Recent developments in anti-arbitration injunctions: tug of war between courts and arbitral tribunals?

Background

The Plaintiff is a 50% shareholder of the Company. PIL (an intended defendant, see below) belongs to the same corporate group of the other 50% shareholder. The Plaintiff brought 2 applications:

• First, an application to seek the Court’s sanction to commence an intended action on behalf of the Company (known as a “derivative action”) against certain intended defendants, amongst others, PIL and the Company’s directors in PIL’s camp. The Plaintiff claimed that these intended defendants had conspired to strip the Company of its assets and/or breached fiduciary duties owed to the Company.
• Second, an application for AAI to restrain PIL from proceeding with an arbitration until determination of the derivative action by the Court on the basis that the arbitration was part of the conspiracy.

In gist, the Plaintiff argued that the alleged conspiracy concerns: (1) PIL’s version of a Loan Assignment Agreement ("LAA”) was fabricated; and (2) a Supplemental Loan Assignment Agreement entered into between the Company and PIL ("SLAA”) was not in existence. 

Relying on the arbitration clause in the SLAA, PIL commenced arbitration at CIETAC against the Company for the transfer of the shares and payment of HK$40.4 million pursuant to the SLAA.

Findings

In relation to the Plaintiff’s first application to commence derivative action, the Court was satisfied that the intended action was seriously arguable and that it was prima facie in the interests of the Company for the claims to be pursued, the Court’s sanction was accordingly granted.

On the issue of AAI, the Court considered the two general conditions (see Section B above) and found as follows:

• AAI would not cause prejudice to PIL as it would still have to experience delay in the recovery under the SLAA (regardless of the AAI), because the Plaintiff could oppose the enforcement of the arbitral award by bringing a statutory derivative action at that stage. PIL would have to go through the intended action with or without the AAI. Also, PIL would have to incur costs in the intended action if it wishes to defend the conspiracy claims, the AAI would not cause injustice to PIL in this regard.[4]
• The continuation of the arbitration would be vexatious, oppressive and/or unconscionable:[5]
  • The Court considered the English case Excalibur Ventures LLC v Texas Keystone Inc & Ors [2011] EWHC 1624 (Comm),[6] whereby the claimant there commenced action against the defendants in the Commercial Court in England & Wales and a New York arbitration at the same time. Some of those defendants were not signatories to the arbitration agreement, and they applied for an AAI to restrain the arbitration. The AAI was granted on the basis that it was oppressive or unfair and unconscionable in the circumstances, weight was given to the fact that those defendants had a strong claim that the New York arbitral tribunal had no jurisdiction over them.
  • In this case, since the intended action was found to be seriously arguable, it follows that the continuation of the arbitration furthers a conspiracy to strip the Company of its assets. The Plaintiff’s objection to the continuation of the arbitration there stems from the need to stop a wrongful conspiracy against the Company and goes beyond the issue of an arbitral tribunal’s jurisdiction, such that the Court considers that this case is even more indicative of oppression and unconscionability than Excalibur Ventures.
  • There is also a real risk that the Company will not be able to properly conduct its defence in arbitration due to the deadlock of the Company’s board – the directors of the Company were divided into the Plaintiff’s camp and PIL’s camp and held different views on whether the LAA and SLAA were genuine. As such, it is unlikely that the Company could instruct its legal representatives on whether and how the Company should defend PIL’s claims in the arbitration.
  • There may be risks of inconsistent findings arising from parallel proceedings between the derivative action and the arbitration, both of which would necessarily decide on the validity of the LAA and SLAA.
  • Although the Company could later in theory set aside the arbitral award as a product of conspiracy, the Court sees no reason why it “should kick the can down the road” instead of injuncting the arbitration now.

Background

The parties were in long-drawn disputes over a land-developing agreement governed by PRC law (the “Agreement”).

In summary, the Defendant had argued that the Agreement was impossible to be performed.[7] In 2006, the CIETAC arbitral tribunal granted the 1^st Award in the Plaintiff’s favour and ordered the Defendants to continue to perform the Agreement (“1^st Arbitration”). In 2007, the Plaintiff sought to enforce the 1^st Award in Hong Kong. Both the Court of Appeal and Court of Final Appeal found in favour of the Plaintiff and rejected Defendant’s impossibility argument[8] (collectively, “Hong Kong Court Decisions”).

