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“Arbitral Lifelines”: The Protection of


Jurisdiction by Arbitrators

Toby Landau (*) Author

Toby Landau

I. Introduction Source

Toby Landau, “Arbitral


In the range of interim measures that parties might seek from arbitral Lifelines”: The
tribunals, “anti-suit” injunctions – or orders restraining a party from Protection of
commencing or pursuing proceedings before a national court or Jurisdiction by
other forum – have long occupied an uncertain position. To many Arbitrators in Albert Jan
they are an oddity of the Anglo-American legal system with no van den Berg (ed),
relevance to international arbitration. To others, they are a menace International Arbitration
and more often than not no more than a tactical sideshow with little 2006: Back to Basics?,
practical importance. ICCA Congress Series,
2006 Montreal Volume
In practice, at least in the field of non-treaty-based commercial 13 (Kluwer Law
arbitration, there is little precedent, and little experience. This is an International 2007) pp.
area into which the majority of arbitrators seem unwilling to tread. 282 - 297
The notion of interfering with a national court has been seen as
beyond an arbitrator's authority and mandate. Indeed, as a matter of
history, many international arbitration rules have hindered initiatives
in this area by limiting interim measures to those that concern the
“subject matter” of the dispute (e.g., Art 26 of the UNCITRAL
Arbitration Rules (1976)), a requirement that has been interpreted as
excluding measures to protect the arbitral process itself.

This reluctance, suspicion and timidity, however, sits uneasily with


the increasing trend on the part of recalcitrant parties in international
arbitration to deploy disruptive tactics – frequently before national
courts. It is now a fact of life in the field of international arbitration
that if, for whatever reason, a party decides to avoid an arbitration,
there is every likelihood that it will try to commence competing
proceedings before a national court (often its own local court), or
worse still, to take positive action to obstruct the arbitral process by
means of local challenge proceedings, or an anti-arbitration
injunction. There is now a rich and troubling jurisprudence in this
regard, with any number of international arbitrations and arbitrators
that have been the subject of local court interference and restraints,
secured in breach of an arbitration agreement. In the words of Judge
Schwebel, this is: page "282"

…a timely and serious subject. The threats to and


breaches of the efficacy, the integrity, and in some
cases the very viability of international arbitration are
profound. (1)

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The result is something of a dislocation. The ability to withstand


such attacks is a critical element in the success of the process, and
often a key factor in the very choice of arbitration as opposed to
national courts. Further, as Emmanuel Gaillard has demonstrated,
international arbitrators are capable of insulating and protecting the
arbitral process. And yet, there remains a fundamental reluctance to
do so.

At the heart of the problem lies a tendency to analyze such interim


measures through the prism of national court practice, and to
impose on arbitrators the same constraints as may limit the powers
of a judge. This approach, it is suggested, is now both outdated and
analytically flawed. Fresh thinking is urgently required, in order to
ensure that, in ever more troubled times, international arbitration
continues to deliver the solutions for which it was designed.

This note urges a new approach by:

(a) testing the analogy between the interim measures of national


courts and international arbitration;
(b) considering the nature of arbitrators' powers in this regard (as
analyzed by Emmanuel Gaillard in his report); and
(c) suggesting factors that might delimit the proper use of such
measures.

II. Court-Ordered “Anti-suit” Relief: A False Analogy

1. Court Orders

“Anti-suit” injunctions were, in their earliest form, creations of the


English courts, and were developed as far back as the 1500s. (2)
Initially, their application was limited to the allocation of jurisdiction
as between competing domestic courts in domestic cases, and, in
general, to prevent oppression or vexation. In particular, such orders
were first issued by common law courts to prevent the expansive
jurisdiction of ecclesiastical courts. Thereafter, they were used by
the Court of Chancery to restrain parties from bringing page
"283" suits in the common law courts. Gradually, their scope was
extended to other courts, and then, from the early nineteenth
century, competing proceedings in Scotland, Ireland and the British
colonies, and finally, in more recent times, to proceedings before
courts in the rest of the world. A broadly similar historical
development took place in the United States.

Nowadays, this jurisdiction has developed into a sophisticated


regime, designed to protect parties from oppressive and vexatious
conduct, as well as to restrain breaches of choice of court and
arbitration agreements. (3) Beyond the Courts of England and the
United States, the jurisdiction to grant such measures has now been
confirmed in, for example, New Zealand, Canada, Australia, India,
Singapore, Malaysia, Bermuda, Pakistan, Fiji, Jersey, and many
other common law countries. (4)

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Although this is primarily a common law development, it is not in fact


the sole preserve of common law courts. There is at least some
(albeit limited) theoretical support for the view that courts in civil law
jurisdictions may issue “anti-suit” injunctions, or equivalent
measures, in the application of civil law doctrines such as “abus de
droit”, especially when parallel proceedings are brought in violation
of a contractual arrangement. (5) Some civil law jurisdictions, indeed,
have recognized such a power. By way of example, Joseph cites, (6)
amongst others, the Courts of Quebec, (7) the French Cour de
Cassation, (8) and the District Court of The Hague. (9)

2. Criticisms

And yet, despite the widespread use of this type of measure, in both
common law and civil law jurisdictions, “anti-suit” injunctions issued
by national court judges still attract substantial criticism, and remain
highly controversial. The key points of concern may be summarized
as follows: page "284"

