Essar Shipping Ltd v Bank of China Ltd

Introduction

This is an arbitration claim. The main remedy sought by the claimant, Essar Shipping Ltd (“ESL”), is an anti-suit injunction against the defendant, Bank of China Ltd (“the bank”). The injunction would restrain the bank from commencing or continuing proceedings in breach of a London arbitration agreement incorporated into a bill of lading contract. The claim also seeks a declaration as to the existence of the arbitration agreement and damages for breach of the arbitration agreement.

At the hearing it was recognised that the proposed injunction required qualification so as not to contravene provisions in Regulation (EU) 1215/2012 of the European Parliament and of the Council, December 12, 2012, on jurisdiction and the enforcement of judgments in civil and commercial matters (recast) [2012] O.J. L351/1 (“Brussels I recast”) and the Lugano convention as revised in 2007. These provisions have effect as regards actual or potential proceedings in an area which can conveniently be described as “the Brussels I recast/Lugano space”. Thus far, however, the present case has been concerned only with proceedings in the People’s Republic of China (referred to in this judgment as “China” or “the PRC”). It has not involved any foreign proceedings in the Brussels I recast/Lugano space. This judgment accordingly proceeds on the footing that I need not examine restrictions which would apply to court orders affecting proceedings in the Brussels I recast/Lugano space.

The injunction, if granted, would specify in particular that the bank must not take any steps to pursue or continue the proceedings currently pending before the Qingdao Maritime Court in Qingdao, China, suit number (2014) QHFSCZ No.1061 (“the bank’s Qingdao proceedings”). The only question which I need determine in relation to the proposed injunction is whether there has been delay which, on the particular facts of this case, has the consequence that the proposed injunction would be neither just nor convenient and ought to be refused.

The evidence adduced on this question comprises:

After describing the background in section B below, in section C below I describe relevant legal principles, and the issues which arise, in relation to the claim for an injunction. Those issues focus on two features of the facts. The first feature concerns whether there has been promptness on the part of ESL in bringing the present claim. I deal with this in section D. In section E I deal with the second feature, which concerns the risk of prejudice to the bank if an injunction were granted. In section F I deal with other aspects of the claim. My conclusions are summarised in section G.

Background: the documentary record

My account of the documentary record is largely taken from ESL’s skeleton argument. In this section I supplement that record with certain matters which either are not in dispute, or are expressly stated to be one side or the other’s account of events.

The MV Kishore (“the vessel”) is owned by ESL’s parent company, Essar Shipping (Cyprus) Ltd (“ESCL”). ESL operates the vessel under a bareboat charter.

On 27 November 2013 ESL time chartered the vessel to Ocean Bulk Shipping Pte Ltd (“OBS”) under an NYPE form charterparty (“the time charter”). Clause 64 of the time charter provided for the possibility of discharge of cargo on the vessel against a letter of indemnity issued by OBS. Clause 74 provided that the contract was to be governed by English law and that disputes were to be submitted to arbitration in London under the rules of the London Maritime Arbitrators’ Association (“the LMAA”).

Also on 27 November 2013 OBS voyage chartered the vessel to Atlas Iron Ltd (“Atlas”). Under clause 56 of that charterparty (“the voyage charter”) it was governed by English law and was subject to arbitration in London under the rules of the LMAA. It is this provision which ESL relies upon in seeking an anti-suit injunction.

On 25 December 2013 a cargo of 104,012 MT of iron fines (“the cargo”) was loaded on to the vessel at Fremantle, Western Australia, for transport to China. Bill of lading number 01 was issued on that date in a set of three originals. I shall refer to it as “the bill of lading”. It acknowledged shipment of the cargo, naming Atlas as shipper, and was signed by agents on behalf of the Master. It is common ground that in this regard the Master was acting as agent for ESL.

The bill of lading was in Congenbill 94 form. A section on the face of the bill for identification of the consignee was made out “TO ORDER”. Also on its face the bill of lading stated:

Freight payable as per CHARTER-PARTY DATED 27 NOVEMBER 2013.

…

FOR CONDITIONS OF CARRIAGE SEE OVERLEAF

…

The conditions of carriage on the back of the bill of lading provided:

(1)

All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated.

Clause (2) of the conditions of carriage was a general paramount clause. The relevant effect of this under English law is common ground: it introduces a time bar so that the carrier and the ship are discharged from liability in respect of the cargo unless suit is brought within one year of the date of delivery of the cargo or the date when it should have been delivered.

Atlas sold the cargo to Cargill International Trading Pte Ltd (“Cargill”), which became the holder of the bill of lading. Pursuant to a contract dated 8 January 2014, Cargill sold the cargo to Shanxi Haixin International Iron and Steel Co. Ltd (“Haixin”). The payment clause of the contract stated, among other things:

Not later than 20^th January 2014, Buyer shall open an irrevocable workable Letter of Credit payable at sight as per Appendix I of this contract for provisional and final payment … in favour of Seller and through a bank acceptable to Seller.

