Star Hydro Power Ltd v National Transmission and Despatch Company Ltd

Factual and Procedural Background

The dispute arose from a Power Purchase Agreement ("the PPA") entered into on 8 March 2012 between a state entity ("Company A") responsible for electricity purchase and operation in Pakistan and a special purpose vehicle ("Company B") engaged in power production. The PPA involved the construction and operation of a hydro-electric power plant in Azad Jammu and Kashmir, with a 30-year electricity purchase commitment. The PPA contained arbitration provisions specifying that disputes exceeding certain monetary thresholds or involving specific issues could be arbitrated in London, otherwise in Lahore, Pakistan.

A dispute arose over the tariff adjustment at the commercial operation date ("COD"). Company B sought a higher tariff based on project cost adjustments, while Company A relied on a regulatory authority's ("The Authority") exclusive statutory power to set tariffs under Pakistani law. Company B initiated arbitration under the London Court of International Arbitration ("LCIA") with the seat in London. The arbitrator issued a final award on 7 May 2024, determining a tariff higher than that set by The Authority and ordering Company A to pay the difference plus interest and costs.

Subsequently, Company A initiated proceedings in the Lahore High Court seeking partial recognition and enforcement of the award under the New York Convention, focusing primarily on the arbitrator's dismissal of other claims and asserting that the arbitrator lacked jurisdiction to determine tariff matters exclusively reserved for The Authority. The Lahore court granted an interim order suspending a demand notice issued by Company B for amounts exceeding the tariff determined by The Authority.

Company B responded by seeking an anti-suit injunction in the Commercial Court in England to restrain Company A from continuing the Lahore proceedings, arguing that the arbitration agreement designated the London seat as the exclusive supervisory jurisdiction. The Commercial Court judge initially dismissed the interim injunction, allowing Company A's pre-emptive challenge under the New York Convention. Company B was granted permission to appeal this decision.

The appeal was allowed, and an anti-suit injunction was granted largely on the terms sought by Company B. The court provided detailed reasons for this decision.

Legal Issues Presented

1. Whether Company A is entitled to bring a pre-emptive application under the New York Convention in Pakistan to challenge the arbitration award before enforcement proceedings are initiated.
2. Whether the Lahore proceedings brought by Company A constitute a breach of the arbitration agreement and the exclusive supervisory jurisdiction of the English courts.
3. Whether the English court should grant an anti-suit injunction to restrain Company A from continuing the Lahore proceedings.
4. The extent to which partial recognition and enforcement of an arbitration award is permissible under the New York Convention and English law.

Arguments of the Parties

Appellant's Arguments (Company B)

• The arbitration agreement designates London as the exclusive seat and supervisory jurisdiction, meaning challenges to the award must be brought in England under the Arbitration Act 1996.
• Company A's Lahore proceedings are a breach of the arbitration agreement and an attempt to undermine the arbitration award.
• The New York Convention does not permit pre-emptive challenges to an award; it only provides a defence against enforcement applications.
• The English courts have jurisdiction to grant an anti-suit injunction to enforce the exclusive supervisory jurisdiction and restrain foreign proceedings in breach of the arbitration agreement.
• The Lahore proceedings, although framed as seeking recognition and enforcement, are in substance a full challenge to the award and should be restrained.

Respondent's Arguments (Company A)

