Sonera Holding B.v Appellant v Cukurova Holding A.S. Respondent

• Jurisdiction: British Virgin Islands
• Judge: Pereira, CJ
• Judgment Date: 23 June 2016
• Judgment citation (vLex): [2016] ECSC J0623-1
• Court: Court of Appeal (British Virgin Islands)
• Docket Number: BVIHCMAP2015/0005
• Date: 23 June 2016

[2016] ECSC J0623-1

THE EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Before:

The Hon. Dame Janice M. Pereira, DBE Chief Justice

The Hon. Mde. Louise Esther Blenman Justice of Appeal

The Hon. Mde. Joyce Kentish-Egan, QC Justice of Appeal [Ag.]

BVIHCMAP2015/0005

Between:

Sonera Holding B.V.

Appellant

and

Cukurova Holding A.S.

Respondent

Appearances:

Mr. Ben Valentin with Mr. John Carrington, QC for the Appellant

Mr. Kenneth MacLean, QC with Ms. Arabella di Iorio and Mr. David Caplan for the Respondent

Interlocutory appeal — Arbitration — Anti-arbitration injunction — Foreign arbitral proceedings — Arbitration Act, 2013 — Interpretation of s. 3(2)(b) of Arbitration Act, 2013 — Whether court has jurisdiction under Arbitration Act, 2013 to grant anti-arbitration injunction so as to restrain party from pursuing foreign arbitral proceedings — If so, whether such injunction ought to be granted in present proceedings to restrain respondent from pursuing foreign arbitral proceedings — Whether learned judge erred in interpreting s. 3(2)(b) of Arbitration Act, 2013 — Whether learned judge erred in dismissing appellant's application for anti-arbitration injunction as a result of his interpretation of s. 3(2)(b)

An ex parte order made by the court on 24^th October 2011 ("the Enforcement Judgment") permitted the appellant, Sonera Holding B.V. ("Sonera") to enforce an ICC arbitration award made in Geneva on 1^st September 2011 ("the Final Award") in the same manner as a judgment of the High Court in the BVI. The respondent, Cukurova Holding A.S. ("CH") applied to set aside the Enforcement Judgment. Their application was brought on various grounds, one of these being that the First Tribunal had acted in excess of jurisdiction in making the Final Award and awarding damages because it had been constituted under an arbitration clause contained in a letter agreement ("the Letter Agreement") but the First Tribunal had granted remedies for breach of a different agreement – a share purchase agreement ("SPA") – which it determined had been concluded between the parties and which SPA contained its own arbitration clause. CH argued this point before the First Tribunal, the High Court of the Virgin Islands, the Court of Appeal and finally, the Privy Council and it was rejected by them all. Accordingly, the Final Award remains in full force. CH then brought revision proceedings before the Swiss Federal Supreme Court, aimed at reopening the First Tribunal proceedings, but these were dismissed on 30^th April 2012. By then, CH had commenced arbitral proceedings under the arbitration clause in the SPA ("the SPA Arbitration") before a second arbitration tribunal ("the Second Tribunal"), seeking the following: (i) a declaration that CH had never entered into the SPA in any form; and (ii) compensation against Sonera in equal amount as the Final Award in favour of Sonera made against CH (plus costs). Sonera raised preliminary objections before the Second Tribunal, arguing that CH's claims should be dismissed as an abuse of process and because: as a matter of Swiss law (which was the governing law for both arbitrations) there was an identity of parties and subject matter between the arbitration which took place before the First Tribunal ("the Letter Agreement Arbitration") and the SPA Arbitration, sufficient to operate as an estoppel per rem judicatam which precluded the grant of relief sought by CH; and (ii) that a proper application of the kompetenz-kompetenz principle meant that the Second Tribunal had no jurisdiction to review the decision of the First Tribunal as to its own jurisdiction. This was something which could only be done by the Swiss Federal Supreme Court or a court asked to enforce the First Tribunal's awards under Article V of the New York Convention.

The Second Tribunal conducted a hearing on the preliminary objections during the course of which Sonera accepted that the Second Tribunal had jurisdiction over the disputes arising out of the SPA and also, that it was competent to determine its own jurisdiction. On 12^th May 2014, the Second Tribunal issued a partial award, holding that it was not bound to 'recognise' those parts of the First Tribunal's series of awards which it felt had 'trespassed' upon matters properly falling within the arbitration clause under the SPA, such as CH's obligation to transfer the shares or otherwise pay damages for failure to do so. The Second Tribunal reasoned that there could be no estoppel arising out of those parts of the First Tribunal's awards that it could not recognise. This resulted in the Second Tribunal directing that the SPA Arbitration proceed to a determination on the merits of CH's claims. The Second Tribunal held, however, that it could recognise those parts of the First Tribunal's awards which concluded that the parties had reached agreement on the terms of the SPA and that CH was in breach of its obligation under the Letter Agreement to execute and deliver a final SPA and thus, it was estopped from making a determination on these issues.

