Aquavita International SA v Indagro SA
| Jurisdiction | England & Wales |
| Judge | Mr Justice Foxton |
| Judgment Date | 12 April 2022 |
| Neutral Citation | [2022] EWHC 892 (Comm) |
| Docket Number | Case No: CL-2022-000174 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 892 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Foxton
Case No: CL-2022-000174
Thomas Steward (instructed by MFB Solicitors) for the Claimant
Yash Kulkarni QC (instructed by Watson Farley & Williams) for the Defendant
Hearing date: 11 April 2022
Draft to parties: parties: 11 April 2022
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE Mr Justice Foxton
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to BAILII and The National Archives. The date and time for hand-down is deemed to be Tuesday 12 April 2022 at 11:30am.
This is the return date of an anti-suit injunction granted by Mr Justice Fraser on 4 April 2022 restraining the Respondent (“Indagro”) from commencing and pursuing court proceedings in Brazil.
The Applicant – who I shall refer to as the Owner — also sought an order for mandatory injunctive relief requiring Indagro to provide bail or other security pursuant to certain Letters of Indemnity which it has provided to the Owner in relation the delivery of cargo without production of bills of lading. However, Mr Steward accepted that such an application was premature in circumstances in which no threat of arrest or quantified claim for security had yet been formulated.
The background
The Owner's vessel AQUAVITA ETERNITY was chartered by Indagro under the terms of a charterparty dated 25 November 2021 (“the Charterparty”) to carry a cargo of 61,500/63,500 mt of ammonium sulphate from Qinhuangdao, China to “1 safe berth / safe anchorage Paranagua plus 1 safe berth / safe anchorage Sao Francisco Do Sul”. There appears to have been a later agreement to add a third discharge port.
Of the cargo loaded, some 42,750mt was shipped under Bills of Lading Nos 1B, 2B and 3B, issued to Yantai Jiahe Agriculture Means of Production Co (“Yantai”) as shipper, who was itself the seller of the 42,750mt to Indagro as buyer. I will refer to the 42,750mt of cargo as “the Cargo” and Bills of Lading Nos 1 B, 2B and 3B as “the Bills of Lading”.
In late January 2022, the Owner received notice from Yantai claiming that Indagro had not made the payment due under the sale contract, with the result that the Bills of Lading had not been released to Indagro. Yantai instructed the Owner not to discharge the Cargo except against presentation of the original Bills of Lading.
The first 12,400 mt of the Cargo sold to Indagro formed part of 17,400 mt to be discharged at Sao Francisco do Sul. On 28 March 2022, Indagro obtained an order from the 2 nd Civil Court of the City of Sao Francisco do Sul requiring the Owner to discharge 17,400 mt of cargo or face a daily fine of about $100,000 as well as possible criminal sanctions (“the 2 nd Civil Court Order”).
Clause 33 of the Charterparty provides for the application of English law and that:
“any and all disputes of whatsoever nature arising out of or relating to this Charter, or to the making, performance or termination hereof, or to any Bill of Lading issued hereunder, shall be referred to the arbitration of three persons in London”.
The Owner contended that the application by Indagro to the 2 nd Civil Court constituted a breach of the arbitration agreement and applied without effective notice to Mr Justice Fraser for an anti-suit injunction requiring Indagro to withdraw the proceedings before the 2 nd Civil Court, set aside the 2 nd Civil Court Order and to refrain from commencing any further proceedings to similar effect in relation to the remainder of the Cargo.
Mr Justice Fraser refused to make any order in respect of the existing Sao Francisco proceedings because, on the evidence before him, discharge of the 17,400 mt of cargo (including 12,400 mt of the Cargo) which was the subject of the 2 nd Civil Court Order was almost complete. However, he was persuaded to grant an anti-suit injunction in relation to the balance of the Cargo, which was due to be discharged at Rio Grande.
There is no dispute between the parties as to the principles to be applied in determining whether to grant an anti-suit injunction. In brief terms:
i) The Court has power to grant such an injunction to restrain proceedings brought in breach of an arbitration agreement under s.37 of the Senior Courts Act 1981, even if no arbitral proceedings are on foot or in prospect: Ust-Kamenogorsk Hydropower Plant JSC v AES Hydropower Plant LLP [2013] UKSC 35, [25].
ii) The applicant must show a “high probability of success” that the pursuit of the foreign proceedings involves a breach of the arbitration agreement ( The Angelic Grace [1995] 1 Lloyd's Rep 87 and Dell Emerging Markets (EMEA) Ltd v IB Maroc.com SA [2017] EWHC 2397).
iii) If the applicant makes out such a case, it is for the respondent to show a “strong reason” why relief should not be granted ( The Epsilon Rosa [2003] 2 Lloyd's Rep 50, 518).
iv) Finally, it must be just and convenient for an anti-suit injunction to be granted.
In this case the principal issue between the parties is that at ii): has the Owner established a “high probability of success” that further proceedings in Brazil for the purpose of ordering the Owner to discharge the balance of the Cargo would constitute a breach of clause 33? Indagro says that the Owner has not, because the proceedings before the 2 nd Civil Court, and any similar proceedings in relation to the balance of the Cargo, are interim in nature and for that reason do not involve a breach of the arbitration agreement. The same argument is raised at the “strong reason” stage.
Before considering this issue further, it is necessary to consider the nature and effect of the proceedings before the 2 nd Civil Court.
The proceedings before the 2 nd Civil Court
Indagro sought a “preliminary injunction” requiring the Owner to discharge the 17,400 mt because its refusal to do so was “illegal” and in breach of provisions of the Brazilian Civil and Commercial Code.
The order was made by the 2 nd Civil Court by way of urgent relief under Article 300 of the Civil Procedure Code. Applications under Article 300 involve a two-stage test:
i) the court being satisfied that the claim brought is plausible or arguable; and, if so
ii) an assessment of the likely harm the applicant will suffer if no order is made.
Article 300(3) provides that emergency relief will not be granted in the event that there is a danger of “irreversibility of the decision”. While this last provision is mentioned in the 2 nd Civil Court judgment, it is not directly addressed.
On the first issue, the 2 nd Civil Court held that the retention of cargo was justified under the terms of Article 7 of (Brazilian) Decree Law No 116/67 and Article 40 of the REB Normative Instruction No 800/27 only in the event of non-payment of freight or when there had been a declaration of general average. The 2 nd Civil Court also construed clause 31 of the Charterparty, which provided for discharge against letters of indemnity where the original bills of lading had not arrived at the port of discharge in time, as supporting the view that there was no right to withhold discharge on the facts of the case. On the second issue, the 2 nd Civil Court referred to the...
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...matter which it is for the arbitrators to decide, the more wary the court should be as a matter of discretion”. 24 Finally, in Aquavita International SA v Indagro [2022] EWHC 892 (Comm), I had to consider the circumstances in which an application for interim relief from a court other than ......