(a) An “anti-suit” injunction is perceived as an unwarranted


interference by a judge in the legal process of another
jurisdiction. Despite the fact that such orders are addressed to
an individual litigant rather than a foreign court, it is said that the
effect is the same, and that, de facto, the measure deprives the
sovereign courts of one state of their right to determine their
own jurisdiction, and regulate their own process. As stated by
Bachand, “anti-suit” injunctions are:

… as serious and effective an interference with


the judicial process of a foreign State as one can
think of. (10)

(b) Similarly, “anti-suit” injunctions in effect pitch one national court


judge against another. This in turn raises serious issues of
sovereignty and international comity.
(c) An “anti-suit” injunction expresses a conclusion that the foreign
forum has no jurisdiction. In issuing such an order, one national
court judge is effectively ruling upon an issue that another
national court judge would otherwise be entitled to consider. In
substance, this pre-emption reflects a lack of trust or confidence
by one judge with respect to the other. Once again, serious
issues of sovereignty and international comity arise.
(d) Further, “anti-suit” injunctions, when addressed to litigants
before foreign fora, effectively give extraterritorial effect to the
determinations of a national court, where otherwise there may
be no such effect, or no reciprocal recognition and enforcement.
(e) “Anti-suit” injunctions risk denying a party what might be a
fundamental and/or constitutional right of access to a court.
(f) Given the concerns of sovereignty and international comity,
“anti-suit” injunctions may be perceived as a provocation, and
simply lead a foreign forum to protect itself by asserting its own
sovereignty and issuing a corresponding measure (such as an
“anti-anti-suit” injunction).

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(g) Within regional jurisdiction and enforcement regimes, such as


the Brussels Regulation (44/2001) in the EU, “anti-suit”
injunctions are particularly controversial, since they bypass the
agreed mechanisms for the allocation of jurisdiction as between
the courts of different Member States, and, in particular, the
ability of each court itself to apply the relevant compulsory
jurisdiction rules. Hence, in the context of the Brussels
Convention, the European Court of Justice (ECJ) has famously
prohibited the issuance of “ant-suit” injunctions by the courts of
one Member State, to restrain a party from proceeding before
the courts of another Member State. (11) The ECJ emphasised
that within the context of a regional regime such as this, the
courts of each Member State have to trust the courts of all other
Member States to apply the rules correctly. The page
"285" critical question as to whether a court of a Member State
may grant an injunction against a person bound by an
arbitration agreement to restrain him from proceeding in breach
of that agreement in a court of another Member State remains
undecided, and has recently been referred to the ECJ by the
English House of Lords. (12)

This is not the place to evaluate the strength of these arguments.


Rather, what is critical for present purposes is the fact that this Court
-based jurisprudence, and the controversies and criticisms to which
it has given rise, have directly infected the approach to “anti-suit”
relief in the field of international arbitration.

In circumstances where many consider that judges should have no


such power, there is a strong body of opinion that arbitrators should
be equally restricted – for the same or analogous reasons. (13) Many
have difficulty conceiving of a situation in which arbitral tribunals
might have greater or different powers in this regard than national
court judges. If a measure is inappropriate for a judge – as many
believe is the case with “anti-suit” relief – so it must also be
inappropriate for an arbitrator. Indeed, it is often said that a private
tribunal is necessarily less well-placed than a judge to intrude upon
a national and sovereign Court process.

Many civil lawyers disregard such measures, on the basis that they
are unknown in civil law courts. (14) Even if, technically, such interim
measures are available to an arbitral tribunal, it is a common view
amongst both common and civil lawyers that they should not be
granted, since it forms no part of an arbitrator's authority, mandate,
or proper function to interfere in a national court process. As a
practical reality, these are issues that are not always expressed in
terms, but which, it is suggested, frequently infuse arbitrators'
thinking in this area. When asked to restrain a party from proceeding
before a national court, it takes a very robust arbitral tribunal to put
aside all concerns as to interference with a national and sovereign
legal process; interference with fundamental or constitutional rights;
expressing disrespect for a national court judiciary; seeking
extraterritorial effect for a jurisdiction determination; short-circuiting a
Court's right to determine its own jurisdiction.

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Further, it is frequently said (or thought) that such measures are


futile in any event if rendered by an arbitral tribunal, since they are
unlikely ever to be recognized or enforced.

Further still, it is considered by many that the New York


Convention's mandate on Contracting States to enforce arbitration
agreements and to stay or dismiss proceedings brought in breach
thereof should suffice to address concerns in this area.

page "286"

3. A Flawed Approach

It is submitted that this approach to “anti-suit” relief in the field of


international arbitration is fundamentally flawed. National courts are
in a completely different position to international arbitral tribunals,
and the jurisprudence and experience of the former is an
inappropriate model for the latter.

Most of the specific factors that impact upon national courts, and
that have shaped the approach to this issue, have little or no
relevance to international arbitration. In particular, national courts:

(a) are bound by a formal system of “international comity”;


(b) must conduct themselves within sovereign limits, and with
careful regard to, and respect for, the courts of other sovereign
nations;
(c) generally have territorial limits upon their jurisdiction;
(d) operate within the confines of procedural codes/civil procedure
rules that are far more rigid and limited than international
arbitration rules;
(e) are often subject to specific doctrines as to the allocation of
jurisdiction (such as, e.g., forum non conveniens and lis alibi
pendens);
(f) in the case of the EU, operate within a self-contained regime on
the allocation of jurisdiction as between Member States.

