ADM Asia-Pacific Trading PTE Ltd v Toepfer International Asia PTE Ltd & Anor

In these proceedings, commenced on 11 September 2015, the claimant (‘ADM’) applies for a final anti-suit injunction to restrain the defendant (‘BSS’) from continuing proceedings against ADM in Indonesia on the grounds that those proceedings are in breach of a FOSFA arbitration agreement between the parties.

The principal ground on which BSS resists the application is that ADM has not acted promptly in bringing these proceedings, ADM having known about the Indonesian proceedings since June 2013 and having participated in them since June 2014.

Following the hearing of the application on 16 December 2015 I notified the parties that I refused to grant the injunction as a matter of discretion, on the grounds of delay, with reasons to be provided in due course.

On 21 December 2015 counsel for the parties forwarded to me a copy of the decision of the Court of Appeal in Ecobank Transnational Incorporated v Tanoh [2015] EWCA Civ 1309, which had been handed down on 17 December 2015. Neither party considered that further submissions were required in respect of that decision, no doubt because it confirmed (contrary to ADM’s contentions at the hearing) the existence of a general discretion to refuse an anti-suit injunction on the grounds of delay in making the application, a discretion which I have exercised in this case on the basis explained below.

On 21 April 2010 ADM and BSS entered a Stock Financing Agreement (‘the SFA’), contemplating the supply by ADM of soybeans to BSS pursuant to individual sales contracts and the provision of financing for such purchases. The scheme of the SFA was that goods purchased by BSS pursuant to a contract of sale would be delivered into warehouses in Indonesia where they would be held under a Stock Management Agreement (‘the SMA’) between the parties and Sucofindo (the latter acting as warehouse manager and administrator). BSS could then take delivery of parcels of the goods upon payment of the relevant part of the purchase price. BSS was obliged to pay for the entirety of the goods within 120 days of delivery to the warehouse.

Clause 17 of the SFA provided as follows:

The parties thereafter entered numerous individual contracts for the sale of soybeans by ADM to BSS. The contract in question in these proceedings was made on 26 April 2012, pursuant to which ADM agreed to sell 66,000MT (+/-10%) of US Grade 2 or better yellow soybeans to BSS (‘the Contract of Sale’). The Contract of Sale incorporated FOSFA 24, was subject to English law and contained the following arbitration clause:

The Contract of Sale gave BSS the option to make payment either (i) by letter of credit or (ii) by a 20% down-payment, with the balance of 80% to be paid “under agreed Stock Financing Terms” (subject to availability within the Stock Financing Limit specified in the SMA).

On 14 September 2012 BSS elected to make payment using the SFA and duly paid US$8,844,183.11, being 20% of the purchase price, on 7 November 2012. The parties agreed to extend the period for payment of the balance to 180 days after discharge.

Pursuant to the Contract of Sale, ADM shipped a cargo of soybeans totalling 65,907.915MT on-board the vessel TIAN TONG FENG. The goods were discharged between 7 and 22 December 2012 at Cigading and Surabaya ports in Indonesia and delivered to warehouses to be stored under the terms of the SFA and SMA. BSS paid a further US$6,825,772.28 and took delivery of goods to the value of the sums it had paid.

On about 22 January 2013 BSS sent a debit note to ADM alleging, in substance, that the quality of the goods was not in accordance with the Contract of Sale and attaching a report from Sucofindo. The parties reached an agreement to sell the balance of the goods and split the proceeds on a without prejudice basis. The result was that US$21,425,291.33 of the total purchase price remains unpaid and is in dispute, ADM refuting BSS’s complaints as to the quality of goods.

In letters to ADM dated 24 April 2013 and 6 May 2013, BSS’s Indonesian lawyers threatened the commencement of proceedings in the Republic of Indonesia and/or any other jurisdiction.

On 22 May 2013 BSS duly commenced proceedings in the District Court of Central Jakarta against ADM and Sucofindo, seeking both provisional and final relief (although the provisional relief has now fallen away), relying on clause 17 of the SFA to found jurisdiction against ADM.

