Singapore: High Court considers whether it can issue a permanent anti-suit injunction in aid of foreign international arbitrations

In R1 International Pte Ltd v. Lonstroff AG [2014] SGHC 69, the High Court considered whether the courts could issue permanent anti-suit injunctions in aid of domestic and foreign international arbitrations.

Facts

This case involved a Singapore claimant (“R1 International“), and a Swiss respondent, (“Lonstroff“). R1 International sold rubber to Lonstroff in five separate orders. Each order was concluded by R1 International sending Lonstroff a signed sales contract. Lonstroff itself never signed the contracts. The five orders provided for arbitration either in London or Singapore.

A dispute arose in relation to the second order, which provided for arbitration in Singapore. Lonstroff claimed that the rubber provided by R1 International emitted a smell, which made it unsuitable for Lonstroff’s purposes. When Lonstroff mentioned this to R1 International, R1 International refused to offset payment against the cost of delivery.

Lonstroff brought proceedings against R1 International in the Swiss courts in March 2013. In July 2013, R1 International responded by trying to commence arbitration against Lonstroff. R1 International argued that the parties were bound by an arbitration agreement found in the sales contract related to the second order.

R1 International therefore asked the Singapore Commodity Exchange (“SICOM“) to set up an arbitral tribunal to hear the dispute. SICOM replied that it would only do so if: 1) the Swiss proceedings were suspended; and 2) both R1 International and Lonstroff agreed to refer the dispute to SICOM arbitration.

R1 International successfully obtained an interim anti-suit injunction preventing Lonstroff from pursuing the Swiss proceedings. As a result, both Lonstroff and R1 International brought applications before the High Court. Lonstroff applied to discharge the interim injunction, whereas R1 International applied to make the injunction permanent.

The High Court’s Decision

The High Court Judge noted that the threshold issue was whether an arbitration agreement even existed between the parties. Counsel for R1 International argued that the arbitration agreement was incorporated into the contract for the second order based on trade custom, or in the alternative, previous dealings between the parties. The Judge rejected both arguments and found that there was no such arbitration agreement. The Judge therefore discharged the interim anti-suit injunction, thereby allowing Lonstroff to proceed with the Swiss proceedings.

Although it was not necessary to do so, the Judge went on to discuss the law relating to interim and permanent anti-suit injunctions. Anti-suit injunctions are orders which a court makes to restrain a party before the court from continuing with foreign court proceedings which that party has commenced.

The Judge noted that Sections 12 and 12A of the International Arbitration Act (“IAA“) do not give courts the power to issue permanent anti-suit injunctions in aid of arbitration. Section 12(1) IAA only enables the courts to issue interim (i.e., non-permanent) anti-suit injunctions. This power could be exercised irrespective of where the arbitration is seated.

The power to issue permanent anti-suit injunctions, however, derives from Section 4(10) of the Civil Law Act (“CLA”). This is a wide-ranging injunctive power which can be exercised to permanently restrain foreign proceedings, in aid of local proceedings. The Judge held the local proceedings included not only court proceedings but also arbitrations. The Judge held that this power was not displaced or replaced by the IAA which only granted the Court the power to issue interim anti-suit injunctions.

But does the Court have the power to issue permanent anti-suit injunctions under the CLA in aid of foreign seated arbitrations (as opposed to domestic arbitrations)? This question did not strictly arise because the specific order in issue provided for arbitration in Singapore. However, some of the sales orders did provide for arbitration in London.

Although the Judge posed the question, she ultimately did not express a concluded opinion on whether courts can issue a permanent anti-suit injunction in aid of foreign seated arbitrations as the issue was not fully argued and it was in any event not necessary to decide the issue. On the one hand, it was logical and consistent for the court to be able to do so based on the more wide-ranging provision in Section 4(10) of the CLA. There could also be good reasons why such a permanent anti-suit injunction may be needed – for example the forum may not provide effective interim measures in support of the foreign seated arbitration. On the other hand, such an extension of power would potentially affect more situations than simply those concerned with arbitration and therefore policy considerations would come into play.

Analysis

This case is interesting because of the analysis relating to permanent anti-suit injunctions. It was always clear from the IAA that the courts can issue interim anti-suit injunctions in aid of arbitration, irrespective of where the arbitration is seated. However it was unclear whether, and on what basis, the courts could issue a permanent anti-suit injunction in aid of arbitration.

The case acknowledges that courts can issue a permanent anti-suit injunction in aid of arbitrations seated in Singapore. That power is derived from Section 4(10) of the CLA. However, while recognising that there were arguments for and against the extension of such a power to foreign seated arbitrations, the Court preferred not to express a concluded opinion because the point had not been fully argued and any decision either way was potentially far-reaching. The Court’s reluctance may have something to do with the Court of Appeal’s remarks on Section 4(10) of the CLA in Swift-Fortune Ltd v. Magnifica Marine SA [2007] 1 SLR(R) 629. In that decision, the Court of Appeal left open the issue of whether courts had the power under Section 4(10) to grant injunctions in aid of foreign court proceedings or foreign arbitral proceedings. Nevertheless, the Court of Appeal remarked that since Section 4(10) has remained unchanged since 1878, the legislative intent also remain unchanged. The meaning of Section 4(10) cannot change merely because social or political conditions have changed. As such, the Court thought that it was arguable that the legislature in 1878 could not have intended for Section 4(10) to grant courts the power to grant injunctions in aid of foreign court proceedings or foreign arbitral proceedings. The Court of Appeal’s remarks suggest that a party asserting that the courts have the power under Section 4(10) of the CLA to grant anti-suit injunctions in aid of foreign seated arbitrations will need to grapple with the issue of how the legislature in 1878 could have intended to provide for such a power through Section 4(10).

By Leng Sun Chan SC, Andy Leck and Celeste Ang.

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