Electronic Arts CV v CTO SpA

JUDGMENT

MR IAN GLICK QC:

1. This is an application by the claimant (“EA”) against the defendant (“CTO”) for an interim injunction to restrain CTO from pursuing certain proceedings commenced by it in the Court of Appeal of Bologna, Italy, against EA (“the Italian proceedings”), or commencing any further or other proceedings in any jurisdiction against EA relating to the interpretation or enforcement of a distribution agreement dated 21 June 2000 and made between the parties.

2. EA is a Dutch limited liability partnership registered in the Netherlands and said to be resident in Barbados. It is a publisher and distributor of computer games. CTO is an Italian company and a wholesale software distributor. According to pleadings filed by CTO in the Italian proceedings, the commercial relationship between companies associated with EA and CTO goes back to 1987.

3. On 9 June 2000 EA (then called Octopus Interactive CV) entered into an investment agreement with CTO, CTO’s parent company Finbox SpA (“Finbox”) and Marco Madrigali, the President of CTO. Under this agreement, CTO agreed to sell to EA shares of CTO, EA agreed to enter into the distribution agreement with CTO and Finbox agreed to pay to EA 35 billion Italian lire, described as a premium to be paid in consideration for EA entering into the distribution agreement with CTO.

4. On 21 June 2000 EA and CTO entered into the distribution agreement. By clause 1.1(a) EA appoints CTO to act as exclusive distributor for certain interactive games and similar products in Italy, the Vatican and the Republic of San Marino. By clause 12.1 the agreement is to run until 31 March 2004, with provision for a two-year extension by CTO provided agreed sales targets are met.

5. Definition (o) at the start of the distribution agreement defines “price”, saying amongst other things: “(iii) For all Products [EA] will set the maximum retail price at which CTO can sell the Products for”. Definition (v) defines “Trade Price” as “the monthly gross trade list price of the Products priced in Italian lire and issued on a monthly basis to CTO by [EA]”. By clause 10.1(i) CTO warrants that it “will not sell the products above the maximum sale price informed to CTO. [EA] will notify CTO of the maximum sales price as soon as it is aware of it and of the applicable Sony Playstation price band. This term is a fundamental term of this agreement”.

6. There are also obligations on CTO to use its best endeavours to maximise sales of the products (clause 5.1); to use its best endeavours to exploit the rights granted to it to the best of its skill and ability, and to ensure that it exploits all the products (clause 10.1(h)); and not intentionally to do anything that may prevent the sale or interfere with the development of sales of the products or affect the goodwill and reputation of EA (clause 10. 1 (d)).

7. Clause 16.1 is a choice of law and arbitration clause. It provides as follows:

“This agreement shall be construed in accordance with, and governed in all respects by the law of England and any disputes relating to its interpretation or enforcement shall be settled under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators, expert of English law and reasonably fluent in Italian and English appointed in accordance with the said rules. The two first appointed arbitrators shall have 30 days from their appointment to select the third arbitrator, failing which the latter shall be selected and appointed in accordance with the said rules. The seat for arbitration shall be London and the language of arbitration shall be English.”

8. It is common ground that disputes have arisen between the parties concerning the operation of the distribution agreement. According to CTO’s pleadings in the Italian proceedings, in May 2002 EA sought and obtained permission from CTO for the accountants KPMG to carry out an audit of CTO’s accounting documents. On the basis of this audit KPMG issued a report critical of the prices charged by CTO for the products it was distributing under the agreement. It accused CTO of charging, in some cases, prices higher than allowed by the agreement. It also said CTO was selling products to a subsidiary, Infomaster, at prices lower than it charged to other customers and that Infomaster was then selling on at prices higher than allowed by the agreement.

9. According to CTO, this was followed by a letter from EA’s English solicitors, Lewis Silkin, accusing CTO of breaching the distribution agreement “with the consequent threat of termination of the Distribution agreement”. Lewis Silkin alleged that CTO had charged in excess of maximum sale prices, which the solicitors equated with trade prices, and had thereby breached clauses 10.1(i), 10.1(h) and 10.1(d).

10. The letter alleged that CTO had granted excessive discounts to Infomaster and it also reserved EA’s right “to notify all relevant retailers itself of the correct price, ie the EA official trade price for each product”. See paragraphs 3.3 to 3.6 of CTO’s summons in the Italian proceedings and also paragraphs 3.8 to 3.16 of CTO’s answer to the request for arbitration.

11. On 21 November 2002 EA issued a request for arbitration to the ICC under clause 16.1 of the arbitration agreement. On the same day EA was served with a summons by which CTO and Finbox had commenced the Italian proceedings against EA and against five companies associated with EA: Electronic Arts (UK) Holding Co; Electronic Arts Ltd; Electronic Arts Publishing SARL: Electronic Arts mc; and Electronic Arts Italian Srl. I shall refer to these five companies, based in England, France, the United States of America and Italy as the “associated companies”.

The request for arbitration

12. In the request for arbitration EA summarises its own case in this way:

“In summary EA alleges that CTO has breached a number of terms of the agreement, in that it has sold the software products at a higher price than that agreed, and has made a secret profit on the sales of products which it has not accounted for to EA. EA therefore claims financial compensation and an injunction to prevent further breaches of the agreement by CTO. EA also seeks a declaration that, by reason of its failure to reach certain sales targets set under the agreement, CTO cannot now exercise an option to renew the agreement for an additional two years. EA does not seek by commencement of this Arbitration to terminate the agreement.” (Para 6)

13. The request alleges that the trade price was the maximum retail price at which CTO was allowed to sell a product to customers (para 15), recites the terms referred to above and alleges three breaches of the distribution agreement. These are:

“(1) CTO has sold Products at a higher price than the Trade Price stipulated by EA; (2) CTO has sold or purported to sell Products at a discounted price to an intermediary sub-distribution company, Infomaster, which then sold the Products on at a higher price. Infomaster is a 98% owned subsidiary of CTO; (3) CTO charged EA, and EA paid for, the cost of compulsory SIAE stickers for Products (a form of tax in Italy), whilst at the same time charging customers for the stickers.”

14. The first of these matters is said to involve breaches of clauses 10.1(i), 5.1, 10.1(h) and 10.1(d) of the distribution agreement. EA seeks financial compensation for these breaches and also an injunction under the Arbitration Act to prevent CTO from selling products above the trade price.

The Italian pleadings

15. The summons in the Italian proceedings was of course prepared before CTO had seen EA’s request for arbitration. The copy of the summons that has been exhibited is a translation of the original and is not always easy to follow. At the outset, however, the proceedings are succinctly characterised as, an “action for voidness and damages according to Article 33, Law 287/1990 for violation of Article 2, Law 287/1990”.

16. In the summoms CTO recites, among other things, the investment agreement, the distribution agreement and its terms, and the complaints made against it by KPMG and by Lewis Silkin. CTO denies ever being notified of any maximum prices, though it accepts that it undertook not to exceed the maximum retail price of which it was notified: see paragraph 3.5. CTO alleges that up until the time the dispute arose, although it had been advised of trade prices, it had customarily set its own prices to its customers. CTO also says this:

“CTO signed the distribution agreement and accepted the clause referred to in article 1(o) and the limitations referred to in article 10(i) only on the assumption that these agreements were lawful and compatible with the applicable regulations, and in particular, with the Italian regulations on antitrust referred to in Law 287/1990.” (See para 3.5.4)

17. CTO then says in brief that EA and the associated companies intended and intend to operate the provisions of the distribution agreement in such a way as to enable EA to impose fixed prices at which CTO must sell to its customers, and that CTO is intending to rely on breaches of this obligation to cancel the agreement so as to be able to enter the Italian market itself: see paragraph 3.6.