• Company A is entitled to apply in Pakistan under the New York Convention for partial recognition and enforcement of the award or to assert that parts of the award are not enforceable in Pakistan.
• The Lahore proceedings do not undermine the arbitration award but seek to uphold the exclusive statutory jurisdiction of The Authority over tariff determination in Pakistan.
• The arbitration award's contractual assessment of tariff usurps The Authority's exclusive regulatory jurisdiction and is thus not enforceable under Pakistani law.
• Company A contends it has a right to pursue recognition and enforcement proceedings in any New York Convention jurisdiction and that such courts have exclusive jurisdiction in those proceedings.
• Company A offered to amend the relief sought in Lahore to seek recognition of part of the award, but the court found this insufficient to change the substance of the challenge.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
C v D [2007] EWCA Civ 1282	Establishes that the seat of arbitration constitutes the exclusive supervisory jurisdiction, akin to an exclusive jurisdiction clause, and that challenges to awards must be brought only in that jurisdiction.	The court applied this principle to hold that the English court has exclusive jurisdiction over challenges to the London-seated award and that foreign proceedings in breach of this are subject to anti-suit injunctions.
Atlas Power Ltd and others v National Transmission and Despatch Company Ltd [2018] EWHC 1052 (Comm)	Confirmed that even where the governing law is foreign, the seat of arbitration determines exclusive supervisory jurisdiction and that concurrent jurisdiction claims by foreign courts are rejected.	The court relied on this case to reject Company A's argument that Pakistani courts had concurrent jurisdiction and to support granting the anti-suit injunction.
UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30	Reaffirmed the English court’s strong approach to enforcing arbitration agreements by granting anti-suit injunctions to restrain foreign proceedings brought in breach of arbitration agreements.	The court cited this to emphasize the appropriateness of granting anti-suit injunctions to enforce the arbitration agreement and supervisory jurisdiction.
Aggeliki Charis Cia Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd's Rep 87	Supported the principle that injunctions to restrain foreign proceedings in breach of arbitration agreements should not be granted sparingly but enforced to protect contractual rights.	Quoted to underline the justification for the injunction and the court’s discretion in enforcing arbitration agreements.
Enka Insaat ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38	Endorsed the approach to anti-suit injunctions restraining foreign proceedings brought in breach of arbitration agreements.	Used to demonstrate the Supreme Court’s support for enforcing arbitration agreements robustly through injunctions.
IPCO (Nigeria) Ltd v Nigerian National Petroleum Corp [2008] EWCA Civ 1157	Confirmed that partial enforcement of arbitration awards is permissible under the New York Convention and English law.	The court acknowledged partial recognition and enforcement of awards, relevant to the discussion on the nature of the Lahore proceedings.
Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2009] UKSC 46	Clarified that challenges to arbitral tribunal jurisdiction can be brought both at the seat and in enforcement proceedings, but enforcement courts only consider jurisdiction when resisting enforcement.	Supported the interpretation that the New York Convention provides a shield, not a sword, for challenges and that pre-emptive challenges are impermissible.

Court's Reasoning and Analysis

The court began by affirming the principle that the seat of arbitration establishes the exclusive supervisory jurisdiction for challenges to an award, referencing authoritative case law. The arbitration agreement designating London as the seat incorporated the Arbitration Act 1996 framework, meaning challenges to the award must be brought exclusively in England.

The court rejected the notion that the English supervisory court has no policing role over foreign proceedings that breach the arbitration agreement. It emphasized that the English court exercises jurisdiction in personam over parties to enforce the arbitration agreement and may grant anti-suit injunctions to prevent breaches.

Regarding the New York Convention, the court clarified that it provides a mechanism for recognition and enforcement of foreign awards in secondary jurisdictions and sets out limited grounds on which enforcement may be refused. Crucially, it does not confer jurisdiction for pre-emptive challenges to awards; such challenges are defensive and can only be raised in response to enforcement applications.

The court found that Company A’s Lahore proceedings, although framed as applications under the New York Convention for partial recognition and enforcement, were in substance a pre-emptive challenge to the award and an attempt to circumvent the exclusive supervisory jurisdiction of the English courts. The relief sought sought to nullify the effect of the award by relying on Pakistani regulatory law and public policy arguments.

The court held that permitting such foreign proceedings would undermine the supervisory jurisdiction of the English courts and contravene established legal principles. It found that Company A’s invocation of the New York Convention as justification was transparently false and that the proceedings were brought in breach of the arbitration agreement.

Accordingly, the court granted an anti-suit injunction restraining Company A from continuing the Lahore proceedings, enforcing the arbitration agreement and protecting the exclusive jurisdiction of the English courts as supervisory courts for the London-seated arbitration.

Holding and Implications

The court ALLOWED THE APPEAL and granted an anti-suit injunction restraining Company A from continuing the Lahore proceedings challenging the London-seated arbitration award.

This decision enforces the principle that the seat of arbitration confers exclusive supervisory jurisdiction over challenges to awards, preventing parties from circumventing this jurisdiction by initiating separate proceedings in foreign courts under the guise of recognition and enforcement applications under the New York Convention.

The direct effect is that Company A is restrained from pursuing its challenge in Pakistan, and any such challenges must be brought exclusively in England under the Arbitration Act 1996. The ruling does not establish new precedent but reaffirms established principles regarding arbitration seat exclusivity, the supervisory jurisdiction of the English courts, and the correct interpretation of the New York Convention as providing defensive, not pre-emptive, rights.