By Sean Hardy - Senior Associate, Pinsent Masons MPillay & Raman Kaur - Associate, MPillay

In the recent case of BC Andaman v Xie Ning [2017] SGHC 64 the Singapore High Court confirmed its power to grant permanent anti-suit injunctions to restrain foreign court proceedings brought in breach of arbitration agreements governed by Singapore law. 

The Singapore Courts' application of anti-suit injunctions in this context is a relatively recent development but is now well-established.

Taking steps to stop (or prevent) the breach of arbitration agreements is of course consistent with both the Singapore Courts’ well established reputation for giving primacy to and upholding arbitration agreements, and Singapore's reputation as an international arbitration hub.

Some commentators, however, have suggested that while it is clear the Singapore Courts have the power to issue interim anti-suit injunctions in this context, they may not have the power to issue permanent anti-suit injunctions. Others continue to question the legitimacy of anti-suit injunctions which restrain foreign court proceedings more generally.

This month we examine in light of BC Andaman v Xie Ning anti-suit injunctions under Singapore law where there is an arbitration agreement, the sources of the Singapore Court's power to grant them, and some of the arguments against their application.

The basics

A valid arbitration agreement imposes a contractual obligation on the parties – in respect of matters governed by the agreement – to arbitrate disputes and, in turn, to refrain from commencing proceedings in any other forum.

When a party breaches that agreement by commencing foreign court proceedings, a Court (or Tribunal) may grant an anti-suit injunction to prevent the party from commencing or continuing those proceedings. An interim injunction, usually sought where there is great urgency, is of course temporary and subject to final determination by the Court or Tribunal. A permanent injunction is final.

An anti-suit injunction in this context (interim or permanent) does not restrain the foreign Court from hearing the proceedings. Rather, it restrains the party pursuing the foreign court proceedings from doing so, or continuing to do so.

Test

BC Andaman confirms that the test applied to the granting of anti-suit injunctions (interim or permanent) differs from the test applicable to interim injunctions generally (typically the test laid down in American Cyanmid Co v Ethicon [1975] A.C. 396).

The Court will consider various factors, including the breach of the arbitration or other jurisdiction agreement, which is the more appropriate forum, whether the foreign court proceedings are vexatious or oppressive, and whether any injustice would be suffered by the party bringing the foreign court proceedings by depriving it of legitimate judicial advantages in doing so.

However, the Singapore Courts will generally grant an anti-suit injunction to restrain a party from pursuing foreign court proceedings where it can be established that doing so is in breach of a valid arbitration agreement. In Maldives Airport v GMR Male International Airport the Singapore Court of Appeal followed the approach of the English Court of Appeal in Angelic Grace [1995] 1 Lloyd’s Rep that an injunction to restrain foreign Court proceedings is justified “on the clear and simple ground that the defendant has promised not to bring them" (Maldives Airport, at [42]).

Source of power

The Singapore High Court first granted an interim anti-suit injunction to prevent the breach of an arbitration agreement in 2002 (WSG Nimbus Pte Ltd v Board of Control of Cricket in Sri Lanka [2002] 1 SLR(R) 1088).

However, it was not until 2013 that the Singapore Courts considered the granting of a permanent anti-suit injunction in this context (Maldives Airport).

The Court of Appeal gave a clear nod to the practice. Menon CJ noted, obiter, at [42] that the right to resolve disputes pursuant to an arbitration agreement could “rightfully be protected by way of an anti-suit injunction, whether on a final or an interim basis”.

Finally, in 2015 in R1 International Pte Ltd v Lonstroff AG [2015] 1 SLR 521 the Singapore Court of Appeal granted a permanent anti-suit injunction, restraining Swiss court proceedings on the basis that that parties had an agreement to arbitrate in Singapore.

The existence and source of the court’s power to grant a permanent anti-suit injunction was not addressed in the judgment by the Court of Appeal in R1 International. However, these issues had been considered, obiter, in the decision at first instance ([2014] SGHC 69).

In the High Court below, Prakash J (as she then was) noted that the court has the power to grant a permanent anti-suit injunction to prevent a breach of an arbitration agreement and that this power emanated from section 4(10) of the Civil Law Act. She also noted that clear words would be needed to abrogate this general power and that the International Arbitration Act does not contain such language.

In BC Andaman Loh J noted the "well-established" principles governing the granting of permanent anti-suit injunctions and their statutory recognition. He cited s 4(10) of the Civil Law Act, as Prakash J had done, but also relied on the Court's inherent jurisdiction as per paragraph 14 to the First Schedule of the Supreme Court of Judicature Act:

14. [The High Court has the] Power to grant all reliefs and remedies at law and in equity, including, damages in addition to, or in substitution for, an injunction or specific performance."

