Arjun Sahni*
Abstract
Parties to a contract, despite the existence of an arbitration agreement, often exhibit obstructive behavior by initiating parallel litigation proceedings, outside the agreement’s natural forum. Remedial judicial intervention is often sought by the aggrieved party in the form of anti-suit injunction; mainly on the grounds that there exists a valid arbitration agreement. However, can such a remedy be sought by a non-party to an agreement? At the outset, this post analyses the recent decision of the Singapore High Court, wherein the HC recognized the rights of a third party to apply for and seek an anti-suit injunction against a party to a contract and the background behind it. It ends with the author’s comment on the decision and its position in law.
Introduction
It is well established that a party to a contract can apply for the stay of parallel litigation proceedings given that it has applied for such a stay in the natural forum and there is a valid and enforceable arbitration agreement.
However, can a third party apply for such a stay?
The decision of Singapore’s High Court in Hai Jiang 1401 Pte. Ltd. v. Singapore Technologies Marine Ltd. (‘Hai Jiang’) ([2020] SGHC 20) is a first where the right of a non-party to obtain an anti-suit injunction against a party to that contract has been endorsed and recognized.
What did the Court hold in Hai Jiang?
In Hai Jiang, a third party applied for an anti-suit injunction on the grounds that a suit was initiated despite there being an exclusive and valid arbitration agreement, outside the natural forum, and that there was vexatious and oppressive conduct on behalf of the party through the said suit.
Judge Quentin Loh, while delivering the judgement, reiterated the governing principles of anti-suit injunctions, laid down in Lakshmi Anil Salgaocar v. Jhaveri Darsan Jitendra ([2019] SGCA 42); the courts would grant an anti-suit injunction if and when:
The initiation of such a suit would amount to the breach of an arbitration agreement and an exclusive jurisdiction clause;
Such an injunction is required to secure the “ends of justice”; and
The court is satisfied that such an injunction would be an effective remedy.
The Court opined that the primary benefit arising out of the suit and the dispute would directly affect the third party and that there was vexatious and oppressive conduct on behalf of the party by initiating such suit outside the natural forum, breaching the arbitration agreement and the exclusive jurisdiction clause (the arbitration agreement in the case was in the form of a clause and the latter contained the provisions regarding exclusive jurisdiction). Thus, the Court held granting an anti-suit injunction would secure the “ends of justice” and be an effective remedy.
The Court’s holding was based on the principle laid down in the English case of Sea Premium Shipping Ltd. v. Sea Consortium Pte. Ltd. ([2001] EWHC 540 (Admiralty)) (‘Sea Premium’) and other related cases.
The principle laid down in Sea Premium
England and Wales High Court in 2001 in the Sea Premium case was faced with the same question. A third party had approached the court seeking an anti-suit injunction against a party to a contract that had initiated court proceedings in Dubai, UAE. The court opined that the parallel proceedings directly affected the interests of the third party. In light of the same, given that there was a valid and enforceable arbitration agreement between the parties to the contract and England was the natural forum, the Court did not hesitate in granting the anti-suit injunction sought.
This holding, known as the Sea Premium principle, was based on the decision of the UK Court of Appeal in 1995 in Aggeliki Charis Compania Maritima SA v. Pagnan SpA ([1995] 1 Llyod’s Rep. 87) (‘Charis’). The Court in Charis opined that the initiation of proceedings outside the natural forum amounts to oppressive and vexatious conduct and in light of there being a valid arbitration agreement containing an exclusive jurisdiction clause, granted the therein sought anti-suit injunction.
The Sea Premium case holds good in law and has been cited in many UK and Hong Kong courts’ judgements (see Qingdao Huiquan Shipping Company v. Shanghai Dong He Xin Industry Group Co. Ltd. ([2018] EWHC 3009 (Comm)), Clearlake Shipping Pte. Ltd. & Anr. v. Xiang Da Marine Pte. Ltd. ([2019 EWHC 2284 (Comm)) and Dickson Valora Group (Holdings) Co. Ltd. v Fan Ji Qian ([2019] HKCFI 482)). The Singapore court in Hai Jiang also found the aforementioned cases persuasive and applicable as part of Singapore law. Typically, the benefits arising out of an arbitration agreement cannot be claimed by a non-party. However, the Sea Premium principle and judgments that follow the principle show that there are exceptions to this.
Comments
Anti-suit injunctive reliefs are granted in cases where there is a clear breach of the arbitration agreement (see Sun Travels & Tours Pvt. Ltd. v. Hilton International Manage (Maldives) Pvt. Ltd. ([2019 SGCA 10)). Such injunctions go to uphold the arbitration agreements and are in conformity with the international law and standards (see Midgulf International Ltd. v. Groupe Chimiche Tunisien ([2010] EWCA Civ 66)).
Though it is well established that Singapore courts have the power to grant anti-suit injunctions u/S. 6(1) r/w S. 31 of the Singapore Arbitration Act, 2001 and u/S. 4(10) of the Civil Law Act, 1909 (see BC Andaman Co. Ltd. & Ors. v. Xie Ning Yun & Anr. ([2017] SGHC 64)), the power to apply for and obtain such injunctions, till now, was only in the hands of the parties to a contract. The Hai Jiang judgement marks an important precedent in the field of anti-suit injunctions and brings the position in Singapore in line with that in the UK and Hong Kong. This holding reaffirms the pro-arbitration approach embraced by Singapore.
The court nevertheless noted that “this is a complex area of law that is developing and the growing number of cases show that the boundaries of the effect of exclusive forum clauses (whether exclusive jurisdiction or arbitration clauses) on third parties are being tested”. Not only does this show that the field of arbitration law is underdeveloped but also it goes on to point out that the courts, while granting anti-suit injunctions to third parties need to make careful determinations in light of the then given facts and circumstances and would grant the sought injunctions if and when:
The third party is directly affected by the initiated suit;
Such a suit has been initiated outside the natural forum; and
There is a valid and enforceable arbitration agreement and an exclusive jurisdiction clause.
Such a power, as was expressed by Judge Quentin Loh, would have to be exercised cautiously and carefully, and only in situations where it would be an effective remedy. The third party, to seek a such relief, will need to have the requisite locus standi in addition to making sure that the other required conditions are fulfilled.
* 3rd year, Symbiosis Law School, Noida. The author can be contacted at arjun007.sahni@gmail.com.
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