ADM became aware that BSS had commenced proceedings in Indonesia on 26 June 2013, when BSS’s Indonesian lawyers wrote to ADM’s English solicitors informing them of that fact. However, service of the proceedings (which was the responsibility of the court, with the assistance of the Indonesian Foreign Ministry) was not effected until 26 May 2014.

Hearings took place in the District Court on 17 June and 19 August 2014. At the latter hearing, ADM indicated that it intended to challenge the jurisdiction of the court. ADM was ordered to file both a defence to the substance of the claim and the challenge to jurisdiction at the next hearing on 2 September 2014.

On 2 September 2014 ADM duly filed both a Demurrer on Absolute Competence and (expressly without prejudice to that challenge to the jurisdiction of the court) a Response to the Statement of Claim, the latter a 49- page document (when translated) containing a detailed rebuttal of the claim. It is common ground that the service of that substantive defence, at the same time as challenging jurisdiction, did not constitute submission to the jurisdiction of the Indonesian court.

BSS submitted a Reply to the Demurrer on Absolute Competence on 23 September 2014 and ADM submitted a Rejoinder on 14 October 2014.

On 2 December 2014 the District Court pronounced its decision upholding ADM’s challenge to the jurisdiction. Both parties were formally notified of that decision on 15 January 2015.

On 28 January 2015 BSS lodged an appeal to the Indonesian High Court against the District Court’s decision to decline jurisdiction. On 5 March 2015 BSS lodged its memorandum of appeal. This came to ADM’s attention on 23 March 2015. ADM was formally notified by the District Court on 4 May 2015 that BSS’s memorandum of appeal had been submitted and the parties were also served with a Notification to Examine the Case Dossier.

On 18 May 2015 the case was transferred to the High Court. ADM was notified of this on 4 June 2015 and BSS on 8 June 2015.

On 8 July 2015 the High Court gave judgment allowing BSS’s appeal and directing the case be remitted to the District Court for the substantive dispute to be considered. ADM, unaware that the judgment had been delivered, filed a counter-memorandum of appeal on 14 July 2015. ADM did not learn of the High Court’s decision until 1 September. It is common ground that the judgment was delivered more quickly than would be usual, but ADM has expressly disavowed any suggestion of impropriety on the part of the Indonesian courts.

ADM has lodged a cassation appeal to the Indonesian Supreme Court, filing its appeal on 23 September 2015 and its memorandum cassation on 9 October 2015.

On 19 June 2013, after the commencement of the Indonesian proceedings but before ADM was aware of them, ADM appointed an arbitrator and thereby commenced a FOSFA arbitration in respect of the dispute between the parties, relying on the arbitration clause in the Contract of Sale. The arbitration did not then progress until after ADM had been served with the Indonesian proceedings. At that point, on 30 May 2014, ADM gave notice to renew the arbitration claim. On 13 June 2014 BSS appointed its own arbitrator, without prejudice to its arguments as to the arbitrators’ lack of jurisdiction.

In the arbitration ADM claimed damages, not only for breach of the Contract of Sale but also for BSS’s alleged breach of the FOSFA arbitration agreement in commencing proceedings in Indonesia. The parties exchanged written submissions in the usual way.

On 7 May 2015 the FOSFA arbitrators made a First Tier award, holding that they did have jurisdiction to determine the dispute and finding that BSS was in breach of the Contract of Sale. The arbitrators awarded ADM damages of US$21,425,291.23 for breach of the Contract of Sale and US$150,000 for breach of the arbitration agreement, together with interest and costs.

BSS appealed the First Tier award in relation to jurisdiction, liability and quantum. The appeal hearing took place before a FOSFA Board of Appeal on 13 and 14 October 2015.

As stated above, ADM commenced these proceedings on 11 September 2015, shortly after learning of the High Court’s decision of 8 July 2015. ADM contends that the circumstances of the High Court’s decision and the decision itself were highly unsatisfactory and led to a loss of confidence on the part of ADM in the Indonesian proceedings.