18. CTO alleges that provisions allowing EA to determine fixed prices for products supplied to CTO contravene Article 2 of the antitrust law 287/1990, read with Articles 2 and 4 of EC Regulation 2790/1999.

19. Pausing there, it seems clear that the EC Regulation contemplates that distribution agreements of this sort may include terms imposing a maximum sale price but not a minimum sale price.

20. The summons mentions the arbitration clause only to assert that it is inapplicable in a case of alleged violations of Italian competition law. As to the associated companies, CTO pleads that Electronic Arts (UK) Holding Co is the general partner in EA; that employees of Electronic Arts Limited and Electronic Arts Publishing Sarl “managed and currently continue to manage the whole commercial relationship with the CTO structure while [Electronic Arts Italia] is the current subject which receives purchase orders for products from CTO”, and that Electronic Arts Inc is the guarantor of all the obligations assumed by EA under the distribution agreement.

21. CTO, as I understand it, alleges that EA and its associated companies jointly and tortiously induced CTO into a void agreement which has imposed on CTO an obligation to sell products at prices fixed by EA in breach of Italian and European competition law. It therefore asks the Bologna Court of Appeal:

“(1) to ascertain and declare that the Investment agreement and the Distribution agreement are contracts connected with other; (2) to ascertain and declare that the defendants have carried on behaviour violating Article 2 of the Law 287/1990 and, by the effect, to declare void all the clauses contained in the distribution agreement to allow the defendants to determine fixed sale prices for the products supplied to CTO ... in execution of the above-mentioned agreement, or subordinately of the entire contract; (3) to sentence the defendants jointly to pay compensation to CTO and/or Finbox for all the damage suffered resulting from the cancellation of the Distribution agreement, with particular regard, but without limiting intent, to the loss of earnings or any other economic benefit which CTO ... and/or Finbox ... could have realised if the contract were to remain constant until 31 December 2006 and all further damages costs incurred plus the reimbursement to Finbox of the sum of 35 billion lire, equivalent to 18,750,991.47 Euros plus accrued interest ... from the moment of payment until the material restitution which were paid by Finbox ... to Electronic Arts CV for the stipulation of a disputed distribution agreement.”

22. These claims for relief are premised on the proposition that the practical effect of the various clauses in the distribution agreement relied on by EA was intended to and does entitle EA to fix both maximum and minimum prices. But for present purposes it is not necessary for me to investigate further precisely how CTO intends to put its case.

CTO’s answer to the request for arbitration

23. CTO served its answer in the arbitration on 31 January 2003. To a significant extent it repeats what is said in the summons in the Italian proceedings, but of course contains no claim against the associated companies. Again, CTO alleges that the effect of EA’s interpretation of the distribution agreement is to allow it to fix prices for products from which CTO cannot depart. Again, CTO alleges that this means that EA has breached Italian and European competition law. CTO continues, so far as material:

“3.18 As a result of these circumstances CTO has commenced ordinary legal proceedings before the Court of Appeal of Bologna, Italy, in order to obtain an order against EA and its affiliates concerned with the operation of the Distribution agreement for violation of Italian Antitrust law no. 287/1990. The first hearing is scheduled for 30 May 2003.

3.19 On these grounds, CTO submits that the present arbitral proceedings should be suspended, on the basis that (i) the causes of action relied upon in these proceedings by EA are the same as those which the Court of Appeal of Bologna is to decide upon and (ii) the ordinary proceedings were filed prior to notification to CTO of the Request for Arbitration.

3.20 CTO also contends that the arbitral tribunal cannot rule on the dispute because the Request by EA seeks an illegal ruling that CTO may not sell the Products on the Italian market at a price higher or lower than the Trade Price, with the consequence that EA intends to apply a fixed price on the products ... In any event, as the EU Regulation has direct effect on member states, the same conclusion should be reached by the distinguished Arbitral Tribunal applying English Competition Law.”

24. The answer then goes on to deal in great detail with the various claims made by EA before setting out the relief it seeks in the arbitration. In particular, CTO seeks as preliminary relief the suspension of the arbitral proceedings pending the outcome of the Italian proceedings and:

“the declaration of the non-arbitrability of the dispute in consideration of the fact that the request by EA to obtain an injunction preventing CTO from breaching the distribution agreement would require an order for CTO to sell the products at a fixed price which is the Trade Price according to EA’s interpretation of the distribution agreement. The above would constitute a violation of the mandatory EU Regulation as well as Italian Antitrust law 287/1990.”

25. In passing I note that EA, of course, says that this misunderstands or mischaracterises what it is really seeking in the arbitration.

26. After setting out various remedies and decisions that CTO asks the arbitrator to give on the merits, CTO concludes by praying “as subordinate relief” the following:

“Should the distinguished Arbitral Tribunal deem the interpretation given by EA [to certain clauses in the distribution agreement] correct, a declaration pursuant to Article 18.3 of the distribution agreement that such clauses are null and void for violation of the EU Regulation, Italian Antitrust Law no 287/1990 and English competition law.”

27. CTO then goes on to make a not insignificant counterclaim.

The Italian proceedings

28. EA has not so far taken any steps in the Italian proceedings and is not required to until 10 May 2003. That is the date for lodging a formal response to the summons. A first hearing is scheduled for 3 June of this year. Mr Jeffrey, the solicitor acting for EA, says in a witness statement that EA will, if necessary, challenge the jurisdiction of the Italian court on the basis that the action in Italy is brought in breach of the arbitration agreement. Such a challenge however needs to be made in EA’s substantive response. Mr Jeffrey sets out – and it does not appear to be in dispute – the likely course the Italian proceedings will take, noting that preliminary objections might only be finally dealt with together with the substantive decision. If proceedings run their course then at first instance “they could last between one and three or more years”.

The arbitration proceedings

29. On 3 February 2003 the Secretariat of the ICC International Court of Arbitration acknowledged receipt of CTO’s answer and counterclaim, noted the jurisdictional objections and invited EA to comment. On 14 February 2003 EA’s solicitors provided their comments. Subsequently, on 6 March 2003, the ICC Secretariat notified the parties that the International Court of Arbitration had decided that the case should proceed pursuant to Article 6.2 of the ICC Rules. Both sides have nominated arbitrators. These are Mr Robert Engelhart QC and Professor Guido Ferrarini. Professor David O’Keefe has been appointed as chairman. The arbitral tribunal has not yet indicated how it intends to proceed and, in particular, how it intends to deal with CTO’s application to suspend the proceedings.

The English proceedings

30. The Part 8 claim form in the present proceedings was issued on 27 March 2003. As already indicated, the relief sought is an injunction to restrain CTO from prosecuting the Italian proceedings against EA and the associated companies, or commencing any other proceedings relating to the interpretation and enforcement of the distribution agreement. At the same time EA issued an application notice for an interim injunction.

31. On 31 March 2003 Morison J gave permission under CPR Part 6.20(5) (c) for the claim form, together with the application notice, to be served on CTO in Italy. The relevant documents were served there on 8 April 2003.

Italian law

32. Both parties have put in evidence of Italian law; CTO from Professor Roberto Ceccon and EA from Mr Federico Bussata. Professor Ceccon, in brief says this:

“(a) CTO’s case in the Italian proceedings is that provisions of the distribution agreement breached antitrust Law 287/1990, which reflects European law now contained in EC Regulation 2790/1999, which derives from Articles 81 and 82 of the Treaty of Rome and which in any event has direct effect on Member States.

(b) Because of this and by reason of certain matters under the Italian Procedural Civil Code, Italian courts would not enforce or recognise an arbitration award enforcing such contractual provisions, which would contravene Italian and European public policy. Such points of competition law are not under Italian law arbitrable issues.

