SAB Miller Africa & Anor v East African Breweries

This is an adjourned application for permission to appeal against an interim injunction granted by Christopher Clarke J in the Commercial Court on 18 August 2009. The injunction restrained the applicant (“EABL”) from doing any of a series of acts which the judge held would be contrary to an agreement between EABL and Tanzania Breweries Limited (“TBL”). The issue before us is a threshold one. As Aikens LJ observed when he adjourned this application on 22 October 2009:

The learned Lord Justice expressed the view, perhaps a provisional view, that the applicants’ argument had a reasonable prospect of success, but considered that the most economic way of managing the proceedings was to adjourn for argument on notice as to this threshold question on this court’s jurisdiction. If we decide that there is jurisdiction in this court to grant leave to appeal and permission to appeal, then there will have to be a further hearing to decide whether EABL should have permission on the merits.

The EABL has been a shareholder in TBL since 2002 and since then has used TBL as exclusive brewer and distributor of its beer brands in Tanzania. But EABL now wishes to terminate this arrangement. It considers that TBL has conducted itself in a way that violates the distribution agreement so as to justify EABL terminating that agreement. The judge accepted that there was an arguable case that that was so and this issue will, as I understand it, be the subject of an ICC arbitration. EABL wishes to enter into alternative arrangements with another brewer in Tanzania and purportedly took steps to do so.

Accordingly, TBL and SABMA, another shareholder in TBL, sought and obtained an injunction against EABL effective until 17 January 2011 or further order of the court or ICC tribunal, restraining EABL from competing or implementing those arrangements. That is the injunction that has given rise to these proceedings. The application for the injunction was lodged on 17 July 2009. It was expressed to be made under section 44 of the Arbitration Act 1996, and that is a fact to which I will return. Section 44 provides:

It is common ground: (a) that if the application was made pursuant to section 44 then, by force of section 44(7), this court has no jurisdiction to grant permission to appeal; and (b) section 44 is what is called a non-mandatory provision and indeed it opens, as I have shown, with the words “Unless otherwise agreed by the parties”. In their skeleton argument in reply and in submissions made by Mr Flynn QC for the applicants today, the applicants assert that their case is not that section 44 has been excluded by the agreement but that the agreement conferred wider powers than section 44 itself allowed. That is an important feature of the case. The relevant contract whose clauses are relied on by the applicants as invoking or conferring these wider powers are two, the brewing and distribution agreement (“BDA”) and the shareholders agreement (“SHA”). The applicants rely on three clauses as follows: First, clause 4.13 of the BDA:

Clause 23.15 of the BDA, also to be found effectively in clause 19.14 of the SHA, is the next provision and reads as follows:

Lastly, clause 24(8) of the BDA:

It is well established that clear words are required to exclude section 44. See for example Re: Q’s Estate [1999] 1 Lloyd’s Rep 931 per Rix J as he then was at 938 and Russell on Arbitration 23^rd edition, paragraph 7186 and footnote 695. Nothing in the contractual provisions relied on in this case constitutes an express or specific exclusion of section 44. However, the applicants submit that the parties had agreed that the court could be asked to grant injunctive relief on a wider basis than could be done under section 44 or, as it is put, “unfettered by the restrictions” placed on the court by section 44. Effectively the submission is that by agreement the parties have incorporated into their contract provision for the power of the court to grant injunctive relief as it is conferred in general terms by section 37 of the Supreme Court Act 1981.

This is a difficult issue. It is clear that there are words in these provisions which appear to refer to power or the exercise of power wider than, on the face of it, is conferred by section 44. However, my own conclusion is that the clauses do not on their true construction extend the court’s power beyond what can be done under section 44. They are not worded so as to confer power. They are worded rather so as to make it clear that existing powers are preserved.

As regards the words which refer to wider powers than are available under section 44, one notes in particular the references in clause 23.15 and 24.8 to final as well as interim relief. There is no reference to a final injunction in section 44. It is to be noted, and Mr Choo Choy observes in his skeleton argument, that there may be cases in which justice requires an order to be made under section 44 which has final dispositive effect even though in form it is an interim order. That is a possibility specifically recognised by Clarke LJ, as he then was, in Cetelem SA v Roust Holdings Ltd[2005] 2 Lloyd's Rep 494at paragraphs 6 and 7.