The first question, logically, is whether ADM has established, to the requisite standard for the grant of a final anti-suit injunction (being the relief sought by ADM), that BSS is acting in breach of the arbitration clause in the Contract of Sale in pursing proceedings in Indonesia.

However, BSS has resisted the application primarily on the ground of delay, accepting that there is at least an arguable case that the Indonesian proceedings are in breach of the arbitration clause but inviting me not to decide the issue on this application. As I have found in favour of BSS on the issue of delay and refused to grant an anti-suit injunction (for the reasons explained below), I agree that it is not necessary or appropriate for me to determine whether the Indonesian proceedings are in breach of the arbitration clause, particularly as that is a live issue both in the FOSFA arbitration and before the Indonesian Supreme Court.

I shall therefore address the issue of delay on the assumption, but without deciding, that the Indonesian proceedings are brought in breach of the arbitration clause in the Contract of Sale.

It was common ground that where foreign proceedings are brought in breach of an agreement to refer disputes to arbitration in London, the court will ordinarily grant an anti-suit injunction to restrain the foreign proceedings (other than those brought in a foreign court within the Brussels/Lugano regime) unless the respondent can show strong reasons for suing in the foreign court: see Donohue v Armco Inc [2001] UKHL 64, per Lord Bingham at [24] and AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant [2013] UKSC 35 per Lord Mance at [24-28].

Mr Russell QC, counsel for ADM, submitted that mere delay in applying for an anti-suit injunction was not, in itself, a ‘strong reason’ for refusing to enforce an arbitration clause. He contended that, before relief could be refused, it was necessary to show that the delay was unconscionable, that is to say, culpable delay which had caused prejudice to the respondent. In particular, he submitted that:

waiting for the foreign court to determine a challenge to its jurisdiction should not be regarded as unconscionable delay: the applicant should not be obliged to seek relief in two jurisdictions simultaneously;

in the absence of evidence that the respondent would have complied with an anti-suit injunction, had it been obtained sooner, by discontinuing the foreign proceedings, the respondent could not show detrimental reliance or prejudice;

comity has no role to play where the applicant is seeking to enforce a contractual right not to be sued in the foreign jurisdiction.

However, even as it was recognised that the court need feel no diffidence in granting an anti-suit injunction to restrain breach of a London arbitration clause, it was emphasised that that was “provided that it is sought promptly and before foreign proceedings are too far advanced”: The Angelic Grace [1995] 1 Lloyd’s Rep 87 per Millett LJ at 96 col 2. In the same way, the principle established in Donohue v Armco (above) that an ant-suit injunction would be granted in the absence of strong reasons for suing in the foreign court was caveated by the word ‘ordinarily’. Lord Bingham explained at [24] that he used that word:

It is plain from the above that the concept of “strong reasons” for not granting an anti-suit injunction relates primarily to justifications for suing in the foreign court. It does not subsume or exclude issues relating to delay on the part of the applicant or other general discretionary considerations which may arise on any application for equitable relief, even where an entitlement to such relief would otherwise have been established.

In a series of cases the Commercial Court has emphasised and enforced the requirement, clearly and authoritatively stated in the The Angelic Grace, that applications for anti-suit injunctions must be brought promptly once the applicant knows of the breach and, further, has rejected each of the propositions advanced by Mr Russell above.

In The Skier Star [2008] 1 Lloyd’s Rep 652 Teare J refused the owners of the vessel an anti-suit injunction to restrain proceedings brought by the cargo interests in Antwerp in breach of a London arbitration clause contained in the bills of lading. The owners had participated in a court survey process in Antwerp in 2005, at the same time serving recourse proceedings and positively disputing the jurisdiction of the Antwerp Court. They were still disputing the Antwerp court’s jurisdiction when they applied for an anti-suit injunction in 2007. Teare J stated:

In Ecobank Transnational Inc v Tanoh [2015] EWHC 1874 (Comm), an anti-enforcement injunction case, Knowles J rejected the contentions (i) that delay does not include any period during which the applicant sought to challenge and (ii) that delay alone (absent detrimental reliance) was not sufficient to deny an anti-suit or anti-enforcement injunction.

