CA2 on Anti-Suit Injunctions: Keep Them Narrow

Ibeto Petrochemical Industries Ltd. v. M/T BEFFEN
2007 WL 106165 (CA2 Jan. 17, 2007)

The Second Circuit recently decided a case regarding an anti-suit injunction. The case involved a maritime dispute subject to arbitration in London. The district court granted an anti-suit injunction to block litigation brought by one party attempting to frustrate the arbitration by pursuing litigation in Nigeria. The Second Circuit affirmed the district court's grant of an anti-suit injunction, but modified it to narrow its scope.

Applying all the factors, the District Court found that the general federal policy favoring arbitration might be frustrated by the Nigerian litigation; widely disparate results might obtain because the Nigerian Courts would not apply the provisions of COGSA; a race to judgment could be provoked by the disparity; equitable considerations such as deterring forum shopping favor the injunction; and “it is likely that adjudication of the same issues in two separate actions would result in inconvenience, inconsistency, and a possible race to judgment.” Ibeto, 412 F.Supp.2d at 293. The District Court foresaw “considerable inconvenience” in the movement of witnesses between the two venues. Id. The District Court determined, however, that the threat to jurisdiction factor did not apply since “both courts have in personam jurisdiction over the parties.” Id. We agree with the foregoing analysis of the District Court in applying the China Trade factors and add our observation that the policy favoring arbitration is a strong one in the federal courts. See Paramedics, 369 F.3d at 654. Accordingly, the injunction is fully justified in this case. We note, however, that the District Court's application of the principle that “ ‘an anti-suit injunction may be proper where a party initiates foreign proceedings in an attempt to sidestep arbitration,” ’ Ibeto, 412 F.Supp.2d at 289 (quoting LAIF X SPRL v. Axtel, S.A. de C.V., 390 F.3d 194, 199 (2d Cir.2004)), is not warranted here, where the proceeding in Nigeria was first in time.

The foregoing having been said, we reiterate our understanding that due regard for principles of international comity and reciprocity require a delicate touch in the issuance of anti-foreign suit injunctions, that such injunctions should be used sparingly, and that the pendency of a suit involving the same parties and same issues does not alone form the basis for such an injunction. See China Trade, 837 F.2d at 36. Having these caveats in mind, we think that the injunction in this case cuts much too broadly.

The learned District Court wrote only that “defendants' motion to enjoin the Nigerian action is granted.” Ibeto, 412 F.Supp.2d at 293. The injunction should be directed specifically to the parties, for it is only the parties before a federal court who may be enjoined from prosecuting a suit in a foreign country. See 13 CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER, FEDERAL PRACTICE & PROCEDURE: JURISDICTION § 3523 (2d ed.1984). Moreover, there is no need for the permanent injunction that the District Court seems to have issued. The parties need to be enjoined from proceeding in the courts of Nigeria only until the conclusion of the London arbitration and the consequent resolution of the still-pending case in the District Court. The District Court should modify its injunction with a specificity consonant with this determination.