The Defendants then sought a determination from the CIETAC arbitral tribunal again on the point that the Agreement could not be performed (“2^nd Arbitration”). In 2009, the arbitral tribunal rejected the Defendant’s claim and made a 2^nd Award affirming in “no uncertain terms” that the 1^st Award was final.[9]

In 2022, the Defendant commenced a new CIETAC Arbitration (“New Arbitration”) seeking, amongst others, an order that the Agreement was terminated and the Defendant’s liabilities should be limited.[10] The New Arbitration raised the same arguments as in the 1^st and 2^nd Arbitrations, i.e. the Agreement was impossible to be performed (“Old Claims”), and new arguments concerning Article 580 of the PRC Civil Code which came into effect in 2021 and allows parties to terminate the agreement in certain specified circumstances (“New Claims”). The Plaintiff sought an AAI to restrain the Defendants from taking any steps to pursue the New Arbitration or the claims therein, and to compel them to take steps to discontinue the New Arbitration.

Findings

The Court considered the two general conditions of AAI (see Section B above) and found that the continuation of the New Arbitration would only be abusive and vexatious if the Defendant is permitted to argue the Old Claims in the New Arbitration. This would amount to a collateral attack on the Hong Kong Court Decisions permitting enforcement of the 1^st Arbitration.[11]

Hence, the Court declined to grant an AAI in the wide terms as requested by the Plaintiff, but instead narrowed down the scope of the AAI to restrain the Defendant from bringing the Old Claims in the New Arbitration.

Background

This case concerns a dispute arising from a shareholder agreement which is governed by Indian Law and designates Singapore as the arbitral seat. Mr Mittal and Westbridge were two of the shareholders of the Company. Disputes between them arose from the shareholder agreement. The procedural history is complex and spawned widely discussed ASI decisions from Singapore courts on pre-award arbitrability. Here, we focus on the AAI angle. In gist:

India – Mittal’s petition before the NCLT

• In March 2021, Mittal commenced legal action before the National Company Law Tribunal, Mumbai Bench (“NCLT”) on the ground of oppression and mismanagement of the Company. In particular, Mittal alleged that Westbridge had colluded with other defendants to acquire control of the Company in an attempt to marginalise him from management.

Singapore – Westbridge’s ASI and arbitration

• During the NCLT proceedings, Westbridge applied for an ASI before the Singapore High Court to restrain Mittal from continuing NCLT proceedings in India, on the basis that the underlying disputes were contractual and should be resolved by ICC arbitration pursuant to the arbitration clause in the shareholder agreement. Westbridge argued that Mittal breached the arbitration clause by commencing NCLT proceedings in India. The ASI was granted and upheld on appeal by the Singapore Supreme Court in 2023.
• Around May 2022, Westbridge commenced ICC arbitration in Singapore and a partial arbitral award was eventually rendered in favour of Westbridge, upholding the arbitral tribunal’s jurisdiction to hear the underlying disputes.

India – Mittal’s anti-ASI

• In 2021, Mittal applied to the Bombay High Court for a non-enforcement order in respect of the Singapore ASI and sought a declaration that the NCLT is the only competent forum to hear and decide the disputes raised in the petition. The Bombay High Court acknowledged that NCLT had exclusive jurisdiction to decide such disputes under section 241, 242 and 430 of the Indian Companies Act. The non-enforcement order (essentially, an anti-ASI order) was granted on 11 September 2023.[12]
• In granting the anti-ASI order, the Bombay High Court found that issues of corporate oppression are not arbitrable in India and any arbitral award on such issues is not enforceable under section 48 of the Indian Arbitration and Conciliation Act 1996. To disallow Mittal from pursuing its case in NCLT (by virtue of the Singaporean ASI) would render him remediless, and it would be against Indian public policy to deny him access to justice.

India – Mittal’s AAI

• Following the Bombay High Court’s anti-ASI decision, Mittal proceeded with an AAI application before the NCLT, restraining Westbridge and others from invoking arbitration in Singapore while Mittal’s application on oppression and mismanagement of the Company is pending before the NCLT.