International arbitration, as primarily a creature of contract, is free of


virtually all of these constraints. In the absence of these factors,
many of the traditional criticisms of “anti-suit” relief fall away, or at
the very least lose much of their force. This does not mean that
international arbitrators are thereby free to intermeddle at will with
national court processes, but it does suggest that the concerns
expressed in the context of court orders must be treated with caution
in the context of arbitration.

Further, there are a number of factors that are relevant in


international arbitration, that strongly militate in favour of the
availability of such relief, but that have little or no significance for
national courts.

International arbitral tribunals are constituted precisely because


parties have contracted out of national courts. In agreeing to
arbitrate, they are undertaking not to pursue their claims before a
court, and so the notion of an arbitral tribunal enforcing that
agreement by restraining a party from proceeding before a national

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court is a natural consequence of the agreement. In so far as there


may be doubts as to the arbitral tribunal's jurisdiction, the doctrine of
kompetenz-kompetenz still endows the arbitral tribunal with the
power to investigate its own jurisdiction, at least in the first instance.

Although there are many reasons why parties might prefer


international arbitration to national courts as a system of dispute
resolution, the truth is that in many areas of international commercial
activity, international arbitration is the only viable option, or as once
famously put, “the only game in town”. National courts may be
considered unfamiliar, inexperienced, unreliable, inefficient, partial,
amenable to pressure, or simply hostile. The larger and more
significant the transaction in question, the less appropriate, or more
risky, a national court may be. And so, where a third country's courts
cannot be agreed upon, international arbitration becomes an
essential mechanism actively to avoid a particular court. Once
again, some form of restraining measure would page "287" then
appear a natural consequence of the agreement, if one party
nevertheless seeks to pursue its claim before the court in question.
In such circumstances, it may be no answer at all to expect the other
party to appear before the (unfamiliar/inexperienced/
unreliable/inefficient/partial/pliable/hostile) court, and challenge its
jurisdiction. Not only might this be a futile exercise, it forces a party
to engage precisely that forum from which it was agreed it would be
insulated.

It is true that national courts that have been expressly chosen by


parties (e.g., by a choice of court clause) may be in a similar
position. However, such courts must still operate within the
constraints and limitations set out above. In contrast, in choosing
international arbitration, parties not only agree to avoid a particular
court or courts, they also agree to do so by way of an international
mechanism that is free from many constraints and limitations, and
able to enforce the parties' expectations by diverse means.

The result, it is suggested, is that “anti-suit” forms of relief are in fact


more appropriate in international arbitration than national courts. On
any view, there are powerful reasons why arbitrators – and not
national courts – ought to have control over the grant of such
measures. As noted by Joseph:

The exercise of such powers diminishes the sense


that one national court, in granting an injunction, has
interfered with the jurisdiction of another. It might also
in due course diminish the sense that the wide
availability of the remedy in common-law jurisdictions
has created an unequal playing field in international
litigation. The availability of the remedy would then
largely depend upon the terms of the parties'
arbitration agreement. (15)

At the very least, this is an area that requires a fresh approach,


divorced from the jurisprudence, and conceptual baggage, of
national courts.

III. The Nature of Arbitrators' Powers to Grant Relief

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In analyzing this area afresh, one must reconsider the type of


measures that an arbitral tribunal might impose, and the juridical
bases for the grant of such measures.

1. Types of Measures

One of the principal reasons why “anti-suit” relief in international


arbitration has been so encumbered by the baggage of national
courts, and so controversial, is terminology – and in particular the
use of the phrase “anti-suit injunction”. This is an entirely misleading
term, both in court and (more so) in arbitration.

As for usage in courts, it was noted by Lord Hobhouse in Turner v.


Grovit (16) that the term “anti-suit injunction” is problematic. As
observed earlier, such injunctions restrain page "288" parties
from taking steps before a court. They are “in personam” (i.e.,
addressed to a defendant), and are neither directed at another court
or judge, nor designed to stop the competing suit itself. As Joseph
has pointed out, (17) such injunctions come in a variety of forms,
many of which are not easily described as “anti-suit”: for example,
an order restraining a party from enforcing a judgment or annulling
an award; or making an application for an anti-suit injunction; or
commencing or proceeding with an arbitration; or making a
disclosure application in a foreign forum; or pursuing a third party by
way of indemnity or contribution.

More significantly, the problem with using the term “anti-suit” in


arbitration is that (a) it directly imports the jurisprudence – and
thinking – of national courts and (b) it suggests that all that is in
issue is an actual injunction restraining a party from commencing or
continuing proceedings elsewhere. There is no reason at all why the
powers of arbitrators should be limited in this way. On the contrary, if
the purpose of such measures is to protect the arbitral process, and
the parties' expectations, there are any number of measures that an
arbitral tribunal might impose, short of an actual “anti-suit injunction”
as this concept is understood in court. This is an area where
arbitrators (unlike some judges) are free to act creatively. So, by
way of random example only, an arbitral tribunal might:

(a) impose notification or reporting requirements upon a party, in


order to ensure that full information is provided to the arbitral
tribunal and all other parties with respect to each step taken
before a different forum;
(b) require that the offending party provide information to the other
forum in question, such as a letter or request from the arbitral
tribunal;
(c) require the offending party to raise particular points before the
other forum;
(d) impose conditions on each step that a party may take before
the different forum (such as the making of an application to the
arbitral tribunal, or the securing of the prior consent of the
arbitral tribunal);
(e) impose a “recommendation” or declaration on an offending
party, as opposed to a strict “order”;

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(f) impose costs penalties on the offending party;


(g) impose orders for limited periods of time (e.g., up until the
completion of the arbitral tribunal's own enquiry into its own
jurisdiction).

