Shashoua & Ors v Sharma

Factual and Procedural Background

The claimants sought an anti-suit injunction pursuant to section 37(1) of the Supreme Court Act 1981 and/or section 44(4) of the Arbitration Act 1996 to restrain the defendant from initiating or participating in proceedings outside England and Wales that challenge or delay enforcement of an interim arbitration award (the Costs Award) and related court orders. An interim injunction was granted on 29th January 2009 and continued until an inter partes hearing on 29th and 30th April 2009.

The dispute arose from a Shareholders Agreement dated 1st July 1998 between the first claimant and the defendant to establish a joint venture company in India. The agreement was governed by Indian law, but included an arbitration clause specifying arbitration under ICC Rules with the venue in London, United Kingdom, and proceedings conducted in English. The parties disputed whether the arbitration agreement was governed by Indian or English law, a point significant for determining the seat and curial law of the arbitration.

Arbitration proceedings commenced in May 2005, including interim relief applications in India and a Request for Arbitration filed in London. The arbitration panel comprised three arbitrators from India, England, and New Zealand. Various jurisdictional challenges and procedural applications were made in both England and India. The tribunal issued a Costs Award requiring the defendant to pay sums which the defendant failed to pay. The English Commercial Court granted leave to enforce the Costs Award as a judgment.

The defendant initiated multiple challenges in India, including a petition under section 34(2)(iv) of the Indian Arbitration and Conciliation Act 1996 (IACA) to set aside the Costs Award and applications to restrain enforcement of English court orders. The defendant also sought removal of an arbitrator and annulment of awards from the tribunal. The claimants maintained that challenges to the arbitration awards and enforcement must be pursued only in the English courts, the designated seat of arbitration.

The defendant contended that the Indian courts had jurisdiction and that the claimants had submitted to that jurisdiction by earlier applications. The claimants disputed this, asserting that any submission to Indian jurisdiction was not valid and that the English courts had exclusive supervisory jurisdiction over the arbitration as the seat was London. The court identified factual and legal disputes regarding submission to Indian jurisdiction requiring oral evidence to resolve.

The court considered the impact of the European Court of Justice's Front Comor decision on anti-suit injunctions but found it inapplicable to proceedings between England and India, as India is not a Member State subject to EU Regulation 44/2001. The court reaffirmed established English law that the seat of arbitration carries exclusive supervisory jurisdiction and that anti-suit injunctions are appropriate to prevent foreign proceedings that undermine this jurisdiction.

Legal Issues Presented

1. Whether the arbitration seat is in London, United Kingdom, thereby conferring exclusive supervisory jurisdiction on English courts over challenges to the arbitration awards.
2. Whether the defendant is restrained from pursuing or participating in proceedings outside England and Wales that challenge or delay enforcement of the Costs Award and related court orders.
3. Whether the claimants have submitted to the jurisdiction of the Delhi High Court by prior applications or conduct, affecting the court's discretion to grant an anti-suit injunction.
4. The applicability and effect of the European Court of Justice's Front Comor decision on anti-suit injunctions in proceedings involving non-EU countries such as India.
5. The appropriate scope and content of the anti-suit injunction sought by the claimants.

Arguments of the Parties

Claimants' Arguments

• The arbitration seat is London, United Kingdom, as expressly designated by the arbitration clause specifying the venue and English language proceedings under ICC Rules.
• English law is the curial law governing the arbitration, and the English courts have exclusive supervisory jurisdiction over challenges to the arbitration awards.
• The defendant's challenges and enforcement proceedings in India improperly seek to circumvent the agreed supervisory jurisdiction of the English courts.
• The claimants have not submitted to the jurisdiction of the Indian courts, and prior applications for interim relief in India do not constitute submission under ICC Rules and applicable law.
• The Front Comor decision concerning EU Member States and Regulation 44/2001 does not apply to England-India disputes; thus, anti-suit injunctions remain appropriate.
• The anti-suit injunction should prevent the defendant from pursuing proceedings outside England and Wales that challenge or delay enforcement of the Costs Award or related court orders, except for challenges permissible under the New York Convention.