By a letter of indemnity (“LOI”) dated 7 January 2014, OBS requested that the cargo be discharged by ESL at Lanshan, China, into the custody of Rizhao Sea-Road Shipping Agency Co. Ltd (“Rizhao Sea-Road”) without production of the original bills of lading. Atlas gave a materially identical LOI to OBS on 9 January 2014, and Cargill gave a materially identical LOI to Atlas on 8 January 2014.

The vessel arrived at Lanshan on 8 January 2014. The cargo was discharged into the custody of Rizhao Sea-Road, without production of the bill of lading, on 9 to 11 January 2014. Following discharge of the cargo the vessel left China.

Upon an application by Haixin, the bank opened a letter of credit for US$11,165,128.46 (“the Cargill sale price”) in favour of Cargill on 12 February 2014. By this time a month had elapsed since discharge of the cargo into the custody of Rizhao Sea-Road. Cargill then issued a provisional invoice to Haixin on 18 February 2014 for the amount of the Cargill sale price. Payment of that amount was made to Cargill by the bank on 26 May 2014.

The bank accepts that by the time of payment it had learnt that the goods had been released without presentation of the bills of lading. It explains that nevertheless, as the documents required under the letter of credit had been properly presented, it honoured its commitment under the letter of credit and paid Cargill in exchange for those documents, which included the 3 originals of the bill of lading.

Of the amount paid by the bank to Cargill, US$2,265,829.46 was funded from monies held by the bank on account from Haixin and the balance of US$8,899,299.00 (“the unfunded balance”) was paid from the bank’s own resources. The bank says that the bill of lading which the bank obtained from Cargill was held by the bank as security for Haixin’s obligation to pay the unfunded balance. In this regard:

After the cargo had been discharged into the custody of Rizhao Sea-Road, an order (“the Lanshan cargo arrest”) was made by the Qingdao Maritime Court in Qingdao, China (“the Qingdao Court”) on 21 March 2014 arresting 23,776.82 MT of the cargo in order to provide security for charges owed by Haixin to the port authority, Rizhao Lanshan Wansheng Port Service Co. Ltd (“Rizhao Lanshan”). On 4 July 2014, the Qingdao Court ordered the sale of that portion of the cargo. It is said by ESL that local enquiries suggest that the balance of the cargo (80,235.18 MT) was transported to customs authorities in Houma in Shanxi province, China, in February 2014 and was subsequently released into the custody of Haixin.

The vessel returned to China in or around September 2014. Pursuant to an order made by the Tianjin Maritime Court (“the Tianjin Court”), the vessel was arrested in Tianjin, China, on 23 September 2014 (“the Tianjin ship arrest”) upon the application of the bank in order for it to obtain security for its claim against ESL under the bill of lading. The order made by the Tianjin Court recorded that the bank had paid the Cargill sale price pursuant to the letter of credit and had received the bill of lading and other shipping documents. It required ESL to provide a guarantee for the bank’s claim within 30 days, i.e. by 23 October 2014, failing which the bank could apply for a sale of the vessel. The order also included a requirement (“the Tianjin commencement requirement”) that the bank bring an action, or refer the dispute to arbitration, within 30 days of the ship arrest.

On 28 September 2014 ESL made an application to the Tianjin Court for reconsideration of the arrest. Three grounds were relied upon. They identified suggested defences to the bank’s claim under the bill of lading. First, it was said that the cargo had not been taken out of the port and thus “the delivery of the cargo without presentation of the original bill of lading does not occur”. Second, the letter of credit was said to have been obviously flawed: it had been opened after the last shipment date, the bank ought to have noticed that the cargo might have arrived, it had acted recklessly and with knowledge that losses would probably result, and on the bank’s case Haixin had acted fraudulently. All these matters were said to have broken “the causation link” between the bank’s losses and the alleged delivery of the cargo without presentation of the bill of lading. Third, it was said that the bank lacked title to sue. The bank was said not to be a party to the contract of carriage of goods by sea because “negotiation by banks” of bills of lading was “only one of the steps in their international settlement business”. Further, it was asserted that the contract between Haixin and the bank gave the bank no security rights over either the bill of lading or the cargo.

Thus all three grounds denied that the bank had any legal entitlement to recover against ESL under the bill of lading. At no stage did the application suggest that the question whether there was such an entitlement was governed by English law. Nor did the application suggest at any stage that the question whether there was such an entitlement had to be determined by arbitration in London.

In accordance with the Tianjin commencement requirement, the bank’s Qingdao proceedings were issued against ESL and ESCL in the Qingdao Court on 29 September 2014. Those proceedings claimed damages of US$11,165,128.46 under the bills of lading.

