Litigation - United Kingdom

In Standard Bank plc v Agrinvest International Inc [2007] EWHC 2595 the Commercial Court considered the approach and principles to be followed in determining whether an anti-suit injunction should be granted, and the construction of an exclusive jurisdiction clause.

Background

An anti-suit injunction restrains a party from commencing or continuing with proceedings in a foreign court. The court's power to order an anti-suit injunction derives from Section 37(1) of the Supreme Court Act 1981. The court may grant an injunction "in all cases where it appears to the court to be just and convenient to do so". The jurisdiction to grant an anti-suit injunction is to be exercised where the "ends of justice" require it.

Anti-suit injunctions are justified on the basis that they do not constitute a restriction on the jurisdiction of the foreign court, but merely restrict the ability of the defendant to avail itself of that jurisdiction. However, as anti-suit injunctions clearly interfere indirectly with the proceedings before the foreign court, they are usually granted only where (i) the defendant has commenced proceedings in another jurisdiction for the purpose of obstructing proceedings in England, and (ii) the defendant's conduct is unconscionable or vexatious and oppressive.

The principles to be applied in granting anti-suit injunctions were reviewed in Société Nationale Industrielle Aerospatiale (SNIA) v Lee Kui Jak [1987] AC 871 PC and summarized in Trafigura Beheer BV v Kookmin Bank Co [2005] EWHC 2350 (Comm) as follows:

The court will grant an injunction where the pursuit of the foreign proceedings is unconscionable. The injunction is a personal remedy for the wrongful conduct of another party - a fault-based remedial concept in respect of conduct which the court may describe as vexatious or oppressive, but deriving from "the basic principle of justice". 

The court will readily grant an injunction to restrain proceedings brought in breach of an exclusive jurisdiction clause, save in circumstances where the Brussels Regulation applies.  

In the absence of an agreement on the exclusive jurisdiction of the English court (or some other special factor), a person has no right not to be sued in a particular forum. Where proceedings are brought in a foreign forum, the question of whether that forum is appropriate is a factor in assessing the conduct of the party suing there.

In order to grant an injunction, the English court must have sufficient legitimate interest in the foreign proceedings - if there is no contractual reason to prevent proceedings in the foreign jurisdiction, there must be proceedings in the United Kingdom which require protection. 

English law attaches high importance to international comity and the foreign court's perception of the interference - albeit indirect - in its proceedings. Therefore, there must be a clear need for protection of the English proceedings. 

An injunction should not be granted if it would unjustly deprive the claimant in the foreign action of an advantage in that forum.

In considering an application, the court embarks on a two-stage process. First, it asks whether England is the appropriate and natural forum for the trial. If so, it asks whether "the ends of justice require the grant of an injunction".(1)

Facts

In Standard Bank plc v Agrinvest International Inc the first claimant, Standard Bank, a London bank, had granted Agrinvest, a US company, an option to purchase promissory notes. A master sale agreement also existed between Standard Bank and Agrinvest in which Agrinvest sold Standard Bank certain securities (issued by an Egyptian company) and agreed to buy them back. Agrinvest failed to buy back the securities from Standard Bank and Standard Bank brought proceedings against Agrinvest claiming the sums due. The former agreement (ie, the option contract) contained no express choice of law or jurisdiction, but the master sale agreement provided for English law and jurisdiction in the following terms:

"Each party hereto irrevocably submits to the jurisdiction of the courts of England for the purpose of any action, suit or proceeding relating to this agreement or any trade confirmation, and irrevocably agrees that all claims in respect of any action, suit or proceeding may be heard and determined in any such court."

Agrinvest issued a motion in a US court alleging that it was not liable to Standard Bank for any monetary claim and that Standard Bank was liable to Agrinvest for breaches of contract in relation to the sale of securities.

Agrinvest, along with two other defendants - Charles Chawafaty, a director of Agrinvest, and Cairo Phoenix Foreign Trade Centre, a trading name used by Chawafaty - subsequently brought proceedings in Egypt in respect of claims arising out of both the option contract and the master sale agreement against Standard Bank and Standard Bank Group Ltd, its ultimate parent company.