Findings

The NCLT granted the AAI, heavily relying on the findings of the Bombay High Court in its anti-ASI decision, and held that the eventual Singapore arbitral award on issues of corporate mismanagement would be unenforceable under Indian law. The NCLT considered that the parallel Singapore arbitration would render Mittal remediless and his application before the NCLT infructuous.

Commentators have observed that the grounds for granting an AAI in Anupam Mittal are anomalous with the usual common law grounds for granting an AAI. It remains to be seen whether the NCLT’s decision will withstand further judicial scrutiny. According to public sources, Westbridge challenged the AAI via an appeal to the National Company Law Appellate Tribunal on 11 January 2024.

Background

The facts and history of this case are complex. For present purposes, the central matter in question is a settlement agreement entered into between the claimant and the respondents, to resolve disputes over the profit-sharing arrangements of a data centre business. The settlement agreement contains an LCIA arbitration agreement.

A company controlled by one of the respondents, which is not party to the settlement agreement, was to pay the claimant the settlement sum, but the company failed to pay all the instalments. This led to the claimant commencing multiple LCIA arbitrations against the respondents in respect of fraudulent breach of trust and dishonest assistance. The claimant successfully obtained three awards in his favour and obtained permission from the Court to enforce those three awards as court judgments. The respondents then applied to Court to stay enforcement of the claimant’s three awards, also filing a Request for Arbitration to the LCIA seeking the same relief as they had sought in Court. The claimant therefore applied to Court for AAI to prevent the respondents from pursuing the LCIA arbitration.

Findings

The English Commercial Court granted the AAI and summarised the relevant principles:

• The test for a grant of AAI is: (i) the pursuit of the arbitration infringes the applicant’s legal or equitable rights; and (ii) the pursuit of the arbitration is vexatious and oppressive and thereby engages the jurisdiction of the English courts to prevent the wrong of vexatious, oppressive and unconscionable conduct.[13]
•  There are three common fact patterns whereby AAI applications are sought:[14]
  • Category 1: Equivalent to a contractual ASI, there is a strong presumption to hold parties to their contractual bargain such that AAI is more readily granted than an ASI. This is where there is no question of interference with a foreign court, eg: parties have agreed to bring the claim in some other forum (say in court or arbitration under a different seat and/or different arbitral rules) or not to arbitrate at all. There is also a further sub-category in relation to a Non-Compliant Challenge (see below).
  • Category 2: AAI applicant contends that the arbitral tribunal has no jurisdiction to decide the dispute, but without contending that there is a contractual right to have the dispute determined in some other forum. Essentially, the AAI applicant seeks the court’s determination as to the jurisdiction of the arbitral tribunal, which may preclude an arbitral tribunal’s competence to rule on its own jurisdiction. This requires particular caution before granting an AAI, even in respect of arbitration seated in England & Wales.
  • Category 3: While there is arbitral jurisdiction to determine the matters in question, it would involve an attempt to re-litigate matters already determined either by a prior arbitral award or a court judgment. There will be cases which fall within both Category 1 (as a Non-Compliant Challenge, see below) and Category 3, because the attempt to re-litigate the contents of the earlier award is sufficiently fundamental and substantial to be characterised as an attempt to challenge the earlier award by a Non-Compliant Challenge. The more clearly the claims in the second arbitration can in substance amount to a Non-Complaint Challenge to the first award, the stronger the case for AAI relief will be.
• The present case concerns the scenario of a Non-Compliant Challenge, whereby an AAI was sought because the applicant was protecting a contractual right arising from the agreement to arbitrate. The parties have agreed that an arbitration will have its legal seat in England & Wales, and a losing party then seeks to challenge the award otherwise than in accordance with sections 67 to 70 of the 1996 English Arbitration Act. The respondents accepted that the challenge to the claimant’s three awards did not satisfy the requirements under the 1996 English Arbitration Act.[15]
• The respondents’ Request for Arbitration amounted to a Non-Compliant Challenge to the claimant’s three awards, infringing the claimant’s rights under the 1996 English Arbitration Act. In any event, any arbitral tribunal appointed under the respondent’s Request for Arbitration would not have jurisdiction to set aside or restrain the enforcement of the claimant’s three awards.[16]