The ECJ decision carries grave implications for arbitrations between parties from EC Member States that are party to an arbitration agreement with a London seat, or any other seat in the EU for that matter. In line with the ECJ decision, parties wanting to avoid quick and efficient arbitral hearings could be subjected to lengthy litigation procedures in courts that take significant periods of time to come to a decision. For parties in this situation, it may then become a race for jurisdiction between the parties as to who commences proceedings in a EC Member State first, irrespective of the legitimacy of the proceedings.
On 10 February 2009, the European Court of Justice handed down its decision in Case C-185/07, Allianz SpA (formerly Riunione Adriatica di Sicurta SpA) and Generali Assicurazioni Generali SpA v West Tankers Inc. This decision was the end of a lengthy dispute between the parties, that began in August 2000 when the “Front Comor”, a vessel owned by West Tankers and chartered by Erg Petroli SpA (“Erg”) collided in Syracuse, Italy with a jetty owned by Erg.
The charter party was governed by English law and contained a clause providing for arbitration in London. Erg claimed compensation from its insurers Allianz and Generali and commenced arbitration proceedings in London against West Tankers for the excess. West Tankers denied liability. After paying Erg compensation, Allianz and Generali brought proceedings against West Tankers in the Tribunale di Siracusa, Italy in 2003, to recover the money they had paid to Erg. West Tankers claimed that the Tribunale di Siracusa lacked jurisdiction to hear the matter due to the existence of the arbitration agreement.
West Tankers brought proceedings at the same time in the United Kingdom, Queen’s Bench Division, seeking a declaration that, in accordance with the arbitration agreement, the dispute between Allianz and Generali was to be settled by arbitration. West Tankers also sought an anti-suit injunction restraining Allianz and Generali from pursuing the proceedings in the Tribunale di Siracusa.
The Queen’s Bench Division upheld West Tanker’s claims and the anti-suit injunction. However Allianz and Generali appealed this decision in the House of Lords on the basis that it was contrary to Council Regulation (EC) No 44/2001 (“the Regulation”), that governs the jurisdiction of the Courts of Member States. Notably, article 1(2)(d) of the Regulation makes clear that the Regulation shall not apply to arbitration.
After observing that the answer to the question was not obvious, the House of Lords stayed the proceedings and referred the following question to the ECJ for a preliminary ruling:
“Is it incompatible with Regulation No 44/2001 for a court of a Member State to make an order to restrain a person from commencing or continuing proceedings before the courts of another Member State on the ground that such proceedings are in breach of an arbitration agreement?”
In light of Article 1(2)(d) of the regulation that explicitly purports to exclude arbitration from its scope, the ECJ turned firstly to the question of whether the proceedings brought by Allianz and Generali against West Tankers before the Tribunale di Siracusa comes within the scope of the Regulation. In answering that question in the positive, the Court found that because the subject matter of the dispute is the nature of the rights to be protected in proceedings, those proceedings come within the Regulation. Therefore, the Court found that any issue concerning the applicability of an arbitration agreement, including its validity, came under the scope of the Regulation.
Following this line of reasoning, the Court found that the use of an anti-suit injunction to prevent a court of a Member State, which normally has jurisdiction to resolve a dispute under Regulation No 44/2001, from ruling on the applicability of the Regulation to the dispute, amounts to “stripping that court of the power to rule on its own jurisdiction under Regulation No 44/2001”. Accordingly, the Court ruled that an anti-suit injunction is contrary to the general principle that every court seized itself, determines under the rules applicable to it, whether it has jurisdiction to resolve the dispute before it. The crux of the Court’s decision seemed to be that no court of one Member State is in a better position to determine whether the court of another Member State has jurisdiction.
The Court concluded by affirming that the answer to the question referred to it was that it is incompatible with Regulation No 44/2001 of a court of a Member State to make an order to restrain a person from commencing or continuing proceedings before the courts of another Member State on the ground that such proceedings would be contrary to an arbitration agreement.
The practical implications of this decision only applies if one party is domicile to an EC country. If so, the message to parties is not to arbitrate in a country where the ECJ has jurisdiction, or else risk being caught in protracted litigation with the effect of obstructing the arbitration. For parties that are both from non-EC states, this decision is not relevant, as the Brussels Regulations will not apply.