Standard Bank and Standard Bank Group sought a permanent anti-suit injunction against Agrinvest, Chawafaty and Cairo Phoenix to restrain the US and Egyptian proceedings on the basis that (i) the jurisdiction clause in the master sale agreement prevented Agrinvest from bringing proceedings outside England, and (ii) Chawafaty and Cairo Phoenix should be restrained from bringing the foreign proceedings on the basis that such proceedings were unconscionable or vexatious and oppressive.

Issues

The court had to decide whether the jurisdiction clause in the master sale agreement was an exclusive English jurisdiction clause and whether the US and Egyptian proceedings should be restrained by anti-suit injunctions. The judge decided in favour of the claimants and granted declarations relating to the applicable law and jurisdiction, as well as the anti-suit injunctions.

Construction of the jurisdiction clause

In examining the wording of the jurisdiction clause in the master sale agreement, the judge concluded that it was exclusive for three reasons:

Although the first limb of the clause imposed an intransitive obligation "to submit to the jurisdiction of the courts of England", the second limb was a transitive construction imposing a mutual obligation to submit all disputes relating to the agreement to the English courts. The courts upheld the long-established interpretation that a transitive obligation establishes an exclusive jurisdiction clause, whereas an intransitive obligation will lead only to a non-exclusive jurisdiction clause.

Having chosen that the master sale agreement would be governed by English law and have English jurisdiction, there seemed to be no good reason why the parties should have agreed that the English courts would have non-exclusive jurisdiction.

The use of the phrase 'may be heard', instead of 'shall be heard', which indicates an option rather than an obligation, was considered in light of the use and context of the word 'irrevocably' in the clause, which the court found to indicate that submission to the English courts was obligatory, rather than optional.

Anti-suit injunctions

In order to obtain an anti-suit injunction, each of the claimants (ie, Standard Bank and Standard Bank Group) had to establish in respect of each of the defendants either (i) a breach of an exclusive jurisdiction clause, or (ii) unconscionable or vexatious and oppressive conduct.

Standard Bank could invoke the exclusive jurisdiction clause only against Agrinvest, as they were the only parties to the master sale agreement. Therefore, it had to establish unconscionable or vexatious and oppressive conduct by Chawafaty and Cairo Phoenix in order to obtain anti-suit injunctions in respect of both the US and Egyptian proceedings. Similarly, Standard Bank Group could not invoke the contractual provision because it was not a party to the master sale agreement. Therefore, it had to show that all three defendants' behaviour had been unconscionable or vexatious and oppressive.

Since the court ruled that the jurisdiction clause was exclusive and that Agrinvest had shown no good reason why it should not be held to its contractual bargain, the court exercised its discretion to grant an anti-suit injunction restraining Agrinvest from bringing proceedings against Standard Bank in the United States and Egypt. An injunction was granted restraining Chawafaty and Cairo Phoenix from bringing proceedings against the claimants in Egypt on two grounds.

First, the Egyptian proceedings were unconscionable or vexatious and oppressive, and were calculated to subvert or frustrate the English proceedings, as Chawafaty and Cairo Phoenix had no contractual claim against Standard Bank and all three defendants had no contractual claim against Standard Bank Group.

Second, Egyptian law had been relied on, contrary to the jurisdiction clause of the master sale agreement, since the claims would have been time barred if brought in England. The court took this as further evidence that the Egyptian proceedings were unconscionable or vexatious and oppressive.

Comment

Although the case does not create new principles, it is a reminder of the way in which the English courts apply the established principles when deciding whether to restrain foreign proceedings. It is also a good example of the grounds used by the English courts when determining whether a jurisdiction clause is exclusive. One of those grounds turned on the complex analysis of whether the obligations imposed in the clause were transitive or intransitive, highlighting the significance when drafting contracts of expressly and clearly specifying whether a jurisdiction clause is exclusive, depending on the parties' intentions.