Defendant's Arguments

• The law governing the arbitration agreement and the curial law is Indian law, not English law, due to the governing law of the Shareholders Agreement and the circumstances surrounding the arbitration.
• The "venue" specified in the arbitration clause is not synonymous with the "seat," and no clear designation of the seat exists, so the seat should be India.
• The claimants submitted to the jurisdiction of the Delhi High Court by making a section 9 application for interim protective measures in 2005 and by conduct during the section 34 petition proceedings in India.
• The Front Comor decision of the European Court of Justice undermines the basis for anti-suit injunctions, and its reasoning should apply to countries like India, which are parties to the New York Convention.
• The claimants delayed unreasonably in seeking the anti-suit injunction, and their motivations are questionable.
• The claimants failed to disclose material facts regarding their submission to Indian jurisdiction when obtaining the interim anti-suit injunction.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by examining the arbitration clause in the Shareholders Agreement, noting that the venue was expressly stated as London, United Kingdom, and that proceedings were to be conducted in English under ICC Rules. The court held that the designation of venue in this context amounted to designation of the juridical seat of the arbitration, which determines the curial law and confers exclusive supervisory jurisdiction on the courts of that seat. The defendant's argument that the seat was India was rejected, as it relied on a distinction between "venue" and "seat" that was not supported by the facts or authorities.

The court analyzed relevant authorities, including C v D, which confirmed that agreement to the seat is tantamount to an exclusive jurisdiction clause. The court also considered the defendant's reliance on the Dubai Islamic Bank and Braes of Doune cases, concluding these did not undermine the claimant's position.

Regarding the defendant's submission that the claimants had submitted to the jurisdiction of the Indian courts, the court found the facts and Indian law disputed and insufficiently clear on the papers. It held that oral evidence and a mini trial would be necessary to resolve these issues, which affect the exercise of the court's discretion in granting the anti-suit injunction.

The court considered the effect of the Front Comor decision, concluding it did not apply to disputes involving non-EU countries such as India and did not alter English law permitting anti-suit injunctions to uphold exclusive jurisdiction and arbitration agreements.

The content of the anti-suit injunction was scrutinized, with the court emphasizing it would not prevent the defendant from raising defences to enforcement under the limited grounds of the New York Convention but would restrain challenges to the validity of the Costs Award or enforcement proceedings outside England and Wales.

The court found the defendant's delay in seeking relief in India did not bar the claimants from obtaining the injunction, given the timing and nature of the defendant's actions. The defendant's failure to offer undertakings not to challenge the arbitrator's appointment in India was noted unfavorably.

Finally, the court acknowledged unresolved issues concerning submission to Indian jurisdiction, non-disclosure, and delay, and ordered directions for further evidence and a further hearing. Meanwhile, the interim anti-suit injunction would continue, subject to a liberty to apply for permission to challenge enforcement in other jurisdictions on New York Convention grounds.

Holding and Implications

The court GRANTED the anti-suit injunction sought by the claimants, continuing the interim injunction restraining the defendant from pursuing or participating in proceedings outside England and Wales that challenge, impugn, or delay enforcement of the Costs Award and related English court orders, except for challenges permitted under the New York Convention.

The court recognized unresolved factual and legal issues regarding the claimants' alleged submission to Indian jurisdiction, non-disclosure, and delay, and directed further hearings to resolve these matters before making any final orders on costs or other relief.

The decision reinforces the principle that the seat of arbitration carries exclusive supervisory jurisdiction, and that anti-suit injunctions are appropriate to uphold the parties' agreement on the seat and prevent parallel proceedings in foreign courts outside the supervisory jurisdiction. The ruling distinguishes the European Court of Justice's Front Comor decision as inapplicable to disputes involving non-EU countries, preserving the established English law position on anti-suit injunctions in arbitration matters.