When delay is okay - English Commercial Courts and anti-suit relief

United Kingdom

In Africa Finance Corp and others v Aiteo Eastern E&P Company Ltd [2022] EWHC 768 (Comm), Sir Nigel Teare (sitting as a High Court judge in the Commercial Court) found that a 13-month delay in applying for an anti-suit injunction was reasonable in the circumstances and should be granted to uphold the parties’ arbitration agreement. This judgment highlights the Court’s pragmatic, flexible approach in granting equitable relief in support of arbitration. It is also a useful reminder of the factors that the Court will consider in an anti-suit injunction application.

Background

Aiteo Eastern E&P Company Ltd (“Aiteo”) borrowed a total of US$2 billion from Africa Finance Corp and eight other lenders (together the “Lenders”) in order to purchase an interest in Nigerian oil fields and facilities. The loan arrangement was documented in two facility agreements, one governed by Nigerian law and the other by English law (the “Facility Agreements”). Both Facility Agreements provided for arbitration seated in London under the ICC Rules.

The Lenders alleged that Aiteo had failed to remedy certain breaches of the Facility Agreements and demanded repayment of the loan. Aiteo disagreed that there had been an event of default. In October 2019, Aiteo sought declaratory relief from the Nigerian Court that it was not liable for the sums due in the Lenders’ letter of demand. Aiteo claimed that the Lenders had refused to restructure the Facility Agreements despite the occurrence of a force majeure event. Aiteo also applied for an interim injunction order that restrained the Lenders from acting on the letter of demand and from interfering in Aiteo’s business, which was granted by the Nigerian Court. In response, the Lenders filed a notice of appeal with the Nigerian Court in November 2019, seeking to set aside the interim injunction order and to dismiss Aiteo’s claim (together, the “Nigerian Proceedings”).

Between November 2019 and November 2020, Aiteo and the Lenders engaged in commercial negotiations on a without prejudice basis. In December 2020, the Lenders commenced two arbitrations pursuant to the Facility Agreements, after the parties failed to make progress in the negotiations.

The Lenders also applied for an urgent interim anti-suit injunction in the English Court in respect of the Nigerian Proceedings. Cockerill J granted the Lenders an interim order restraining Aiteo from continuing the Nigerian Proceedings and from bringing claims arising out of the Facility Agreements in any forum other than London-seated ICC arbitration (the “Interim Order”).

In March 2022, the arbitration tribunal (the “Tribunal”) determined that it had jurisdiction over the dispute. The present case concerned the Lenders’ application for a final anti-suit injunction and Aiteo’s application to set aside the Interim Order.

Aiteo argued that the Lenders had waived their right to arbitration by filing a notice of appeal in the Nigerian Proceedings, thereby submitting to the jurisdiction of the Nigerian Court. In addition, Aiteo maintained that the Lenders should not be granted injunctive relief in view of their significant delay in making the application.

Decision

The Court upheld the Tribunal’s finding that the Lenders had not submitted to the jurisdiction of the Nigerian Court. Aiteo was in breach of the arbitration agreements and the Court would grant an anti-suit injunction unless there were strong reasons against doing so.

Substantial delay can be such a strong reason. It is established that an anti-suit injunction must be sought promptly and before foreign proceedings are too far advanced (The Angelic Grace [1995] 1 Lloyd’s Reports 87). Reasons for the need to avoid delay include the avoidance of prejudice, detriment and the waste of resources, the need for finality, as well as considerations of comity and public policy (Ecobank Transnational Inc v Tanoh [2016] 1 WLR 2231).

The Court acknowledged that the Lenders did not promptly seek an anti-suit injunction in the English Court upon Aiteo’s breach of the arbitration agreements in November 2019. However, there was a reasonable explanation for the delay. The primary reason was that the parties were engaged in negotiations to restructure the Facility Agreements, which was envisaged to bring an end to the Nigerian Proceedings.

Moreover, given that the Nigerian Proceedings had been effectively paused since November 2019 due to the Covid-19 pandemic, there was no issue of wasted time and costs. Even if Aiteo was correct that the Lenders should have applied for a stay of proceedings instead of filing a notice of appeal, this had no bearing on cost as there had been no progress on the merits. The grant of anti-suit relief by the English Court in this instance would not waste money and scarce judicial resources in Nigeria.

Aiteo further argued that the Lenders’ delay in applying for injunctive relief from October 2020 to December 2020 was unreasonable as there was no need to have commenced arbitration before seeking such relief. The Court disagreed that the Lenders should have sought English legal advice prior to the Tribunal’s decision on jurisdiction. The Court’s view was that the time taken to issue the application for anti-suit relief after the negotiations ended was not unreasonable. Even if it was, this was not to the extent that it would be unjust to grant the Lenders injunctive relief.

The Court emphasised that Aiteo’s conduct in commencing proceedings on the merits and in seeking injunctive relief in the Nigerian Court demonstrated a clear need for injunctive relief from the English Court to enforce the parties’ agreement to resolve their disputes by arbitration. There was no risk of offending the Nigerian Court, particularly in view of Nigerian Court of Appeal’s subsequent refusal to grant Aiteo injunctive relief by restraining the Lenders from enforcing the arbitration agreement.

Aiteo’s application to set aside the Interim Order was also dismissed in its entirety. The Court held that there was a good reason for the Lenders to proceed with their ex parte application for the Interim Order. 

Comment

The Court’s consideration of the reasons behind the delay in an application for injunctive relief demonstrates its pragmatic, flexible and pro-arbitration approach. This was not an attempt by an applicant to derail foreign proceedings that were already far progressed, which would have resulted in wasted resources and upset the foreign court.

Nonetheless, the Court was careful to highlight that every case will turn on its facts. Given that no steps were taken in the Nigerian Proceedings due to the pandemic, the parties did not incur legal costs and the Nigerian Court had not wasted any resources. The Court also noted that the Lender's decision not to initiate arbitration proceedings in November 2019 came with the risk that injunctive relief would be denied when later requested. In this instance, the circumstances worked in the Lenders’ favour. However, this will not always be the case.

As such, the progress of foreign court proceedings during any period of delay, as well as the length of the delay itself, will remain important factors in the Court’s analysis. Even if there is a reason for delay, parties are advised to apply for injunctive relief as soon as practicable.