(c) In Italy special and exclusive jurisdiction to try such issues is conferred on particular courts, and in the present case on the Appeal Court of Bologna.

(d) The English proceedings should be stayed under Article 27 or 28 of EC Regulation 44/2001 (the Jurisdiction and Judgments Regulation) as the Court of Appeal of Bologna was the court first seised of the dispute between the parties.

(e) An injunction by the English High Court in the terms of the order sought will be regarded by the Italian court as an infringement of Italian sovereignty. Further, pursuant to Article 25 of the Constitutional Charter of the Republic of Italy, no person may be diverted from his natural judge as determined by law. In this case this is the Appeal Court of Bologna and the effect of the injunction would be to deprive an Italian company of its constitutional rights under the Charter.”

33. Mr Bussata disagrees with Professor Ceccon whether issues of competition law are arbitrable in Italy. In his opinion they are. He also disagrees with him on whether the Italian courts would enforce or recognise an arbitration award determining a dispute raising competition law issues.

34. In so far as these two witnesses disagree on matters of Italian law it is difficult, if not impossible, for me to resolve those disputes on a hearing such as this. It seems to me clear, however, that whatever may otherwise be the position under Italian law, the effect of European law is this. If EA obtains an arbitration award in its favour on the matters in respect of which European competition law issues are raised, then when EA comes to try to enforce that award in Italy or have it recognised there, CTO may challenge the award and in the result the underlying merits of the dispute may end up being re-examined by an Italian court. See Eco-Swiss China Time Ltd v Benetton International NV [1999] 2 All ER Comm 44.

35. Mr Bussata does not comment on Professor Ceccon’s opinion as to how an Italian court would view an English anti-suit injunction or on the constitutional point he makes. On a different front, however, Mr Bussata says that in his view, if the injunction is granted, it will have the practical effect of stopping Finbox from proceeding as well as CTO “because Finbox’s claim is entirely grounded on CTO’s claim”.

36. Mr Berry QC for CTO, on instructions, disputes this, saying that CTO and Finbox intend to prosecute the Italian proceedings at least to the maximum extent permitted by any injunction.

The issues

37. Mr Browne-Wilkinson QC, for the claimants, helpfully gave me a list of issues which, with slight adaptations, I gratefully adopt: (1) Is there a binding arbitration agreement? (2) If so, are the claims made in the Italian proceedings within the ambit of that agreement? (3) Are the present proceedings within the arbitration exception contained in Article 1.2(d) of the Jurisdiction and Judgments Regulation, formerly Article 1.4 of the Brussels and the Lugano Conventions? (4) If the answer to (3) is “yes”, should the court exercise its discretion to grant the injunction sought?

38. In view of my conclusions set out below, I do not list other issues that would have arisen had my answer to question (3) been “no”. I also record two issues that fell by the way. First, Mr Berry did not pursue the point made in the evidence that service of the proceedings had not been properly effected. Secondly, Mr Browne-Wilkinson did not pursue his original claim that any interim injunction should prohibit CTO from proceeding in Italy against the associated companies.

Is there a binding arbitration agreement?

39. It is common ground that clause 16.1 of the distribution agreement constitutes a binding arbitration agreement between the parties.

Are the claims made in the Italian proceedings within the ambit of that agreement?

40. Mr Berry accepted on behalf of CTO that there is a sufficient arguable case that the claims made by CTO against EA in the Italian proceedings are claims that fall within the arbitration agreement. By that I understand him to accept that on this issue EA satisfies the threshold test for an interim injunction, though of course he says EA should not get it for other reasons.

41. It seems to me that this concession is rightly made as CTO could, and indeed to a large extent does, make its allegations of breach of competition law and associated allegations in the arbitration.

Are the present proceedings within the arbitration exception contained in Article 1.2(d) of the Jurisdiction and Judgments Regulation?

42. Article 1 of the Jurisdiction and Judgments Regulation provides, so far as material, as follows:

“(1) This Regulation shall apply to civil and commercial matters whatever the nature of the court or tribunal. It shall not extend in particular to revenue, customs or administrative matters.

“(2) The Regulation shall not apply to ... (d) arbitration.”

43. The exception for arbitration is in identical terms to those in the Brussels and Lugano Conventions, which I shall refer to together as “the Convention”. The ambit of this exception has been considered by the European Court of Justice in The Atlantic Emperor, usually known as the Marc Rich case [1992] 1 Lloyd’s Reports 342; and it has also been considered by English courts on several occasions. The Court of Appeal in Toepfer International v Société Cargill France [1998] 1 Lloyd’s Reports 379 lists The Heidberg [1994] 2 Lloyd’s Reports 287; The Angelic Grace [1994] 1 Lloyd’s Reports 168; The Xing Su Hai [1995] 2 Lloyd’s Reports 15; Toepfer International v Molino Boschi [1996] 1 Lloyd’s Reports 150; and Lexmar Corporation v Nordisk [1997] 1 Lloyd’s Reports 289. To this must now be added The Ivan Zagubanski [2002] 1 Lloyd’s Reports 106.

44. Those authorities deal with whether the exception is wide enough to cover in particular (a) disputes as to whether an arbitration clause exists; (b) disputes as to whether the commencement and continuation of proceedings constitute the breach of an arbitration agreement and; (c) disputes as to whether a person should be prevented from litigating a matter he has agreed should be determined by arbitration.

45. In the present case I am concerned only with the third of these points, and I think I can confine my discussion of the authorities to Marc Rich, The Heidberg, Toepfer International v Molino Boschi, Toepfer International v Société Cargill France and The Ivan Zagubanski.

46. In Marc Rich the plaintiffs had bought oil from Italian defendants. A dispute arose and on the basis that the contract contained an arbitration clause the plaintiffs commenced an arbitration in London. The defendants failed to appoint an arbitrator and the plaintiffs applied to the court to appoint one on their behalf, obtaining leave to serve proceedings on the defendants in Italy. The defendants applied to set aside the order for service on the grounds that the dispute as to the existence of the arbitration agreement fell within the Convention.

47. The matter was referred by the Court of Appeal to the European Court of Justice. That Court decided that proceedings to appoint an arbitrator fell within the arbitration exception, and that whether there was a preliminary issue concerning the existence or validity of an arbitration agreement did not affect how the Convention applied.

48. The European Court of Justice said this:

“26. In order to determine whether a dispute falls within the scope of the Convention, reference must be made solely to the subject-matter of the dispute. If, by virtue of its subject-matter, such as the appointment of an arbitrator, a dispute falls outside the scope of the Convention, the existence of a preliminary issue which the court must resolve in order to determine the dispute cannot, whatever that issue may be, justify application of the Convention. …

28. It follows that, in the case before the court, the fact that a preliminary issue relates to the existence or validity of the arbitration agreement does not affect the exclusion from the scope of the Convention of a dispute concerning the appointment of an arbitrator.

29. Consequently, the reply must be that Art 1.4 of the Convention must be interpreted as meaning that the exclusion provided for therein extends to litigation pending before a national court concerning the appointment of an arbitrator, even if the existence or validity of an arbitration agreement is a preliminary issue in that litigation.”

49. Thus in any given case it is necessary to identify and characterise the subject-matter of the dispute between the parties to determine whether it falls within the scope of the regulation, or that of the exception.

50. In The Heidberg a Belgian court had held there was no arbitration agreement between the parties. The question was whether the English court was bound by this finding. That, so far as relevant, depended on whether the Belgian decision was within the Convention, in which case it was binding, or within the exception, in which case it was not.

51. Deputy Judge Diamond QC held that the decision was within the scope of the Convention, not the exception. The judgment on the point is very full and considers, for example, Marc Rich and the Jenard, Schlosser and Evrigenis Kerameus reports which give guidance as to interpretation of the Convention.

