On December 19, 2002, the French Supreme Court upheld a decision of the Paris Court of Appeals that had ordered a creditor to discontinue a lawsuit initiated in Spain against a company under bankruptcy in France, under penalty of a daily fine.[1] The court held: “subject to international treaties or European regulations, which are not applicable in the present case, bankruptcy proceedings initiated in France produce their effect on all the assets of the bankrupt company.” By so holding, the court recognized the validity of injunctions commanding creditors of a company in bankruptcy to do or desist from doing something with respect to the assets or funds of the company, regardless of the location of assets or funds at issue. The commentators of the Banque Worms case were keen to announce the introduction into French law of a concept well known in common law countries, namely, anti-suit injunctions.

That was before the European Court of Justice (ECJ) rendered its decision in the much publicized Turner case.[2]

Mr. Turner was employed as a solicitor by an English company but worked from Spain. After he was fired, he brought an action against his employer before an employment court in England and was awarded damages. The employer brought an action against him in Spain, alleging breach of duty and claiming damages. The employee responded by obtaining from the English court an anti-suit injunction restraining the employer from pursuing the claim in the Spanish courts. The English Court of Appeal insisted on the fact that the primary purpose of the proceeding initiated by the employer in Spain was to intimidate and exert pressure on the employee.

The House of Lords referred the question of whether the grant of the anti-suit injunction was consistent with the Brussels Convention (now EU Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters) to the ECJ. The ECJ held that a court of a Member State could not issue an injunction restraining a party from pursuing proceedings in a court of another Member State, even if the proceedings in question had been commenced in bad faith. The ECJ was of the opinion that a party must await a decision from the court first seized, whether seized in good faith or not. The ECJ’s reasoning was based on the fact that EU rules on jurisdiction were grounded in the principle of mutual trust among the courts of the Member States. Consequently, a court of one Member State may not issue an anti-suit injunction prohibiting the institution of an action before the court of another Member State. The Turner case followed the path opened by the Gasser case,[3] in which the ECJ held that a court of an EU Member State on which exclusive jurisdiction had been conferred by a choice-of-forum clause must nonetheless stay its proceedings if a court of another Member State was seized first.

Those were the circumstances under which the French Supreme Court had to decide whether an international freezing order, or Mareva injunction, issued by an English court should be recognized in France.

In the Mellon case,[4] the French Supreme Court accepted that a Mareva injunction issued in the United Kingdom should be recognized in France. The injunction in question froze a defendant’s assets wherever they might be located. The court held that the injunction was independent of the offense of contempt of court for failure to comply with the injunction. The court concluded that, unlike anti-suit injunctions, international freezing orders do not interfere with the sovereignty of the French State and may therefore be recognized in France.

Because the injunction was designed not to preserve the status quo or safeguard rights before the determination of the action in the U.K. but to ensure the execution of the judgment rendered in that action, the French Supreme Court should have treated it as a means of enforcement rather than a provisional protective measure. Such injunctions fall outside the ECJ definition of provisional measures as established in Reichert II, in which the court held that provisional measures are measures adopted to safeguard the rights of a party before he obtains a decision on the merits.[5]

Since the judgment was rendered after the Turner decision prohibiting the use of anti-suit injunctions between EU Member States, the French Supreme Court took great care to distinguish international freezing orders from anti-suit injunctions. The court affirmed that, unlike anti-suit injunctions, international freezing orders do not interfere with the sovereignty of other states. This position could be contested because Mareva injunctions prohibit debtors from freely disposing of their assets in France, yet France should have a monopoly on coercive power over assets situated in France. The court rejected this analysis by stressing that a Mareva injunction is not a measure affecting goods but an in personam measure affecting the person of the debtor himself. The court therefore confirmed that although French courts have a monopoly to exercise coercion over assets situated in France, foreign courts may nonetheless take coercive measures against the owner of such assets. The distinction between measures affecting the assets themselves and those affecting the owner in respect of his disposal of the assets seems, at best, superficial because, one way or another, both measures affect assets located in a foreign country.

