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In Evison Holdings Limited v International Company Finvision Holdings & Anor [2019] EWHC 3057 (Comm), the English High Court considered an application for the continuance of an anti-suit injunction against a non-party to an arbitration agreement. The application was based on the non-party having pursued proceedings in Russia which raised the same or overlapping issues to those which were the subject of the arbitration.
Background
In August 2016, Evison and Finvision entered into a framework agreement relating to the merger of one of Finvision’s subsidiaries into OEB, a Russian subsidiary of Evison. The framework agreement provided for LCIA arbitration seated in London.
Disputes subsequently arose when Finvision attempted to exercise a call option to acquire a tranche of Evison’s shares in OEB which, when combined with the existing shareholdings of Finvision’s affiliates, would have given Finvision control over OEB.
Evison commenced four LCIA arbitrations in April and May 2018 (the “Arbitrations”) in which the same arbitrators were appointed in respect of each arbitration (the “Tribunal”). Finvision brought cross-claims, including three heads of claim seeking damages for the alleged wrongdoings of Evison whilst it was in control of OEB, asserting that such wrongdoings caused Finvision damage in its capacity as shareholder.
Separately, Finvision commenced court proceedings in Russia requiring Evison to transfer the call option shares. Despite anti-suit relief granted by the Tribunal, Finvision obtained a Russian court order which effectively gave Finvision control over OEB.
Having gained control, Finvision replaced the chairman of OEB’s executive board. Under its new management, OEB commenced court proceedings in Russia against Evison on 30 July 2019 (the “OEB Russian Proceedings”). OEB’s claim against Evison alleged the same three wrongdoings as those in Finvision’s counterclaims in the Arbitrations.
The issues before the court
Evison applied for an anti-suit injunction against OEB, seeking to restrain it from pursuing the OEB Russian Proceedings. Whilst the application was initially granted on a temporary basis, the case as to whether the injunction should be continued came before Phillips J.
At the hearing, Evison asserted that Finvision and OEB had colluded to bring the OEB Russian Proceedings in order to impede the Arbitrations. In this respect, Evison relied upon two cases in which anti-suit injunctions were granted against non-parties as a result of collusion with one of the parties to an arbitration (BNP Paribas v Open Joint Stock Company Russian Machines [2011] EWHC 308 (Comm) and Mace (Russia) Ltd v Retansel Enterprises Ltd [2016] EWHC 1209 (Comm)). In both cases, the non-party and the party to the arbitration were under common control and anti-suit injunctions were granted in circumstances where the proceedings brought by the non-parties involved collusion between them such that they could be considered to be “direct attempts to invalidate the underlying agreements and thereby frustrate the arbitrations” and “were, at least arguably, vexatious and unconscionable”.
Evison’s claim also included arguments that (i) the OEB Russian Proceedings would require Evison to engage with the same issues in dispute in two jurisdictions, (ii) given that the OEB Russian Proceedings were due to conclude before the Arbitrations, they may give rise to issue estoppels binding upon the Arbitrations, and (iii) the OEB Russian Proceedings may lead to Evison being seized of its shares in OEB.
In response, OEB, not being a party to the Framework Agreement containing the arbitration agreement, argued that it was simply pursuing its own corporate claims for wrongs done to it by Evison in Russia, the natural and only forum where they could be pursued. In turn, Finvision denied any collusion with OEB, submitting evidence demonstrating that it had required OEB to discontinue the OEB Russian Proceedings. Finvision also offered to undertake to the Court not to rely upon any issue estoppel arising from the OEB Russian Proceedings.
Decision
Despite Finvision’s ownership of OEB giving rise to a presumption of collusion between the two entities, the application was denied.
In particular, the judgments relied upon by Evison were distinguished by the Court on the basis that OEB’s claims were its own corporate claims, which had been “brought by the proper claimant … in the proper and natural forum” and the OEB Russian Proceedings were not considered to have been commenced with a design to impede the arbitration.
The Court therefore held that “it is difficult to regard [the OEB Russian Proceedings] as vexatious or unconscionable… [i]ndeed, it would be a remarkable step for this court to restrain a foreign public company pursuing its own legitimate claims in such circumstances”. It was further held that, regardless of the circumstances of the appointment of OEB’s current management, they were acting in good faith and in OEB’s best interests. The Court considered that it was the counterclaims brought by Finvision in the Arbitration which were questionable, and the Court urged Evison to consider seeking further remedies in respect of Finvision’s conduct instead. The Court also accepted Finvision’s undertaking not to rely upon any issue estoppel arising from the OEB Russian Proceedings.
Comment
This decision confirms that, whist the Court will often not hesitate (subject to well-known EU law restrictions) to exercise its jurisdiction under section 37 of the Senior Courts Act 1981 to prevent a party to an English seated arbitration agreement from breaching that agreement by commencing proceedings in a non contractual forum, the Court will be hesitant to restrain non-parties to the arbitration agreement for pursuing proceedings which raise the same or overlapping issues to those which are or might be subject to arbitration. In order to successfully obtain an injunction in such circumstances, the applicant will require strong evidence that the proceedings involve collusion with a party to the arbitration and represent a vexatious and unconscionable attempt to impede it. In that way the Court will seek to distinguish cases where the non-party is simply pursuing its own legitimate claims.
Hannah Lilley would like to thank Luke Dee for his contribution in preparing this article.
12 December 2019
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