52. In Toepfer v Molino Boschi the parties were in dispute about soya meal sold by the plaintiffs to the defendants on GAFTA terms. The defendants began proceedings in Italy. The plaintiffs sued in England for a declaration that the defendants were bound to arbitrate the disputes and for injunctions restraining them from proceeding in Italy.

53. Mance J (as he then was) said this at page 512, column 2:

“The originating summons contains a claim for a declaration and claims for three injunctions, and it is necessary here, as in other contexts in this judgment, to bear in mind that the same considerations may not apply to each. A declaration that a defendant is entitled and obliged to arbitrate a particular dispute or disputes might be regarded as more closely related to arbitration than injunctions requiring him not to pursue and to discontinue foreign proceedings. Even so, such a declaration is not integral to the arbitration process in the same way as an application to the Court to appoint an arbitrator (cf Marc Rich & Co AG v Societa Italiana ImpiantiPA (The Atlantic Emperor) [1992] 1 Lloyd’s Reports 342 (ECJ)). It may be designed to do no more than to establish the basis for a claim for damages for breach of contract in failing to arbitrate or for an issue estoppel in relation to foreign proceedings. In the former case, a claim for such a declaration would not seem to me to fall within Art 1.4 of the Convention. In the latter case, if the decision in Partenreederei m/s Heidberg and Another v Grosvener Grain Feed Co Ltd and Others (The Heidberg) [1994] 2 Lloyd’s Rep 287 is right, it would also not fall within Art 1.4. The claims for injunctions, although based on the asserted existence of binding and applicable arbitration clauses, are also directed to stopping foreign proceedings rather than actually bringing any arbitration into existence. As I have said, Toepfer’s response to any suggestion that there could actually be any effective arbitration would be time bar. For present purposes, I shall proceed on the basis that the Brussels Convention does apply to all the claims made by Toepfer’s originating summons.”

54. Like Aikens J in The Ivan Zagubanski (page 120, column 2), I understand from the report that Mance J did not actually rule on the Article 1.4 issue. However that may be, if The Heidberg and Toepfer International v Molino Boschi stood unchallenged those authorities would point virtually conclusively to antisuit injunctions falling outwith the arbitration exception.

55. In Toepfer International v Société Cargill France [1997] 2 Lloyd’s Reports 98 the dispute concerned soya bean pellets sold by the plaintiffs to the defendants on GAFTA terms. Disputes arose and the defendants began proceedings in France. The plaintiffs in turn commenced proceedings in England for declarations that the disputes were within the arbitration agreement, that the defendants were obliged to refer the disputes to arbitration and that the commencement of the French proceedings was a breach of the arbitration agreements. They also sought injunctions to restrain the defendants from proceedings in France and requiring them to discontinue there.

56. At first instance Colman J decided that the claims for declarations and those for injunctions fell within the arbitration exception. The learned judge reviewed the authorities very fully, including Marc Rich, The Heidberg and Toepfer International v Molino Boschi.

57. After quoting the passage from Mance J that I have already read, Colman J said this:

“This passage from his judgment suggests that Mance J considered that the applicability of the Art 1.4 exclusion depended upon the extent to which the remedy claimed could be said to be integral to the arbitration process in the same way as an application to the court to appoint an arbitrator. If by that approach he was, as I believe, confining the applicability of Art 1.4 to proceedings claiming remedies facilitating or regulating arbitrations as distinct from remedies enforcing arbitration agreements, I consider that this approach was too narrow. Since the enforcement of agreements to arbitrate is within those matters covered by the New York Convention, an application to the courts of the seat of the arbitration to enforce an agreement to arbitrate by stay or injunction, the latter in relation to foreign proceedings, must, on the reasoning in Marc Rich be excluded by Art 1.4.”

58. Colman J made the declarations and granted the injunction that had been sought.

59. The defendants appealed and the Court of Appeal referred to the European Court of Justice a two-part question, the first part of which was this:

“Does the exception in Art 1.4 of the Brussels Convention extend to the proceedings commenced before the English courts seeking:

(a) a declaration that the commencement and continuation of proceedings before a French Court constitutes a breach of an arbitration agreement;

(b) an injunction restraining the appellants from continuing the proceedings before the French court, or instituting any further proceedings before any other court, in breach of the arbitration agreement?”

60. The Court of Appeal, in the course of its judgment, observed that difficult questions arose as to how to interpret Article 1.4 of the Convention. In the event, however, the parties settled their differences before the European Court of Justice could come to any conclusion on the reference.

61. Finally, there is The Ivan Zagubanski. In that case the claimants were shipowners and the defendants were the shippers, insurers and receivers of a cargo of bagged rice. The bills of lading provided for arbitration in London, but when disputes arose the cargo interests brought proceedings in Marseilles. The claimants applied to this court for a declaration as to validity of the arbitration agreement and for an anti—suit injunction to restrain the cargo interests from pursuing court proceedings in Marseilles or elsewhere.

62. Once again the court had to decide whether such claims fell within the scope of the Convention. Aikens J held that they did not, but fell within the arbitration exception. Aikens J reached this conclusion after a detailed consideration of the authorities, including Marc Rich, The Heidberg, Toepfer International v Molino Boschi (which he did not think provided much guidance on the scope of Article 1.4) and Toepfer Internationalv Société Cargill France.

63. His conclusion on the ambit of the arbitration exception were these at p 122, para 100:

“I have concluded that the nature of the subject-matter of both the claims in the present case falls within the ‘arbitration exception’ in Art 1(4).

(1) The first claim, for a declaration that there is a valid arbitration agreement between the parties, clearly concerns arbitration. That is the principal focus or ‘essential subject-matter’ of that claim. The tenor of the decision in Marc Rich, the reports of Jenard and Schlosser and the decision of the ECJ in the Van Uden case all lead me to the conclusion that the subject-matter of this claim is outside the scope of the Brussels Convention. Insofar as the decision of Judge Diamond QC in The Heidberg case takes the contrary view I respectfully disagree with it.

(2) The object of the claim for an ‘antisuit’ injunction (assuming the arbitration agreements are valid and binding) is to make the defendants adhere to their contractual agreement to resolve disputes by arbitration in London by using the English court’s powers to grant injunctive relief. The principal focus or essential subject-matter of that claim is therefore also arbitration, because the claim is for relief to enforce the arbitration agreement.”

64. The two most recent decisions, therefore, are clear that a claim for an anti-suit injunction to prevent a person bound by an arbitration agreement from seeking to have a dispute within the ambit of that agreement determined in some other forum falls within the arbitration exception.

65. Mr Berry, however, says that both these are decisions at first instance (as are The Heidberg and Toepfer International v Molina Boschi) and that I am free to choose between the two conflicting views on the ambit of the exception.

66. This caused me some concern during the hearing, and almost immediately afterwards I came across the decision of Nourse J in Colchester Estates v Carlton plc[1986] Ch 80, which considers the question of previous conflicting decisions of judges of co-ordinate jurisdiction. I drew the case to the attention of counsel, who have had, and taken, the opportunity to make submissions in writing to me about it.

67. In the Colchester Estates case, Nourse J was faced by conflicting decisions of McNeill J and of Vinelott J about the effect of a provision of the Leasehold Property (Repairs) Act 1938. Nourse J found assistance in a decision of Denning J in Minister of Pensions vHigham[1948] 2 KB 153. That case led him to say this:

“Minister of Pensions v Higham was a case where Denning J, who was then the judge nominated to hear appeals from the Pensions Appeals Tribunals in England, was faced with a conflict between a dictum in an earlier case of his own and a decision of the Court of Session on an appeal from one of the Pensions Appeals Tribunals in Scotland. In the later case the Court of Session, having considered the dictum in the earlier one and having no doubt considered it fully, said that they were unable to agree with it. Denning J, having stated the special position in which he was there placed, said [1948] 2 KB 153, 155:

‘I lay down for myself therefore the rule that, where the Court of Session have felt compelled to depart from a previous decision of this court, that is a strong reason for my reconsidering the matter: and if on reconsideration I am left in doubt of the correctness of my own decision, then I shall be prepared to follow the decision of the Court of Session, at any rate in those cases when it is in favour of the man, because he should be given the benefit of the doubt.’