There are many other possibilities, short of the imposition of an


actual overall restraint. Few of these other types of order attract the
same criticisms as full-blooded, court-style “anti-suit injunctions”. Yet
all such measures are best analyzed as aspects of the same
procedural power.

To this end, in the recently introduced Art. 17(2)(b) of the


UNCITRAL Model Law, a broad wording has been adopted that
encompasses a range of different types of interim measure,
including but not limited to “anti-suit injunctions”, but without any
mention of “anti-suit injunctions” themselves. Hence interim
measures are specified as including (inter alia) any measure by
which a party is ordered to: page "289"

Take action that would prevent, or refrain from taking


action that is likely to cause, current or imminent harm
or prejudice to the arbitral process itself. (18)

It is suggested, therefore, that if some other term is used, instead of


an “anti-suit injunction” (such as, for example, a “jurisdiction
protection” measure), much of the unhelpful court “baggage” will be
jettisoned; resistance to such measures may well be diffused; and
the way will be cleared for some fresh thinking in this area.

As set out below, this issue has an important bearing upon the
analysis one may adopt to explain the juridical basis for such
measures.

2. Juridical Bases

In his excellent report, Emmanuel Gaillard advances two different


bases for the grant of “anti-suit” relief by arbitrators: (1) the arbitral
tribunal's jurisdiction to sanction violations of the arbitration
agreement, and (2) the arbitral tribunal's power to take any measure
necessary to avoid the aggravation of the dispute or to protect the
effectiveness of the award.

The first of these bases represents a core element in Gaillard's


approach. The principle of “kompetenz-kompetenz” allows the
arbitrators to decide any challenge of the arbitration agreement
itself, which by definition includes the jurisdiction to decide on
breaches of the obligation to arbitrate – and the power to sanction
such breaches by way of remedies for breach of contract (e.g.,
damages, specific performance or injunctions). Gaillard deploys this
analysis to neutralize attacks on the exercise of the power, and in
particular the criticism that “anti-suit” relief constitutes an undue
interference with national courts. According to Gaillard, such orders
cannot be seen as an undue interference, because:

the parties who enter into an arbitration agreement


accept, by definition, to waive their right to resort to

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domestic courts for the settlement of their dispute. (p.


241)

(….)

The relevant question, therefore, is not a party's


fundamental right to seek relief before national courts,
but whether a valid arbitration agreement exists and
whether the dispute is covered by the agreement, and
who has jurisdiction to decide these questions. (p.
242)

(….)

In that context, the answer is provided by the rules of


international arbitration law concerning the interaction
between arbitrators and domestic courts…. Domestic
courts should not, in parallel and with the same
degree of scrutiny, rule on the same issue at least at
the outset of the arbitral process. In other words … the
courts should limit, at that stage, their review to a
prima facie determination page "290" that the
agreement is not null and void, inoperative or
incapable of being performed. (p. 242)

(….)

As a result, a court that is confronted with the question


of the existence or validity of the arbitration agreement
must refrain from hearing substantive arguments as to
the arbitrators' jurisdiction until such time as the
arbitrators themselves have had an opportunity to do
so. (p. 242)

This is obviously a powerful rationale for relief to protect jurisdiction.


There are, however, a number of difficulties with this approach.

First, by characterizing this form of relief as simply a remedy for the


breach of the arbitration agreement, the jurisdiction to grant such
remedies and the type of order that may be available may depend
upon the law governing the arbitration agreement. It is far from clear
that every such law will allow the grant of injunctive relief as a
remedy for breach, and even if it does so, it may well be with
limitations. More importantly, even if injunctive relief is available, the
other types of order or recommendation suggested above may be
unavailable as a remedy for a breach of contract.

Second, whilst Gaillard's reasoning on “kompetenz-kompetenz” is


impeccable, as a practical matter, it still remains aspirational in
many jurisdictions. Regrettably, the notion that, pending the
completion of the arbitral tribunal's own enquiry into its jurisdiction,
courts must restrict their review to a prima facie enquiry, has yet to
be adopted in many systems, (19) and until it is, the “undue
interference” argument may persist (on the basis that the court in
question, according to its own rules, is entitled to proceed further
than simply a “prima facie” review).

Third, there is a timing problem with this approach. Once an arbitral


tribunal has ruled on its own jurisdiction, for example in a partial

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award, and the “kompetenz-kompetenz” phase is over, the way may


then be cleared for national courts to step in and review the
arbitrators' jurisdiction. However, at this point, on this analysis, there
would appear to be no justification for imposing any restraint upon a
party from proceeding before a national court – notwithstanding that
the arbitral proceedings may still have some way to go, and that the
proceedings before the national court might entirely undermine
them. Any such restraint would again be vulnerable to the “undue
interference” complaint.

