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English court intervenes to stop Indian case going ahead

An Indian solar panels manufacturer cannot continue legal action in India because to do so would undermine an earlier English court ruling, the High Court in London has ruled.10 Nov 2010

A dispute between India's Moser Baer Photo Voltaic, a solar panel maker, and its Norwegian silicon wafer supplier, REC Wafer, concerns a contract which specified English law as its governing law. It also specified that disputes should be settled by arbitration under the International Chamber of Commerce (ICC) rules, with the seat of arbitration in England.

The contract demanded that Moser Baer provide bank guarantees for $130 million, which it did. REC made an $18m demand on those guarantees in 2009 following disputes between the companies about the specifications of the wafers.

Moser Baer began court action in India seeking an injunction to stop REC from making demands on those guarantees. Although that application was refused, Moser Baer's claim proceeded on other grounds. In addition, Moser Baer appealed the decision to refuse the injunction.

Moser Baer then took action in the English High Court, where an interim injunction was granted against demands being made on the guarantees until a hearing could take place. At that hearing, on 27th May 2010, the injunction was lifted.

In the meantime, between the grant of the interim injunction and the hearing in the English High Court, Moser Baer began arbitration proceedings against REC.

REC applied to the English High Court for an anti-suit injunction to prevent Moser Baer from continuing the Indian proceedings.

REC argued at the High Court that Moser Baer should be stopped from pursuing its Indian court case in breach of the arbitration clause in their agreement. It also said that, given the outcome of the injunction application before the English High Court, Moser Baer's pursuit of redress before the Indian Court was both "vexatious and oppressive".

Moser Baer denied that. It said that REC had deliberately chosen not to seek to enforce the arbitration agreement in the past for tactical reasons. Instead, it said that REC had now chosen to "detonate the nuclear weapon" of the anti suit injunction before the English Courts. There was no reason why an anti-suit injunction ought to be granted since REC could always be adequately compensated in damages.

Mr Justice Blair disagreed. "This response does not appear to me to meet the objection that is taken," he said. "Notwithstanding its earlier application in the Indian proceedings, Moser Baer applied to the English court for an injunction restraining demand on the guarantees. That issue having been decided against it, there can be no good reason for continuing to seek the same relief on appeal in India."

"Following the approach laid down in Glencore v Exter Shipping, an injunction is, in my view, necessary to protect [REC's] legitimate interest in English proceedings, since to withhold it would ... undo [the Commercial Court's] order of 27 May 2010," said Mr Justice Blair.

The judge said that he could award damages instead of granting the injunction, but that this was not appropriate in this case. "The bargain agreed by the parties allowed the supplier to make call on the bank guarantees, with the contractual dispute between the parties to be resolved in the arbitration. The effect of Moser Baer's conduct is to deprive REC of its contractual entitlement to immediate payment in the sums demanded, which cannot be compensated for (or adequately compensated for) in damages," he said.

He also said that had Moser Baer not applied to the English Court for relief, he might have decided not to grant the injunction on grounds of delay.

Mr Justice Blair made clear in his ruling that the anti-suit injunction did not order the Indian court not to hear the case. Rather, it ordered Moser Baer not to pursue it.

Richard Twomey of Pinsent Masons, the law firm behind OUT-LAW.COM, said that this case was important in indicating to companies that English courts are prepared to intervene to stop companies pursuing multiple sets of proceedings in several jurisdictions. "This is a good example of the English courts intervening and applying their discretion to restrain a party from pursing multiple foreign actions, arguably in breach of the parties’ agreement as to the forum of choice." he said.

"There may well be circumstances where it is appropriate to seek relief from a foreign court prior to initiating arbitration proceedings. However, if it looks like those foreign proceedings may not give you the result you want, you had better think carefully before bringing the same claim before the English Court," he said. "Because if you lose, the Court is prepared to intervene and stop you pursuing those foreign proceedings."

"There is a reminder here for companies on the other side of the dispute too," said Twomey. "If they want to enforce an arbitration clause in the face of foreign proceedings, they had better get on and do it quickly."