Chapter 8: Injunctions and arbitration

8.1 An injunction is an order requiring a party to do something or (more usually) to refrain from doing something. It is a remedy with a very broad range of use. For example, freezing orders may be granted to stop a party dissipating its assets pending the determination of a dispute (see chapter 18). Injunctions may also be the appropriate remedy to prevent disclosure of confidential information (see chapter 13). Injunctions are a general remedy which arbitrators can award under section 48(5) of the 1996 Act (see chapter 19).

8.2 This chapter will primarily focus on the use of an injunction against a party who has breached an arbitration agreement by pursuing foreign proceedings which relate to disputes the parties agreed to resolve by arbitration, or where a party is pursuing an arbitration in an unlawful way (for example, where the matter has already been decided against that party). European case law 1 now precludes an English court from granting such an injunction in relation to court proceedings in another EU state but such relief remains available to restrain court proceedings outside the EU. Law and practice is discussed in this chapter (and throughout this book) on the basis that the UK is a member of the EU. The position is likely to be affected by future changes implemented by reason of Brexit. However, the continuing application of the New York Convention and the exclusion of arbitration from the scope of the Brussels I Regulation mean that the changes may be less significant to arbitration than in other areas of jurisdictional dispute.

8.3 Where proceedings are brought in the English courts in breach of an arbitration clause the appropriate remedy is a stay of proceedings (see chapter 7). Stays and anti-suit injunctions are regarded in English law as opposite and complementary sides of a coin; operating as counterpart remedies that support the arbitration agreement. 2

8.4 Beyond disputes concerning anti-suit injunctions, the most common court injunctions are those sought under section 44(2)(e) of the 1996 Act to support an existing or proposed arbitration. Section 44 is set out in chapter 12 and dealt with in more detail there and also in chapter 18 as regards freezing orders.

8.5 English law recognises that an injunction may be granted either as an “interim” or as a “final” remedy. A final injunction is a permanent order restraining a party indefinitely from doing something (or requiring him to do something). An interim injunction is a temporary order of the same sort and is usually sought to preserve the status quo pending the final determination of the parties’ rights, for instance a freezing order will usually be subject to a time limit. Despite its temporary nature an interim injunction may be commercially determinative of the dispute between the parties. The basic rule governing the grant of an interim injunction is that the remedy is discretionary. The applicant must establish a serious issue to be tried on the merits (although if the injunction is likely to be determinative of the question of the forum for a dispute, an applicant will probably have to show a stronger case on the merits). 3 An interim injunction will not be granted if damages would be an adequate remedy for the wrong alleged. The applicant must also establish that the balance of convenience lies in favour of the grant of an injunction. This will involve considering the risk of causing injustice if the injunction is granted or refused. 4 One particular feature of an interim injunction is that the applicant must give an undertaking (often to be supported by security) to pay damages for any loss sustained by reason of the injunction if it is found that the applicant was not entitled to it.

8.6 Injunctions are also sometimes categorised on grounds of whether they prohibit an act (a negative injunction) or require a positive act (a mandatory injunction). The courts are generally much more reluctant to make mandatory injunctions unless it is clear exactly what the enjoined party is required to do. The court needs to have “a high degree of assurance” that the claimant has the right contended for, 5 and may sometimes need to be satisfied that the applicant has “an unusually strong” case for the injunction. 6

8.7 An injunction to restrain a party from pursuing foreign proceedings is generally called an anti-suit injunction and can be granted as a final or interim order. An injunction to restrain a party from pursuing arbitral proceedings is often called an anti-arbitration injunction (and can similarly be granted as final or interim relief).

8.8 An injunction granted to restrain an imminent or threatened wrongful act is sometimes called a quia timet 7 injunction.

8.9 Section 48(5) of the 1996 Act makes clear that as regards remedies, arbitrators have the same powers as the court “to order a party to do or refrain from doing anything”. Thus arbitrators may grant an injunction as a remedy in an award (for example, an order restraining disclosure in breach of confidence). In practice, however, a tribunal’s power to grant injunctions is more limited than that of a court.

8.10 First, an injunction granted by an arbitrator will only be enforceable against the parties to the arbitration and cannot bind third parties. 9 Secondly, an arbitrator lacks the court’s coercive powers to punish for non-compliance (for example, committal for contempt). Enforcement can only be achieved by means of sanctions for non-compliance (e.g. peremptory orders) 10 or, more commonly, by obtaining a court order for enforcement (typically under section 66 of the 1996 Act or foreign legislation giving effect to the New York Convention). Thirdly, an arbitrator only has power to grant final relief and cannot grant an interim injunction unless the parties have agreed on such powers. This is because section 39 of the 1996 Act precludes the grant of interim relief on a provisional basis in the absence of written consent. This construction of the Act was applied in Starlight Shipping Co v Tai Ping Insurance Co Ltd 11 where Cooke J held that arbitrators had powers under LMAA Terms to make a final award restraining the pursuit of foreign proceedings, but not to grant an interim injunction. The current LMAA Terms similarly do not give arbitrators powers to grant interim injunctions. Even if the parties have agreed to confer power on the tribunal to grant interim orders, such orders may be less easy to enforce than a comparable court order, in particular since it is not clear whether they are sufficiently final and binding to be enforceable under the New York Convention.

8.11 Fourthly, urgent injunctive relief may be more difficult to obtain from an arbitral tribunal because it may not be possible to constitute the tribunal at short notice. There are no provisions for emergency arbitrators under the LMAA Terms. This is not perceived as a shortcoming since in most cases the English Commercial Court has the expertise and resources to provide effective remedies backed by the court’s coercive powers. Maritime arbitrators will be reluctant to hear an application without full notice to the other party since this is seen as inconsistent with the consensual nature of arbitration and the tribunal’s duties to give each party a reasonable opportunity to put its case. There is also concern that enforcement of such an injunction could be refused on grounds of lack of proper notice. Fifthly, even if final, an arbitrator’s order may be less likely to be given recognition in a foreign court than a conventional award of damages. 12 Accordingly, it is more common for injunctions to be sought from a court and injunctions are relatively uncommon to be awarded. If granted, the injunction will typically lie alongside a declaration or an order to pay damages and it will be given following a full hearing on the merits (whether on paper or orally). It would usually consist of an order that a party stop doing a wrongful act or that it proceed with a specific transaction or give specific instructions.

8.12 The court’s power to grant any injunction in the commercial context is based on statute. 13 Section 37 of the Senior Courts Act 1981 (“the 1981 Act”) gives broad powers for the court to grant an injunction “in all cases in which it appears to the court to be just and convenient to do so”. It is the primary source of the High Court’s general powers to grant injunctions and will be triggered where a party has acted or threatened to act unconscionably or where a party has invaded or threatened to invade the applicant’s legal or equitable rights.

8.13 The 1996 Act also provides rules on injunctions. Section 44 of the Arbitration Act 1996 deals specifically with interim injunctions available from the court in support of existing or proposed arbitral proceedings (the typical example being a freezing order). As explained above, a tribunal’s power to grant injunctions arises under section 48(5) of the 1996 Act which expressly confers power on arbitral tribunals to grant injunctions in a final award. Section 72 of the Act...