It is suggested that Gaillard's second rationale for this type of relief


(the power to take any measure necessary to avoid the aggravation
of the dispute or to protect the effectiveness of the award) avoids
these difficulties.

Unlike the first basis, this second approach is not dependent upon
the law that governs the arbitration agreement, and the remedies
that may be available for breach of contract. Instead, it depends
primarily upon the law governing the arbitral proceedings, which is
likely to be far more flexible, allowing the arbitral tribunal a broad
discretion page "291" with respect to the types of procedural
measures it might impose, in order to safeguard the overall arbitral
process and the parties' expectations. This, in turn, allows for
creativity on the part of the arbitral tribunal.

Equally, as a practical matter, this second basis is safer, since it


does not depend upon the “prima facie” approach to arbitral
jurisdiction being adopted by the national courts in question.

Gaillard's second basis may also be justified by a further argument.


It is well settled that when a domestic court acts, it acts as an organ
of the State for whose actions that State is internationally
responsible. As Judge Schwebel has explained, when a domestic
court issues an injunction against an international arbitration, it acts
in breach of the letter and spirit of the New York Convention 1958,
as well as in violation of customary international law (denial of
justice to an alien). Its acts might also amount to an arbitrary or
tortuous confiscation of an alien's contractual rights. (20) There is now
a developing body of jurisprudence that international arbitral
tribunals may properly disregard such international law violations,
and continue, notwithstanding restraining orders. (21) If an
international arbitral tribunal can or indeed should disregard an anti-
arbitration injunction rendered by a national court, it is only a small
step in the analysis to say that such a tribunal ought also to be able
to take proactive measures to protect itself and its process against
such interference. Further, such measures (to stop or limit the
interference of parallel proceedings) ought to be available even
where no anti-arbitration injunction has actually been ordered, since
the very existence of parallel proceedings will often effectively
undermine the integrity of the arbitral process, and thereby violate
international norms.

On this theory, arbitral tribunals ought to be free to implement


measures to protect their own jurisdiction and the arbitral process,
including restraining a party from proceeding before a national court,
as part of their overall procedural powers and discretion.

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As Joseph notes in his extremely valuable analysis, (22) there is high


authority for the proposition that any international tribunal possesses
an inherent jurisdiction to make such orders as are necessary to
ensure the orderly and enforceable disposal of disputes over which
it has jurisdiction, (23) and the principle underlying the grant of interim
measures of protection has been described as a “general principle
of law” within the meaning of Art. 38(1)(c) of the Statute of the
International Court of Justice.

page "292"

Seen in this light, and given the totally different nature of a national
court's standing and authority as compared to that of an international
arbitral tribunal, the example of “anti-suit injunctions” issued by
national court judges is of very limited assistance.

IV. Delimiting the Proper Ambit of Such Measures

Once one has swept away the “cobwebs” of national court practice,
and focused upon the true nature of the measures in question, there
remains the key question: When a party is pursuing its claim before
a national court or other forum, in violation of the arbitration
agreement, when is it appropriate for arbitral tribunals to grant relief
to protect their own jurisdiction and process?

And it is here where more courage on the part of arbitrators is urged.

1. The Paradigm Case

There is an increasingly important category of case where such


measures are absolutely vital, and where nothing less will do. In this
type of case, interim measures constitute, in effect, “lifelines”,
without which the entire arbitral process may be defeated. This
category, it is suggested, defines the paradigm case, and is a useful
starting point. Its components are as follows:

(a) A cross-border transaction, often (though not necessarily) of


substantial size and complexity, and of political or economic
sensitivity (such as a power plant or similar foreign investment).
(b) A choice of international arbitration primarily motivated by a
desire to avoid an
inexperienced/unreliable/inefficient/partial/pliable/hostile/local
court – particularly if the transaction in question is the subject of
local politics.
(c) A defendant who nevertheless approaches the local court, in
breach of the arbitration agreement, and seeks an anti-
arbitration injunction or some other interference with the arbitral
process, or commences a challenge procedure.
(d) At least one of the participants in the arbitration being an entity
subject to the jurisdiction of the local court in question (e.g., a
local investment vehicle), such that it will be bound by any order
of the local court, and such that the remedy of ignoring such a
court order (e.g., as in Salini v. Ethiopia (24) ) is of no assistance.

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Wherever all of these components are present, an anti-arbitration


injunction, or other interference by a local court – unless restrained –
is likely to defeat the entire arbitration. As long as one of the parties
is subject to the local court's jurisdiction (as is so often the case in
foreign investment), it will have no choice but to engage with the
national court process, and comply with the result (to avoid a
contempt). Where the stakes are high, recalcitrant parties may
deploy any number of tactics to shift the focus of the dispute away
from the arbitration and into the court of their choosing. In such
page "293" cases, the award of damages by the arbitral tribunal
for breach of the arbitration agreement is a wholly inadequate
remedy. If the arbitration is defeated, the losses may be vast, and
simply not compensable by damages. Indeed, the entire project may
be threatened. An award of damages may never be enforced
(particularly if the local court has justified its own intervention).
Further, the impact of the local court process will rarely be
quantifiable in damages in any event. Procedural safeguards, such
as confidentiality, may have been lost; sensitive documents may
have been ordered to be produced; individuals may have been
subjected to local pressures; and the politics (and so economics) of
the project may have been forever changed.

