Nomihold Securities Inc. v Mobile Telesystems Finance SA [QBD (Comm)]

JurisdictionEngland & Wales
JudgeAndrew Smith J
Judgment Date02 February 2012
Date02 February 2012
CourtQueen's Bench Division (Commercial Court)

Queen's Bench Division (Commercial Court).

Andrew Smith J.

Nomihold Securities Inc
Mobile Telesystems Finance SA

Adrian Beltrami QC and Alexander Polley (instructed by Simmons & Simmons LLP) for the claimant.

Vernon Flynn QC, David Scorey and Tom Smith (instructed by Latham & Watkins LLP) for the defendant.

The following cases were referred to in the judgment:

A v B [2006] EWHC 2006 (Comm); [2007] 2 CLC 157.

A v B [2007] EWHC 54 (Comm); [2007] 2 CLC 203.

Alfred C Toepfer International GmbH v Société Cargill France [1998] CLC 198.

Allianz SpA v West Tankers IncECAS (Case C-185/07) [2009] 1 CLC 96; [2009] ECR I-663; [2009] 1 AC 1138.

Best Beat Ltd v Rossall [2006] EWHC 1494 (Ch).

C v D [2007] EWHC 1541 (Comm); [2007] 1 CLC 1038; [2007] EWCA Civ 1282; [2007] 2 CLC 930 (CA).

Claxton Engineering Services Ltd v TXM Olaj-Es Gazkutato KFT [2011] EWHC 345 (Comm); [2012] 1 CLC 326.

Compagnie Europeenne de Cereals SA v Tradax Export SAUNK [1986] 2 Ll Rep 301.

Conquer v BootELR [1928] 2 KB 336.

Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46; [2010] 2 CLC 793.

Dexter Ltd v Vlieland-BoddyUNK [2003] EWCA Civ 14.

Downing v Al Tameer EstablishmentUNK [2002] EWCA Civ 721; [2002] CLC 1291.

Elektrim SA v Vivendi Universal SA [2007] EWHC 571 (Comm); [2007] 1 CLC 227.

Excomm Ltd v Guan Guan Shipping (Pte) Ltd (The Golden Bear)UNK [1987] 1 Ll Rep 330.

Glasgow and South-Western Railway Co v Boyd & ForrestENR 1918 SC 14 (HL).

Glencore International AG v Exter Shipping Ltd [2002] CLC 1090.

HE Daniels Ltd v Carmel Exporters and Importers LtdELR [1953] 2 QB 242.

Henderson v HendersonENR (1843) 3 Hare 100.

Intermet FCZO v Ansol Ltd [2007] EWHC 226 (Comm).

J Jarvis & Sons Ltd v Blue Circle Dartford Estates Ltd [2007] EWHC 1262 (TCC).

Masri v Consolidated Contractors International Co SAUNK [2008] EWCA Civ 625; [2008] 1 CLC 887.

Noble Assurance Co v Gerling-Konzern General Insurance Co [2007] EWHC 253 (Comm); [2007] 1 CLC 85.

Sheffield United FC Ltd v West Ham United FC plc [2008] EWHC 2855 (Comm); [2008] 2 CLC 741.

Smith v JohnsonENR (1812) 15 East 213; 104 ER 824.

Sun Life Assurance Co of Canada v Lincoln National Life Insurance CoUNK [2004] EWCA Civ 1660; [2005] 2 CLC 664.

Vale do Rio Doce Navegacao SA v Shanghai Bao Steel Ocean Shipping Co Ltd [2000] CLC 1200.

Yat Tung Investment Co Ltd v Dao Heng Bank LtdELR [1975] AC 581.

Arbitration — Anti-arbitration injunction — Stay of proceedings — Share sale agreement and option agreement providing for LCIA arbitration — Claimant exercised put option but defendant refused to pay — Claimant began option agreement arbitration — Defendant commenced arbitration under S PA — Option agreement arbitrators held S PA valid and made award in favour of claimant — Claimant sought to enforce award as judgment — Defendant filed amended request for arbitration in S PA arbitration and new request for arbitration under option agreement — Claimant sought to restrain pursuit of new arbitrations — Defendant undertook not to seek in new arbitrations any declaration that award not binding — Court had jurisdiction to make anti-arbitration injunction — Subject of proceedings not matter agreed to be referred to arbitration but matter within court's supervisory jurisdiction — No stay of proceedings — Court would grant anti-arbitration injunction only in exceptional circumstances — Not appropriate to make order in light of defendant's undertaking — Senior Courts Act 1981, s. 37 — Arbitration Act 1996, s. 9, 66.

These were an application by the claimant (Nomihold) for a final injunction requiring the defendant (MTSF) to discontinue two arbitrations before the London Court of International Arbitration (LCIA), and an application by MTSF for a stay of Nomihold's application under s. 9 of the Arbitration Act 1996.