Meanwhile ESL had called upon OBS, Atlas and Cargill to comply with their obligations under the LOIs and, in particular, to provide security for the release of the vessel. OBS, Atlas and Cargill initially denied any obligation under the LOIs to indemnify ESL against losses caused by the discharge of the cargo to Rizhao Sea-Road. On 30 September 2014 ESL commenced an action, 2014 Folio 1177, in this court in order to enforce the LOIs. That action was discontinued on 6 October 2014 in favour of proceedings in Singapore, where both OBS and Cargill are registered. The Singapore proceedings were begun on 8 October 2014. They sought, among other things, orders that OBS, Atlas and Cargill provide security as may be required to secure the release of the vessel from the Tianjin ship arrest, and that they:

do provide [ESL] with sufficient funds to defend the proceedings commenced by [the bank] against [ESL] in the Tianjin Maritime Court in China;

…

On 11 October 2014 the Tianjin Court dismissed ESL’s application for reconsideration. In its written decision it noted that ESL failed to adduce evidence proving that it had control over the cargo or could deliver the cargo under the bill of lading, and added that the issues raised by ESL “should be determined through substantive proceedings”. An order made by the High Court of Singapore on 27 October 2014 provided for ESL to request from the bank details of the security sought, and required OBS and Cargill jointly and severally to furnish that security.

On 7 November 2014 Cargill provided security for the bank’s claim. The Tianjin ship arrest was lifted, and the vessel was duly released, on 8 November 2014. The security provided by Cargill comprised a letter of undertaking (“the DB undertaking”) dated 7 November 2014 addressed to the bank (referred to as “the Beneficiary”). The DB undertaking was issued by Deutsche Bank (China) Co., Ltd., Beijing Branch (“DB China”) for ESL (referred to by its name or as “the bareboat charterers of M/V “KISHORE”). It stated, among other things:

On 24 November 2014 ESL filed a formal challenge to the jurisdiction of the Qingdao Court. That jurisdiction challenge alleged that the bill of lading contract incorporated the terms of either the time charter between ESL and OBS or the voyage charter between OBS and Atlas, including the arbitration clause. In support of the challenge ESL produced copies of the time and voyage charters.

The first anniversary of completion of delivery of the cargo in Lanshan occurred on 11 January 2015. This was the date by which, as a matter of English law, the general paramount clause in the bill of lading required the bringing of proceedings by cargo interests. The Qingdao proceedings had been brought within this period. However no arbitration proceedings had been brought within this period.

The claim form in the present proceedings was issued by ESL on 8 July 2015. It was served on the bank’s London branch on 31 July 2015. In the meantime, on 17 July 2015, the Qingdao Court issued a judgment dismissing ESL’s jurisdiction challenge. ESL has filed an appeal against that ruling. No judgment on the appeal has yet been issued.

The proposed injunction: legal principles and issues

It is common ground that, if what the bank says about its security interest is correct, then the position under English principles of domestic and private international law is that:

It does not, however, follow that ESL is bound to succeed in its claim for an injunction under section 37 of the Senior Courts Act 1981. The grant of an injunction under that section is discretionary. The section confers a broad discretion to grant an injunction in all cases in which it appears to the court to be just and convenient to do so. But the exercise of that discretion is controlled by principles to be derived from a substantial line of authority here and abroad: see the speech of Lord Bingham in Donohue v Armco Inc [2001] UKHL 64, [2002] 1 All ER 749 at paragraph 23.

One such principle is that where parties have bound themselves to a particular forum “effect should ordinarily be given to that obligation” in the absence of strong reasons for departing from it. These were the words used by Lord Bingham, in the context of exclusive jurisdiction clauses, in Donohue at paragraph 24. The principle is also relevant to arbitration clauses: see the judgment of Lord Mance in AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] UKSC 35, [2013] 1 WLR 1889 at paragraph 25.

An injunction is a form of equitable relief. Accordingly under section 37 equitable principles relevant to injunctive relief may be engaged. This was recognised by Lord Bingham in paragraph 24 of his speech in Donohue:

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 dilatoriness or other unconscionable conduct.

Lord Bingham noted at the end of paragraph 24 that considerations of comity arise in relation to anti-suit injunctions. Lord Mance at paragraph 25 of his judgment in AES discussed those considerations in the context of injunctions enforcing arbitration agreements. Prior to the decision of the Court of Appeal (Neill, Leggatt and Millett LJJ) in Aggeliki Charis Cia Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd's Rep 87 it had come to be thought that the power to injunct foreign proceedings brought in breach of contract should be exercised “only with caution”, because English courts “will not lightly interfere with the conduct of proceedings in a foreign court”. In Angelic Grace the parties had agreed to arbitrate all disputes in London. Owners commenced such an arbitration. Charterers, however, sued in court in Venice. Lord Mance observed that in Angelic Grace the Court of Appeal held that courts ought not to feel diffident about granting an anti-suit injunction, if sought promptly. Without it the claimant would be deprived of its contractual rights in a situation where damages would be manifestly an inadequate remedy.