In such cases, it is also no answer to expect the local court to


comply with its New York Convention obligations, or for the arbitral
tribunal to proceed on the basis of respect and trust for a national
judiciary – for the weaknesses of the local court system were
precisely the reason why the arbitral tribunal was constituted in the
first place.

With this combination of factors, the arbitral tribunal may be the one
and only available source of help. Indeed, this is precisely the type
of help for which the parties will have contracted in choosing
international arbitration. An application for a measure to restrain a
party from proceeding before the local court is, in effect, a plea for a
final “lifeline” – and a refusal by the arbitral tribunal to throw it is then
a dereliction of duty, which may compromise the whole arbitral
process.

There are many – too many – recent examples of this paradigm


case. By way of illustration, one may focus on one case in particular:
The Hub Power Company Ltd v. WAPDA, (25) a widely reported major
foreign investment in Pakistan, involving the construction and
operation of one of the world's largest electricity-generating plants,
located on the Hub river estuary. As required by local regulations,
the foreign investors operated through a vehicle incorporated locally
in Pakistan (Hubco). In August 1992, a Power Purchase Agreement
(PPA) was concluded between Hubco and the Governmental entity
responsible for water and power (WAPDA). The project was hugely
significant in Pakistan in terms of both economics and politics. A
Sovereign Guarantee was executed on behalf of the President of the
Islamic Republic of Pakistan guaranteeing (inter alia) WAPDA's
obligations under the PPA. Further guarantees were provided by the
World Bank and other co-financiers. Perhaps unsurprisingly, the
foreign investors insisted upon an arbitration agreement in the PPA,
and the parties agreed to ICC arbitration in London, with a choice of
English governing law.

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In the years following signature of the PPA, a number of amending


agreements were concluded between the parties, which coincided
with a number of different governments that came and went. In
1994, during the term of office of Benazir Bhutto, one such
amendment (Amendment No. 2) markedly increased the tariff for
electricity payable by WAPDA to Hubco. This gave rise to a political
storm locally, with widespread disquiet page "294" at the cost of
electricity, and doubts as to the justification for the whole project. On
5 November 1996, Bhutto was dismissed as Prime Minister, and a
new government was elected in February 1997, with Nawaz Sharif
as Prime Minister.

The tariff issue as between Hubco and WAPDA maintained an


extremely important political dimension, with almost daily reporting
in the Pakistan press. Hubco asserted its rights to receive the
increased tariff. On 8 May 1998, a public interest Writ Petition was
filed by an individual petitioner in the Lahore High Court in Pakistan,
joining Hubco and WAPDA, challenging WAPDA's decision to enter
into Amendment No. 2. It was alleged that Hubco had colluded with
WAPDA and the then government in fixing what was described as
an exorbitant tariff, and that the amendment was the product of
bribes, kickbacks and other corrupt practices. During the course of
these proceedings, WAPDA allied itself with the position of the
Petitioner, seeking to avoid Amendment No. 2 – but not the
underlying PPA containing the arbitration agreement – on the
grounds that it was “illegal, fraudulent, collusive, without
consideration, mala fide and designed to cause wrongful loss to
WAPDA and the Government of Pakistan”.

On 9 July 1998, Hubco referred this dispute to arbitration in


accordance with the ICC Rules, and the provisions of the PPA. Both
Hubco and WAPDA paid substantial advances on costs and
nominated arbitrators, and the ICC duly constituted a Tribunal.

On 16 January 1999, WAPDA filed a suit before the Senior Civil


Judge in Lahore for an ex parte application that Hubco be
permanently restrained from proceeding any further with the ICC
proceedings. One of the primary grounds advanced was that the
issue in dispute (allegations of bribery and corruption) was not
arbitrable in an ICC proceeding in London, since it raised
fundamental issues of public policy. The injunction was granted.
Since Hubco is a Pakistan company, it was bound thereby.

There followed a large number of appeals and other court


proceedings concerning this injunction, culminating in a month's
argument before five judges in the Supreme Court of Pakistan in
April 2000. Meanwhile, various members of the Hubco Board of
Directors were the subject of preliminary criminal investigations, and
were prevented from leaving the country by being placed on the Exit
Control List (although no criminal charges were ever brought). By
the time of the Supreme Court hearing, the Pakistan military had
taken over the government. Ultimately, the Supreme Court upheld
the injunction. Thereafter, Hubco was forced to pursue its claims in
the domestic courts of Pakistan, and the ICC arbitration was
rendered defunct.

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In India, almost exactly the same scenario was replicated in the long
-running dispute between Dabhol and the Government of
Maharashtra/Government of India. (26) In that case, the parties had
contracted for UNCIITRAL arbitration in London, yet the focus of the
dispute soon shifted to the Indian courts, with multiple anti-
arbitration injunctions, and challenge proceedings in India (both pre-
and post- the 1996 Indian Arbitration and Conciliation Act), all of
which ultimately bound the Claimant (Dabhol page "295" Power
Company), it being a locally incorporated investment vehicle.
Ultimately, every UNCITRAL arbitration that was commenced was
ended prematurely by the action of the Indian Courts, and recourse
was then sought under a Bilateral Investment Treaty.

