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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Enercon GmbH & Anor v Wind World (India) Ltd [2014] EWHC 4049 (Comm) (02 December 2014) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2014/4049.html Cite as: [2014] EWHC 4049 (Comm)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
		2 December 2014

Mr Justice Eder:

1. The principle issue before the Court is the determination of costs reserved by the Court in these proceedings on three previous occasions in 2012 and 2013.
2. The background to the underlying disputes is set out in my previous Judgment which I delivered on 23 March 2012 and which is reported at [2012] EWHC 689 (Comm). It is unnecessary to repeat what is there set out. For present purposes, it is sufficient to note the following.
3. The present proceedings commenced on 21 November 2011 when the claimants (who I shall refer to compendiously as "Enercon") issued an Arbitration Claim Form ("ACF") seeking, in particular, (i) the appointment of a third arbitrator pursuant to s18 of the Arbitration Act 1996 (the "1996 Act"); and (ii) an anti-suit injunction preventing the defendant ("WWIL") from starting or pursuing proceedings in India which interfered with Enercon's attempt to seek the appointment of a third arbitrator. In effect, Enercon thereby invoked the supervisory jurisdiction of the English Court on the basis that (i) there was a binding arbitration agreement between the parties; and (ii) England was the seat of the arbitration which Enercon had previously sought to commence in March 2008 pursuant to that arbitration agreement.
4. On 25 November 2011, Enercon then obtained an ex parte order (the "first Order") from Flaux J (i) permitting them to serve the ACF on WWIL out of the jurisdiction; and (ii) granting the anti-suit injunction. This ex parte anti-suit injunction effectively prevented WWIL from proceeding with the ongoing Writ Petitions in the Bombay High Court ("BHC") or the Daman Court.
5. On 15 February 2012 Enercon made a further application (which came before me) and obtained an ex parte injunction (the "second Order") in the sum of €90m in respect of claims in connection with the underlying contract ("IPLA") and Heads of Agreement.
6. On 1 March 2012, WWIL then issued an application notice for an order declaring (i) that the English Court did not have jurisdiction in relation to the ACF action; alternatively (ii) that the English Court should not exercise its jurisdiction; alternatively (iii) that the English Court should stay the ACF action pending further order of the Court. The notice also sought the discharge of the first and second Orders. On 8 March 2012, Enercon then issued their own application notice seeking continuation of the first and second Orders. I heard these applications on 12 and 13 March 2012 and delivered my Judgment as referred to above on 23 March 2012.
7. On the same day i.e. 23 March 2012 and pursuant to that Judgment, I discharged the ex parte freezing injunction with all consequential matters, including costs, being adjourned to a hearing to be fixed. In summary, I held (para 69) that even on the assumption that s44 of the 1996 Act applied, Enercon could not satisfy the requirements of "urgency"; that s37 of the Senior Courts Act 1991 (assuming it applied) could not be used to circumvent the restrictions in s44 of the 1996 Act; and that I did not consider that there was sufficient evidence of risk of dissipation to justify the continuation of the freezing injunction. On 27 March 2012, I ordered (paras 7 and 8) that Enercon pay WWIL's costs of the application to discharge the freezing injunction with an interim payment of £30,000.
8. Further, by my Order dated 27 March 2012, I discharged Enercon's anti-suit injunction and upon the giving of certain undertakings by WWIL stayed the ACF action to enable the Indian Courts to resolve the outstanding issues. My reasons for doing so are set out primarily in paras 48 and 49 of my Judgment dated 23 March 2012 which I do not propose to repeat. Further, I gave liberty to restore (i) WWIL's jurisdiction challenge and application to set aside service of the ACF out of the jurisdiction; and (ii) Enercon's s18 application on the first convenient date after 14 May 2012. That date was chosen in the hope that matters in India would be dealt with expeditiously but that, if they were not, then Enercon would be able to renew their application for relief sought in the ACF action. Save for the costs of the discharge of the freezing injunction which I have already referred to above, all other costs were reserved. These reserved costs form part of the subject of the present application.
9. Following the hearings in March 2012, and pursuant to its undertakings to this Court, WWIL applied in India to have the Writ Petitions dealt with by the BHC on an expedited basis. The upshot was that the BHC listed the substantive hearing to start on 18 June 2012. Following further correspondence between the parties, on 11 June 2012, Enercon issued a further application in this Court seeking inter alia orders (i) lifting the stay which I had granted on 27 March 2012 on Enercon's application under s18 and on WWIL's jurisdictional challenge; (ii) dismissing WWIL's jurisdictional challenge; (iii) granting Enercon's application to appoint an arbitrator under s18; and (iv) that "the costs reserved under paragraph 9 of the Order of Mr Justice Eder dated 27 March 2012 be disposed of and that … the defendant do pay the claimant the costs of and occasioned by the Arbitration Claim Form and the defendant's application dated 1 March 2012". That application was listed for hearing for two days on 2/3 July 2012. Substantial evidence was served by WWIL on 25 June 2012 and leading Counsel was briefed.
