English Commercial Court upholds comity in refusing anti-anti-arbitration injunction against Malaysian proceedings

The case context: a complex cross-border dispute

The case involved ongoing proceedings in the Malaysian High Court and arbitration under the London Maritime Arbitrators Association (LMAA). An application for an anti-anti-arbitration injunction was subsequently made before the English Commercial Court. This case highlights the discretion applied by the English Court in deciding whether to grant injunctions of this nature as well as the role of comity and delay in the English Court’s decision.

Factual background

The case before the English Commercial Court involved a complex dispute arising from the sub-bailment relationship relating to crude oil cargo which was stored on a vessel owned by the claimant (Euronav) docked at a Malaysian port. The defendant (BSP) brought a claim against Euronav before the Malaysian High Court which Euronav opposed on the basis that an unsigned addendum provided for a London-seated arbitration under the LMAA. Euronav subsequently commenced LMAA arbitration proceedings against BSP and argued that BSP had failed to abide by the arbitration agreement between the parties.

Euronav submitted an application before the Malaysian High Court to stay or strike out the proceedings. However, the Malaysian High Court held that in doing so, Euronav had voluntarily submitted to its jurisdiction, a substantive action in the proceedings. Subsequently, BSP was successful in obtaining an anti-arbitration injunction (AAI) from the Malaysian High Court, preventing Euronav from continuing its LMAA arbitration proceedings. Euronav appealed this decision and that appeal is pending.

Euronav then applied for an anti-anti-arbitration injunction before the English Commercial Court to set aside enforcement of the AAI awarded by the Malaysian High Court in favour of BSP. The English Commercial Court decided that even though there is a high degree of probability that the arbitration agreement is valid and binding, it would exercise discretion and not interfere in the proceedings which were already underway in the Malaysian High Court primarily due to the principle of comity between the two countries.

Legal threshold to be applied

The relief sought by Euronav is an anti-anti-arbitration injunction. The English Court considered the appropriate threshold test for applications of this nature. The American Cyanamid¹ approach of asking only whether there is a serious issue to be tried is not appropriate for injunctions of this nature due to the risk of parallel proceedings. In particular, the English Court noted that the effect of an injunction would essentially preclude BSP from litigating the claim in the Malaysian High Courts (where it has been ruled that both BSP and Euronav have submitted to its jurisdiction). The English Court said the following about the effect of the injunction sought:

‘It will permit both the Malaysian court proceedings and the London Arbitration to continue resulting in an entirely undesirable race to judgment, obvious risk of inconsistent decision making, needlessly complex and expensive enforcement issues and obvious duplication of work in two jurisdictions at enormous avoidable cost […].’²

The burden is on the applicant (Euronav) to prove to “a high degree of probability” that there is an arbitration agreement which governs the dispute. If the applicant is able to satisfy this requirement, then the Court will exercise its discretion to restrain the pursuit of proceedings which were brought in breach of an arbitration agreement, unless there are strong reasons put forward by the defendant to refuse the relief sought.³

At paragraph 28 of the judgment, the English Court said:

‘If an applicant cannot prove the existence (or breach) of an applicable arbitration (or exclusive jurisdiction) agreement to a high degree of probability […], then the court should not be contemplating making such an order.’⁴

In this case, the English Court assessed not only the unsigned addendum (which contained the arbitration agreement and terms), but also the conduct between the parties. The English Court held that there is a high probability that an arbitration agreement has been agreed. The English Court then went on to consider whether an injunction should be granted as a matter of discretion.

Applying discretion: the principle of comity and balancing international interests

The English Court applied its discretion in the circumstances of this case and determined that it ‘ought to refuse to consider whether to grant the injunction sought until after determination of the appeal by the Court of Appeal of Malaysia’ ⁵.

The grounds for the English Court’s dismissal of application are as follows⁶:

1. Comity: Granting this order would impact the comity between both jurisdictions ‘in a manner that is inappropriate’. The Malaysian High Court has already ruled on an order via the AAI decision which essentially prevents Euronav from proceeding with arbitration until the determination of the appeal (at the Malaysian High Court), in which case it has been determined that Euronav has voluntarily submitted to the jurisdiction of the Malaysian High Court.
2. Parallel proceedings: It would result in duplicative proceedings. ‘The effect of such an order will be to facilitate the conduct of duplicative proceedings in which Euronav hopes to obtain a favourable liability award before the Malaysian court has been able to adjudicate on the issues that arise in proceedings in respect of which Euronav has submitted to the jurisdiction of that court’.⁷
3. Vexatious and oppressive: The order ruled by the Malaysian High Court is binding on the parties unless it is overturned on appeal. The English Court held that it is ‘vexatious and oppressive’ for Euronav to seek orders from the English Court that will enable it to continue to pursue the arbitration at the same time. The English Court noted that if Euronav’s appeal succeeds before the Malaysian Courts, it may result in a different outcome in respect of its anti-anti-arbitration injunction. It would also be vexatious for BSP to be required to defend the arbitral proceedings whilst the Malaysian proceedings are ongoing.
4. Delay: If Euronav applied for an anti-suit injunction much sooner, it may have resulted in a different outcome. As it was, the Malaysian Courts were already heavily engaged in proceedings at the time of application.

Key takeaways

Discretion: This case shows the discretion applied by the English Courts in deciding whether to grant an anti-anti-arbitration injunction, even when it has determined that Euronav has a high probability of success of showing there is a valid and binding arbitration agreement which BSP has breached.

Comity: Central to the English Court's decision was the principle of comity, which emphasises respect for the legal processes and decisions of foreign jurisdictions. The English Court decided to not grant an anti-anti-arbitration injunction to set aside the AAI, it instead adjourned the case until after Euronav’s appeal is determined by the Malaysian Court of Appeal.

Delay: BSP had served its Statement of Claim at the Malaysian High Court on 16 October 2023 whereas Euronav submitted its application for an injunction at the English Commercial Court on 5 February 2024, with almost four months of delay. This case highlights delay as a factor which weighed in the discretion of the Court’s decision.