The examples may be multiplied, and drawn from many areas of the
World. All, however, share the same basic features.

The Hubco and Dabhol type of case is the classic instance in which
an arbitral tribunal should do all that it can to protect its own
process, and the parties' expectations. Interestingly, in each of these
cases, applications were made to each of the arbitral tribunals for
injunctions to restrain the commencement or continuation of actions
in, respectively, Pakistan and India. And yet in each case, these
applications were refused. Without embarking on a critique of each
of the arbitral tribunal's reasoning, it is instructive to note that in each
case, concerns were expressed (a) as to the power of an arbitral
tribunal to grant such relief; (b) as to the possible adverse impact
such an order might have in each country; and (c) as to the
enforceability, and thus utility, of such orders.

Issue (a) has now been laid to rest by Emmanuel Gaillard's Report.

As to issues (b) and (c), experience shows that in many such cases,
some form of restraint issued by an arbitral tribunal can be of
immense help – even if it is not enforceable in terms. (27) It can
counter arguments before local courts that the international
arbitration is an ineffective forum, or that the arbitration can be
disregarded without any difficulty. It can be a source of influence and
deterrence on local judges. It can be a source of education for local
courts on the norms of international arbitration. It can attract
international and political attention. It can also act as a deterrent on
the offending party, for in many such cases, that party will still pause
before breaching an international arbitral tribunal's order. Given the
range of possible measures, any adverse impact locally can be
minimized by the way the order, or recommendation, is crafted.

Further, in many cases, such measures are the only option left,
before the arbitration grinds to a halt.

Overall, such cases often involve a delicate but critical local


situation, of which the arbitral tribunal may not be fully aware, or
best placed to judge. If a claimant comes to an arbitral tribunal with
a plea for such an order, then it should not be regarded as an
exceptional measure, but rather a lifeline that, absent special
circumstances, ought to be thrown. This, after all, is simply to
provide one of the specific protections for which international
arbitration was chosen in the first place. This, it is suggested, is a

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powerful ground to counter those that caution against the use of


such measures.

page "296"

2. Other Cases

Stepping away from the paradigm case, there exists a spectrum of


situations, ranging all the way to those instances where an action
before a local court is of no significance to the arbitration.

For example, no party may be technically bound by a local court


action, and yet there may still be an adverse impact on the
arbitration by virtue of the cost and distraction of a parallel
proceeding, or the risk of inconsistent results. Alternatively, a local
court may not be hostile or unreliable, but perfectly trustworthy,
supportive, and efficient.

With each step further away from the paradigm case, there are likely
to be less compelling reasons to issue such orders. However, the
approach in each case should be flexible, pragmatic – and robust.
Measures ought to be carefully crafted and imposed whenever there
is a need to insulate the arbitral process from any adverse impact, or
to safeguard the expectations of the parties.

In this way, international arbitration may continue as a viable and


effective form of dispute resolution, in the face of ever increasing,
and ever more ingenious, attacks. page "297"

*
Essex Court Chambers; M.A., B.C.L. (Oxford); LL.M. (Harvard);
FCIArb; CArb; Barrister-at-Law (London); also of the New York State
Bar.
1
Stephen M. SCHWEBEL, “Anti-Suit Injunctions in International
Arbitration: An Overview” in Emmanuel GAILLARD, ed., Anti-Suit
Injunctions in International Arbitration (Juris Publishing, Inc.) p. 5.
2
See generally: David JOSEPH, Jurisdiction and Arbitration
Agreements and their Enforcement, 1st edn., (Sweet & Maxwell
2005), Chapter 12, pp. 308-381; David W. RAACK, “A History of
Injunctions in England Before 1700”, 61 Ind.L.J. p. 539; Marco
STACHER, “You Don't Want to Go There – Antisuit Injunctions in
International Commercial Arbitration”, 23 ASA Bulletin (2005, no. 4)
at p. 640; George BERMANN, “The Use of Anit-Suit Injunctions in
International Litigation”, 28 Columbia Journal of Transnational Law
(1990) p. 593; Trevor HARTLEY, “Comity and the Use of Antisuit
Injunctions in International Litigation”, 35 American Journal of
Comparative Law (1987) p. 487.
3
This is obviously not the place to examine the precise nature of
the jurisdiction to grant this form of relief, and the criteria that are
applied. As to this, see, e.g., JOSEPH, op. cit., fn. 2.
4
See the comparative survey in JOSEPH, op. cit., fn. 2, at pp. 375-
380. With respect to the United States, both JOSEPH and
STACHER (op. cit., fn. 2) note that differences in approach have

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developed across different circuits in the United States.


