The decision of the Court of Appeal in Cetelem v Roust Holdings Limited in May this year has revealed a tension between the two statutory grounds most frequently invoked by parties seeking interim injunctions from the Commercial Court in support of international arbitrations. This tension will be felt keenly by anyone involved in applications for such injunctions in London.
The tension arises from the fact that a claimant seeking such an injunction may potentially rely on two separate statutory provisions which have been revealed to be inconsistent with each other.
The most obvious ground for a claimant in such circumstances is Section 44(3) of the Arbitration Act 1996, which allows the court, “if the case is one of urgency, [to] make such orders as it thinks necessary for the purpose of preserving evidence or assets”. The second ground is the residual power of the court to grant any type of interim injunction, without restriction, under Section 37 of the Supreme Court Act 1981.
The Court of Appeal’s decision in Cetelem related to the extent to which the English Commercial Court should be entitled to grant an interim mandatory injunction in support of an international arbitration, with a seat in London, which was contemplated, but had not yet been commenced. The Court of Appeal held that Section 44(3) should be interpreted restrictively, meaning that the court’s power under this section was limited to orders that could be said to be for the express purpose either of preserving evidence or assets. In doing so, the Court of Appeal rejected the broader interpretation given to Section 44(3) by Mr Justice Beatson at first instance, who had followed the decision of Mr Justice Cooke in Hiscox Underwriting Limited v Dixon (2004) (see also the decision of Mr Justice David Clarke in The National Insurance & Guarantee Corporation Ltd v M Young Legal Services Ltd (2004)).
Despite applying this restrictive interpretation, the Court of Appeal maintained the injunction granted at first instance by adopting a wide definition of “preserving assets”. The court found that these words were wide enough to countenance an order that had the effect of preserving a chose in action, such as a contractual right, and could also, hypothetically, support an order for the sale of putrefying fish or delivery of a share certificate for registration. This construction of the words “preserving assets” clearly extends the range of circumstances in which the court can assist – or, depending on your viewpoint, intervene – in the arbitral process.
The Court of Appeal also held that it had standing to grant itself permission to consider an appeal when the judge at first instance had exceeded his powers under Section 44, for instance by making an order which he “could not” have made as opposed to “should not” have made. This finding is interesting in the light of the jurisprudence surrounding Section 44(7) of the Arbitration Act 1996, which has consistently been interpreted as conferring exclusive jurisdiction on the first instance judge to decide whether or not permission to appeal should be granted.
What remains unresolved is the tension between the restrictive interpretation of Section 44(3) and the residual power of the court to grant any type of interim injunction, without restriction, under Section 37 of the Supreme Court Act 1981. If it is open to the parties to invoke Section 37 and invite the court to grant any form of injunction it sees fit, then the restrictive interpretation of the wording of Section 44 of the Arbitration Act becomes worthless. On the other hand, it might come as a surprise to many if the court were no longer able to grant injunctions – such as, for example, anti-suit injunctions – on the grounds that it could not be said to preserve evidence or assets. This last point did not, however, fall to be resolved by the Court of Appeal on this occasion and, as Clarke J said: “The resolution of that tension must await another day”.
Rupert Reece, partner, Gide Loyrette Nouel, Paris