The anti-suit route
25 September 2006
Mareva injunctions (freezing injunctions) were invented and refined in the mid-1970s by shipping lawyers and such injunctions remain a formidable weapon in the average shipping lawyer's armoury. Anton Pillar injunctions (search orders) were invented by IP lawyers, but again shipping lawyers can and do find them useful on occasions. But it is the anti-suit injunction that has become the most regularly used injunction in the shipping world.
The first words of a typical anti-suit injunction are: "This order prohibits you from continuing, instigating or commencing proceedings whether in rem or otherwise or from continuing to detain the vessel [name of ship] for claims arising from alleged shortage/damage to cargo carried under Bills of Lading numbered [numbers] issued on [date] at [load port] in any jurisdiction other than before a London arbitration tribunal."
Typically, the injunction then continues: "If you disobey this order you may be found guilty of contempt of court and may be sent to prison or fined. In the case of a corporate correspondent, it may be fined, its directors may be sent to prison or fined or its assets may be seized."
Most shipowners still insist that the contract of carriage for the goods transported is subject to English law, with all disputes under it being dealt with in London arbitration. Certainly a Greek shipowner, unless in a commercially very weak bargaining position, simply would not carry a cargo on any other basis.
Most cargo insurers, however, would much prefer that law and jurisdiction based on the French system should be applicable. That has become all the more so since the cargo insurance market has become dominated in some trades by Belgian, French and Swiss companies.
So, a ship arrives with damaged cargo or after discharge some cargo is alleged to be missing and, as is to be expected, a demand for security is made and the vessel is arrested. Frequently nowadays, despite the English law/arbitration provisions in the contract of carriage, a demand for security, with French law and jurisdiction/arbitration being conceded, is made. This is even though those making the demands know perfectly well that the governing charterparty and bills of lading issued thereunder are subject to English law and jurisdiction.
It is almost always then said that, unless French law and jurisdiction are agreed upon, instead of accepting an insurance guarantee a local bank guarantee will be insisted on, as will jurisdiction of the local court. That demand is made in the knowledge that establishing a bank guarantee is expensive and time-consuming, if not impossible, and, coupled with agreement to local jurisdiction, is tantamount to payment of the claim in full.
The aim is either to obtain pragmatic payments from shipowners to get their ships released or, failing that, the referral of the matter to the cargo-friendly French courts or arbitrators. In France the shipowner is more likely to lose cargo shortage and damage claims documented as they typically are with what appear, at first blush, to be quite plausible reports. These reports will generally not survive scrutiny in London; neither will cargo owners benefit from several crucial presumptions that they will benefit from in France. Furthermore, in France the charterparty, which the owner has so painstakingly negotiated, cannot be relied upon by the owner/carrier, but cargo owners can pick and choose any clauses they wish in the charterparty.
The court in London will issue an injunction obliging cargo interests and their underwriters, brokers, claims handlers and lawyers to arbitrate in London, and not to maintain an arrest if a P&I (protection and indemnity) Club guarantee has been issued securing such London arbitration.
If an injunction is not obeyed promptly the London court can impose fines on the companies and individuals and can even send the individuals to prison. Joining lawyers and claims consultants to the injunctions at the same time as making an application to commit them and their clients for contempt of court is particularly effective in situations where injunctions have not been obeyed immediately. Those concerned tend to rethink rapidly when it is explained to them that they are effectively telling the Queen, through the court, to take a running jump and what the consequences of doing that actually are.
Anti-suit injunctions have been successfully kept in place despite some tough challenges by lawyers for cargo. To save time it is highly desirable that all paperwork and advocacy necessary to obtain the injunction is handled by the solicitor instructed, and provided they are given the necessary material they should be able to obtain an anti-suit injunction within 24 hours of being instructed to do so. The material they need is:
- copy of the contract of carriage;
- copies of the emails or faxes containing the demands made by cargo interests - if the demands were all on the telephone they need an email from the person they were made to describing the demands made; and
- an original signed guarantee in the standard wording securing a claim in London arbitration proceedings.
Of course, those making the demands are expecting that the pressure caused by delay, particularly in high-freight markets, will mean their demands will be given in to.
However, if the demands are not given in to, and there is delay while an anti-suit injunction is obtained and obeyed, then:
- London arbitrators will generally make an award to the shipowners in respect of any legal and other related costs incurred where the ship was wrongly detained by the cargo owners. They will also make an award for all time lost to the vessel at the daily hire rate, for bunkers consumed during the arrest and for port charges. These counterclaims by owners can be set off against any part of the cargo claim that proves genuine.
- The London court will potentially find cargo underwriters/brokers/claims handlers/lawyers liable for wrongful interference with the carrier's right to arbitrate in London and will potentially award the same amounts described above.
If an injunction is obtained but not obeyed promptly, one would normally expect to obtain a costs order against those disobeying it on the indemnity basis.
In practice, those legal costs quite often form part of an overall settlement later on. However, in particularly abusive cases actual payment of full indemnity costs will be ordered by the court.
Nick Parton is a partner at Jackson Parton