In Angelic Grace it was urged by charterers that “the proper approach” for the English court would be to leave to the Italian court the question whether it should decline jurisdiction or not. Leggatt LJ, with whom both Neill and Millett LJJ agreed, said at p.95:

For my part, I do not contemplate that an Italian Judge would regard it as an interference with comity if the English Courts, having ruled on the scope of the English arbitration clause, then seek to enforce it by restraining the charterers by injunction from trying their luck in duplicated proceedings in the Italian Court. I can think of nothing more patronising than for the English Court to adopt the attitude that if the Italian Court declines jurisdiction, that would meet with the approval of the English Court, whereas if the Italian Court assumed jurisdiction, the English Court would then consider whether at that stage to intervene by injunction. That would be not only invidious but the reverse of comity.

Millett LJ, with whom Neill LJ agreed, said at p. 96:

We should, it was submitted, be careful not to usurp the function of the Italian Court except as a last resort, by which was meant, presumably, except in the event that the Italian Court mistakenly accepted jurisdiction, and possibly not even then. That submission involves the proposition that the defendant should be allowed, not only to break its contract by bringing proceedings in Italy, but to break it still further by opposing the plaintiff's application to the Italian Court to stay those proceedings, and all on the ground that it can safely be left to the Italian Court to grant the plaintiff's application. I find that proposition unattractive. It is also somewhat lacking in logic, for if an injunction is granted, it is not granted for fear that the foreign Court may wrongly assume jurisdiction despite the plaintiffs, but on the surer ground that the defendant promised not to put the plaintiff to the expense and trouble of applying to that Court at all. Moreover, if there should be any reluctance to grant an injunction out of sensitivity to the feelings of a foreign Court, far less offence is likely to be caused if an injunction is granted before that Court has assumed jurisdiction than afterwards, while to refrain from granting it at any stage would deprive the plaintiff of its contractual rights altogether.

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 agreement and one to restrain proceedings in breach of an exclusive jurisdiction clause … 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.

Applying these principles, Mr Richard Lord QC and Mr Michael Bolding, who appear on behalf of ESL, submit that there are no strong reasons why the arbitration agreement in the bill of lading should not be enforced by injunction. Mr Simon Croall QC, who appears for the bank, submits first that ESL did not issue the present proceedings promptly. There was a delay of more than nine months between the commencement of the bank’s Qingdao proceedings and the issue of the claim form in the present case. That, he submits, is of itself a sufficiently strong reason for this court not to grant the injunction sought. If that were wrong, however, Mr Croall submits that unless the bank acted unreasonably in failing to commence an English arbitration before 11 January 2015, it cannot be in the interests of justice for the court to grant an anti-suit injunction which would deprive the bank of its claim. Accordingly for this reason the right course is to refuse to grant an injunction, or to make the grant of an injunction conditional upon ESL not relying upon the time bar.

I turn first to examine the parties’ contentions on whether ESL’s application for an injunction has been made promptly.

Has there been a lack of promptness?

Nearly two months elapsed after the start of the bank’s Qingdao proceedings before ESL lodged its jurisdiction challenge in Qingdao. ESL’s decision to issue that challenge in Qingdao, rather than to seek an anti-suit injunction here, would make sense if ESL were content to abide by such decision on jurisdiction as might be made by the Qingdao Court.

Once the jurisdiction of this court is properly invoked by ESL then it may well be that ESL, in proceedings here, is not bound by the determination of the Qingdao court in that regard. Nevertheless, if ESL had in mind that it might seek an anti-suit injunction here, then those familiar with Angelic Grace will be likely to find, at least on first impression, that ESL’s decision was perplexing. There are two immediate concerns. First, the result of that decision is that ESL has now issued proceedings here nine months after commencement of the bank’s Qingdao proceedings and seven months after ESL’s Qingdao jurisdiction challenge, a course of action which Leggatt LJ in Angelic Grace described as “not only invidious but the reverse of comity”. Second, on ESL’s case it had an entitlement not only to say that proceedings should not have been brought in Qingdao, but also to insist that the bank refrain from opposing ESL’s Qingdao jurisdiction challenge: see the opening sentences of the citation in section C above from the judgment of Millett LJ in Angelic Grace. The decision taken by ESL not to insist on this entitlement might well be thought to expose ESL to the danger that a subsequent application for an injunction here would be refused for lack of promptness.

