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From Russia with love? The limits of English anti suit injunctions

Star Reefers Pool Inc v JFC Group Co Ltd Pacific Basin [2012] EWCA Civ 14 (Court of Appeal LJs Rix, Sullivan, Lewison)

Star Reefers Pool Inc v JFC Group Co Ltd Pacific Basin [2012] EWCA Civ 14 (Court of Appeal LJs Rix, Sullivan, Lewison)

What is the basis for the English Courts granting an anti-suit injunction restraining a party from pursuing a claim in another jurisdiction, where there is no contractual agreement for English court jurisdiction, or for English arbitration?

The background concerned vessel owners, Star Reefers, time chartering two of its ships to a Cypriot company, Kalistad, under charterparties governed by English law/arbitration. Star Reefers required a parent company performance guarantee to be provided by Russian based JFC Group. To that end JFC issued letters separate to the charter (to which it was not a party) agreeing to guarantee Kalistad’s obligations.

The charters later ran into difficulties and were wrongfully repudiated by Kalistad, leaving Star Reefer with substantial claims for damages. They started arbitration against both Kalistad and JFC as the guarantor. JFC appointed an arbitrator without prejudice to its denial of being party to any arbitration agreement.

Meanwhile: (1) JFC started proceedings in Russia, denying liability under the guarantees and (2)  Star Reefers commenced separate English court proceedings against JFC, which (following an unsuccessful jurisdiction challenge by JFC) obtained unopposed summary judgment for some US$16 million. In parallel, Star Reefers applied for an injunction restraining the Russian proceedings (presumably as these substantive proceedings would prejudice possible attempts to enforce the undefended English judgment in Russia).  

Teare J., sitting in the Commercial Court, granted the anti-suit injunction, which JFC appealed.

The Court of Appeal granted the appeal and dismissed the injunction, applying the principles in Glencore v Exter Shipping [2002] 2 All ER (Comm). Where there was no jurisdiction agreement, the court’s approach boiled down to two issues, namely: (i) was England the natural forum?; and (ii) was the conduct of the party to be injuncted “unconscionable, vexatious or oppressive” i.e. an abuse of process designed to defeat justice in the matter, such that the claimant in the foreign court should be prevented from proceeding there? The court would always have to exercise caution, and would consider whether it would be unjust to the respondent to permit the injunction.

At first instance the Commercial Court had been persuaded that a number of factors - JFC starting proceedings without any notice, JFC not having previously disputed the guarantees, and the apparent weakness of the expert case on Russian law- indicated the Russian claim was vexatious and simply designed to frustrate Star Reefers.  

The Court of Appeal disagreed. There was nothing unconscionable about the Russian action. JFC had started the proceedings first. It was a legitimate tactical advantage to pursue. They had not promised to litigate or arbitrate in England. There was no duty to give warning of proceedings. Further, whilst the Russian law expert’s views might seem surprising, it could not be said that JFC’S contention as to their letters only being offers to guarantee (to which Star Reefers did not respond) rather than actual guarantees, were hopeless as a matter of Russian law.

Finally, the Commercial Court had overlooked considerations of comity in its judgment. Properly viewed, this was simply a case of opposing parties seeking to invoke principles of private international law so as to enable pursuit of the same substantive claim in different jurisdictions. In such a case the English Court would have to think “long and hard” before granting an injunction.

This decision provides two lessons. Firstly, for operators in the negotiation of charters, that to have a guarantor as party to the same contract will much simplify any later proceedings. Secondly, that outside the situation of exclusive jurisdiction agreements, absent compelling evidence as to a party’s bad faith, that the English courts will be reluctant to restrain foreign proceedings.

Mike Burns
Partner
Weightmans Marine & Transit
Weightmans LLP