Had the judge stopped there, I might well have agreed with counsel that the case could not, by reason of its special features, be treated as being of any general value. However, he went on to say:

‘In this respect I follow the general rule that where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decision is to be preferred, if it is reached after full consideration of the earlier decision.’

“That unqualified statement of a general rule comes from a source to which the greatest possible respect is due. It is fortuitous that my own instinct should have coincided with it. However diffident I might have been in relying on instinct alone, the coincidence encourages me to suggest a reason for the rule. It is that it is desirable that the law, at whatever level it is declared, should generally be certain. If a decision of this Court, reached after full consideration of an earlier one which went the other way, is normally to be open to review on a third occasion when the same point arises for decision at the same level, there will be no end of it. Why not in a fourth, fifth or sixth case as well? Mr Barnes had to face that prospect with equanimity or, perhaps to be fairer to him, with resignation. I decline to join him, especially in times when the cost of litigation and the pressure of work on the courts are so great. There must come a time when a point is normally to be treated as having been settled at first instance. I think that that should be when the earlier decision has been fully considered, but not followed, in a later one. Consistently with the modern approach of the judges of this Court to an earlier decision of one of their number (see eg Police Authorityfor Huddersfield v Watson[1947] KB 842, 848 per Lord Goddard CJ), I would make an exception only in the case, which must be rare, where the third judge is convinced that the second was wrong in not following the first. An obvious example is where some binding or persuasive authority has not been cited in either of the first two cases. If that is the rule then, unless the party interested seriously intends to submit that it falls within the exception, the hearing at first instance in the third case will, so far as the point in question is concerned, be a formality, with any argument upon it reserved to the Court of Appeal.”

68. In the present case, of course, I have not one but two cases subsequent to The Heidberg and Toepfer International v Molino Boschi that go the other way. It seems to me that I should follow the decisions of Colman J and Aikens J unless I am convinced that they are wrong.

69. Mr Berry has indeed attempted to so convince me, but without intending any disrespect I think I can deal with his arguments shortly and with quite a broad brush. He suggests that Aikens J cannot have given adequate weight to the Evrigenis Kerameus Report because he does not quote the relevant passage in its entirety. However, that passage does appear in full in The Heidberg which Aikens J considered and with which he disagreed.

70. Mr Berry argues that on a proper reading of the Marc Rich case, and in particular the passages I have cited above, it is clear that as a matter of language the ECJ were implicitly saying that a dispute as to the existence or validity of an arbitration agreement on its own does not fall within the arbitration exception. That, he says, is the implication of the words “even if” in paragraph 29.

71. But this is too much to hang on the language used. The decision of a court, even of the ECJ, is not a statute. I fully accept the decision as to the existence or validity of an arbitration agreement may not fall within the exception; for example, in the context of a claim for damages for breach of such an agreement. In other circumstances it may.

72. Mr Berry’s main point, however, was this. Antisuit injunctions are granted to enforce the implied negative obligation in an arbitration agreement not to litigate a dispute in some other way. The subject-matter of such actions, he says, as illustrated by the prayer for relief in the claim form in the present case, is stopping the non-arbitral proceedings. It is not a claim concerned with the arbitration itself. Indeed, that was a point made by Mance J.

73. The subject-matter of the present case is thus the Italian proceedings, not the ICC arbitration. Moreover, he points out that in this case, unlike some others, the defendants are participating in the arbitration which, he says, illustrates the fact that the English action is really about the Italian proceedings. Though, of course, CTO has asked the arbitrators to suspend the proceedings pending the determination of the Italian proceedings.

74. I see the force of Mr Berry’s argument but it does not convince me that Colman J and Aikens J were wrong to hold that the subject-matter of a claim for such an antisuit injunction is the enforcement of the agreement to arbitrate, and that therefore such a claim falls within the arbitration exception. Indeed, with respect, I do not think Mr Berry’s arguments come close to making this the sort of exceptional case envisaged by Nourse J, in which I would be justified in departing from those decisions.

75. I therefore hold that the claim for an injunction in the present case is not within the scope of the Jurisdiction and Judgments Regulation.

Should the court exercise its discretion to grant the injunction sought?

76. The principles which are relevant to the exercise of the court’s discretion are clear. In Continental Bank NA v Aeakos Compania Naviera SA and Others[1994] 1 WLR 588, where an injunction was sought to prevent the breach of an exclusive jurisdiction clause, Steyn LJ (as he then was) said this at page 598:

“In our view the decisive matter is that the bank applied for the injunction to restrain the defendants’ clear breach of contract. In the circumstances, a claim for damages for breach of contract would be a relatively ineffective remedy. An injunction is the only effective remedy for the defendants’ breach of contract. If the injunction is set aside, the defendants will persist in their breach of contract, and the bank’s legal rights as enshrined in the jurisdiction agreements will prove to be valueless. Given the total absence of special countervailing factors, this is the paradigm case for the grant of an injunction restraining a party from acting in breach of an exclusive jurisdiction agreement. In our judgment the continuance of the Greek proceedings amounts to vexatious and oppressive conduct on the part of the defendants.”

77. In The Angelic Grace [1995] 1 Lloyd’s Reports, 87 the question of how to exercise the court’s discretion arose directly in the context of the breach of an arbitration agreement. Millett LJ (as he then was) said this at page 96, column 2:

“In my judgment, where an injunction is sought to restrain a party from proceeding in a foreign court in breach of an arbitration agreement governed by English law, the English court need feel no diffidence in granting the injunction, provided that it is sought promptly and before the foreign proceedings are too far advanced. I see no difference in principle between an injunction to restrain proceedings in breach of an arbitration clause and one to restrain proceedings in breach of an exclusive jurisdiction clause as in Continental Bank NA v AeakosCompania Naviera SA[1994] 1 WLR 588. The justification for the grant of the injunction in either case is that without it the plaintiff will be deprived of its contractual rights in a situation in which damages are manifestly an inadequate remedy. The jurisdiction is, of course, discretionary and is not exercised as a matter of course, but good reason needs to be shown why it should not be exercised in any given case.”

78. Most recently, in Donohue v Armco Inc[2001] UKHL 64; [2002] Lloyd’s Reports 452, a case on exclusive jurisdiction clauses to which I shall have to return later, Lord Bingham of Cornhill, with whom Lord McKay of Clashfern and Lord Nicholls of Birkenhead agreed, said this at page 432, column 2:

“24. If contracting parties agree to give a particular court exclusive jurisdiction to rule on claims between those parties, and a claim falling within the scope of the agreement is made in proceedings in a forum other than that which the parties have agreed, the English court will ordinarily exercise its discretion (whether by granting a stay of proceedings in England, or by restraining the prosecution in proceedings in the non-contractual forum abroad, or by such other procedural order as is appropriate in the circumstances) to secure compliance with the contractual bargain, unless the party suing in the non-contractual forum (the burden being on him) can show strong reasons for suing in that forum. I use the word ‘ordinarily’ to recognise that where an exercise of discretion is called for there can be no absolute or inflexible rule governing that exercise and also that a party may lose his claim to equitable relief by dilitariness or other unconscionable conduct. But the general rule is clear: where parties have bound themselves by an exclusive jurisdiction clause effect should ordinarily be given to that obligation in the absence of strong reasons for departing from it. Whether a party can show strong reasons, sufficient to displace the other party’s prima facie entitlement to enforce the contractual bargain, will depend on all the facts and circumstances of the particular case.”