ESL submitted that in the passage cited in section C above Millett LJ identified two provisos that are related. What is important in my view is that they are cumulative provisos: the court need feel no diffidence provided that the injunction is sought promptly and provided that, even if the application cannot be criticised for lack of promptness, the foreign proceedings are not too far advanced. In my view there can be no doubt that lack of promptness alone may justify refusal of an anti-suit injunction. In this regard the bank drew attention to the decision of Knowles J in Ecobank Transnational Incorporated v Tanoh [2015] EWHC 1874 (Comm). In that case a submission that delay does not include periods when jurisdiction was challenged in the foreign court was rejected, as was a submission that delay alone (without detrimental reliance) would not suffice. At paragraphs 21 to 24 Knowles J said:

21.

However Mr Coleman, for Ecobank, submits that delay does not include any period during which the applicant sought to challenge the jurisdiction of a foreign court and the period pending the foreign court's decision on that challenge.

22.

I cannot accept that proposition. Leggatt LJ in The Angelic Grace (above, at 95) described graphically the "reverse of comity" were the English court "to adopt the attitude that if [a foreign court] declines jurisdiction, that would meet with the approval of the English court, whereas if [the foreign court] assumed jurisdiction, the English court would then consider whether at that stage to intervene by injunction". As Christopher Clarke J said in Transfield Shipping Inc v Chiping Xinfa Huayu Alumina Co Ltd [2009] EWHC 3629 at [78] "… comity, which involves respect for the operation of different legal systems, calls for challenges … to be made promptly in whatever is the appropriate court". ….

…

23.

Mr Coleman sought to draw on a separate discussion of (the defence of) laches in Fisher v Brooker and another [2009] 1 WLR 1764; [2009] UKHL 41 at [64], to develop the proposition that delay alone was not sufficient to deny an applicant for an anti-suit or anti-enforcement injunction because detrimental reliance upon the delay must (he submitted) also be shown.

24.

I am not able to accept that proposition. It is not supported by authority in the area under consideration, and as a matter of principle it would unnecessarily restrict the approach of the courts. The position is best left that the presence of detrimental reliance may be a relevant circumstance to be taken into consideration, but it is not an essential condition to the preparedness of the courts to uphold or decline to uphold an arbitration agreement (or other jurisdiction clause)….”

It was suggested in argument by ESL that Ecobank could be distinguished because it concerned an anti-enforcement injunction rather than an anti-suit injunction. It is clear, however, that Knowles J was treating the relevant principles in enforcement cases as being at least no less onerous than those identified in Angelic Grace. Moreover, I consider that the approach adopted by Knowles J is supported by strong public interests in requiring that those who seek an anti-suit or anti-enforcement injunction should act promptly even though, on the facts of a particular case, there has been no detrimental reliance upon the delay. That does not mean that parties must rush to court prematurely. The starting point is that it is generally desirable to resolve issues speedily. Moreover, there are significant dangers to the interests of the parties and to the public interest if applications for coercive relief are delayed. If such applications are made promptly they are inherently likely to be much less complicated than will be the case at a later stage. Where a party seeking coercive relief does not act promptly, the other side is likely to be understandably aggrieved by the delay. An anti-suit injunction is a particularly intrusive form of relief, barring a party from access to justice in the forum that it would prefer. In the particular context of anti-suit and anti-enforcement injunctions, lack of promptness will increase the danger that such injunctions, although they are granted against a party and are not directed to the foreign court, will nevertheless be seen as inappropriately interfering with the jurisdiction of the foreign court.

ESL in its skeleton argument took objection to “any suggestion that a party seeking an anti-suit injunction is somehow precluded from challenging the jurisdiction of the foreign court before commencing proceedings in England…”. The general suggestion that ESL postulates and seeks to attack, however, involves a negative proposition which is obviously too broad. ESL’s objection to it does not engage with the two immediate concerns identified above.

ESL’s skeleton argument also, however, asserted a positive proposition. Paragraph 33 of the skeleton argument acknowledged, as has been inevitable since Angelic Grace, that despite earlier suggestions to the contrary, there is no requirement for an applicant for an anti-suit injunction first to apply to the foreign court for a stay of the foreign proceedings or to challenge the foreign court’s jurisdiction. Nevertheless it was submitted on behalf of ESL that:

… a party to an arbitration agreement is perfectly entitled to do so [i.e. apply in the foreign court first] without prejudicing its position in relation to any application for an anti-suit injunction in England.

If the notion of applying to the foreign court “first” connotes a delay before applying to the English court, then I cannot accept this proposition. It was said to be supported by a citation from paragraph 12-090 of Dicey, Morris and Collins, The Conflict of Laws (15^th ed., 2012), where the editors state that the better view is that there is no requirement to challenge the foreign court’s jurisdiction before applying for an injunction in England, but they note that:

There is some support for the view that an application is premature if it has not been preceded by an application for jurisdictional relief in the foreign court: as an anti-suit injunction will interfere with the procedures of the foreign court, it may be preferable that the foreign court be asked not to exercise jurisdiction. It would follow that the practice of applying to the foreign court first is appropriate, at least in cases where the foreign proceedings are not themselves vexatious: this has been described as the ‘normal’ procedure, and it has been said that there must be some good reason why the application is made in England first.

