The recent case of ADM Asia-Pacific Trading PTE Ltd v PT Budi Semesta Satria [1] illustrates the need for parties to act promptly and carefully when faced with proceedings contrary to an arbitration agreement.

The court refused to grant an anti-suit injunction to restrain proceedings in favour of arbitration because the claimant had actively engaged in the proceedings for over a year and delayed in making its application for relief.

The Facts

ADM Asia-Pacific Trading PTE Ltd (ADM) and PT Budi Semesta Satria (BSS) entered into a stock finance agreement (the Agreement) which contained a jurisdiction clause referring to the Indonesian courts. As contemplated by the Agreement, the parties entered into a separate contract for the sale (by ADM) and the purchase (by BSS) of soybeans containing an arbitration clause with the seat in London (the Sale Contract).

BSS refused to pay the full purchase price complaining that the quality of goods was not in accordance with the Sale Contract, which ADM refuted. On 22 May 2013, BSS commenced proceedings in the Indonesia courts relying on the jurisdiction clause in the Agreement.

The chronology of subsequent events was ultimately crucial to the English court’s judgment:

• 19 June 2013: ADM appointed an arbitrator relying on the arbitration agreement in the Sale Contract;
• 26 June 2013: ADM became aware of the Indonesian proceedings;
• 26 May 2014: an Indonesian court effected service of those proceedings;
• 17 June and 19 August 2014: hearings took place in the Indonesian court and ADM indicated to the Indonesian court its intent to challenge jurisdiction;
• 2 September 2014: ADM complied with an Indonesian court order to file its defence and challenge to jurisdiction;
• 2 December 2014: the Indonesian court upheld ADM’s challenge to jurisdiction;
• 28 January 2015: BSS appealed the Indonesian court’s decision to decline jurisdiction and lodged its memorandum of appeal on the 5 March 2015;
• 23 March 2015: ADM became aware of BSS’s appeal;
• 7 May 2015: the arbitral tribunal issued an award deciding that it did have jurisdiction and that BSS was in breach of the Sale Contract;
• 8 July 2015: the Indonesian appeal court allowed BSS’s appeal and directed that the case be remitted to the lower court;
• 11 September 2015: ADM applied to the English courts for an anti-suit injunction; and
• 13 – 14 October 2015: BSS challenged the arbitral award.

Judgment

The court noted the general principle that where foreign proceedings are brought in breach of an arbitration agreement, the court will usually grant an anti-suit injunction to restrain the foreign proceedings, unless the respondent can show strong reasons for suing in the foreign court.

The court refused the application because:

BSS argued that the English court should refuse the application for an anti-suit injunction because ADM had delayed in bringing the application. By contrast, ADM argued that delay alone was not a strong reason to refuse enforcing the arbitration clause. It argued that the delay had to prejudice BSS and be unconscionable, and that waiting for the Indonesian court to determine a jurisdictional challenge should not be regarded as an unconscionable delay.

1. ADM failed to apply promptly for the anti-suit injunction, which it should have done shortly after service of the Indonesian proceedings on 26 May 2014, and ADM provided no explanation for the delay;
2. ADM actively engaged in the Indonesian proceedings by filing a defence (and claiming the costs as damages for breach of the arbitration clause) rather than applying for an injunction;
3. ADM incurred costs in filing a substantive defence and its delay in applying for the anti-suit injunction also caused BSS to incur costs;
4. ADM could not “have the best of all worlds”, and the sequence of events demonstrated that ADM was content to have the matter dealt with by the Indonesian courts until they made a decision against its interests at which point it brought the anti-suit injunction application; and
5. intervention by the English court at this stage, when the substantive proceedings were ongoing in Indonesia, would be inappropriate.

Comment

This case confirms the general position that anti-suit injunctions will usually be granted where proceedings are brought contrary to an arbitration agreement. However, the case highlights the necessity to act promptly and carefully when dealing with proceedings commenced instead of arbitration. Delay in applying for an injunction may lead to a denial of relief even when the proceedings are contrary to an arbitration agreement. Parties must take care when participating in those proceedings, for example filing submissions and attending hearings.

[1]               [2016] EWHC 1427 (Comm).

This post was prepared with the assistance of Eleanor Scogings in the London office of Latham & Watkins.