Anti-arbitration injunction can't be granted unless parties show strong reasons: DIFC Court

The Dubai International Financial Centre (DIFC) Court of First Instance has held that where parties have agreed to DIFC-seated arbitration, they must show “good or strong reasons” to avoid enforcement of the arbitration agreement and parallel court proceedings cannot be used to bypass the agreed arbitral forum..The order was passed by Justice Michael Black KC in proceedings between Oswin, Otila and Ondray, following an urgent application to stop ongoing litigation in Abu Dhabi that was alleged to be in breach of an arbitration agreement..The dispute arises from a 2019 joint venture agreement governing shareholding in a company operating a medical and hazardous-waste facility. Oswin holds 49% and the second defendant holds 51%, but board decisions require unanimity and shareholder decisions a 75% majority, resulting in a management deadlock.The agreement requires disputes to be resolved through arbitration seated in the DIFC after a pre-arbitration negotiation period. After the dispute escalated, the claimant commenced arbitration proceedings before the Dubai International Arbitration Centre..Despite the arbitration being underway, the defendants initiated proceedings before the Abu Dhabi courts seeking to enter project premises, take control of the business, restrict the claimant’s signing authority and appoint the second defendant to manage the company.Earlier interim orders of the DIFC Court had restrained the defendants from acting on behalf of the company or altering management without proper approvals. While the Abu Dhabi Court of First Instance dismissed the initial case due to the arbitration, the defendants later filed an appeal, prompting the claimant to seek urgent anti-suit relief..The DIFC Court emphasised that the applicable test is not whether foreign proceedings are “vexatious or oppressive,” but whether there are strong reasons not to enforce the arbitration agreement.“An anti-suit injunction is not directed to the courts of another jurisdiction… The injunction is aimed at the party over whom this Court has jurisdiction because that party has entered into an arbitration agreement.”It reiterated that an arbitration clause operates as an exclusive jurisdiction agreement and that courts of the arbitral seat must protect the parties’ contractual bargain unless the agreement is void or unenforceable..It held,“The Defendants have failed to show good or strong reasons why the agreement to arbitrate should not be enforced.”The Court noted that urgent relief could be sought from the arbitral tribunal or an emergency arbitrator..The Court restrained the defendants from continuing the Abu Dhabi proceedings and warned that breach could lead to referral to the Dubai Attorney General, fines or asset seizure.Finding that the defendants had acted in breach of earlier DIFC orders, the Court awarded the claimant full costs..The claimant was represented by M&Co Legal, with Advocate Tariq Khan acting as lead counsel..The order can be read here..Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.