The short answer to that suggestion is that in the sentence which immediately follows on from ESL’s citation, the editors of Dicey, Morris and Collins state:

But this approach … was specifically disapproved in The Angelic Grace…

It was added by ESL that its positive proposition was supported by Briggs, Civil Jurisdiction and Judgments (6th ed. 2015) para. 5.50. Here, too, the answer is that the author cites Angelic Grace in answer to the notion that an objection to jurisdiction should be made in the foreign court first. The author adds an observation that:

… an applicant who wishes to have two bites at the cherry is well advised to consider it. …

I read this observation as envisaging a “bite at the cherry” in England which is not appreciably later than a “bite at the cherry” in the foreign court. Any other reading would be inconsistent with the author’s own citation from Angelic Grace.

At the hearing ESL acknowledged that its positive proposition required qualification, and that it might not be reasonable if the application to the foreign court would involve “long delay”. Again it seems to me that there is a failure here to engage with Angelic Grace: it is not a question of whether it is reasonable to apply to the foreign court, nor of whether there will be long delay in the foreign court, but a question of whether the application in this court has been made promptly.

The oral submissions for ESL rightly accepted that what is or is not “prompt” was fact sensitive. The submissions then went on, however, to assert that in all the cases in which an application for an anti-suit injunction has been held to be too late, “there has been a very significant delay in absolute terms”. As to that I decline to examine first instance decisions in which the facts have been held to fall on one side of the line or the other. They are not cases which involve any question of principle and necessarily turn on their own facts.

ESL at the hearing sought to rely upon propositions which it derived from paragraph 8.11 of Raphael, The Anti-Suit Injunction (2008, with first supplement 2011). These suggested propositions were that:

Each of these propositions was said to be supported by first instance decisions cited in the footnotes to paragraph 8.11. I reject these suggested propositions. I do not consider that the decisions cited are decisions which seek to lay down general propositions. The decisions cited largely involved an examination of the facts in the particular case in order to decide whether an injunction ought to be granted.

I turn to the facts in the present claim. One of the important features is that if arbitration proceedings were to be effective then, on ESL’s case, they needed to be brought within twelve months of discharge of the cargo. I deal in section E below with the bank’s complaint of particular prejudice in this regard. For present purposes I put that specific complaint to one side. As regards promptness generally, the bank observed that against a twelve month yardstick periods of months should be regarded as significant. I agree. This point was not explicitly addressed by ESL and I can see no answer to it.

Another important feature is the likely delay associated with, and utility of, ESL’s jurisdiction challenge in Qingdao. On this, Professor Wang Pengnan’s first opinion stated:

Professor Wang Pengnan observed that two of these three requirements were not met, for on the face of the bill of lading it did not state the parties to the charterparty and on the face of the bill of lading it did not state that an arbitration clause was being incorporated.

On behalf of ESL Mr Wang Hongyu did not dispute the passages from Professor Wang Pengnan’s first opinion summarized at (1) and (2) above. As to the passages from paragraph 8 cited at (3) above, Mr Wang Hongyu’s statement in paragraphs 7 and 8 said:

7.

As Mr Wang Pengnan says at paragraph 6 of his opinion, China is not a case precedent system. Therefore, although the courts are required to follow guidance notes issued by the Supreme People’s Court of the P.R. of China, the courts are nonetheless able to render decisions based on the facts of each case. Thus in this matter, I consider that although ESL faced significant difficulties in its jurisdictional challenge, it had and still has a properly arguable case based on the facts of this matter. Those arguments are set out in full in ESL’s Objection to Jurisdiction … and in ESL’s appeal against the decision of the Qingdao Maritime Court …

8.

It is an internal rule that the first instance court shall seek guidance from the high court which in turn shall seek guidance from the Supreme Court to determine the enforceability of the arbitration clause incorporated into the bill of lading. In the circumstances, it is not possible to predict which party will succeed on the jurisdictional challenge until the final ruling is handed down, although as I have said above I accept that previous cases put obstacles in the way of ESL succeeding.

Professor Wang Pengnan’s second opinion dealt with this at paragraphs 3 to 7:

3.

The Claimant would know that it had no chance of succeeding with a challenge to jurisdiction: I refer to paragraph 7 and 8 of Wang Hongyu’s witness statement. It is incorrect for Mr Wang to give the impression that the lower court (including China Maritime Courts which are also courts of first instance) and the Higher People’s Courts (which are the first appeal level) could decide the question on the jurisdictional challenge on their own. As is clear from the SPC Notice No. 18 in 1995 referred to in my first opinion this is a special situation under Chinese law where the lower courts and appeal court must refer the case for directions from the SPC before issuing their judgment where it takes the preliminary view that the arbitration clause and agreement in dispute is invalid or void.