The court was also quick to distinguish the freezing order itself from the penalty incurred for failure to comply with it (a fine for contempt of court). The penal nature of contempt of court would have complicated the recognition of the measure because it would have precluded the application of the Brussels Convention (now EU Regulation 44/2001) which is only applicable to civil and commercial cases.

On the other side of the Channel, the debate over anti-suit injunctions was fueled, rather than extinguished, by the ECJ decision in the Turner case. The next question that occupied the attention of English judges and legal scholars was whether the Turner decision bars English courts from making orders restraining a person from commencing or continuing proceedings in another Member State on the ground that such proceedings contravene an arbitration agreement. The issue, which arose in the West Tankers case,[6] sparked heated debate because arbitration is excluded from the scope of Regulation 44/2001.[7]

On February 21, 2007, the House of Lords referred the following question to the ECJ:

May the court of a Member State grant an injunction against a person bound by an arbitration agreement to restrain it from initiating or pursuing proceedings in breach of this arbitration agreement in a court of another Member State which has jurisdiction to entertain those proceedings under Regulation 44/2001?

The facts of the case were as follows. A ship owned by West Tankers and chartered out to Erg Petroli had hit and damaged a pier belonging to Erg in the port of Syracuse, Sicily. The charter party contained a clause providing for arbitration in London. Erg had been compensated by its insurers up to the limit of its insurance cover and instituted arbitration proceedings against West Tankers in London for the excess. Exercising their subrogation right, the insurers brought proceedings before the Tribunale di Siracusa against West Tankers to recover the amounts paid out to Erg. It was not disputed that but for the arbitration agreement, the Sicilian court had jurisdiction under Regulation 44/2001. Taking the view that, because of the subrogation, the arbitration agreement contained in the charter party was binding upon the insurers under both English and Italian laws, West Tankers filed an application in the High Court in London for an injunction restraining the insurers from pursuing the proceedings brought before the Sicilian court.

In referring the question to the ECJ, Lord Hoffmann diplomatically offered his own opinion “in case it should be of any assistance to the Court of Justice.” According to one commentator, Lord Hoffmann’s opinion was “a vibrant plea for the cause of anti-suit injunctions and even more so for the cause of arbitration.”[8]

Lord Hoffmann contended that because arbitration is excluded from the scope of Regulation 44/2001, the effect of an anti-suit injunction was not to prevent the court of another Member State from ruling on its own jurisdiction under the regulation but to guarantee to the parties to an arbitration agreement that their contractual right to have their dispute adjudicated by arbitration will be respected. Lord Hoffmann pointed out that it is necessary for courts of the Member States to trust the arbitrators under the compétence-compétence doctrine or the court having jurisdiction over the arbitration to decide if the arbitration clause is binding and, if need be, to make orders requiring the parties to arbitrate and not to litigate.

In support of his proposition that anti-suit injunctions issued in areas excluded from the scope of Regulation 44/2001 are valid, Lord Hoffman cited the Banque Worms decision (above), which was rendered in a matter relating to insolvency  an area that, like arbitration, is excluded from the scope of Regulation 44/2001.

Lord Hoffmann considered, however, that the essential argument lay elsewhere. What was paramount in his eyes was to protect “the practical reality” of international arbitration as “a method of resolving commercial disputes.” He regards anti-suit injunctions and the compétence-compétence doctrine as essential tools for enabling parties to enforce arbitration agreements and considers that courts have a duty to help parties accordingly. The House of Lords was eager to defend the London arbitration market and stressed that other major arbitration centers, such as New York, Bermuda or Singapore, offered parties the possibility to obtain anti-suit injunctions when proceedings have been commenced in violation of an arbitration agreement.

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Anti-suit injunctions and international freezing orders are “false twins.” Their differing treatment by French courts raises many questions and uncertainties. The solution might well be the creation, at EU level, of a special judge for jurisdictional issues, who could deal with such issues rapidly and ensure EU-wide harmonization of the manner in which they are resolved.[9] In any case, the decision of the ECJ in the West Tankers case will be closely scrutinized.