High Court refuses to grant anti-suit injunction to stop pre-emptive application under New York Convention challenging recognition and enforceability of arbitral award

Background

Star Hydro is a Pakistani hydropower company and NTDC is a Pakistani government-owned power transmitter. Star Hydro commenced LCIA arbitration against NTDC when it curtailed power from the hydropower project and refused to pay the contractual tariff under the parties’ Power Purchase Agreement. Star Hydro was successful, and an award was rendered in May 2024.

NTDC then applied to the Pakistani courts under the Convention for partial recognition of the arbitral award and a declaration of non-enforceability of part of the award under Article V. Unusually, it did so before Star Hydro tried to seek recognition or enforcement of the award in Pakistan or any other Convention member state.

Star Hydro applied for an ASI in the English High Court. It argued that NTDC’s application under the Convention was in fact an attempt to challenge the substance of the LCIA award and that consequently it should have been brought to the English courts since the arbitration was under English procedural law and the English courts had supervisory jurisdiction. Star Hydro also opposed the Defendant’s entitlement pre-emptively to challenge the award under the Convention before the winning party exercised its own right to seek recognition or enforcement.

Decision

The application was refused with the High Court deciding in favour of NTDC.

The power to grant an ASI is found in section 37(1) of the Senior Courts Act 1981. It is a discretionary remedy. The Angelic Grace test provides that the English court will grant an ASI if the claimant demonstrates with a high degree of probability the existence of an arbitration agreement to which the defendant is a party, which covers the dispute and there are no exceptional circumstances which mean relief should not be granted.

The judge considered three issues:

(I) The allocation of jurisdiction under the Convention

(II) The substance of NTDC’s application in Pakistan

(III) Whether it was in any event appropriate for the English courts to intervene

Jurisdiction

The Court found that contracting parties to the Convention have agreed that, so long as the award falls within the scope of the Convention and none of the grounds for non-recognition or enforcement are met, an award made in one contracting state can and must be recognised and enforced in another. Those contracting states have undertaken a binding obligation to recognise and enforce awards made in accordance with the Convention when they are asked to do so. The English courts do not have a policing role in this exercise.

The judge also noted that just as the winning party to an arbitral award is not bound to seek enforcement or recognition, so the losing party is not bound to bring any jurisdictional or other challenge in the courts of the arbitral seat. It can wait until the winning party seeks recognition and enforcement and then resist under Article V of the Convention – which is a substantive right.

Following that reasoning, the Court further found that there was nothing in the Convention to preclude a losing party making a pre-emptive application. Consequently, if a losing party wishes to challenge recognition and enforcement of an award in a particular jurisdiction in advance of the winning party exercising its own right, it is permitted to do so.

Substance of the application

Star Hydro argued that the application had nothing to do with recognition and enforcement but instead was concerned with challenging the award itself. The court disagreed. Article V of the Convention provides for challenges at the recognition and enforcement stage on permitted grounds, including lack of jurisdiction, public policy concerns and non-arbitrability. Consequently, the substance of the application was a matter for the Pakistan courts. It would be wrong for the English courts to intervene applying principles of comity.

ASI appropriate in any event?

In light of the findings on jurisdiction and substance, the judge concluded that NTDC’s conduct was not vexatious or oppressive and that there was no basis on which to grant an ASI.

Key Takeaways

This short judgment is interesting as it:

- demonstrates the limits of ASIs in restraining foreign proceedings where they relate to the recognition and enforcement of awards; and

- highlights a potential route for challenging awards outside of the courts of the seat and before the winning party has taken any steps to have the award recognised and enforced.

Other takeaways:

• The judgment underscores the standard under the Convention that a party is entitled to have an award made in one contracting state recognised and enforced in any other contracting state, and similarly reaffirmed that it is permissible to seek recognition and/or enforcement of only part of an award.
• The losing party to an arbitral award is under no obligation to only challenge its recognition or enforcement under the Convention in the jurisdiction where the arbitration was heard.
• A pre-emptive application against recognition or enforcement of an arbitral award is permissible and is not improper in and of itself. A losing party to arbitral proceedings need not wait for the winning party to first seek enforcement or recognition before it can bring its own challenge.
• Article V grounds are a legitimate basis for a pre-emptive challenge to recognition or enforcement.
• The merits of that challenge are a matter for the courts in which recognition is sought to decide applying principles of comity and English courts will be wary of crossing jurisdictional boundaries.

The decision has been appealed with a hearing expected in April 2025.

With thanks to Koyin Onakomaiya for her assistance in preparing this article.