4.

In a case where the facts were truly different and raised new points from previous SPC guidance cases a different result may be possible. However, there is nothing on the facts raised in the present case that makes it any different from the prior cases already decided by the SPC as referred to in my first opinion.

5.

Mr Wang Hongyu has referred to (and attached) the full argument put before the Qingdao Maritime Court by him for the jurisdictional challenge (WH1 p. 3-10). I note that these arguments raise no new or special facts or try in any way to distinguish this case from the prior SPC guidance notes.

6.

I do not consider that any knowledgeable Chinese lawyer in this area could conclude that there was a reasonable case to argue that the Qingdao Maritime Court should find that it was without jurisdiction. A knowledgeable Chinese lawyer in the area would have properly advised their client that the application had no hope but would only delay matters.

7.

It is not unusual for the jurisdictional challenge review process to take time since the Qingdao Maritime Court would have had to report internally to the Shandong Higher People’s Court which in turn would have reported internally to the SPC. The SPC is very busy as it deals with regulatory matters in addition to decisions on individual cases. It is therefore not unusual for jurisdictional challenges to result in delays of several months as occurred in this case. I do not believe that a decision within three months as has been indicated would have been realistic at the time in question.

On the material put before this court my assessment is that Professor Wang Pengnan’s observations on this aspect of the case are compelling. Paragraphs 7 and 8 of Mr Wang Hongyu’s statement did not go beyond saying that the jurisdiction challenge was “properly arguable”. They did not say that it had a substantial prospect of success. Indeed they did not even explain how, consistently with following the SPC guidance, there was anything in the facts of the present case that could enable the Qingdao court to decline jurisdiction. The material before this court includes translations of ESL’s challenge in the Qingdao court and of its appeal. Those translations fully bear out the observations in paragraph 5 of Professor Wang Pengnan’s second opinion.

ESL submitted that, in Millett LJ’s words, the bank’s Qingdao proceedings were not “too far advanced”. For the reasons given above, however, this does not show that ESL’s application has been made promptly.

My conclusion is that the bank is right to say that the present claim has not been brought promptly. In a case where there was a potential time bar expiring in January 2015, if ESL were to seek an anti-suit injunction, it needed to issue and serve a claim form here, in the absence of some good reason to the contrary, no later than the end of November 2014. ESL’s decision to defer issuing a claim form pending its Qingdao jurisdiction challenge is not a good reason to the contrary, for three reasons both individually and in conjunction with each other:

ESL urged that its delay in seeking an injunction had not resulted in significant wasted expense. I will assume in ESL’s favour that this is right. Even so, and after giving proper weight to points relied on by ESL, when all the circumstances are taken into account it seems to me that ESL’s lack of promptness is so serious that the proposed injunction would be neither just nor convenient and ought to be refused.

Although it forms no part of my decision, I add that I have a concern that the evidence points strongly to a conclusion that the purpose of ESL’s challenge in the Qingdao court was to delay matters. I have real difficulty in understanding how ESL could have thought that there was any substantial prospect of its Qingdao jurisdiction challenge being successful. At the hearing it was said that I could not go behind evidence of Mr Wartski in his second witness statement at paragraphs 20 to 22:

20.

In light of the above, there was no appreciable delay between the arrest of the Vessel and ESL’s objection to the jurisdiction of the Qingdao Court. The jurisdiction challenge was filed by ESL in good faith and on the basis that it considered that it had a chance of success as has the appeal which has been filed by ESL to the Qingdao Court’s ruling on jurisdiction.

21.

The Qingdao Court took a long time to consider the ESL’s jurisdictional challenge. Indeed, although ESL expected a decision within a maximum of three months, the Court only handed down its decision rejecting ESL’s jurisdictional challenge on 17 July 2015 – some 8 months after the challenge was made. This may be an indication that the Court gave serious consideration to ESL’s jurisdictional challenge.

22.

As I explained in my first witness statement, ESL decided to challenge the jurisdiction of the Qingdao Court by filing an objection to jurisdiction before that court, rather than immediately applying in England for an anti-suit injunction. I do not believe that ESL can sensibly be criticised for doing so. The rationale was that it was unnecessary and a potential waste of time and money to launch expensive and resource-heavy English proceedings when the Chinese proceedings were not being progressed in substantive terms pending the outcome of the challenge to jurisdiction, and never would be if the challenge was successful as ESL hoped it would be. When it became apparent that there was a risk that the Qingdao Court would not rule on ESL’s jurisdiction challenge until a significant period of time had elapsed, ESL took the view that it would be better to apply in England for an anti-suit injunction rather than wait for the Qingdao Court’s ruling.