MTSF was incorporated in Luxembourg and was a financing entity for its parent company, Mobile Telesystems OJSC, a wireless communications provider in Russia. Nomihold, a British Virgin Islands company, owned the shares in a company (Tarino), incorporated in the Seychelles, which was the indirect holder of the share capital of a mobile telecommunications company (Bitel) incorporated in the Kyrgyz Republic.

MTSF and Nomihold entered into a sale and purchase agreement (SPA) under which MTSF agreed to acquire a 51% holding in Tarino from Nomihold for $150 million. MTSF and Nomihold also entered into a put and call option agreement in respect of the other 49% shares in Tarino and a corresponding interest in Bitel. The option agreement gave MTSF a call option and Nomihold a put option in respect of the 49% holding at a price of $170 million. The SPA and the option agreement each included an agreement for arbitration in London under LCIA rules.

A dispute arose between Nomihold and MTSF after Bitel's corporate offices were seized by a third party following a decision of the Kyrgyz Supreme Court, as a result of which, MTSF claimed, the investment in Tarino was valueless. Nomihold exercised the put option or purported to do so, and MTSF refused to pay.

Nomihold commenced an arbitration before the LCIA under the option agreement, and sought among other relief specific performance of the put option. MTSF commenced an arbitration under the SPA, alleging that it was not bound by the SPA, because of misrepresentation, mistake and Nomihold's breach of its terms, and that Nomihold was obliged to return the money paid thereunder and to pay damages.

The tribunal in the option agreement arbitration considered the validity of the SPA and concluded that MTSF had failed to establish that the SPA or the option agreement was void or unenforceable for misrepresentation or mistake or that there was any breach of warranty in relation to either. It made an award ordering MTSF to pay US$170 million in exchange for 49% of the shares in Tarino and damages.

Nomihold obtained leave under s. 66(1) of the 1996 Act to enforce the award as a judgment and to enter judgment in terms of the award under s. 66(2).

MTSF then submitted to the LCIA what it called an “amended request for arbitration” in the SPA arbitration, and a new request for arbitration under the option agreement, in both cases raising new claims of money-laundering against Nomihold. Nomihold contended that it was a breach of contract and abuse of process for MTSF to re-arbitrate matters that had already been determined in the first option agreement arbitration.

MTSF offered an undertaking not to advance in the new arbitrations any claim for a declaration that it was not obliged to carry out the award or for an order that it was released from any obligation to pay the purchase price under the option agreement.

Held , dismissing both applications:

1. The court had jurisdiction under s. 37 of the Senior Courts Act 1981 to grant an anti-arbitration injunction or an injunction preventing the arbitration of matters already determined between the parties, where the arbitral proceedings were an infringement of a legal or equitable right of a party, or threatened breach of such a right, or the proceedings were or threatened to be vexatious, oppressive or unconscionable. By the arbitration agreements in the SPA and option agreement Nomihold and MTSF had agreed both to LCIA arbitration and to the supervisory jurisdiction of the English court. That supervisory jurisdiction included the jurisdiction to make orders to support the arbitration under s. 44 of the 1996 Act and orders to enforce an award and to make effective the agreement to refer disputes to arbitration. Thus it was a breach of an arbitration agreement to bring proceedings to make an unlawful attempt to invalidate the award or to make a collateral attack on a binding judgment or award of a properly constituted tribunal. Therefore, if the new arbitrations involved an unlawful attempt to invalidate the award or an impermissible collateral attack upon it, the court had jurisdiction to restrain them.

2. If the new arbitrations proceeded, the arbitrators in them would be entitled to determine Nomihold's contention based upon estoppel per rem judicatam, issue estoppel and the principle of Henderson v HendersonENR (1843) 3 Hare 100 or Smith v JohnsonENR(1812) 15 East 213. There was no relevant difference between the ambit of the powers available to tribunals in the new arbitrations to dispose of claims and the power that a court would have to dispose of claims on the basis ofHenderson v Henderson. However, that was not enough to establish that the legal proceedings brought by Nomihold were “in respect of a matter which under the agreement is to be referred to arbitration' within the meaning of s. 9 of the 1996 Act. That expression connoted that the parties agreed that the matter had to be referred to arbitration. The objective of s. 9 was to ensure that the parties' arbitration agreement was observed and enforced, and a party to an arbitration agreement was entitled to a stay to that end. However, by making the arbitration agreements, Nomihold and MTSF also agreed to the supervisory jurisdiction of the English court. So long as its application sought relief in accordance with that part of the agreements, Nomihold could not be said to be acting in breach of the arbitration agreements. Thus the crucial question in determining whether s. 9 applied to Nomihold's application was not whether it was in respect of matters covered by the arbitration agreements but whether it was about matters that could also fall to be decided when the court was exercising its supervisory jurisdiction. (Toepfer International GmbH v Société Cargill France[1998] CLC 198 and Sheffield United FC v West Ham United FC[2008] EWHC 2855(Comm); [2008] 2 CLC 741 applied.)

3. If it was wrong to recognise an area of overlapping or concurrent jurisdiction so that matters could fall within the compass both of an arbitration...

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