In Essar Shipping Ltd v Bank of China [2015] EWHC 3266 (Comm) Walker J agreed with the approach taken by Knowles J, rejecting the contention that it was distinguishable on the grounds that Ecobank was a case dealing with anti-enforcement injunctions. Walker J added:

Walker J also rejected the contention that a party to an arbitration agreement was entitled first to challenge the foreign court’s jurisdiction, without prejudicing its position in relation to an application for an anti-suit injunction in this jurisdiction, stating:

Mr Russell accepted that recent cases had focused on lack of promptness as a reason for declining an anti-suit injunction, but submitted that that was the wrong approach, maintaining that delay was not in itself a sufficient basis for refusing to enforce an arbitration agreement. I took the contrary view in reaching the decision I communicated to the parties, a view which, in the event, is consistent with the decision of Court of Appeal in Ecobank Transnational Incorporated v Tanoh (above). The Court of Appeal upheld the decision of Knowles J at first instance and confirmed that, for general discretionary considerations and the need for comity, an applicant for anti-suit relief needs to act with appropriate despatch.

As to the relevance of and approach to delay, Christopher Clarke LJ (with whom the Chancellor, Sir Terence Etherton, and Patten LJ agreed) explained:

As for delay whilst a challenge was made to the jurisdiction of the foreign court, the Court of Appeal held that such a challenge was capable of giving rise to prejudice to the other party and to third parties, including the foreign court, so it should not be left out of account. Christopher Clarke LJ stated:

The Court of Appeal also rejected the contention that an injunction would only be refused if detrimental reliance or prejudice could be shown. Christopher Clarke LJ explained the position as follows:

The Court of Appeal also rejected the contention that judicial comity, properly understood, had no relevance to the question of if and when to grant an anti-suit (or anti-enforcement) injunction. Christopher Clarke LJ stated:

Christopher Clarke LJ concluded, at [137], that both general discretionary considerations and the need for comity mean that an applicant for an anti-suit injunction needs to act with appropriate despatch, citing his own dictum in Transfield Shipping [2009] EWHC 3642 (Comm) that “… comity, which involves respect for the operation of different legal systems, calls for challenges to be made promptly in whatever is the appropriate court.”

The question of promptness was again considered by the Commercial Court in The Magellan Spirit [2016] EWHC 454 (Comm). Although the Court of Appeal decision in Ecobank was not cited, Leggatt J adopted the same approach, holding that:

Leggatt J also considered that, even though the applicant was still challenging the jurisdiction of the foreign court, the steps taken in that court rendered it inappropriate to grant an anti-suit injunction.

In summary, the legal propositions advanced by Mr Russell mirror those which were advanced by the appellant and rejected in the Court of Appeal in Ecobank but firmly rejected. They are also entirely at odds which the approach the Commercial Court has adopted to anti-suit injunctions for some time, now supported and approved by that Court of Appeal decision.

The starting point is the assumption that ADM has a contractual right not to be sued in Indonesia and that BSS has identified no good reason for suing in that jurisdiction. Further, BSS has participated in proceedings in the assumed contractual forum, the FOSFA arbitration, those proceedings having reached an advanced stage. The question is whether ADM’s delay in seeking an anti-suit injunction should, as a matter of discretion, deprive it of the right to restrain the Indonesian proceedings in circumstances where the result may be parallel proceedings and inconsistent decisions.

ADM were aware of BSS’s intention to commence proceedings, and that they might do so in Indonesia, as long ago as April 2013. By June 2013 ADM knew that proceedings had been commenced in Jakarta, in clear breach (on ADM’s case) of the arbitration clause. ADM clearly could have applied for anti-suit injunction in 2013, but cannot be criticised for not applying prior to being served with the Indonesian proceedings in late May 2014.

