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11 April 2019
Parties entering into arbitration agreements ordinarily abide by their contractually chosen dispute resolution mechanism and proceed accordingly. However, counterparties sometimes start proceedings in a foreign jurisdiction in breach of an arbitration clause. How does an innocent party restrain such conduct? In Sun Travels & Tours Pvt Ltd v Hilton Manage (Maldives) Pvt Ltd, the Singapore Court of Appeal set out firm guidance that a party in this scenario should act as fast as possible to restrain the counterparty by way of an anti-suit injunction.
The court clarified that once a judgment (including one subject to appeal) has been issued in a foreign court, it is too late for an anti-suit injunction to be sought or obtained in the seat court. The question remains as to when parties should attempt to obtain anti-suit injunction relief before a judgment has been handed down in the foreign proceedings. As an anti-suit injunction is an equitable relief and dilatoriness and unconscionable conduct can bar parties from obtaining such relief, they should proceed promptly and before the proceedings are too far advanced in the foreign jurisdiction to secure such relief. In other words, parties should move fast (and as soon as is practicable) once the breach of an arbitration agreement has been discovered to seek the anti-suit injunction in the Singapore courts.
Sun Travels & Tours Pvt Ltd (Sun) is a resort operation that owns a hotel in the Maldives. Hilton International Manage (Maldives) Pvt Ltd (Hilton) is a Maldivian incorporated company in the hotels and resort industry. Sun and Hilton entered into a hotel management agreement in February 2009. Sun was later dissatisfied with Hilton's performance and gave notice in 2013 to terminate the management agreement. Hilton accepted the termination on the basis that it was a wrongful repudiation of the agreement.
Hilton later commenced arbitration proceedings pursuant to the arbitration clause in the management agreement. In 2013, the International Chamber of Commerce Court of Arbitration fixed Singapore as the seat of arbitration. Midway through the arbitration proceedings, and after a partial award had been issued, Sun stopped participating in the proceedings even though it was given several opportunities by the tribunal to do so. The tribunal later issued an award ordering Sun to pay Hilton damages amounting to $20.945 million plus interest and $342,500 in legal fees incurred.
After the final award was issued, Hilton commenced enforcement proceedings in the Maldivian courts in relation to the arbitral awards. After some procedural hiccups around the proper court to commence the enforcement proceedings, Hilton obtained a judgment in its favour and commenced proceedings in the enforcement division of the Maldivian courts to start the second enforcement proceedings.
Before the appeal in the enforcement division was heard, Sun commenced a civil action in the Maldives against Hilton. The civil suit essentially concerned the same issues and disputes as that decided by the arbitral tribunal in the partial and final award.
In January 2017 the Maldivian Civil Court decided that it would determine both the procedural and jurisdictional matters at the same time when it heard the merits of the case on Sun's civil suit. The court later delivered a judgment in March 2017, holding that Sun had made out its claims against Hilton. This judgment was later relied on by the Civil Court's enforcement division to refuse Hilton's second enforcement proceedings (the March judgment). Hilton appealed against the March judgment and the appeal was still pending when the Singapore Court of Appeal delivered its judgment in the Singapore courts.
In July 2017 Hilton filed an application in the Singapore High Court against Sun. One of the reliefs sought was a permanent anti-suit injunction to restrain Sun from taking any steps in reliance on the March judgment. The Singapore High Court decided in Hilton's favour. Sun appealed against the order to the Singapore Court of Appeal.
The Singapore Court of Appeal confirmed that the jurisdiction to grant anti-suit injunction relief was equitable. In cases involving an arbitration agreement or an exclusive jurisdiction clause, showing a breach of such an agreement would suffice and anti-suit injunction relief would ordinarily follow, unless there were strong reasons not to allow it. However, this is subject to the caveat that the court must not feel diffident in granting an anti-suit injunction. For example, it may be the result of the applicant's delay in not seeking anti-suit injunction relief promptly, resulting in the foreign proceedings being too advanced.
In its judgment, the Singapore Court of Appeal justified its position on two bases. First, the longer the delay and the more advanced the foreign court proceeding becomes, the more unlikely the Singapore courts are to grant an anti-suit injunction given the time, effort and judicial resources that will be wasted by the abandonment of the foreign proceedings following the grant of an injunction. Second, what matters is the extent to which the delay has allowed the foreign court proceedings to have progressed. Pertinently, the Singapore Court of Appeal clarified that delay cannot be justified on the basis that jurisdictional objections are being made in the foreign court proceedings. Indeed, allowing such conduct on the part of the applicant would effectively give it two bites of the cherry to encourage parties to seek an anti-suit injunction if its challenge in the foreign court fails.
The Singapore Court of Appeal went on to expound on the limited circumstances seen to be appropriate to grant an anti-enforcement injunction, even after a judgment has been issued by a foreign court.
To this end, the authorities speak with one voice on the need to exercise great caution in granting such injunctions, because of the way they interfere with foreign proceedings. Two aspects stand out in this regard. First, such an injunction would preclude other foreign courts from considering whether a judgment should be recognised and enforced. Second, allowing such relief would be an indirect interference with the execution of a judgment in the jurisdiction where it was given and where the judgment can expect to be obeyed.
The Singapore Court of Appeal surveyed the considerations and cases where anti-enforcement injunctions have found to have been justified and concluded that they are few and far between and include where:
The Singapore Court of Appeal did not approve of the applicant's conduct in seeking an anti-suit injunction after the foreign proceedings had progressed substantially (even leading all the way to a judgment).
Nonetheless, the court clarified that as the court of the seat of arbitration, it had the discretion to grant declaratory relief to signify to the foreign court that the defendant had breached the arbitration agreement by instituting civil proceedings in the foreign jurisdiction when the arbitration award on the same dispute had already been issued. In the court's words, "these orders serve to uphold the integrity of arbitration agreement and the awards rendered on the basis of such agreements".
This decision is significant to any party that has entered into an arbitration agreement with Singapore as the seat of the arbitration. In light of Sun Travels, when the other contracting party has instituted civil proceedings in a foreign jurisdiction, in breach of the arbitration agreement, the aggrieved party must act with speed in making an anti-suit injunction application as soon as possible after it discovers the existence of the foreign proceedings. In particular, it should not seek to resist the foreign proceedings on the basis of an arbitration clause and only after that fails should it move to restrain the counterparty by commencing anti-suit injunction relief in the Singapore courts. The Singapore Court of Appeal clarified that after judgment is issued in foreign proceedings, anti-suit injunction relief is almost impossible, save in exceptional circumstances (as set out above).
The question remains as to what would happen where foreign proceedings have commenced, but the aggrieved party applies for an anti-suit injunction before a judgment is issued. While this situation was not specifically dealt with by the Singapore Court of Appeal, the courts will conduct the usual balancing exercise by considering a multitude of factors, including:
Time is of the essence if the counterparty commences foreign proceedings in breach of an arbitration clause; parties should move as fast as possible and as soon as is practicable once they discover the breach of an arbitration agreement to seek the anti-suit injunction relief in Singapore.
For further details please contact Philip Jeyaretnam or Shobna Chandran at Dentons Rodyk by telephone (+65 6225 2626) or email (email@example.com or firstname.lastname@example.org). The Dentons Rodyk website can be accessed at www.dentons.rodyk.com.
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