Shashoua and Another v Sharma

Hearing dates: 29 and 30 April 2009

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 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 HON MR JUSTICE COOKE

Mr Justice Cooke :

Introduction

The claimants seek an order pursuant to section 37(1) of the Supreme Court Act 1981 and/or section 44(4) of the Arbitration Act 1996 restraining the defendant from bringing or participating in any proceedings outside the jurisdiction that challenge, impugn or have as their object or effect the prevention or delay in enforcement by the claimants of an interim arbitration award (the Costs Award) and various orders of this court in connection therewith. On 30 ^th January 2009 Andrew Smith J made an order to this effect on the claimants' application without notice to the defendant and by consent that order has been continued until the inter partes hearing which took place on 29 ^th and 30 ^th April 2009.

Following the grant of the interim injunction on 29 ^th January 2009, the claimants wrote to the tribunal inviting the tribunal to determine whether it would hear the claimants' application for interim relief or whether it would grant permission for the claimants to pursue the application in this court. Following representations by both parties, the tribunal wrote a letter of 11 ^th February 2009 giving its permission to the claimants to pursue the application in the court and setting out the reasons why it did not consider itself able to act effectively in the circumstances. It is not disputed that the requirements of section 44 of the Arbitration Act for the court to exercise its supervisory jurisdiction are met.

In order to understand the content of the anti suit injunction originally granted and now sought on a perpetual basis, it is necessary to explain the history of an arbitration in which a final award is still awaited and the series of applications which have been made in England and India.

The Shareholders Agreement

By a Shareholders Agreement dated 1 ^st July 1998 the first claimant and the defendant agreed to set up a joint venture using a public limited company incorporated in India for the purpose of constructing and running an exhibition/convention/seminar centre in India. The Shareholders Agreement contained provisions relating to the 50/50 shareholdings to be held by the first claimant and the defendant in the joint venture company, about composition of the board and other matters relating to the business to be carried out. Clause 17.6 provided that the agreement was to be governed by the laws of India and clause 14 was an arbitration clause which provided for arbitration to be in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce, Paris. Clause 14.2 provided for arbitration proceedings to be conducted in the English language and clause 14.4 provided that “the venue of arbitration shall be London, United Kingdom”. There was a further provision in clause 14.5 that each party should bear its own costs in connection with such an arbitration. The agreement further provided that English would be used in all correspondence and communications between the parties.

There is no dispute that the governing law of the Shareholders Agreement is Indian law. There is a dispute between the parties as to the law of the arbitration agreement since the defendant submits that it is Indian law and the claimant maintains that it is English law. There is now, although there was not at an earlier stage, a similar dispute in relation to the curial law of the arbitration which is significant in the context of deciding where a challenge can be mounted to any arbitration award.

The Arbitration

On or about 21 ^st May 2005 the claimants made an application to the High Court in New Delhi seeking “interim measures of protection” under section 9 of the Indian Arbitration and Conciliation Act 1996, prior to the institution of arbitration on 26 ^th of that month. The protection sought related to inspection of the joint venture company's books of account, the stopping of board meetings, the prevention of the use of the joint venture company's bank accounts and of disposal of its assets. In its application the claimants stated that the arbitration agreement was governed by English law and the arbitration was to be held in London as the seat, but because of the domicile of the second respondent to the application and the location of the company records, the application for interim protection would lie under Indian law. There is an issue in Indian law as to whether this application by the claimants amounts to a submission to the jurisdiction of the Indian courts for all purposes connected with the arbitration.

On 26 ^th May 2005 the claimants filed a Request for Arbitration in accordance with clause 14 against the defendant and 2 further entities, one of which has played no part in the arbitration proceedings and the other of which was the joint venture company which was the subject of the dispute. The arbitration panel consists of 3 lawyers, Mr Harish Salve SC (India), Mr Andrew Onslow QC (England) and Mr David A R Williams QC (New Zealand), who was the chairman. Hearings on the merits took place in November 2007, March 2008 and May 2008. According to the letter from the arbitrators dated 11 ^th February 2009, the arbitrators are in the course of writing their award.

On 12 ^th July 2005 the second respondent in the arbitration (a company associated with the defendant to which shares in the joint venture company had been issued) applied to the Delhi High Court for a declaration that there was no valid arbitration agreement between it and the other parties to the arbitration. That application was rejected by the High Court on 20 ^th December 2005 but was the subject of an appeal on 21 ^st February 2006 which has been much delayed. It appears that appeal has now been heard but judgment has not yet been handed down. Meanwhile the arbitration progressed against the first respondent (the defendant) but not against the second respondent.

The History

Following the commencement of the arbitration the defendant and the joint venture company raised a challenge to the jurisdiction of the arbitral tribunal which the panel heard as a preliminary issue with hearings in July and October 2006. By an award dated 12 ^th February 2007, the tribunal rejected the jurisdictional objections, confirmed the existence of the Shareholders Agreement and the arbitration agreement within it, confirmed the parties to the arbitration agreement and found that the first defendant was not authorised to retain legal representatives to act for the joint venture company.

On 20 ^th October 2007 the defendant applied to the tribunal for permission to apply to the English court to use court procedures to compel the production of documents and oral evidence from third parties. The tribunal dismissed that application on 26 ^th March 2007 and ruled that the claimants were entitled to their costs of the defendant's application.

As is usual, the ICC Court had fixed the advance on costs in the arbitration proceedings. Although the claimants paid their 50% share, as the defendant did not, the claimants did so in order to cover the position as required by the ICC Rules. On 27 ^th June 2007 the defendant consented to an award that he pay the US$140,000 sum which the claimants had paid as the defendant's share of the advance.

On 15 ^th November 2007 the tribunal made an award dealing with the costs of these matters, namely the hearing of the jurisdictional challenge, the advance on costs and the defendant's disclosure application. In this award (the Costs Award) the defendant was ordered to pay $140,000 and £172,373.47. The defendant has failed to make any payment at all in respect of this award. It will be recalled that under clause 14.5 of the Shareholders Agreement, each party was to bear its own costs but the defendant accepted and the panel awarded costs on the basis that section 60 of the English Arbitration Act prevented such an agreement from being valid, unless it was made after the dispute in question had arisen. The panel thus, with the acceptance of the defendant, applied the English Arbitration Act to the arbitration.

On 4 ^th December 2007 the Commercial Court gave leave to the claimant to enforce the Costs Award against the defendant as if it were a judgment.

On 20 ^th December 2007 the defendant sought to file a petition in the High Court of Delhi applying for an order under section 34(2)(iv) of the Indian Arbitration and Conciliation Act 1996 (IACA), asking that the Costs Award be set aside. The claimant became aware of this in January 2008 and the case number in the Delhi High Court is OMP4 of 2008.

By an arbitration claim form dated 11 ^th January 2008 the defendant sought to challenge the Costs Award in the Commercial Court under section 68 and 69 of the Arbitration Act 1996 but because the claim was made outside the requisite 28 day period, the claim form included an application under section 70(3) of the Arbitration Act for an extension of time. On 8 ^th February 2009 Andrew Smith J dismissed the defendant's application for an extension of time and the section 68 and 69 applications with it, ordering that the defendant pay the claimants' costs of the application which he summarily assessed at...