79. Thus it is clear that an injunction should issue unless the defendant can show strong reasons why it should not.

80. Indeed, both parties accept I think that these are the principles that I should apply. They both seek to put their own gloss upon them.

81. Mr Browne-Wilkinson suggests that some factors, such as multiplicity of proceedings, have less weight in arbitration cases than in exclusive jurisdiction clause cases. As to this, to the extent he is submitting that the weight to be attached to any factor depends on the circumstances of the case, I agree with him. Beyond that, despite the support he receives from Colman J in Toepfer International v Société Cargill at 110, I am unwilling to go, although I note that in that case the Court of Appeal did not disturb the exercise by Colman J of his discretion.

82. Mr Berry, on the other hand, stresses how extraordinary it is that English courts should grant injunctions in arbitration cases that, albeit indirectly, usurp the function of foreign courts. He says that the judicial mood about doing this has changed since The AngelicGrace. In this connection he referred me to the judgment of the Court of Appeal in Toepfer International v Société Cargill at page 386, column 2. There the Court declined independently to endorse that part of Millett LJ’s judgment which says that there is no need for judicial diffidence in the face of the sensitivities of foreign courts when granting an antisuit injunction to enforce a contractual promise.

83. See also the comments of the Court of Appeal in Phillip Alexander Securities & FuturesLtd v Bamberger[1997] ILPr 73 to which I must refer a little later.

84. So far as this point is concerned, I cannot accept it. The Court of Appeal in the passage referred to went on to say that what is said in The Angelic Grace is open to argument in a higher tribunal. Unless and until such a tribunal says otherwise, I must follow The Angelic Grace. In this connection I respectfully agree with paragraph 110 of Aikens J’s judgment in The Ivor Zagubanski.

85. What then are the matters that CTO says constitute strong reasons for not granting the injunctions sought? CTO’s reasons are put forward under three headings: public policy; multiplicity of proceedings; and comity. I must decide whether, taken individually or together, these constitute sufficiently strong reasons not to grant an injunction.

Public policy

86. CTO says that under Italian law the competition law issues that it has raised in both proceedings are not arbitrable, and that under European law any award EA may obtain in its favour would be open to examination on the merits if any question of enforcement or recognition arises in Italy or any other European Community country.

87. As to Italian national public policy, there is a dispute between the two experts. Assuming for the moment that it is contrary to Italian public policy to have competition issues determined by arbitrators, where does that lead? The parties have agreed that their contract should be governed by English law and that disputes should be determined by ICC arbitration in England. It is EA that takes the risk that it will not be able to enforce or have recognised an award in its favour because an Italian Court invokes Article V.2 of the New York Convention on Arbitral Awards.

88. Similarly, it is EA that takes the risk that, in accordance with the Eco-Swiss case, the underlying merits of such an award may be examined by a court asked to enforce or recognise it.

89. If CTO is right any order EA obtains may be worthless, or at least CTO may be entitled to a second bite at the cherry on the merits. But these do not seem to me strong reasons not to let EA force its contractual right to an arbitration if that is how it wishes to proceed. Moreover, whether problems of this sort will ever arise simply cannot be known at this stage.

90. The fact that in Italy it is mandatory (assuming it is) to take disputes involving competition issues before a court does not seem to me to be a good reason for not according primacy to the agreement to arbitrate in England contained in a contract governed by English law. See Bankers Trust International plc v RCS Editori SpA [1996] Commercial Law Cases 899 per Longmore J at 905; and Shell v Coral Oil [1999] 1 Lloyd’s Reports 72 per Moore-Bick J at 78. In those cases the court did not regard the fact that the injunction sought would deny the party in breach of the arbitration or exclusive jurisdiction clause the benefit of local mandatory rules as a good reason for not granting it.

91. In my judgment these public policy issues do not provide a strong reason for denying EA the injunction it seeks.

Multiplicity of proceedings

92. If an injunction is granted EA will proceed with the arbitration against CTO and doubtless CTO will proceed with its counterclaim. If EA obtains an award in its favour that may lead to further litigation in Italy, as discussed above. Meanwhile in Italy CTO, assuming it complies with the injunction, will pursue the Italian proceedings against only the associated companies whilst Finbox pursues them against both the associated companies and EA.

93. Mr Browne-Wilkinson suggests that, if necessary, Finbox can be restrained from carrying on the Italian proceedings against EA, as EA can seek an injunction to enforce the arbitration agreement contained in the investment agreement. But that seems to me at the moment speculation and, in any event, will not stop both CTO and Finbox pursuing the Italian proceedings against the associated companies. If an injunction is not granted and the parties adhere to their present positions, both the arbitration proceedings and the Italian proceedings will therefore be pursued in parallel.

94. However, Mr Berry points out that it will then be open to EA to drop its claims in the arbitration, or at least those in respect of which competition issues are raised, and make them by way of counterclaim in the Italian proceedings. Then all the disputes in which CTO says that EA and the associated companies have acted in breach of Italian and European competition law can be tried together in one forum: the Court of Appeal in Bologna.

95. Mr Browne-Wilkinson points out that there is no evidence that such a counterclaim against CTO is possible under Italian law, but it seems to me likely that this could be done and I shall assume that it can.

96. Mr Berry says that the fact that if the injunction is refused a single forum exists in which all related claims and cross-claims could be decided is a powerful reason for refusing an injunction. In so doing, he relies on the decision of the House of Lords in Donohue v Armco.

97. The facts of that case are complex, and I shall confine my summary to those that seem material for present purposes. There the sale of a UK-based insurance business had been effected by three contracts. The parties to those contracts were, on the Armco vendors’ side, three US-based companies, Armco Inc. (as successor in title to another company), AFSIL and AFSC and on the Donohue purchasers’ side, Mr Donohue, Mr Atkins and companies called CISHL and Wingfield.

98. The contracts were governed by English law and conferred exclusive jurisdiction over disputes on the English court. Subsequently, Armco Inc, AFSIL and AFSC, as well as two other companies in the Armco group that were not parties to the contract, sued Mr Donohue, Mr Atkins, CISHL and Wingfield, as well as a number of other individuals and companies not parties to the contracts, in New York for fraud. Mr Donohue applied in the English court for an injunction against the five Armco companies that had sued him to restrain them from proceeding against him in any forum other than England.

99. I have already quoted what Lord Bingham had to say about the exercise of discretion generally in exclusive jurisdiction clause cases. He went on to consider, at paras 25–28, the authorities dealing with cases where the disputes between the two contracting parties also involve other people not party to the exclusive jurisdiction clause. In such cases the risk of parallel proceedings and inconsistent decisions may lead the court to refuse injunctive relief.

100. Lord Bingham pointed out that Mr Donohue was contractually entitled to insist on being sued by three of the Armco companies only in England, and would suffer clear prejudice if he was not; whereas on the other hand all five Armco companies were entitled to sue in New York those defendants there who were not party to the contracts.

101. Moreover, the Armco companies not party to the contracts were entitled to sue in New York even Mr Donohue; and the first three Armco companies were entitled to sue him in New York where their claims were not covered by the exclusive jurisdiction clause.

102. Lord Bingham said this:

“33. Thus Mr Donohue’s strong prima facie right to be sued here on claims made by the other parties to the exclusive jurisdiction clause so far as the claims may fall within that clause is matched by the clear prima facie right of the Armco companies to pursue in New York the claims mentioned in the last three paragraphs. The crucial question is whether, on the facts of this case, the Armco companies can show strong reasons why the court should displace Mr Donohue’s clear prima facie entitlement. If strong reasons are to be found (and the need for strong reasons is underlined in this case by the potential injustice to Mr Donohue, already noted, if effect is not given to the exclusive jurisdiction clauses) they must lie in the prospect, if an injunction is granted, of litigation between the Armco companies on one side and Mr Donohue and the PCCs on the other continuing partly in England and partly in New York. What weight should be given to that consideration in the circumstances of this case?