10. Meanwhile, on 27 June 2012, the BHC was ordered by the Indian Supreme Court to expedite the Writ Petitions and begin hearing them on 2 July 2012. The following day, the BHC directed that the hearing would indeed begin on that day i.e. 2 July 2012. On the same day, Enercon wrote to this Court seeking to vacate the hearing which, as stated above, was due to start in this Court on 2 July on the basis that "at long last it appears that the Writ Petitions … may now finally be on a pathway to resolution". Meanwhile, substantial costs (including brief fees) had been incurred by WWIL in preparing for the hearing in this Court which had been fixed for 2/3 July. In the event, that hearing was adjourned pursuant to Enercon's request save to deal with the issue of costs. WWIL sought those costs as being wasted in the light of the adjournment. Enercon's position was that the costs should again be reserved. The logic was that once the "ultimate outcome of the relief sought by the ACF" was known, the reserved costs could and should be dealt with. In the event, I made an order to that effect i.e. reserving the costs of Enercon's application and the hearing itself. The Order also reserved Enercon's costs in respect of its application by notice dated 11 June 2012 and vacated the hearing. My reasons for such Order are set out in a short Judgment which I do not propose to repeat. These reserved costs are also part of the subject of the present application.
11. On 5 October 2012, Savant J in the BHC dismissed both of the Writ Petitions. In summary, he held that there was no agreement as to "seat"; that the English and Indian Courts had "concurrent jurisdiction"; and that Enercon were therefore entitled to invoke the jurisdiction of the English Court.
12. Thereafter, WWIL wished to appeal against that judgment of the BHC. However, there was no automatic right of appeal and therefore WWIL required leave from the Indian Supreme Court to file what has been referred to as an "SLP" i.e. Special Leave for Permission. An issue then arose (because Enercon opposed the issuing of an SLP by WWIL) as to whether filing an SLP was prohibited by the undertakings given by WWIL to this Court as contained in my first Order. In order to clarify the position, WWIL then issued an application notice in this Court dated 16 October 2012 for a declaration that the undertakings in the first Order did not prevent the filing of an SLP i.e. WWIL contended that the filing of an SLP did not constitute "new proceedings"; alternatively that the undertakings should be varied to permit WWIL to file an SLP. Enercon then issued its own cross-application dated 17 October 2012 seeking a declaration that the filing of an SLP would be a breach of undertakings (i.e. on the basis that the SLP would be "new proceedings") alternatively restraining the filing of an SLP and seeking (yet again) the appointment of a third arbitrator pursuant to s18 of the 1996 Act and an anti-suit injunction preventing WWIL from filing an SLP.
13. These applications were heard by Cooke J on 13 November 2012 following which he delivered a Judgment reported at [2012] EWHC 3711 (Comm). In summary, he concluded that the filing of an SLP did not amount to a breach of the undertakings (because it did not amount to "new proceedings"). Costs were reserved. These are part of the subject of the present application.
14. There was then a further dispute between the parties as to the undertakings to be provided by WWIL pending the determination by the Indian Supreme Court. The scope of these undertakings was dealt with by Cooke J at two further hearings on 19 December 2012 and 15 February 2013. By an order dated 15 February 2013, Cooke J dealt with (i) the adjourned and relisted application of Enercon dated 11 June 2012; (ii) WWIL's application dated 16 October 2012; and (iii) Enercon's cross-application dated 17 October 2012. In summary, he made an order declaring that the undertakings previously provided by WWIL did not prevent it from filing and pursuing the SLP; and ordered that (i) Enercon's application dated 17 October 2012 be dismissed; (ii) Enercon's application to lift the stay be dismissed; (iii) upon WWIL giving undertakings, the stay of the ACF issues be continued; (iv) the costs of the applications dated 11 June 2012, 16 October 2012 and 17 October 2012 be reserved; and (v) WWIL pay Enercon's costs of the hearing on 15 February 2013. It appears that the reason why WWIL had to pay Enercon's costs of the hearing on 15 February was because Cooke J found against WWIL in relation to certain of the undertakings.
15. On 14 February 2014, the Indian Supreme Court delivered its Judgment on the appeals from the BHC. In one sense, this was something of a curate's egg for both parties. So far as Enercon was concerned, this Judgment constituted a victory to the extent that it upheld the existence of the parties' arbitration agreement which had consistently been disputed by WWIL. However, it also held (contrary to my tentative view as expressed in my Judgment) that the seat of the arbitration was India and that India rather than England had, in effect, supervisory jurisdiction. It was on this basis that the Indian Supreme Court also appointed a third arbitrator, i.e. as Chair of the arbitral tribunal. Thus, after almost six years of litigation in the courts of India and England, the arbitral tribunal was finally constituted.
16. It is against that lengthy background that I can now turn to consider the present application which was issued by WWIL on 20 June 2014 seeking the costs previously reserved as stated above. In summary, Mr Green QC on behalf of WWIL submitted that it should have all the costs reserved by the orders dated 27 March 2012, 3 July 2012 and 15 February 2013 between them relating to the applications dated 1 March 2012, 8 March 2012, 11 June 2012, 16 October 2012 and 17 October 2012. In particular, Mr Green submitted that the effect of the Indian Supreme Court was that the present proceedings in this Court which were initiated by the ACF are misconceived because, in effect, this Court has no supervisory jurisdiction; and that the relief sought by Enercon in the ACF has not been, and never will be, granted.
17. In summary, Mr Joseph QC on behalf of Enercon opposed that application on three main grounds:

