HAYRI INTERNATIONAL v HAZIM TELECOM [2017] DIFC ARB 010 — The Anti-Suit Injunction as a Shield Against Procedural Sabotage

How did Hayri International LLC seek to prevent Hazim Telecom from using Pakistani court proceedings to stall their arbitration?

The dispute arose from a Master Services Agreement (MSA) containing an arbitration clause that the Claimant, Hayri International, sought to enforce. The Respondents, Hazim Telecom Private Limited and Hazim Telecom Limited, initiated proceedings in Pakistan, which the Claimant argued were a bad-faith attempt to frustrate the arbitration process. The Claimant sought an interim anti-suit injunction from the DIFC Court to restrain these foreign proceedings, asserting that the DIFC was the seat of the arbitration and that the Pakistani litigation was a clear breach of the parties' agreement to arbitrate.

The court found that the Respondents’ conduct was purely obstructive. As noted in the ruling:

It is plain also from the material before the court that the proceedings in Pakistan have been adopted with one view in mind; namely that of stalling any progress with the arbitration and making it as hard as possible for the Claimant to pursue its claim.

The Claimant’s objective was to preserve the integrity of the arbitral process by preventing the Respondents from litigating the validity of the arbitration agreement in a forum with no connection to the contract. The full details of the dispute and the court's intervention can be found at the DIFC Courts website.

Which judge presided over the Hayri International v Hazim Telecom [2017] DIFC ARB 010 hearing in the Arbitration Division?

The matter was heard by Justice Sir Jeremy Cooke in the DIFC Court of First Instance, Arbitration Division, on February 25, 2017. The ruling was handed down on the same day.

What specific legal arguments did Hayri International and Hazim Telecom advance regarding the seat of arbitration?

The Claimant argued that Clause 14 of the MSA clearly evidenced an intention to arbitrate and that the reference to DIFC rules established the DIFC as the seat of arbitration. They contended that the Respondents’ attempt to litigate in Pakistan was a breach of this agreement and that the DIFC Court, as the supervisory court, had the power to grant an anti-suit injunction to protect the arbitral process.

The Respondents, conversely, attempted to argue that the seat was not the DIFC, pointing to references to "Dubai" in the agreement to suggest a non-DIFC seat. They sought to use the Pakistani courts to challenge the validity of the arbitration agreement itself. Justice Sir Jeremy Cooke noted the ambiguity regarding which of the two named entities was the primary defendant, leading him to join both for the purposes of the order:

At this stage, it is worth pointing out that there is a measure of doubt as to which of the two named Defendants is truly the Defendant and it is clearly right that both of these Defendants should be joined in for the purposes of the order which I am about to make.

What was the jurisdictional question regarding the validity of the arbitration agreement that Justice Sir Jeremy Cooke had to resolve?

The court had to determine whether it possessed the authority to restrain foreign proceedings when the validity of the arbitration agreement was being contested in a foreign court. The doctrinal issue centered on whether the determination of an arbitration agreement's validity is a matter for the supervisory court (the DIFC) or the foreign court (Pakistan). Justice Sir Jeremy Cooke had to decide if the DIFC Court could intervene to prevent the Respondents from bypassing the arbitral tribunal’s or the supervisory court’s exclusive jurisdiction to rule on the agreement's validity.

How did Justice Sir Jeremy Cooke apply the test for granting an anti-suit injunction in the context of the Hayri International MSA?

Justice Sir Jeremy Cooke applied the principles established in English law, which are mirrored in the DIFC, to determine if an anti-suit injunction was appropriate. He first established that the DIFC was the seat of the arbitration, thereby granting the court supervisory jurisdiction. He then evaluated whether the Respondents had a "strong reason" to avoid the arbitration agreement. Finding none, he concluded that the injunction was necessary to prevent a breach of the agreement.

The court emphasized the high probability of the Claimant’s success:

In this case I am satisfied that there is a high degree of probability that the Claimant will be entitled to the final relief it seeks. The starting point must be the terms of Clause 14 of the Master Services Agreement (“MSA”) which evidences clearly an intention on both parties to arbitrate.

He further reasoned that the Pakistani proceedings were a "paradigm case" for intervention, as they were designed to sabotage the arbitration.

Which specific statutes and RDC rules were applied by the court in the Hayri International ruling?

The court relied on its inherent jurisdiction as a supervisory court to grant interim relief. While the ruling focused on the principles of arbitration law, the procedural aspects of the claim were governed by the Rules of the DIFC Courts (RDC). Specifically, the court addressed the requirements for service of the claim form, noting that the Claimant required permission to serve by email under the RDC. The court also referenced the governing law of the MSA (Commonwealth of Virginia), noting that in the absence of evidence to the contrary, it was to be treated as consistent with the law of the DIFC.

How did the court utilize the precedents of The Angelic Grace and AES Ust-Kamenogorsk in its reasoning?

Justice Sir Jeremy Cooke utilized Aggeliki Charis Compania Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd’s Rep 87 to establish the foundational principle that an agreement to arbitrate must be upheld and that an anti-suit injunction is the appropriate remedy for a breach of that agreement, absent a "strong reason" to the contrary.

He further relied on AES Ust-Kamenogorsk Hydropower Plant JSC v AED UST-Kamenogorsk Hydropower Plant LLP [2013] 1 WLR 1889 (SC) to reinforce the court's power to grant such injunctions even in the absence of an ongoing arbitration, provided there is a clear agreement to arbitrate. These cases were used to confirm that the DIFC Court, as the supervisory body, has the exclusive jurisdiction to determine the validity of the arbitration agreement, thereby invalidating the Respondents' attempt to use the Pakistani courts to circumvent this process.

What was the final disposition and the specific relief granted by the court?

The court granted the Claimant’s application for an interim anti-suit injunction, restraining the Defendants from pursuing the proceedings in Pakistan. Additionally, the court granted an extension of time for the service of the claim form and permitted the Claimant to effect service by email, acknowledging the urgency of the situation and the Respondents' evasive conduct.

Regarding the necessity of the injunction, the court stated:

In those circumstances, I am satisfied that this is not just an appropriate case but a paradigm case for the grant of an interim injunction to restrain the proceedings taken by the Defendants in Pakistan.

What are the wider implications of this ruling for practitioners dealing with anti-suit injunctions in the DIFC?

This ruling serves as a critical precedent for practitioners, confirming that the DIFC Court will act decisively to protect its jurisdiction as a supervisory court. It clarifies that foreign proceedings intended to stall arbitration will be met with anti-suit injunctions, provided the DIFC is the seat of the arbitration. Practitioners must anticipate that the DIFC Court will prioritize the integrity of the arbitral process over foreign litigation, particularly when the foreign forum has no real connection to the dispute. The deep editorial analysis of this case is at: Hayri International v Hazim Telecom [2016] DIFC ARB 010: The Anti-Suit Injunction as a Shield Against Procedural Sabotage.

Where can I read the full judgment in Hayri International v Hazim Telecom [2017] DIFC ARB 010?

The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/arbitration/hayri-international-llc-v-1-hazim-telecom-private-limited-2-hazim-telecom-limited-2016-difc-arb-010-1 and via the CDN at https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/arbitration/DIFC_ARB-010-2016_20170228.txt.

Cases referred to in this judgment:

Legislation referenced:

• Rules of the DIFC Courts (RDC), specifically regarding service of process (Rule 7.23).