Why anti-suit injunctions may be on the rise after Brexit
Anti-suit injunctions can be an important tool in cross-border commercial disputes. They can stop a party from pursuing a claim where those proceedings would be in breach of a contractual jurisdiction clause or are otherwise vexatious. Brexit is expected to lead to a rise in the number of anti-suit injunctions sought in the English courts. In this article we analyse the four main reasons why that is the case.
From 11pm on 31 December 2020, the end of the Brexit transition period, the rules on jurisdiction changed for the UK. Up to that point, the rules were found in the Brussels Regime1 which applied equally across the EU and most EFTA states and offered a high degree of certainty as to which court had jurisdiction to hear a dispute.
However, that regime fell away for the UK from 31 December 2020 (save for a handful of transitional provisions, for example, in relation to proceedings commenced before that date). To mitigate the effects of that change the UK joined the 2005 Hague Convention on Choice of Court Agreements (Hague 2005) in its own right from 1 January 2021 and has also sought to join the 2007 Lugano Convention (albeit so far without success).
Hague 2005 is therefore, as matters stand, the key regime governing jurisdiction in cross-border matters between the UK and the EU2. It is narrower in scope than the Brussels Regime which it has replaced and, where it does not apply, commercial parties have only a patchwork of UK domestic law on jurisdiction to fall back upon that has no application outside the UK (with other EU countries having their own rules).
The result is much diminished certainty as to the approach that courts across the EU (and EFTA states) will take as to jurisdiction.
What is an Anti-suit injunction?
An anti-suit injunction is an order of the English courts, obtained by Party A, to restrain Party B from pursuing proceedings elsewhere (either in an overseas court or in arbitration). It is most commonly issued on the basis that Party B is in breach of contract (by breaching a jurisdiction clause or arbitration agreement) but can also be used to restrain otherwise vexatious or oppressive proceedings.
Why can anti-suit injunctions be expected to be more common post Brexit?
1. Anti-suit injunctions were prohibited under the Brussels Regime
The Brussels Regime effectively prohibited anti-suit injunctions between contracting states, regardless of whether they were intended to support a jurisdiction clause3 or an arbitration clause4.
This was because they had the effect of telling the court of another contracting state what to do; under the Brussels Regime, the question of jurisdiction was one for that court to consider in light of its obligations under that Regime. In certain circumstances, that was not an issue. For example:
- if a party to an exclusive jurisdiction clause in favour of the English courts brought a claim in France in breach of that clause, the French court would have had to stay its proceedings under the Brussels Regime, and defer to the English court.
- If, however, the same parties had agreed a jurisdiction clause in favour of an EFTA state to which only the Lugano Convention applied, there would have been no onus on the French court to stay proceedings. Instead, the French court would have had the right to consider whether it had jurisdiction (providing it were the court first seised). In these situations, the inability of a party to protect its position with an anti-suit injunction could have been a significant issue.
Post Brexit, it is once again open to parties to apply to the English courts for an anti-suit injunction to restrain overseas proceedings that were issued in breach of contract, regardless of whether those proceedings are in an EU or EFTA state.
2. The English Courts now have automatic jurisdiction where a contract includes an English jurisdiction clause
In April 2021, a new jurisdiction rule came into force for the courts of England (CPR 6.33(2B)(b)). This hands jurisdiction to the English court automatically where there is a choice of court clause in its favour (including those that are non-exclusive, asymmetric and or imposed on a weaker party, e.g. through “clickwrap” standard terms and conditions).
The effect is that, where these clauses apply, a Claimant can issue a claim form in England without first asking the English Court’s permission (albeit there is nothing to stop an opponent challenging jurisdiction further down the line).
The new rule was prompted by Brexit. When the Brussels Regime applied to the UK, a Claimant who was party to an English jurisdiction clause could bring a claim against an entity in the EU before the English courts without asking the permission of the English Courts. That was not initially the case after Brexit (unless Hague 2005 applied) and the new CPR 6.33(2B)(b) was seen by many as righting the imbalance caused by Brexit.
Whilst the new rule is good news for Claimants, who can avoid the attendant risk and costs of asking permission before serving a claim form, it is not such good news for Defendants. This is because it may be harder for a Defendant to challenge automatic jurisdiction than it is for it to challenge jurisdiction granted at the court’s discretion.
A by-product of the new rules, therefore, may be a rise in anti-suit injunctions. This is for two reasons. First, if a Defendant knows its opponent intends to issue a claim in England, it may try to “get in first” by issuing a claim overseas (the so called “Italian torpedo”); in turn, the Claimant may seek an anti-suit injunction in England in an attempt to sink the torpedo. Secondly, the Defendant may opt instead to seek an anti-suit injunction overseas (subject to the local law). That injunction may be tricky to enforce in England but could, at the very least, be taken into account by the English court when the Defendant later challenges its jurisdiction.
3. It might be argued that Hague 2005 Convention has a carve out for disputes involving parties exclusively from the EU
Many international commercial parties choose to include an exclusive English jurisdiction clause in their contracts. Post Brexit, the main form of protection for that contractually agreed position is Hague 2005.
However, Hague 2005 has a troubling “stand aside” carve-out: if the contracting parties are solely from the EU, there is an argument that Hague 2005 must “stand aside” and that the Brussels Regime will apply instead.
The Brussels Regime does not prioritise jurisdiction clauses in favour of non-EU states (such as the UK ). There is, therefore, a possibility that an EU Court applying the Brussels Regime to a dispute between EU contracting parties would decide that an EU court had jurisdiction, with the result that a party which had contracted to litigate any disputes in England would end up litigating elsewhere in Europe instead.
In those circumstances it would be open to that party to go to the English courts and seek an anti-suit injunction to restrain its opponent from pursuing the proceedings in the EU in breach of the agreed English jurisdiction clause (with the consequence that this is another reason why we may, post Brexit, see increasing numbers of anti-suit injunctions).
4. Arbitration is on the rise
Many commercial parties opt to resolve cross border disputes through arbitration rather than litigation, and more may now do so in order to side-step the jurisdictional and enforcement uncertainty thrown up by Brexit.
Courts in most jurisdictions are likely to uphold a contractual election to arbitrate disputes and enforcement is relatively straightforward across the 168 New York Convention contracting states.
However, anti-suit injunctions frequently go hand in hand with arbitration. It is not entirely uncommon, once a dispute occurs, for one contracting party to commence court proceedings notwithstanding the parties' previous agreement to arbitrate. In turn, it is open to the contractual counterparty to seek an anti-suit injunction to force the other party back into the arbitration it originally agreed to. An increase in arbitration, therefore, may lead to a rise in anti-suit injunctions seeking to hold recalcitrant counterparties to their contractual obligations.
While the full implications of Brexit continue to play out, it is clear that the UK / EU rules on jurisdiction have, for the moment at least, taken on an increased layer of complexity. It is likely that some commercial entities will seek to exploit that complexity by breaching previously agreed contractual choice of jurisdiction clauses for their own advantage. In such circumstances, wronged parties will need to fight back, and the anti-suit injunction may prove to be just the weapon they need.
1The Brussels Regime includes Regulation (EU) No 1215/2012 of 12 December 2012 (Brussels Recast) and the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters of 21 December 2007 (Lugano Convention), together with their respective predecessors as applicable.
2 The EFTA states are not party to Hague 2005
3 Turner v Grovit C-159/02 (2004)
4 Allianz SpA and Others v West Tankers Inc.  EUECJ C-185/07