i) Enercon is entitled to a mandatory stay pursuant to s9(1) of the 1996 Act alternatively pursuant to the Court's inherent jurisdiction; alternatively

ii) The Court should adjourn all question of costs until after the claims and counterclaims have been determined by the arbitral tribunal; alternatively

iii) The Court should make no order as to costs or payment on account in respect of costs.

18. I deal with each of these points below.

Stay application – s9 Arbitration Act 1996

19. S9(1) of the 1996 Act provides as follows:

"A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter."

20. On the basis of this statutory provision, Mr Joseph submitted, in summary, as follows:

i) There can be little doubt following the decision of the Indian Supreme Court that Enercon and WWIL are parties to an arbitration agreement set out in the IPLA and the Heads of Agreement.

ii) The present application brought by WWIL dated 20 June 2014 can, and indeed does, constitute "legal proceedings" for the purposes of s9 of the 1996 Act. In particular, legal proceedings are defined in s82(1) of the 1996 as meaning "… civil proceedings in the High Court …" There is nothing in the definition of s82 restricting the scope of legal proceedings to some kind of originating process. Equally an amendment to proceedings can constitute "legal proceedings". Any alleged step in the proceedings can only be after WWIL's application notice; but here there is no such step and Enercon retains the right to seek a stay arising from this new application notice, see generally para 8.28 of Merkin Arbitration Law Looseleaf and Ahad & Ahmed v Uddin [2005] EWCA Civ 883.

iii) A central issue in the pending arbitration will be whether, and to what extent, the initiation and pursuit of both the English and Indian Court proceedings constitute breaches of the arbitration agreement.

iv) There can be no doubt that arbitrators are entitled to and do regularly fix liability for the costs of a breach of an arbitration agreement through the bringing of legal proceedings and the denial of the agreement, see by way of analogy Union Discount v Zoller [2001] 1 WLR 1517. Thus, in the present case, there will be at least the following questions or disputes for consideration by the arbitrators:

a) Which, if any, proceedings has WWIL brought in breach of the agreement to arbitrate and not litigate;

b) Which, if any, proceedings have Enercon brought in breach of the agreement to arbitrate and not litigate;

c) In respect of which of these proceedings is it appropriate in principle to compensate the innocent party in damages;

d) The quantum of any such claims;

e) The application of set off between rival claims under principles of Indian law governing the arbitration agreement, if allowed on both sides.

v) Here, WWIL resolutely opposed the grant of relief in support of the arbitration and further sought to tie in the outcome of the English process with that in India. Now the Indian Supreme Court has referred all disputes to arbitration; and the question of liability for costs of the proceedings is one such dispute then this is a matter which falls to be referred under s9.

