MV OCEANIA: English court refuses to interfere with a foreign court’s Anti-Arbitration Injunction

This case review was authored by Mallory Pradel-Weisz, Litigation Assistant.

This dispute concerned a storage agreement for a cargo of oil off the coast of Malaysia aboard the Oceania concluded between Euronav Shipping and Silk Straight.

Upon a tip-off from an NGO that the cargo was actually Iranian and thus sanctioned, Euronav surrendered the cargo to the US Department of Justice. This resulted in both parties seeking to protect their position in Malaysia (BSP) and London (Euronav). It was found that despite an arbitration agreement in the storage contract, Euronav had submitted to the Malaysian court’s jurisdiction.

For that reason, and in order to avoid duplication of proceedings, the English court used its discretion to adjourn English proceedings seeking to uphold the arbitration agreement pending the outcome of the Malaysian proceedings.

The storage agreements

The agreement between Euronav and Silk Straight came with two addenda - a sanctions clause, and an LMAA arbitration clause. Silk Straight later entered into an agreement with Black Swan Petroleum (BSP) to store purportedly Iraqi oil on the Oceania. This agreement also included a sanctions clause.

Malaysian and English proceedings

• BSP went to the Malaysian High Court to arrest the ship whilst Euronav started arbitration in London.
• BSP challenged the jurisdiction of the LMAA tribunal before the Malaysian court.
• Euronav engaged in the Malaysian proceedings, seeking a stay or striking out of the Malaysian claim, prompting the Malaysian judge to consider that such step meant they had submitted to Malaysian jurisdiction.
• Upon BSP’s application, the Malaysian court issued an Anti-Arbitration Injunction (AAI), restraining Euronav from continuing the LMAA arbitration.
• Euronav appealed the decision of the Malaysian High Court.
• Euronav later applied to the English High Court for an order to prevent BSP from pursuing their claim outside of LMAA arbitration.
• Euronav argued that the application for the AAI was a breach of the arbitration agreement.

English court’s decision

Although the AAI application in Malaysian proceedings was found to be a breach of the arbitration agreement, the judge exercised his discretion not to grant the order to stay the Malaysian proceedings until the outcome of the appeal in the Malaysian court was known.

The judge reasoned that granting such an order would negatively impact the comity between English and Malaysian courts and result in duplicative proceedings. Further, having been held to have voluntarily submitted to the Malaysian court’s jurisdiction, pursuing arbitration at the same time would be vexatious and oppressive.  For these reasons, and until the Malaysian Court of Appeal’s verdict is known, the application to the High Court was adjourned.

Comment

This case is a timely reminder that courts are willing to exercise their discretion and will view a dispute in its entirety in order to avoid duplication of time and costs to all parties.

The case also highlights the dangers both of deferring any application to the court to uphold an arbitration agreement faced with proceedings brought in an overseas court in perceived breach of that agreement and of taking active steps in those proceedings, thereby voluntarily submitting to the jurisdiction of that court. Such submission to the Malaysian court’s jurisdiction fortified the English judge’s decision to defer to the Malaysian court thereby avoiding duplication of proceedings and respecting comity.