5
See, e.g., Yuval SHANY, The Competing Jurisdictions of
International Courts and Tribunals (Oxford University Press 2003) at
p. 161, who cites Dogauchi for the proposition that Japanese law
may in theory support anti-suit injunctions, and Lenenbach for the
proposition that Sect. 826 of the German Civil Code, prohibiting
wilful conduct contrary to public policy, provides a proper basis for
anti-suit injunctions in cases where initiation of foreign parallel
proceedings may be deemed an unconscionable act.
6
Op. cit., fn. 2.
7
See, e.g., Johns-Manville Corp v. Dominion of Canada General
Insurance Co, [1991] Recueils de jurisprudence de Quebec 616
(CA); Opron Inc v. Aero Systems Engineering, 1999 CarswellQue
940; Lac D'Amiante du Canada Ltd v. Lac D'Amiante du Quebec
Ltd, 1999 CarswellQue 3688.
8
See, e.g., Banque Worms v. Epoux Brachot, 19 Nov. 2002 Cass.
Civ. 1re, noted by Muir WATT in [2003] C.L.J. 573.
9
See, e.g., Medinol v. Cordis, Judgment 5 August 2004, Cause no.
KG 04/688.
10
Frédéric BACHAND, “The UNCITRAL Model Law's Take on Anti-
Suit Injunctions”, in Emmanuel GAILLARD (ed.), op. cit., fn. 1, at p.
88.
11
Turner v. Grovit, Case C-195/02 [2004] ECR I-3565. See also
Gasser GmbH v. MISAT Srl, Case C-116/02 [2003] ECR I-14693
(which decided that a court of a Member State on which exclusive
jurisdiction has been conferred pursuant to Art. 23 cannot issue an
injunction to restrain a party from prosecuting proceedings before a
court of another Member State if that court was first seised of the
dispute).
12
West Tankers Inc. v. Ras Riunione Adriatica di Sicurta SPA (“the
Front Comor”), [2007] UKHL 4.
13
See, e.g., Laurent LÉVY, “Anti-suit Injunctions Issued by
Arbitrators” in Emmanuel GAILLARD (ed.), op. cit., fn. 1, pp. 115-
119.
14
This point was frequently made in discussions within the
UNCITRAL Arbitration Working Group, in the course of deliberations
on the new Art. 17 of the UNCITRAL Model Law (powers of
arbitrators to issue interim measures). These deliberations have now
been concluded, and the scope of Art. 17 has now been expanded
in order to include “anti-suit” injunctions and related measures.
15
Op. cit., fn. 11, at p. 309.
16
[2002] 1 W.L.R. 107, 117, at para. 23.
17
Op. cit., fn. 2, pp. 309-310.
18
See the UNCITRAL 39th Commission Report, available at
<www.uncitral.org>.
19
See, e.g., the different approaches in Birse Construction Ltd v. St
David Ltd (No. 1) [2000] B.L.R. 57 & [1999] B.L.R. 194; Al Naimi v.
Islamic Press Agency [2000] 1 Lloyd's Rep. 522; Shin-Etsu
Chemical Co. v. Aksh Optifibre (2005) SCC 234 (Indian Supreme
Court, including an analysis of different approaches in various
jurisdictions worldwide).
20
Judge Stephen SCHWEBEL, “Anti-Suit Injunctions in

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International Arbitration, An Overview”, in Emanuel GAILLARD (ed.).


Op. cit., fn. 1, at pp. 9-10.
21
See e.g., F.A. MANN, “The Consequences of an International
Wrong in International and National Law”, 48 British Yearbook of
International Law (1976-1977) 1 at p. 46; Salini v. Ethiopia, ICC
Arbitration No. 10623/AER/ACS (Award of 7 December 2001)
(Gaillard; Bernadini; Bunni) ASA Bulletin (2003, no. 1) at p. 59.
22
Op. cit., fn. 2, at pp. 308-9.
23
Joseph cites, inter alia: Nuclear Tests Case (Australia v. France)
1974 I.C.J. 253, 259-260; Case Concerning the Northern
Cameroons (Cameroons v. UK) (Preliminary Objection) 1963 I.C.J.
97, 103; Anglo Iranian Oil Company Case (UK v. Iran) 1951 I.C.J.
89, 93; Electricity Company of Sofia v. Bulgaria, 1939 P.C.I.J.,
series a/B, no. 79 at 199; COLLINS, “Provisional and Protective
Measures in International Litigation”, in Essays in International
Litigation and the Conflict of Laws, pp 169-170.
24
Op. cit., fn. 21.
25
The Hub Power Company Ltd v. (1) WAPDA & (2) The
Federation of Pakistan Judgment of the Supreme Court of Pakistan,
14 June 2000 (Civil Appeal No. 1398 and 1399 of 1999) [2000] 16
Arbitration International 431; 15 Mealey's International Arbitration
Report (2000, no. 7) at Sect. A.1 This case is cited because it is now
very well known, and serves as a good illustration of the paradigm
case. It should be noted, however, that the author acted as counsel.
The description here draws only from materials in the public domain,
and seeks to present an objective account.
26
For related aspects of this dispute, see the OPIC claim between
GE/Bechtel (available at:
<www.opic.gov/FOIA/Awards/2294171_1.pdf>) and the US Govt
Claims under an Investment Incentive Agreement, 1997 (available at
<www.opic.gov/foia/awards/GOI110804.pdf>). Again, by way of
caution, it should be noted that the author acted as counsel in this
dispute.
27
In contrast to Hubco, mention may be made here of SGS v.
Pakistan (2002) – the well known ICSID case arising out of a Swiss-
Pakistan BIT. In that case, an anti-arbitration injunction was sought
by the Government of Pakistan, and issued by the Pakistan
Supreme Court. Subsequently, however, the ICSID Tribunal
recommended interim measures to protect its own jurisdiction and
process. Ultimately, the Pakistan Government decided to participate
in the arbitration, rather than the Pakistan Courts.

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