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ANTI ARBITRATION INJUNCTIONS: LEGAL OR NOT?
An “anti-arbitration injunction” is an injunction whereby one party seeks orders against the other party restricting to proceed or commence with an arbitration proceeding in pursuance of the arbitration agreement between the parties. Though the concept of “anti- arbitration injunction” is not defined in the Arbitration and Conciliation Act, 1996, there have been different judgements on whether such injunctions are enforceable.
A court may grant an anti-arbitration injunction against the commencement or continuation of arbitration proceedings when the parties have mutually agreed that they will not settle the matter via arbitration or when they have opted for litigation or another alternative dispute resolution method.
Some of the reasons include:
- Anti-suit injunctions are viewed as a manner in which the national courts exercise their jurisdiction to threaten arbitral tribunals' authority to rule on their jurisdiction.
- The source of a court's jurisdiction to issue an anti-arbitration injunction under the Arbitration and Conciliation Act 1996 is ambiguous. The absence of an express provision authorising the grant of anti-arbitration injunctions in the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 and the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration1985 complicates this matter further. Further, no provision in any applicable law declares anti-suit injunctions as illegal.
Conflicting judgements
Delhi High Court in Bina modi vs Lalit modi
Facts of the case:
A Trust Deed was executed at London between Mr. K K Modi and Bina Modi, Charu Modi, Lalit Modi, and Samir Modi under the name called K K Modi Family Trust. Clause 36 of Trust Deed provided for the dispute resolution vlause to resolve the disputes through an amicable settlement. In light of the same, one of the trustees, Mr. Lalit Modi invoked dispute resolution clause of the deed by filing an application before International Chambers of Commerce (ICC), Singapore. Meanwhile, in respect of the arbitration proceedings initiated in Singapore, the other trustees, filed anti arbitration injunction suit, seeking restraining orders against the proceedings stating that the arbitration proceeding is contrary to the public policy of India.
Question involved:
Whether an anti-arbitration injunction is lawful
Observation and Judgement:
The Hon’ble High Court further highlighted the doctrine of ”Kompetenz-Kompetenz and contended that Section 41(h) of Specific relief Act,1963 bars court from granting injunction in cases where alternate efficacious remedy is available and in the present case Section 16 of Arbitration Act, 1996 provides the efficacious remedy.
In light of the above, the Hon’ble Delhi High Court rejected the suit granting anti arbitration injunction and directed the parties to resolve the dispute before the Arbitral Tribunal, inclusive of the non-arbitrability disputes arising out of trust deed.
Calcutta High Court in Balasore Alloys Limited v. Medima LLC
Facts of the case:
An Indian company Balasore Alloys Limited and a US company Medima LLC, who in 2017, entered into an arrangement for the sale of high carbon ferro chrome manufactured by Balasore and its exclusive distribution by Medima in the territories of Canada and USA. According to the agreement, the two parties decided to refer the potential disputes to arbitration.
Question involved:
The question arose whether the seat of arbitration would be in India or before the International Chamber of Commerce (ICC) in the United Kingdom. According to the clause in the Agency Agreement from 2018, the ICC would have the jurisdiction, however the terms and conditions in purchase orders required application of Indian arbitration law with Kolkata as the venue for arbitration.
When the US company Medima started arbitration proceedings in the ICC, United Kingdom, the Indian Company Balasore moved the Calcutta High Court seeking restrictions on the UK arbitration, and an injunction against the foreign seated arbitration.
Observation and judgement:
The Calcutta High Court has found that Balasore did not conclusively discharge its burden of displaying whether the ICC in London, the alternate forum in this case, is either a forum non-conveniens or that the proceedings initiated before it by the respondent are oppressive in nature. The court further noted that mere existence of multiple proceedings in multiple forums is not sufficient reason to render an arbitration agreement inoperative. The court thus found no reason to grant an anti-interim injunction to restrain the arbitration proceedings before ICC in UK.The Calcutta High Court ordered that Indian courts have the power to grant anti-arbitration injunctions against foreign seated arbitrations .
Thus after two conflicting judgements, the legal validity of anti arbitration clause still remains uncertain. This ambiguity should be addressed by the government by having clear provisions in the act.
- Meaning
- Case laws
- Conclusion
