Wednesday, 8 July 2015

Interaction between an application for interim injunction and a cross-application for stay of proceedings

July 8, 2015. 

In Jacobs E&C Limited v Laker Vent Engineering Ltd [2015] EWHC 4818 (TCC) the English High Court considered the interaction between an application for an interim injunction and a cross-application for a stay of those proceedings under the Arbitration Act 1996 (the “Act“). Dismissing both applications, the Court considered each application separately and held that it is not required to consider the applications jointly when deciding on their merits.

In his obiter remarks, Ramsey J also demonstrated a reluctance by the Court to grant an interim injunction while arbitration is still pending, where the granting of such an injunction would effectively amount to ordering the remedy sought by the claimant in the arbitral proceedings,  showing a general unwillingness by the Court to interfere with arbitral proceedings.

Legal and factual background 

The claimant (“Jacobs”) had entered into four supply subcontracts with the defendant (“Laker”), the first of which contained a clause appointing an arbitrator to resolve disputes under all four of the subcontracts. Under these subcontracts, Jacobs alleged that Laker was obliged to provide it with a specific document by July 2014, or else Jacobs would be liable to pay damages to its counterparty under the main contract.

Jacobs therefore applied to the Court for a mandatory interim injunction, pursuant to sections 44(2)(e) and 44(3) of the Act, for specific performance of Laker’s alleged obligation to deliver up the document.

Laker, in turn, made a cross-application for a stay of the Court proceedings pursuant to section 9 of the Act, stating that Jacobs’ claim for the interim injunction conflicted with their right to resolve the dispute through arbitration. The Court may stay proceedings under s.9 where they relate directly to a matter which, under the relevant arbitration agreement, is to be referred to arbitration.

The Court heard both the s.9 and s.44 applications in May 2014, on the morning of the same day as a preliminary hearing before the arbitration was due to take place.

Decision

In a brief judgment, Ramsey J refused both Jacobs’ application for a mandatory injunction and Laker’s application for a stay of the proceedings.

Refusal of stay

Ramsey J refused Laker’s cross-application for a stay in the proceedings and held that s.9 was not applicable in this case. In considering a s.44 application the Court can either grant the relief, or choose not to; it is not obliged to also consider whether the matter should be stayed so as to allow the arbitration proceedings to conclude. If the Court were obliged to consider this each time, every application for an interim mandatory injunction would have to be stayed and referred to the arbitrator – an outcome unintended by the legislation.

Further, Ramsey J held that an application for urgent interim relief where the arbitrator “has no power or is unable for the time being to act effectively” (s.44(5)) is not a matter which can be said to have been referred to arbitration under s.9, and cannot therefore be subject to a stay under that section.

Refusal of injunction

Ramsey J noted that the powers of the Court to grant an interim injunction under s.44 are limited to cases of urgency for the purposes of preserving evidence or assets (s.44(3)), or where no urgency exists, where the arbitrator has given permission or the parties have agreed in writing (s.44). In either case, the Court is only permitted to act in cases where the arbitrator “has no power or is unable for the time being to act effectively” (s.44(5)).

The Court held that there was no sufficient urgency in Jacobs’ case to enable the Court to grant an injunction, as there was potential for the dispute to be dealt with by the arbitrator before the time for performance in July 2014 (there were still approximately two months before Laker’s alleged deadline to produce the document to Jacobs expired). In any event, a preliminary arbitral hearing was scheduled to take place that same day, meaning that the grounds under s.44(5) had not been satisfied, as the arbitrator was able to act effectively within the necessary time period.

Source: http://globalarbitrationnews.com

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