This is a helpful clarification as reliance on section 4(10) of Civil Law Act alone is potentially problematic given it appears on its face to be limited to the court's power to grant interim (or interlocutory) rather than permanent injunctions.

Arguments against

International Arbitration Act

The Singapore Courts have previously recognised the International Arbitration Act as expressly granting it the power to grant interim anti-suit injunctions (section 12A, read with section 12(1)(i) of the IAA), but not permanent anti-suit injunctions (for example, R1 International Pte Ltd v Lonstroff AG [2014] SGHC 69).

 In turn, it has been suggested that Article 5 of the Model Law (which has the force of law pursuant to section 3(1) of the International Arbitration Act) precludes the Courts from granting permanent anti-suit injunctions, given the absence of an express power to do so (unlike interim anti-suit injunctions). Article 5 provides that:

"In matters governed by this Law, no court shall intervene except where so provided in this Law."

However, as above, the Singapore Courts have identified a different legislative source of their power to grant permanent anti-suit injunctions, which does not rely on the International Arbitration Act.

Further, this objection assumes that the Model Law exhaustively governs all matters relating to the enforcement of arbitration agreements, and that this must therefore include permanent anti-suit injunctions. However, the travaux prepartoires of the Model Law suggests that this is not the case, indicating that the Model Law does not govern all enforcement-related matters, including for example the impact of State immunity and parties' capacity to conclude an arbitration agreement

Kompentenz-Kompentenz

A further objection to the Court's power to grant permanent anti-suit injunctions has been proposed in the specific scenario where the injunction is sought before a tribunal decides on its jurisdiction, thus offending the kompetenz-kompetenz principle that the tribunal must have jurisdiction to do so.

However, this is academic because, if the anti-suit injunction is granted, the tribunal would still have the opportunity then to rule on its jurisdiction.

On the other hand, if the anti-suit injunction was not granted in these circumstances and the foreign court accepted jurisdiction, this would arguably represent a far more serious breach of the kompetenz-kompetenz principle given the foreign court would effectively be deciding that the arbitration agreement does not apply and the arbitral tribunal should not have jurisdiction.

New York Convention

A related argument is that in accordance with Article II of the NY Convention, which obliges courts of signatory countries to stay court proceedings brought in breach of an arbitration agreement, any foreign court of a signatory country should first be given the opportunity to stay those court proceedings. In turn, if an anti-suit injunction deprives the foreign court of this opportunity, it offends the NY Convention.

However, as noted by the High Court in WSG Nimbus, the NY Convention "obliges state parties to uphold arbitration agreements and awards". Anti-suit injunctions to restrain foreign court proceedings commenced in breach of arbitration agreements are, in principle, entirely consistent with this objective.

Further, the practical reality is that not all signatories fully honour their obligations under the NY Convention.

The alternative – if an anti-suit injunction is not granted on this basis and the foreign court accepts jurisdiction but does not then stay the court proceedings – would arguably represent a far more serious breach of the NY Convention.

International Comity

Finally, arguments to resist anti-suit injunctions (both interim and permanent) on grounds of international comity are probably as old as the remedy itself.

However, it is well established under English law, and there has been no departure from this under Singapore law, that any affront to comity is minimal where an anti-suit injunction is sought to enforce a party's contractual agreement to arbitrate. As noted in Angelic Grace, which was approved by the Singapore Court of Appeal in Maldives Airport at [42]:

“…I cannot accept the proposition that any Court would be offended by the grant of an injunction to restrain a party from invoking a jurisdiction which he had promised not to invoke and which it was its own duty to decline.”

Conclusion

It is clear that the Singapore Courts are prepared to take action against parties who breach valid arbitration agreements by commencing foreign court proceedings.

While BC Andaman is unlikely to silence all detractors, it helpfully provides further confirmation and clarity regarding the Singapore Court's position that it has the power to grant both interim and permanent anti-suit injunctions to restrain foreign court proceedings brought in breach of arbitration agreements, and the source of that power.

The Singapore legislation, NY Convention and legal doctrines considered above do leave some, limited room for arguments that the Singapore Courts do not have the power to grant anti-suit injunctions – particularly permanent anti-suit injunctions.

However, these arguments, although no doubt of interest to legal commentators, are unlikely to be of any practical application before the Singapore Courts when considered in the full context of the Singapore legislation and the NY Convention.