In compliance with a procedural order made by the Second Tribunal, CH produced and filed its statement of claim. It then became apparent that CH was seeking not merely an equal and opposite award to the Final Award to, in effect, cancel it out, but it also sought orders restraining Sonera from relying on the Enforcement Judgment and further ordering Sonera to 'unwind' the charging order which was granted and made final by the BVI court on 4^th November 2014 (which order was not appealed) by way of enforcing the Enforcement Judgment. Sonera, finding that CH's new claims amounted to a serious collateral attack against the Enforcement Judgment, filed an application on 27^th October 2014 for an anti-arbitration injunction. By the time this application had been made, the BVI had brought into force the Arbitration Act, 20131 ("the Act") which repealed the 1976 Arbitration Act.2 The learned judge who heard Sonera's application held that based on his construction of the provisions of the Act, the court could no longer interfere in ongoing arbitral proceedings by the grant of an injunction. In arriving at this conclusion, the judge placed reliance mainly on section 3(2)(b) of the Act which states that: 'the Court shall not interfere in the arbitration of a dispute, save as expressly provided in this Act'. The learned judge accordingly dismissed Sonera's application for the anti-arbitration injunction. Sonera appealed the decision, contending that the learned judge erred in his interpretation of the relevant sections of the Act as the court had and continues to have jurisdiction to grant the injunctive relief which it was seeking – the Arbitration Act, 2013 has in no way affected the general power of the court to grant injunctions as provided in section 24(1) of the West Indies Associated States Supreme Court (Virgin Islands) Act3 ("the Supreme Court Act"). Moreover, the court ought to have exercised the jurisdiction and granted an injunction restraining CH from pursuing the proceedings before the Second Tribunal. CH opposed the appeal, arguing that the learned judge was right to hold that the Arbitration Act, 2013 had removed the court's jurisdiction to grant the anti-arbitration injunction, and even if it had the jurisdiction (which it does not accept that it has), the court ought not to exercise its discretion in favour of granting such an injunction.

Held: allowing the appeal and ordering that CH be restrained from causing or seeking to cause the Second Tribunal from granting any relief which would have the effect (or the potential effect) of: (i) preventing Sonera from enforcing the Enforcement Judgment issued on 24^th October 2011 or the final charging order issued on 4^th November 2014; or (ii) requiring Sonera to discharge, reverse or unwind the BVI court orders; that:

1. 1. The learned judge erred in holding that section 3(2)(b) of the recently enacted Arbitration Act, 2013 took away the court's jurisdiction to grant injunctive relief as provided under section 24 of the Supreme Court Act. The Court retains its general power and jurisdiction pursuant to section 24 of the Supreme Court Act to grant such relief. This power is wholly independent of the provisions of the Arbitration Act, 2013. Had it been intended that section 3(2)(b) would oust the court's jurisdiction to grant injunctions in relation to arbitral proceedings provided under section 24 of the Supreme Court Act, this would have been clearly stated in section 3(2)(b) itself.

2. 2. Section 3(2)(b) of the Act does no more than state the policy as to how arbitrations are to be viewed and governed in the Virgin Islands, with a clear prohibition or warning to the court in the seat of the arbitration not to interfere in an arbitration. This warning to the court contained in section 3(2)(b) as a guiding principle informs the court's approach to an arbitration, be it domestic or foreign. A clear distinction should be drawn, however, between interference with an arbitration on the one

   hand, and restraining a party who may be using, be it an arbitral process or a court process, in a manner which may be said to be vexatious, or oppressive and abusive of the court's own process, on the other hand. The equitable remedy of an injunction was developed by the courts of equity to relieve, among things, against unconscionable conduct, or conduct aimed at undermining the court's lawful processes. Further, the power of the court expressed in section 24 of the Supreme Court Act to grant injunctions in circumstances as the court deems just and convenient, is a power expressed in the broadest terms and a power which must remain flexible, as what justice may require, will vary from case to case.

   AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC 4 [2013] 1 WLR 1889 applied.

3. 3. The seeking of an award by CH in an...