Gazprom OAO  Judgment in EUCJEU C-536/13
The ability of the English courts to restrain court proceedings in another Member State in breach of an arbitration agreement was curtailed, following the infamous decision of the Court of Justice of the European Union (CJEU) in Allianz SpA (formerly Riunione Adriatica di Sicurtà SpA) v West Tankers Inc, (The Front Comor) (Case C-185/07). Earlier this year, there were hopeful signs that this decision might be reviewed following the referral to the CJEU by the Lithuanian Supreme Court of similar questions arising in a dispute between Gazprom OAO and Lithuania. The CJEU’s decision in that case was issued on 13 May 2015 and while it has declined to revisit The Front Comor, the CJEU has potentially opened up the back-door to court ordered, intra-EU anti-suit injunctions.
In the West Tankers case, the CJEU found that it was incompatible with the Brussels Regulation 44/2001 (the original Brussels Regulation) for a court of a Member State to restrain a person from commencing or continuing proceedings before the courts of another Member State on the ground that the proceedings would be in breach of an arbitration agreement, in circumstances where the proceedings brought in the other Member State were within the scope of the Brussels Regulation. This decision meant that an anti-suit injunction could not be granted to restrain proceedings within the scope of the original Brussels Regulation brought in another EU Member State in breach of an arbitration clause.
Since – and in part because of – the decision in West Tankers, the original Brussels Regulation has been replaced by Brussels Regulation 1215/2012 (the recast Brussels Regulation), which has applied since 10 January 2015.
It is against this background that a dispute arose between Gazprom OAO and Lithuania concerning the running of Lithuania’s main natural gas provider, in which both parties were shareholders. The Lithuanian Ministry of Energy initiated court proceedings in Lithuania. Gazprom subsequently commenced arbitration under the rules of the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) in Sweden. Gazprom argued that the Ministry’s claims were in breach of an arbitration agreement contained in the shareholders’ agreement to which they were both parties. The tribunal in the SCC arbitration issued an award ordering Lithuania to withdraw certain of its court claims (subsequently referred to by the Lithuanian court as an anti-suit injunction), which Gazprom then sought to have recognised and enforced in the Lithuanian Court of Appeal. The court refused and Gazprom appealed to the Supreme Court of Lithuania, where Lithuania argued that, in light of West Tankers, the anti-suit injunction issued by the arbitral tribunal was contrary to the original Brussels Regulation.
The Supreme Court of Lithuania referred the matter to the CJEU, asking whether the court of a Member State could refuse to recognise and enforce an award containing an arbitral anti-suit injunction as being incompatible with the original Brussels Regulation.
Advocate General opines that West Tankers should be reconsidered
On 4 December 2014, Advocate-General Wathelet concluded that the original Brussels Regulation must be interpreted as not requiring the court of a Member State to refuse to recognise such an award (the conclusion); and (b) suggested, in the context of a discussion of the recast Brussels Regulation, that it is was possible that the CJEU might reconsider the approach taken in West Tankers, both in relation to the original and the recast Brussels Regulation (the suggestion).
The decision of the CJEU
The CJEU declined to follow the Advocate-General’s suggestion and has therefore avoided revisiting its earlier decision in West Tankers. Although it referred to West Tankers, the CJEU limited itself to considering the specific questions posed by the Lithuanian court. In this respect, the CJEU agreed with the Advocate General’s conclusion that the Brussels Regulation must be interpreted such that a Member State court is not required to refuse to recognise or enforce an arbitral award containing an anti-suit injunction.
In reaching this decision, the CJEU confirmed that arbitration is outside the scope of the original Brussels Regulation because the Regulation governs only conflicts of jurisdiction between courts of the Member States. The CJEU took the view that there was no such conflict in this case and no question of infringement of trust by the interference of the court of one Member State in the jurisdiction of the court of another Member State (the only court involved was the Lithuanian court). The arbitral award did not deny the party restrained from obtaining judicial protection because, in any proceedings for recognition and enforcement of the arbitral award, that party could contest recognition and enforcement and the Lithuanian court would have to determine, on the basis of national procedural law and international law, whether or not the award should be recognised and enforced.
The CJEU therefore concluded that the original Brussels Regulation did not “preclud[e] a court of a Member State from recognising and enforcing, or from refusing to recognise and enforce, an arbitral award prohibiting a party from bringing certain claims before a court of that Member State, since that regulation does not govern recognition and enforcement, in a Member State, of an arbitral award issued by an arbitral tribunal in another Member State”.
The original Brussels Regulation is widely considered to have been a successful European instrument. However, there were concerns including in relation to the arbitration exception whose application in practice resulted in ambiguity about the boundaries between the jurisdiction of Member State courts to act in support of arbitration in accordance with national law and their jurisdiction to act under the Brussels Regulation.
The CJEU sought to address this ambiguity in the West Tankers case. Unfortunately, this decision has had the no doubt unintended but unfortunate consequence of opening the door for parties to act abusively by bringing substantive proceedings within the scope of the Brussels Regulation in the courts of the Member State most likely to find the arbitration clause invalid (so-called “Italian torpedo” tactics), and rendering the party wishing to uphold the arbitration agreement and other Member State courts, including the courts of the seat of the arbitration, powerless to prevent this. It also means that the courts of those other Member States will subsequently have to enforce any judgment on the merits given by the Member State court that heard the substantive claim in breach of the arbitration clause.
Recital 12 of the recast Brussels Regulation seeks to address this concern as it makes clear that the ruling by a court of one Member State on the effectiveness of an arbitration agreement is not subject to the rules of recognition and enforcement laid down in the recast Brussels Regulation. Following the Opinion of Advocate General Wathelet in Gazprom OAO in particular in respect of the recast Brussels Regulation, it was hoped that the CJEU might strengthen the effect of Recital 12 and revisit the approach taken in The Front Comor. The CJEU has not done so.
While this might, at first glance, appear unsatisfactory for users of arbitration keen to quell the tide of the abusive Italian torpedo, the decision warrants closer review. The CJEU concluded that the original Brussels Regulation “does not govern recognition and enforcement, in a Member State, of an arbitral award issued by an arbitral tribunal in another Member State”. This at least suggests that the decision in Gazprom should be the same where the courts of more than one Member State are involved in the analysis. In other words, it is at least open to debate following this decision whether a party to an arbitration seated in one Member State could now obtain an arbitral award restraining a counterparty from continuing proceedings in another Member State which could then be recognised by the courts at the seat, effectively obtaining a court-ordered anti-suit injunction by the back door and circumventing the limitation imposed by West Tankers.
Alternatively and possibly avoiding the inevitable risks involved in recognition and enforcement proceedings (and the question whether such an injunction could ever be issued as an award), a party may seek the arbitral injunction in the form of a peremptory order. If the arbitration were London seated, at least, that order could then be enforced by court order under section 42 of the Arbitration Act 1996. In either case, the party concerned would then have the benefit of a court order preventing their arbitral counter-party from pursuing proceedings in breach of the arbitration agreement in the court of another Member State with equivalent effect to a standard court-issued anti-suit injunction.
 The Court of Justice of the European Union was formerly known as the European Court of Justice (ECJ).