Sudden impact: interim injunctions, arbitration clauses and the court’s jurisdiction to intervene in disputes

Posted: 24/03/2016

• The High Court has jurisdiction under s44 (3) Arbitration Act 1996 to grant interim injunctions, where necessary for the purpose of preserving evidence or assets, in support of an English arbitration.
• Contractual rights can constitute an asset for the purposes of s44.
• The court has jurisdiction even if the existence of the contractual right is to be decided in the arbitration itself.

The question of the court’s jurisdiction to intervene in disputes which are subject to an arbitration clause is governed by the Arbitration Act 1996 (the Act). The recent case of GigSky ApS v Vodafone Roaming Services SARL [2015] EWHC 4047 (Comm) provides a useful illustration of the court’s approach to granting urgent interim injunctions where there is an arbitration clause but no arbitration is on foot. 

Background

In GigSky, Vodafone SARL (Vodafone) agreed to provide GigSky ApS (Gigsky) with access to Vodafone’s (and Vodafone’s roaming partners’) GSM networks throughout the world (the network), so that GigSky could provide that network access to GigSky’s authorised subscribers to the GigSky service (the agreement). The GigSky service enabled mobile phone users to obtain international data roaming at a low cost. 

Vodafone purported to terminate the agreement by notice given late one evening and the next day disconnected the services and withdrew access to the network.

The day after the purported termination, GigSky obtained a without notice interim mandatory injunction from the Commercial Court directing Vodafone to reinstate the service.

On the return date Vodafone attempted to discharge the injunction on a number of grounds. This article concentrates on the question of whether the High Court had jurisdiction to grant the interim injunction, given that the agreement contained a clause that all disputes were to be referred to an ICC arbitration with its seat in London.

Section 44 of the Arbitration Act 1996

The answer to that question turned on section 44 of the Act (see text box).

GigSky’s submissions

GigSky submitted that, by virtue of section 44 (2) (e) of the Act, the court has the same power to grant an interim injunction as it has for the purposes of and in relation to legal proceedings. That power is potentially limited in cases of urgency by section 44(3); but that sub-section did not limit the court’s power in this case as the purpose of the injunction was to preserve GigSky’s assets (being its contractual rights under the agreement). GigSky relied on the Court of Appeal’s decision in Cetelem SA v Roust Holdings Ltd [EWCA] Civ 618 and [2005] 1 WLR 3555. 

Vodafone’s submissions

Vodafone made the following submissions: 

ICC emergency arbitrator

As the agreement contained an ICC arbitration clause, interim relief should have been sought from an ICC emergency arbitrator in accordance with article 29 and appendix V of the ICC Rules. 

Urgency

The matter was not urgent and therefore the court did not have jurisdiction under s44 of the Act. GigSky could not rely on its own delay in bringing the application to manufacture urgency.

No asset

There was no “asset” as contemplated by s44 of the Act. 

Vodafone accepted, following Cetelem, that an “asset” under s44(3) includes a contractual right.

However, it submitted that GigSky was not seeking to protect a contractual right, but rather the potentialasset that might arise if it succeeded in its claims in the arbitration; and that s44(3) allows the court to grant relief in respect of an actual asset only, and not a potential one. 

Vodafone argued that, for a contractual right to amount to an “asset”, that right must indisputably exist without the court having to decide the very issue reserved for the arbitral tribunal. It submitted that that distinction was supported by the decision in Zim Integrated Shipping v European Container [2013] 2 CLC 800 and EWHC 3581 in which the judge concluded that: “strictly speaking, the court's jurisdiction to make the order would only arise if the claimants do in fact have the assets – ie the contractual rights – on which they rely. Section 44(3) does not refer to possible assets or alleged assets, but ‘assets’". 

Vodafone claimed that GigSky was asking the court to protect a potential asset, namely the contractual right to ongoing service that would exist if GigSky were right on the question of termination which was the very question which the ICC tribunal had to decide.  

Alternatively, Vodafone submitted that, if there was an “asset” and jurisdiction existed, the court ought to exercise its discretion very cautiously so as not to usurp the arbitral tribunal’s jurisdiction by determining the very issues that were expressly reserved to it – namely whether Vodafone could rely on its right to terminate. 

The judgment

ICC emergency arbitrator

For the purpose of s44(5) of the Act, there was no other tribunal empowered to act when the injunction was sought.

Urgency

The matter was clearly urgent, because Vodafone had terminated the service the day before. It was true that the matter would not have been urgent, or so urgent, had GigSky applied earlier but that went to the exercise of the court’s discretion in deciding whether or not to grant an injunction and not to existence of the relevant jurisdiction, which requires urgency as at the date of the application. 

Disputed asset

The asset claimed was GigSky’s right to have the service provided to it by Vodafone under the agreement. 

In Cetelem, Clarke LJ said in paragraph 63:“There is nothing in the subsection to limit the power of the court to orders which do not involve a preliminary determination of a contractual right of the parties. I see nothing in the subsection which provides that the court has no power to make an order which it thinks necessary for the purpose of preserving evidence or assets because it will also involve forming a view on the merits of the dispute which the parties have agreed to submit to arbitration. Whether it is right in principle to make such an order in any given case is an entirely different question, but I cannot see there is anything in the subsection or the Act which deprives the court of the power to make an order which it thinks is necessary for the purpose of preserving evidence or assets.”

Accordingly, Judge Waksman QC saw “nothing in Cetelem to suggest that if the claimed contractual right is disputed, or the resolution of the claim to an injunction may require the court to make some finding or preliminary finding as to the merits, then as a matter of jurisdiction the injunction cannot be granted” (paragraph 46). 

The judge concluded (in paragraph 53) that Zim was a very different case. The parties were both in the arbitral process when relief was sought under s44(3). The judge concluded that Zim was not authority for the proposition that the court has no jurisdiction if the existence or otherwise of the contractual right said to be the asset is to be decided in the arbitration. Rather that is a significant factor to be considered in each case by the court in the exercise of its discretion.

Accordingly, the judge concluded (in paragraph 55) that he had the relevant power under s44(3) and should exercise it in favour of GigSky. 

Observations

The purpose of section 44 of the Act is to give the court powers to be used when the tribunal cannot act effectively and, in particular, to assist the arbitral process in cases of urgency before an arbitration is on foot. Without such powers, it would be all too easy for a party who is bent on a policy of non-cooperation to frustrate the arbitral process. 

As the judge commented in paragraph 47, it will almost always be the case, on an application for an interlocutory injunction, that the court will not be asked to determine (ie finally resolve) any point on the merits, but merely decide whether there is a serious issue to be tried such that there is a case to go forward. That does not involve any usurpation of the arbitral process where the issue, at the end of the day, will be whether the claimed right does or does not exist.

This case is another example of the English courts’ willingness to protect arbitration agreements with an English seat by making orders which maintain the status quo pending the effective exercise of power by the arbitral tribunal. This includes granting freezing injunctions or seize and search orders, more common forms of urgent protective measures to preserve assets or evidence than in this case. 

Penningtons Manches and Wilberforce Chambers acted for the successful applicant. 

This article was published in New Law Journal in March 2016. 

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