34. I am driven to conclude that great weight should be given to it. The Armco companies contend that they were the victims of a fraudulent conspiracy perpetrated by Messrs. Donohue, Atkins, Rossi and Stinson. Determination of the truth or falsity of that allegation lies at the heart of the dispute concerning the transfer agreements and the sale and purchase agreement. it will, of course, be necessary for any court making that determination to consider any contemporary documentation and any undisputed evidence of what was said, done or known. But also, and crucially it will be necessary for any such court to form a judgment on the honesty and motives of the four alleged conspirators. It would not seem conceivable, on the Armco case, that some of the four were guilty of the nefarious conduct alleged against them and others not. It seems to me plain that in a situation of this kind the interests of justice are best served by the submission of the whole dispute to a single tribunal which is best fitted to make a reliable, comprehensive judgment on all the matters in issue. A procedure which permitted the possibility of different conclusions by different tribunals, perhaps made on different evidence, would in my view run directly counter to the interests of justice. …

36. In my opinion, and subject to an important qualification, the ends of justice would be best served by a single composite trial in the only forum in which a single composite trial can be procured, which is New York, and accordingly I find strong reasons for not giving effect to the exclusive jurisdiction clause in favour of Mr Donohue.”

103. In that case the grant of an injunction would have produced parallel proceedings and the risk of inconsistent findings. In the absence of an injunction all the disputes would inevitably be tried in New York where, as a matter of fact, the Armco companies had already successfully founded jurisdiction

104. I do not think Lord Bingham’s reasoning touches a case where there will be parallel proceedings and the risk of inconsistent findings whether there is an injunction or not. Indeed, Lord Bingham at paragraph 28 of his speech records, apparently with approval, the decision of Rix J (as he then was) in Credit Suisse First Boston (Europe) Ltd v MLC(Bermuda) Ltd [1999] 1 Lloyd’s Reports 767, where the learned judge granted an injunction in a case involving several parties notwithstanding that there would still be parallel litigation in London and New York. Rix J could not make any order that would have achieved a trial in one forum of all proceedings arising out of all the relevant agreements.

105. In the present case there is an agreement to arbitrate between EA and CTO There is already an arbitral tribunal appointed Its members are not only well qualified to deal with a contract governed by English law, as indeed required by the arbitration agreements they are also well qualified to deal with questions of European law The parties have already exchanged extensive pleadings As already pointed out, the proceedings in Italy are not so far advanced.

106. Mr Berry suggests that because EA could abandon the arbitration and have all disputes between EA and the associated companies on the one side, and CTO and Finbox on the other, determined in the Italian proceedings in Bologna, I should refuse an injunction But this case is quite different from Donohue v Armco In that case there were no parallel proceedings and would not be unless the injunction was granted. In this case, as I have already explained, there will be parallel proceedings and the risk of inconsistent findings whatever I do, and it does not seem to me a strong reason for refusing an injunction that EA could procure the determination of all disputes in a single forum by abandoning its contractual rights. I certainly do not expect it to do so.

107. If there is no injunction EA and CTO will lock horns directly with one another in both sets of proceedings. If there is an injunction that will only be the case in the arbitration, though of course Finbox has claims against EA in the Italian proceedings so EA will not be able to escape them entirely Of course, either way CTO and Finbox say they will pursue their claims against the associated companies in Italy.

108. None the less, what EA contracted for was that its disputes with CTO should be determined by arbitration and not by litigation. An injunction should achieve that. It is a limited objective but, in my judgment, a legitimate one In short, it does not seem to me that in the circumstances of this case the fact that if there is an injunction there will still be multiplicity of proceedings constitutes a strong reason that would justify me not granting an injunction.

Comity

109. Mr Berry submits that Professor Ceccon’s uncontradicted evidence is that the Italian court would regard an injunction as an infringement of Italian sovereignty and that its effect would be to deprive CTO of its constitutional rights in Italy. He submitted this alone was sufficient reason to refuse an injunction, relying on the decision of Waller J (as he then was) in the case of Mr Riedel in Phillip Alexander Securities & Futures Ltd v Bamberger.

110. In that case Waller J had to consider whether an arbitration clause in a consumer contract between an English company and a German customer was enforceable and, if so, whether an antisuit injunction should be granted to restrain the customer bringing proceedings in Germany. Waller J concluded that the arbitration clause was unlikely to be enforceable as a result of the impact of European law, but if it was he would not grant an injunction. One reason for this was that it was clear the German court was offended by the grant of such injunctions and regarded it as an interference, and would not stay the German proceedings pursuant to the New York Convention. Indeed, in the cases of other individual defendants there were German judgments to that effect.

111. Waller J pointed out that in The Angelic Grace, Leggatt LJ and Millett LJ had assumed that where the English court was enforcing an arbitration clause between the parties the foreign court would not regard an anti-suit injunction as an interference.

112. On appeal the Court of Appeal decided the arbitration agreement was unenforceable and that thus there was no possibility of an injunction. It did, however, say that the practice of courts in England of granting antisuit injunctions might require reconsideration where the defendant was abroad and had no assets here, and the relevant foreign courts would regard such an injunction as an infringement of their sovereignty.

113. The present case, however, is different from that of Mr Riedel. In that case there was clear evidence of what the German courts themselves had said. Here there is the opinion of Professor Ceccon, the lawyer acting for CTO in the Italian proceedings. Moreover, as Italy is a party to the New York Convention, I infer that his view rests on the premise that competition issues are not arbitrable under Italian domestic law. That is a view that is disputed by Mr Bussata and, as I have already said, that is not a dispute I can decide.

114. I recognise the need for caution in this area, but on the present state of the evidence I am not satisfied that considerations of comity and of being thought to be interfering in a foreign jurisdiction amount to a sufficiently strong reason for refusing an injunction. Moreover, looking at the three considerations raised by CTO together I come to the same conclusion.

115. For these reasons I conclude that the court ought to issue an interim injunction to restrain CTO from continuing with the Italian proceedings against EA. A question arises as to the duration of this injunction. CTO has applied to the arbitral tribunal to suspend the proceedings there, pending the outcome of the Italian proceedings. That application has yet to be determined. So on this point I will hear counsel.

116. MR BROWNE-WILKINSON: My Lord, first of all, thank you very much. Secondly, we have sought in our draft order an interim injunction restraining the defendant until trial or further order. I would respectfully submit that your Lordship should make an order in that form rather than risk the danger of confusing the arbitral tribunal.

117. THE DEPUTY JUDGE: Without any express liberty to apply?

118. MR BROWNE-WILKINSON: Yes.

119. THE DEPUTY JUDGE: On the footing that Mr Berry can come back if the arbitral tribunal does suspend on the basis that circumstances have changed?

120. MR BROWNE-WILKINSON: Yes, my Lord, I would be happy to say that. Obviously we will be saying that the arbitral tribunal should not suspend.

121. THE DEPUTY JUDGE: I accept that, but they may come to a different conclusion.

122. MR BROWNE-WILKINSON: Exactly.

123. THE DEPUTY JUDGE: They will have the benefit of course amongst their membership of a very distinguished Italian lawyer.

124. MR BROWNE-WILKINSON: Quite. Yes, I would be happy to make clear that if they came to a different conclusion then that would be a change in circumstance entitling Mr Berry to return to your Lordship, whilst at the same time making it clear that we will be opposing that course.

