David Ndolo, Coventry Law School, Coventry University

The UK parliament passed the European Union Withdrawal Act 2018 (“EUWA”) that gained royal accent on 26 June 2018. While the exit day is currently set for 29 March 2019, there is a proposed transition period until December 2020 in case a Brexit deal is agreed upon.

In any event, the default position is set under sections 1 and 2 of EUWA, that EU Law will no longer be a source of law in the United Kingdom after the exit day. This includes the decisions of the Court of Justice of the European Union (“CJEU”).

To avoid legal gaps and uncertainty, the EUWA 2018 copy pasted all EU law, including CJEU case law, into the domestic UK law. As a result, the first and second instance courts will remain bound by previous CJEU cases. The UK Supreme Court, however, under section 6(4) of the EUWA, has the power to depart from previous CJEU decisions in the same way it can depart from its own earlier case law.

In other words, the UK Supreme Court can depart from the West Tankers case removing the restriction on UK courts power to issue anti-suit injunctions to parties in EU national courts. As has been discussed here, the CJEU held in West Tankers [(C-185/07) EU:C:2009:69 (ECJ (Grand Chamber)] that the anti-suit injunctions of this nature run counter to the principle of mutual trust among the EU member states as required by the Brussels I Regulation (replaced by the Brussels Recast Regulation in 2015). As result, EU member state courts, including English courts, cannot issue an anti-suit injunction in favour of arbitration where a party starts foreign court proceedings in an EU state. Despite the controversy that the AG’s opinion raised in Gazprom OAO EU:C:2014:2414., the English courts re-affirmed that they still firmly apply the CJEU’s approach in West Takers in Nori Holdings Ltd v Bank Financial Corp [2018] EWHC 1343 (Comm).

The UK Supreme Court highly values its power to issue anti-suit injunctions in favour of arbitration. In fact, in Turner v Grovit [2001] UKHL 65, it formally referred to anti-suit injunctions as an ‘important valuable weapon’ (emphasis added) and sees it as giving London seat of arbitration an advantage over its competitors. The UK Supreme Court has also twice ruled in favour of court’s power to issue anti-suit injunction in West Tankers [2007] UKHL 4 and Turner v Grovit as not being contrary to principle of mutual trust under Brussels Regulation 1, albeit its decisions were overturned by the CJEU.

Moreover, despite the CJEU ruling in West Tankers, the English courts have continued to grant anti-suit injunctions in favour of arbitration proceeding directed to parties who stated foreign proceeding in non-EU national courts. In fact in 2013, in Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP [2013] UKSC 35,the UK courts further widen their power to grant anti-suit injunction in favour to restrain foreign proceedings brought in breach of an arbitration agreement, to cases where there is no existing or proposed arbitration.

Following this, it is likely that the UKSC is to overturn West Tankers after the exit day such that UK courts will regain the full power to issue anti-suit injunctions post-Brexit. However, if this were to happen, the adoption of the Brussels I Recast2015 into domestic UK law and the previous CJEU decisions in West Tankers and Turners v Grovit EU:C:2004:228 are indications that the English courts would need to reconsider its power to issue anti-suit injunctions especially those directed to parties EU national courts.

If the UK were to regain the power to issue anti-suit injunctions where the foreign court proceedings are commenced in a European court, this may give the London seat as a practical pro-arbitration advantage over its competitors within the EU. This is because it will give the parties guarantee where there is valid arbitration agreement, the English Court can compel the parties to comply with that voluntarily choice to settle via arbitration even where the proceedings are commenced in EU state court. Indeed, in a recent survey conducted by Queen Mary University the respondents indicated that they will continue to use English law after Brexit because of its support for arbitration and regain of such a remedy may further cement their decisions. (QMU & White Case, ‘International Arbitration Survey: The Evolution of International Arbitration’(2018) at 12 )

However, the corollary to such an approach is that there is also the risk that where an anti-suit injunction is granted to stop proceedings in EU State court, those courts might later refuse to recognise and enforce the arbitral award on the basis its being contrary to the EU member state’s public policy in reliance on the New York Convention, Article V(2)b. In addition to this, as West Tankers only applies to EU State courts, EU State courts would equally be free to grant anti-suit injunctions to restrain a party from pursuing a claim before the English courts. As a result, this approach can be seen by the parties as being too uncertain, restrictive and a disadvantage and thus they prefer an EU Seat where it is clear and well settled that EU state court cannot grant anti-suit injunction directed to a party in EU state court. In such a case it is likely that Paris as a seat of arbitration will most benefit. (QMU Survey 2018)