At that point, in June 2014, ADM commenced the FOSFA arbitration, making the clear assertion that the Indonesian proceedings were brought in breach of the arbitration clause and seeking damages for that breach, but not claiming an anti-suit injunction in the arbitration or by application to this court. Instead, ADM engaged in the Indonesian proceedings, attending three hearings and filing extensive submissions, not only on jurisdiction but also on the substantive issues. It was therefore ADM which brought about the situation where there are parallel proceedings and the risk of inconsistent decisions.

It is not clear why ADM did not seek to enforce what it claims to be a clear-cut contractual right to restrain the Indonesia proceedings in 2014. The result is that the parties have incurred no doubt significant costs in Indonesia (in parallel with the costs of the arbitration) and three levels of the Indonesian courts have been engaged with the case.

Mr Russell contends that the only period of delay which can be attributed to ADM is the period from service of the Indonesian proceedings on 26 May 2014 to the initial decision of the District Court to decline jurisdiction on 2 December 2014, a period of only 6 months. He submits that the decision of ADM to challenge jurisdiction in Indonesia first was appropriate and did not greatly delay matters. ADM, he submits, cannot be criticised for not applying for an injunction in the period between December 2014 and July 2015, at a time when the Indonesian courts had declined jurisdiction. As soon as ADM learnt that the Indonesian High Court had allowed BSS’s appeal on the question of jurisdiction, it applied for an anti-suit injunction.

I do not accept that approach. The task for the Court is not to look at periods of delay and attribute blame for them, but to consider whether the application was made promptly and how far and with what consequences the foreign proceedings have progressed. Whilst ADM was plainly entitled to challenge the jurisdiction in Indonesia, doing so did not remove the need to apply promptly for an anti-suit injunction, if one was to be sought at all. Further, ADM cannot expect the Court to ignore the fact that the steps it decided to take in Indonesia, instead of applying for an injunction, resulted in BSS pursuing an appeal (and now in ADM pursuing its own appeal).

In my judgment it is clear that ADM did not apply for an anti-suit injunction either promptly or before the Indonesian proceedings were too far advanced, such that it would be inappropriate to exercise the discretion to grant an injunction, for the following reasons:

It is self-evident that a prompt application for an anti-suit injunction would have been one made shortly after service of the Indonesia proceedings on 26 May 2014. No good reason has been put forward why an application could not have been made at that point. Nor has it been suggested that there was a useful purpose to be served in holding back. It cannot be said, in my judgment, that ADM acted with appropriate speed.

ADM clearly made a conscious choice to engage with the Indonesian proceedings and to claim the costs of so doing as damages for breach of the arbitration clause, rather than to apply for an injunction. Whilst that was not a formal or binding election, the fact that an applicant initially claimed (and has been awarded) damages for a breach of contract rather than claiming an injunction must weigh against the applicant in a subsequent application for an injunction.

ADM engaged in a jurisdiction dispute knowing that it would also be required to file a substantive defence and did so, submitting a detailed and lengthy rebuttal of the underlying claim. It did so also knowing that it would claim the costs of the exercise from BSS in the arbitration. ADM’s delay in applying for an anti-suit injunction therefore caused BSS to incur both its own costs and liability for ADM’s costs.

ADM was clearly content for the matter to be dealt with by the Indonesian courts until those courts made a decision contrary to its interests, at which point it has belatedly sought the intervention of this court. ADM is, in a very real sense, attempting to have the best of all worlds, litigating in Indonesia on the basis that it would claim the costs as damages, and then resorting to this court whilst the issue it was previously content to leave to the Indonesian courts is pending in the Supreme Court of that country on ADM’s own appeal.

Intervening at this stage, when ADM has engaged on the substantive issues in Indonesia (albeit without prejudice to its jurisdiction challenge) and is taking the jurisdiction issue to the Supreme Court, cannot be regarded as a sensible method of conducting curial business. The Indonesian courts have been seised of the matter, including the scope and application of the arbitration clause, to an extent which would make it inappropriate for this court to intervene.

ADM did not apply for an anti-suit injunction with appropriate despatch, but actively engaged with the Indonesian proceedings (both as to jurisdiction and substance) for more than a year. In those circumstances both general discretionary considerations and the needs of comity lead me to refuse the application.