125. MR BERRY: My Lord, on that basis I do not object to trial or further order. What concerns us is the submission that he made to the tribunal that your Lordship’s order in some way, because it is to trial or further order

126. THE DEPUTY JUDGE: Mr Berry, to cut you short, if it will help you

127. MR BERRY: “... with liberty to apply in the event that the arbitrators” or something of that kind.

128. THE DEPUTY JUDGE: If it will help you, no doubt there will be a transcript, or can be a transcript if you choose to have one, and certainly as I understand the law the arbitrators are entirely free to come to their own conclusion on this matter. They are free agents and will have to take their own course, taking their own view of the relevant law.

129. MR BERRY: In that case, my Lord, I am happy.

130. MR BROWNE-WILKINSON: My Lord, I am very much obliged. I think that leaves one or two further points.

131. THE DEPUTY JUDGE: I have received schedules of costs, but this case in fact lasted two days and not one, and also you have had to come back today. I do not know how relevant those schedules are.

132. MR BROWNE-WILKINSON: The answer is that the costs have increased somewhat.

133. THE DEPUTY JUDGE: Do you want me to deal with the matter now or what?

134. MR BROWNE-WILKINSON: I wondered if your Lordship could make an order that we should have our costs; that there should be detailed assessment but that your Lordship should order a payment on account of a suitable sum. That might be the sensible way to do it, rather than asking you to assess costs in their entirety given that it has gone for two days. Your Lordship sees that our schedule comes to £35,000. Our total costs will in fact be greater than that because that is on the basis of one day and we have had to come back for another day’s argument.

135. THE DEPUTY JUDGE: I do remember seeing that, although I have now mislaid the schedule.

136. MR BROWNE-WILKINSON: I can hand it up.

137. THE DEPUTY JUDGE: Mr Berry’s schedule was somewhat more modest.

138. MR BERRY: It was about half.

139. MR BROWNE-WILKINSON: But our arguments turned out to be right!

140. THE DEPUTY JUDGE: Can I cut you short again. Mr Berry, if I were to make an interim order of £20,000, would you strenuously resist?

141. MR BERRY: Without agreeing to anything I cannot think of any reasonable opposition.

142. THE DEPUTY JUDGE: On the basis that this is an interim order and, of course, a Costs Judge may come to a higher or lower figure than the £20,000 on account. What period?

143. MR BROWNE-WILKINSON: 14 days?

144. THE DEPUTY JUDGE: I will say 28 days. I warn you I shall be expecting junior counsel to produce a draft of this.

145. MR BROWNE-WILKINSON: There is one other thing. In our draft order we ask for an order restraining the defendant – this is the fourth line – from commencing proceedings in Italy against the claimant and five other companies in the claimant’s group of companies.

146. THE DEPUTY JUDGE: And you have dropped that last bit?

147. MR BROWNE-WILKINSON: Exactly. I think that we should put a line through “and five other companies in the claimant’s group of companies”.

148. THE DEPUTY JUDGE: What I am anticipating is that an order will be drawn up in which that is omitted.

149. MR BERRY: Two other things, my Lord. I have some authorities here but I do not think they will be necessary. As this is an interim injunction the normal terms would be that there would be a cross-undertaking in damages.

150. THE DEPUTY JUDGE: Unless that is resisted?

151. MR BROWNE-WILKINSON: No.

152. MR BERRY: I had been minded to raise the question of fortification of that undertaking, given the slight doubt about the locus of the claimant company. I would not want to make that application now because we have not investigated that matter, but I also would not want it to be said that we have been Henderson v Henderson’d out of coming back.

153. THE DEPUTY JUDGE: You reserve that point.

154. MR BERRY: If I may reserve that point. My Lord, finally I would ask for permission to appeal, partly because the only person who can refer this matter back to the European Court is not your Lordship but the Court of Appeal.

155. THE DEPUTY JUDGE: Mr Berry, you are wrong. I Only the House of Lords can now refer it. the view of Dicey & Morris on the recent checked the underlying documentation but say is the effect of the recent change. that is the effect of the recent change, to believe him.

156. MR BERRY: There is a prima facie case. My Lord, I still apply for permission, even if that be right, because the point clearly is one of importance.

157. THE DEPUTY JUDGE: Can I put it this way: unless Mr Browne-Wilkinson persuades me otherwise on that issue my provisional view is that I should give permission, but I would be reluctant to give permission on the issue of discretion. If you are right on jurisdiction, of course everything I have said about discretion is going to fall away although I dare say Mr Browne-Wilkinson may try and make jurisdiction good on the other front. As you will have observed, I did not think it right in the judgment to deal with those alternative points, in part of course because they were only the subject of very short debate and even from that it became clear that they raise in themselves very profound issues with which, I know not, the Court of Appeal will have to deal. Are you asking for permission on discretion?

158. MR BERRY: I would on just one aspect, which is the Donohue aspect. My submission on Donohue would be that the important point is not to avoid multiplicity but to ensure that at least one court somewhere can have all the parties before it.

159. THE DEPUTY JUDGE: I will hear Mr Browne-Wilkinson.

160. MR BERRY: The submission in this case would be that while your Lordship cannot avoid multiplicity your Lordship, as a matter of discretion, ought to have facilitated at least one court somewhere being able to do that. Your Lordship has made that impossible, as it were. That is the argument.

161. MR BROWNE-WILKINSON: My Lord, in our respectful submission you are entirely right to distinguish between jurisdiction questions and discretion questions. The first thing that your Lordship should do is decline to grant permission to appeal on any discretion question, (a) for the normal and good reasons and (b) because the point that my learned friend seeks to suggest might be arguable was in fact fully dealt with in your Lordship’s judgment, which is a perfectly fair and right reading of the Donohue decision. My Lord, put discretion on one side and do not grant permission on that question.

162. THE DEPUTY JUDGE: I am in a difficulty on the other one, Mr Browne-Wilkinson.

163. MR BROWNE-WILKINSON: Of course, my Lord is in a difficulty and I can see why your Lordship says what you say, save that you now do have those two full decisions. I will leave it to your Lordship. I would not want to find a position whereby jurisdiction was re-argued elsewhere, these proceedings were not found to fall within the exception but I was somehow shut out from arguing our Convention points on Article 5.

164. MR BERRY: If his Convention points are good then he can raise them in any other forum and we will not take a point. I do not see what point we could take. On the merits he can apply again.

165. THE DEPUTY JUDGE: I think what Mr Berry is saying is that if he does put in a notice of appeal you can, if you put in a respondent’s notice, raise that as another reason to support. I think that is really what he is saying.

166. MR BROWNE-WILKINSON: If that is in the transcript, no doubt that will deal with the question.

167. THE DEPUTY JUDGE: Though of course it would involve you persuading the Court of Appeal – as it would have involved you persuading me – that you can deal with it on what amounts, under the old procedure, to an ex parte basis because the proceedings were not served that way. That is, as they say, your problem, Mr Browne-Wilkinson and not mine.

168. MR BROWNE-WILKINSON: My Lord, I leave it to your good sense on the first point. I can see the arguments, particularly in the light of what Aikens J said at the end of his judgment, for granting permission restricted to that particular point.

169. THE DEPUTY JUDGE: Very well. I grant permission in respect of the jurisdiction issue. I think it is a matter for the Court of Appeal in relation to any questions of discretion. I believe there is a form that I have to fill in. If you will forgive me, I will just do that. (Pause) What I have written in the reasons are: “The question whether anti-suit injunctions fall within the arbitration exception in the Jurisdiction and Judgments Regulation EC44/2001 is one of difficulty on which there are conflicting previous first instance decisions. Permission to appeal questions of discretion refused.” Is there anything else?

170. MR BERRY: I do not think there is, my Lord. Thank you very much.