 2023 | 4:37 pm | 2 min. read

A ruling by the Higher Regional Court of Hamm has confirmed for the first time in the context of arbitration-related proceedings, that legal proceedings already pursued in Germany cannot be stopped by a prohibition of legal action obtained abroad.

A German investor had obtained an arbitral award in an investment protection arbitration before an ICSID tribunal, which was made in its favour against an EU state and is now to be enforced in the US. In response, the state turned to the Regional Court at the seat of the investor and demanded that the enforcement of the arbitral award outside Europe be prohibited. The investor, in turn, used these proceedings as an opportunity to apply to a US court for the termination of the Essen proceedings by means of a so-called anti-suit injunction in order to be able to continue the enforcement.

In order to stop this, the plaintiff again applied for a so-called "anti-anti-suit injunction" in summary proceedings before the Essen Regional Court. This application demanded that the investor be prohibited from taking legal action against the Essen proceedings abroad outside the EU. In the first instance, the Regional Court of Essen rejected this request. In the second instance, after an oral hearing, the Higher Regional Court of Hamm has ruled in favour of the plaintiff state.

In its reasoning, the Higher Regional Court of Hamm said that the anti-anti-suit injunction can particularly be based on the right to access to justice, which is protected by the German Civil Code. The court found that the attempt to prevent the continuation of the pending proceedings at the Regional Court of Essen by means of judicial measures in the US constituted an infringement of the right to access to justice and, an infringement of Germany's judicial sovereignty.

It said that it was unacceptable to attemptto prevent a German court deciding the matter when the case had been brought to that court: The German court alone should decide without restriction on the admissibility, merits and all substantive issues relevant in this context. The urgency resulted from the attempt to prohibit the state from pursuing the proceedings in Germany by means of foreign legal remedies. According to the court, this is even the case if these proceedings were no longer pending, because there was in any case a risk of repetition. In fact, the investor had already withdrawn the proceedings in the US by the time the judgement was handed down in Hamm.

"The prohibition of such anti-suit injunctions, as now confirmed by the Higher Regional Court of Hamm, is not surprising," said Franziska Graf of Pinsent Masons. "German procedural law does not empower the judges to deprive a party of the right to conduct proceedings before a foreign court by means of anti-suit injunctions. On the one hand, this is because they could affect the jurisdiction and sovereignty of other courts, which jeopardises the right to effective legal protection. Secondly, within the EU, European law is often used as an argument against anti-suit injunctions.“

Alexander Shchavelev, a dispute resolution expert at Pinsent Masons, said: “Anti-suit injunctions contradict the principle of mutual trust within the system of the Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (recast) as well as the statutory provisions on jurisdiction, which grant equal expertise to each court in the EU. Other German courts have therefore also issued anti-anti-suit injunctions several times in the past, especially in patent disputes. This practice has now also been confirmed in the context of arbitration-related proceedings."

Anti-suit injunctions are court orders that prohibit someone from starting or continuing proceedings in another court or jurisdiction. Typically, this action is taken against the plaintiff in an ongoing lawsuit. The aim of an anti-suit injunction is to prevent the party from bringing parallel or concurrent proceedings in different jurisdictions. In the US in particular anti-suit injunctions are widespread. They are often used to prevent so-called ‘forum shopping’, where a party deliberately chooses a jurisdiction that seems more favourable to its position.

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