The Commercial Court in London recently granted an anti-suit injunction in order to halt Lebanese legal proceedings brought in breach of an English arbitration agreement: Perkins Engines Company Ltd v. Ghaddar [2018] EWHC 1500 (Comm). The decision provides a reminder of the Court’s preparedness to uphold arbitration agreements. 

Background to the Decision

The Applicant ("Perkins"), a UK supplier of gas and diesel engines and a wholly owned subsidiary of Caterpillar Inc., entered into a Distributor Agreement with the Respondent ("Ghaddar"), a Lebanese family-owned business. Perkins had terminated the Agreement claiming that Ghaddar had breached it by selling a number of engines (and parts) into Syria in 2017. Ghaddar denied that the sales into Syria amounted to breaches of the Agreement and in April 2018 commenced proceedings against Perkins in Lebanon.

Perkins then sought an urgent interim anti-suit injunction in London alleging that the Lebanese proceedings breached an arbitration provision contained in the Agreement. The rather unusual provision was in these terms:

“To the extent there is no reciprocal enforcement procedures between the United Kingdom and the country in which the Distributor is located, the Parties agree to submit any dispute arising between them that cannot amicably be settled to arbitration. The arbitration shall be held in London, England…”

The Key Issues

The parties’ arguments focused on whether “reciprocal enforcement procedures between the United Kingdom and [Lebanon]” existed and what this term actually meant. From the outset, both parties acknowledged that no official treaty for reciprocal enforcement between the United Kingdom and Lebanon existed.

Ghaddar, maintaining that there was no breach of the arbitration agreement, contended that there were “reciprocal enforcement procedures” between the UK and Lebanon because an English judgment should be enforceable to “substantially the same extent” in Lebanon as a Lebanese judgment would be in England. Ghaddar argued that because English common law provides enforcement procedures for overseas judgments, and because Lebanon has exequatur enforcement procedures for overseas judgments, there was no need for a treaty to exist and such constituted “reciprocal enforcement procedures.”

However, Perkins contended that “reciprocal enforcement procedures” meant the existence of a binding bilateral or multilateral treaty between the UK and Lebanon. Perkins focused on the use of the terms “between” and “the United Kingdom” in arguing that the arbitration agreement could only be referring to a treaty between states, especially given that the language distinguished between the UK and England. It maintained that for a Lebanese judgment to be enforceable in England the English courts would have to recognise the jurisdiction of the Lebanese court and in this instance they would not. Furthermore, enforcing a decision of the English courts in Lebanon would likely be problematic and, as such, would fall foul of Lebanese public policy. Perkins argued that its interpretation was more consistent with business common sense and reasonableness, given that enforcing a decision of the English courts would likely be far quicker in the English than in the Lebanese courts.

The Decision

The Court had little hesitation in dismissing Ghaddar’s arguments, applying settled principles of construction. It accordingly found in favour of Perkins and granted the anti-suit injunction preventing Ghaddar from pursuing the Lebanese proceedings. The Court preferred the speed, simplicity and certainty of Perkins’ construction as opposed to Ghaddar’s which required a complicated and time-consuming calculation as to whether Lebanese and English enforcement procedures were "substantially the same."

This judgment demonstrates that the Court is not willing to allow clear terms of arbitration agreements to be ignored. It also provides a reminder of the importance of precision when drafting the terms of arbitration provisions in commercial agreements.