Introduction

In Friendship Shipping and Trading S.A. v I.V.L. Dhunseri Polyester Company S.A.E. [2024] HKCFI 3180, the Hong Kong Court of First Instance (the “Court”) dismissed an application for an anti-suit injunction (“ASI”) despite the disputes between the parties are governed by an arbitration agreement.

Background

Egyptian proceedings

The Defendant, an Egyptian company, initiated civil proceedings in Egypt on 21 June 2023 against the Plaintiff, as the carrier, after discovering the cargo damage. The Egyptian proceedings progressed significantly, with both parties making submissions on jurisdiction and the merits. The Egyptian Court reserved judgment, with a decision expected on 28 November 2024.

Hong Kong proceedings

Pursuant to the arbitration agreement embedded in the bills of lading (the “Arbitration Agreement”), the Plaintiff commenced arbitration proceedings in Hong Kong by serving a notice of arbitration on the Defendant in Hong Kong on 10 August 2023. However, the Defendant rejected the arbitration notice, and the Plaintiff took no further steps until June 2024, when it sought to appoint arbitrators.

The Plaintiff filed its Originating Summons in the Hong Kong Court on 13 June 2024, contending that the Egyptian proceedings was brought in breach of the Arbitration Agreement and seeking an ASI to restrain the Defendant from continuing the Egyptian proceedings. The Defendant disputed the existence and applicability of any arbitration agreement, and opposed the ASI.

Court’s decision

Issue 1: Applicable standard of proof as to
existence of arbitration agreement

Under section 45 of the Arbitration Ordinance (Cap. 609) and Article 17 of the Model Law (incorporated by section 35 of the Arbitration Ordinance), the Court has jurisdiction to grant an ASI, as an interim measure to maintain the status quo and prevent harm to the arbitral process by restraining foreign proceedings that breach an arbitration agreement.

To successfully obtain an ASI, the Plaintiff must demonstrate the existence of an arbitration agreement governing the dispute. However, the required threshold to establish a valid and binding arbitration clause differs across jurisdictions. While the English Court of Appeal demands a “high degree of probability,” Hong Kong courts have applied varying standards, ranging from a “high degree of probability” to a “strong or convincing prima facie case.”

The Court held that for an interim relief under section 45 of the Arbitration Ordinance, a prima facie case of an arbitration agreement is sufficient, as the Court’s role is to facilitate arbitration rather than to make a final determination.

Issue 2: Whether the Plaintiff satisfies the prima facie threshold
as to the existence of an arbitration agreement

The Court held that the Plaintiff met the prima facie threshold for the existence of a Hong Kong arbitration agreement by demonstrating the incorporation of the 4^th charterparty’s arbitration clause into the bills of lading.

Issue 3: Whether an ASI should be ordered

Hong Kong Courts generally grant ASIs to restrain foreign court proceedings that violate a valid arbitration agreement providing for Hong Kong arbitration, particularly when the injunction is sought promptly and the foreign proceedings have not advanced too far. An ASI is an equitable remedy subject to equitable defences, so delay or significant progress in the foreign proceedings weigh heavily against granting it.

Hong Kong Courts’ emphasis on the importance of acting swiftly to seek an ASI aims to prevent waste of judicial resources and to uphold comity between jurisdictions. Delay in applying for an ASI reduces its chances of success, especially if the foreign proceedings are well advanced or a judgment is imminent. The court’s focus is on avoiding duplication and ensuring finality rather than asserting judicial supremacy.

In the present case, the Court refused to grant the ASI because the Plaintiff delayed nearly a year after becoming aware of the Egyptian proceedings, during which substantial hearings and progress occurred. The Court observed that the Plaintiff only sought to enforce the arbitration agreement after unfavourable developments in Egypt, reflecting a lack of clean hands and disregard for comity. It stressed that both the timing of the application and the stage of the foreign proceedings are critical factors in deciding whether to grant an ASI.

Conclusion

The decision reinforces the strict approach taken by the Hong Kong Courts to uphold anti-suit injunctions to protect arbitration agreements but require prompt action and respect for foreign court processes. Delay, extensive progress in foreign proceedings, and questionable conduct by the applicant can lead to refusal of an ASI.