For reasons given earlier, I disagree with the suggestion in the last sentence of paragraph 22 that “a significant period of time” had not elapsed before the application for an anti-suit injunction was made. Turning to what, if any, basis there could have been for thinking that ESL’s Qingdao jurisdiction challenge had any real prospect of success, Mr Wartski’s first witness statement simply did not address that question. In his second witness statement Mr Wartski has carefully not gone beyond stating that ESL “considered” that the Qingdao jurisdiction challenge “had a chance of success” and “hoped” that it would be successful. There is no express statement that ESL believed it had any substantial prospect of success.

These matters would support a conclusion that the prospect of delay was a major factor in ESL’s decision to lodge the Qingdao jurisdiction challenge and to defer issuing a claim form here. Even without that conclusion, however, in all the circumstances I consider that I should refuse the application for an injunction because it has not been made promptly.

The bank’s complaint of prejudice

My conclusions in section D above make it unnecessary for the bank to rely upon its complaint of prejudice. I shall therefore deal with it relatively shortly.

The prejudice that is relied upon is that, even though the bank’s Qingdao proceedings were brought within time and are still on foot, an arbitration claim brought now would be out of time. In that regard I have no doubt that if ESL’s claim form here had been issued and served by the end of November 2014 the bank could and would have begun protective arbitration proceedings by 11 January 2015. ESL’s delay has thus caused prejudice. That remains the case even if, as ESL suggests, the bank has other potential avenues of recourse.

The relevant legal principles are common ground: the bank’s ability to rely on prejudice in this regard turns on whether the bank’s omission to bring arbitration proceedings within time was unreasonable. The bank accepts that it bears the burden of showing that its omission was not unreasonable.

I cannot accept that the bank has met that burden:

There is no evidence before this court that directly contradicts Mr Wang Hongyu’s observation in paragraph 14 of his witness statement that anti-suit injunctions brought in English and Hong Kong courts are not an unusual approach taken by foreign shipowners to support their defences in China. My conclusion accordingly, on analysis of the particular evidence in the present case, is that:

It follows that the bank has not met the burden which it accepts it must meet if it is to rely on specific prejudice. It must show that it was not unreasonable to have omitted to bring arbitration proceedings prior to 11 January 2015. After analysing the evidence I conclude that it has not shown that its omission in this regard was “not unreasonable”. On the contrary, in circumstances where deployment of anti-suit injunctions against cargo owners was not unusual, it was unreasonable to ignore the danger that such an injunction might be sought in the present case.

I acknowledge that the process of reasoning by which I arrive at that conclusion necessarily has been conducted on an examination of written evidence alone, and involves attributing particular weight to one of a number of factors – in this instance, whether by November 2014 a particular type of challenge by shipowners had been deployed against cargo interests in China sufficiently frequently to be described as “not unusual”. This, to my mind illustrates the importance of the general principle that those seeking anti-suit injunctions must act promptly. Proof that undoubted prejudice would result from an anti-suit injunction, and could not reasonably have been avoided, will often be a compelling reason for refusing an injunction. But there are general public policy reasons, identified in section D above, why the bank should not, in a case where ESL has delayed in seeking an injunction, have to take the court through a detailed analysis and be in a position where everything turns on a judgment as to whether an omission to act was “not unreasonable”.

Other aspects of the claim

I noted in section A that ESL seeks a declaration that the arbitration agreement was incorporated in the bill of lading contract. As I understand it, the bank accepts that in these proceedings ESL is entitled to such a declaration.

The remaining matter that I need to deal with is ESL’s claim to damages for breach of the arbitration agreement. I am by no means sure that this breach will be found to have caused any relevant loss to ESL at the end of the day. There is no evidence that in the bank’s Qingdao proceedings ESL will be deprived of a defence that would have succeeded in London arbitration proceedings. There is no evidence that the costs of Wing Jing & Co. in defending the Qingdao proceedings will be higher than the costs of lawyers in London. Moreover ESL will have saved the expense of paying arbitration fees.

The bank submitted that ESL’s claim to damages should in these circumstances be dismissed for lack of evidence. I am not willing to take that course out of hand. If ESL does intend to proceed with a claim for damages, I will invite submissions from the parties as to whether I should give directions for that purpose and if so what those directions should be. It is not clear to me whether the bank seeks to contend that any claim to damages must, consistently with the declaration which I will grant, be brought by way of arbitration. If so, and ESL objects to that course, then it may be necessary to give directions for determination of whether the claim for damages should be stayed pending arbitration.

Conclusion

For the reasons given above I will grant the declaration sought, but I refuse to grant an anti-suit injunction. In that regard ESL is left to its claim in damages.