I recognise that the construction issue is a fine one, but I would hold that if parties to an arbitration are to agree that interim relief is to be granted under section 37 free from the provisions of section 44(3) to (7), then very clear provision would have to be made to that effect. The measures contained especially in sections 44(5) and (6) are, in my view, of particular importance as ensuring that the power to grant interim relief is conformable with the arbitral tribunal’s being in charge of the dispute, conformable indeed with the statutory policies expressed in section 1(c).

In sum, then, I would, though not without considerable hesitation, accept the respondent’s submission that on their true construction the clauses relied on preserve the section 44 power and effectively do no more. They are there to make it clear that the agreement to arbitrate, some of whose provisions are complex, is not intended to prevent either party seeking such injunctive relief as is available to them, and do not confer powers. They are, as Mr Choo Choy observes, quite similar in terms to various provisions contained in arbitration rules such as those cited at paragraph 21 of the respondent’s skeleton, which undoubtedly has the effect of preserving existing powers and not conferring others. Mr Choo Choy’s submission is, moreover, lent some force by the elaborate nature of the dispute resolution procedure, clause 23 of the agreement.

In fact, however, as I have indicated, the applicants do not suggest that section 44 has been excluded but only that it has been added to. It is necessary to consider what will be the position if that was so. Mr Flynn refers, for example, to paragraph 4 of Cetelem as showing that there is an unresolved debate as to the co-existence or precise relationship between sections 37 and 44. Such tension might indeed arise if it were clear that the parties had, so to speak, introduced section 37 powers into the contract. For reasons I have given, in my view that is not the position. Mr Choo Choy submits, further, that parties are not actually competent to introduce section 37 powers into the contract at all. We need not, in my view, consider that far-reaching question. For even if section 37 had been introduced here, in my judgment that circumstance cannot assist Mr Flynn. If section 44 has not been excluded by the parties (as, by concession, it has not) then in my judgment it will apply in relation to any order falling within its terms whatever might be the position as regards an order which could not be made under section 44. Christopher Clarke J’s order could be so made and was so made. It is notable and important, in my view, that the application of the respondent for an injunction was expressly made on notice under section 44(3) and the judge expressly acknowledged (judgment, paragraph 51), that the order he made was under section 44. I consider that we should go on the basis that what was said to be done was done. One may compare the reasoning of Eady J in Glidepath Holdings BV v Thompson [2005] 1 All ER (Comm) 434 at paragraph 16. I would hold that section 44 applies here and that, by force of section 44(7), this court has not the power to grant permission to appeal, which I would therefore refuse.

I also agree that this court does not have the power to grant permission to appeal against the order made by Christopher Clarke J because of the terms of section 44(7) of the 1996 Act. I do so because it is not in dispute that the application in the court below was made under section 44, and the judge’s order was likewise made under that provision. Neither party in the proceedings before the judge sought to have the matter determined on the basis of section 37 of the Supreme Court Act 1981. In those circumstances it seems to me that the restriction contained in section 44(7) on obtaining permission to appeal bites because that was the power being exercised by the judge. His decision was, in the words of subsection (7), a decision “under this section”. I make it clear that I prefer to base my decision on that footing because I regard the arguments about the meaning of the relevant clauses of the agreement (clause 4.13, clause 23.15 and clause 24.8) and whether they confer wider substantive powers on the courts or merely deal only with access to the courts as being less clear-cut. For my part, I incline more to the former interpretation than the latter but, given the position which I have already reached on a different basis, I do not propose to express any concluded view on that issue.

Likewise, it is unnecessary in the circumstances to deal with Mr Choo Choy’s final argument about whether the parties can by agreement confer wider powers on the court to grant permission, in circumstances already covered by section 44, so that the limits set out in that section would not apply if that is what the parties agree. Nonetheless the end result which I have arrived at is the same as that arrived at by my Lord.