Guest blog: To aid or obstruct arbitration? That is the question

  • 26 November 2019
Guest blog: To aid or obstruct arbitration? That is the question

Following the conclusion of the International Chamber of Commerce’s (ICC) 17th edition of the ICC Miami Conference, Juan Garcia and Juliana de Valdenebro Garrido of Hogan Lovells showcase their industry insight on the ways national courts play a role in international commercial arbitration in this guest blog.

Hogan Lovells authors
Juan C. Garcia, Counsel, Hogan Lovells (left) and Juliana De Valdenebro Garrido, Law Clerk, Hogan Lovells (right)

While parties often seek injunctive relief to aid their arbitration, they may also use it to obstruct or impede proceedings. Although rare, an interesting phenomenon occurs when national courts of two countries issue conflicting injunctive relief in the same dispute.  For example, a recalcitrant party may attempt to disrupt the arbitral process by seeking an “anti-arbitration injunction” before national courts, even though the parties’ contract contains a valid arbitration agreement whereby the parties agreed to resolve all dispute through arbitration.  In these cases, the party seeking to enforce the arbitration agreement could also seek before national courts an injunction in support of arbitration.  In turn, the arbitral tribunal or institution—if the tribunal is not yet constituted—may be confronted with some difficult choices.  Does the action aid or obstruct the arbitral process?  Which injunction should prevail?  Can the tribunal or institution disregard the anti-arbitration injunction?  What is the appropriate response in such cases?

The response to these questions should follow the well-established principles of competence-competence, separability and party autonomy—all of which weigh in favour of the arbitral tribunal deciding whether a dispute should be resolved in arbitration.

When served with an anti-arbitration injunction, many tribunals recognise the parties’ intent to arbitrate their dispute—as embodied in the parties’ arbitration agreement—and allow the arbitration to proceed without delay.

Pierre Lalive, acting as sole arbitrator in ICC case number 1512, was confronted with an order by the High Court of West Pakistan restraining one of the parties from pursuing the arbitration as early as 1970.  Mr Lalive chose to continue with the arbitral proceeding.  In upholding his jurisdiction, the sole arbitrator found that “the defendant’s decision to institute the national lawsuits was another tactical move to gain time and slow down the arbitration proceedings.”  He went on to say that “it [was] undisputable also that the ICC Rules [excluded] any resort by one party to a judicial authority pendent arbitratione . . . ”  The arbitrator made clear that he would exercise jurisdiction and move forward with the arbitration despite the court order.

Allowing the arbitration to proceed after a court issues an anti-arbitration injunction appears to be the norm.  Notably, the International Arbitration Practice Guidelines of the Chartered Institute of Arbitrators (CIArb) specifically includes in its commentary that “if parallel court proceedings are initiated outside the place of arbitration, and the relevant court rules that the arbitrators have no jurisdiction, arbitrators are not bound by such a ruling and they should, therefore, proceed with the arbitration proceedings.”

A more interesting question arises when the arbitral tribunal has not yet been constituted.  What should arbitral institutions do when served with an anti-arbitration injunction before the tribunal has been established?  Disruption or delay may be inevitable in that scenario—and more so when parties direct the injunction against the institution.

The arbitral institution’s reaction may depend on which court issued the injunction.  Under Article II of the New York Convention, the court of the seat should refer the matter to arbitration “unless it finds that the said agreement is null and void, inoperative or incapable of being performed.”  As such, in certain circumstances, if the court of the arbitral seat issues an anti-arbitration injunction based on the invalidity of the arbitration agreement, the institution may be deterred from allowing the arbitration to proceed.

However, statistics show that parties regularly seek anti-arbitration injunctions—not in the courts of the seat of arbitration, but rather before their local judicial system.  For example, according to the ICC International Court of Arbitration, of the 31 cases where anti-arbitration injunctions were granted in 2006, 25 were granted by courts of the nationality of one of the respondents rather than the arbitral seat.

Fortunately, the practice of arbitral institutions seems to be identical to that of tribunals.  Recent cases have confirmed that institutions are not deterred by anti-arbitration injunctions issued outside of the place of arbitration and will proceed with the constitution of the tribunal notwithstanding the judicial order.  Yet, a countervailing injunction in aid of arbitration issued by the court of the seat could provide reassurances to the institution so that it can continue to guard the proceeding.  With this, parties would not be allowed to disregard a commitment to arbitration simply by rushing to their national court and threatening the institution.

Although a party’s success in obtaining an anti-arbitration injunction from a court is worrisome, the established practice of arbitration institutions and tribunals is reassuring.  It demonstrates the key role that arbitral institutions and tribunals play in safeguarding the principles of competence-competence and separability, as well as protecting the parties’ right to arbitrate.  Nevertheless, the court of the seat may be the ultimate gatekeeper in avoiding the negative effects of anti-arbitration injunctions.

Hogan Lovells was a Platinum sponsor of the 17th ICC Miami Conference on International Arbitration. To view photos from the flagship event, please visit our dedicated Flickr album.

*Disclaimer: The content of this interview does not reflect the official views of the International Chamber of Commerce. The opinions expressed are solely those of the authors and other contributors.