[co-author: Mihail Krepchev]

In circumstances where the parties have already chosen arbitration as a means of settling disputes, the English courts will give short shrift to arguments focused on practical difficulties in providing witness evidence or on a strong connection between the claim and another jurisdiction.

The facts

In Hanaro Shipping Co Ltd v Cofftea Trading Co Ltd, the claimant cargo carriers and the defendant cargo receiver had entered into a bill of lading for the transportation of a shipment of sugar from Thailand to Sudan. The defendant argued that the shipment had been delayed and contaminated during shipping and commenced court proceedings in Sudan despite an arbitration clause in the bill of lading providing for arbitration under English law seated in London.  The claimant obtained an anti-suit injunction preventing the defendant from continuing its claim in Sudan and in this case applied for the continuation of the injunction.

The decision

The High Court considered the well-established principle that an injunction restraining a claim brought in breach of an arbitration agreement should be granted unless there are strong reasons for not doing so.[i] The defendant argued that such strong reasons existed because:

(i) the clause had not been pre-negotiated by the parties;

(ii) the defendant’s witnesses had not been able to obtain UK visas in the past and their evidence via video-link would be given less weight by the tribunal;

(iii) the arbitral proceedings in London would be more expensive than the court proceedings in Sudan; and

(v) the case was very strongly connected to Sudan where all material events had occurred and all witnesses were located.

The Court dismissed all these arguments and continued the injunction. The Court held that the connection to Sudan was “relevant but of very little weight” when there had been an express choice of a neutral forum. The Court also stated that the arbitration would be sufficient grounds for granting visas to the defendant’s witnesses and in any event their evidence would not be given less weight if given via video-link. The Court also dismissed concerns that giving evidence via video-link, which was not available in Sudan, would require the witnesses to travel for two days.

Practical takeaways

The High Court has confirmed its “no-nonsense” approach to parties who wish to avoid agreed arbitration clauses. In this case, the considerable inconvenience that would be suffered by the witnesses was not a good enough reason to disregard that clause. When agreeing an arbitration clause, it is worth considering the practical consequences of any dispute being heard in the chosen jurisdiction such as the availability of evidence and witnesses. This case also emphasises the need to consider all relevant factors carefully when choosing a dispute resolution mechanism at the outset.

Case: Hanaro Shipping Co Ltd v Cofftea Trading Co Ltd (also known as Cofftea Trading Co), 23 October 2015 (unreported)

Note: the full judgment of the case is not yet available and this post has been prepared on the basis of a reported case summary.

[i] Aggeliki Charis Compania Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd’s Rep. 87