21. I do not accept these submissions broadly for the reasons advanced by Mr Green on behalf of WWIL. First, s9 of the 1996 Act entitles a party to an arbitration agreement "against whom legal proceedings are brought" in respect of a matter falling within the scope of an arbitration agreement to have the proceedings stayed. Here, the relevant "legal proceedings" is the ACF action and not WWIL's application dated 20 June 2014. These legal proceedings were brought by Enercon not against Enercon; and consequently, s9 of the 1996 Act does not, in my view, have any application. Second, in circumstances where the costs were reserved by this Court in the context of an action brought by Enercon, s9 cannot, in my view, be used to deprive this Court of the jurisdiction to deal with the very costs which it reserved. In other words, these reserved costs are not a matter which the parties have agreed are to be referred to arbitration within the meaning of s9 of the 1996 Act.
22. For the avoidance of doubt, I should make it absolutely plain that that says nothing about whether or not such costs may subsequently be recovered by way of damages in the current arbitration; and, again for the avoidance of doubt, I should record that Mr Green on behalf of WWIL expressly accepted that that was indeed the case.
23. For the sake of completeness, I should also mention that Mr Green advanced certain further arguments to the effect that Enercon had in effect "waived" any right to rely on s9 of the 1996 Act; but, in the event, it is unnecessary to address these further arguments.

Inherent Jurisdiction

24. Alternatively, Mr Joseph submitted that if the Court were not satisfied that the conditions for a mandatory stay under s9 of the 1996 Act were established, a stay should be ordered under the Court's inherent jurisdiction. In that context, he referred me to the decision of the Court of Appeal in Al-Nimi v Islamic Press Agency Inc [2000] 1 Lloyds Rep 522 per Waller LJ and Albon Naza Motor Trading SdnB HD [2007] 2 All ER 1075 per Lightman J. I am prepared to assume in favour of Enercon that the Court does indeed have an inherent jurisdiction to stay proceedings. However, I do not consider that it would be just or appropriate to exercise any such inherent jurisdiction for reasons similar to those which I have already stated in the context of dealing with the arguments under s9 of the 1996 Act and which I do not propose to repeat.

Adjournment of all questions relating to costs

25. Third, Mr Joseph submitted that I should adjourn all question of costs until after the claims and counterclaims had been determined by the arbitral tribunal including all important issues of damages for breach of the arbitration agreement.
26. In particular, Mr Joseph submitted that the Court had jurisdiction and a wide discretion to adjourn these questions and that there was strong merit in such an approach for the following reasons:

i) Quite clearly (now that each side is bringing these claims) the tribunal will in the course of the arbitral reference of the rival claims for recovery of costs as damages be making determinations on each of the questions identified in paragraph 20(iv) above. The tribunal's determinations on those questions are likely to be if not determinative certainly strongly influential in the exercise of any residual discretion of this Court may consider as regards costs.

ii) The arbitrators unlike this Court will have jurisdiction to make determinations across the whole spectrum of the claims brought in the various Courts in India and in this Court and properly take into the account the wider conduct of the parties.

iii) It is no answer to say, as WWIL does, that Enercon can claim what they like and WWIL will only claim any shortfall in what it recovers from this Court. The effect of recovering costs whether by a costs order from this Court or damages from the tribunal is potentially to disable the paying party from recovering these costs because they would have already been ordered against Enercon.

iv) This very argument proves too much. It shows that in the view of WWIL it would be appropriate for two different tribunals, respectively the Court and the arbitral tribunal to examine different aspects of the costs of the parallel proceedings. This cannot be desirable. In circumstances such as the present there is strong merit in one tribunal with jurisdiction over the entire question of costs incurred in the parallel proceedings to rule upon the same. Indeed the stance taken by WWIL makes it clear that they accept and indeed assert that the tribunal does have jurisdiction to make these determinations because they wish to claim "unrecovered" costs from the tribunal which it can only do if the tribunal has jurisdiction.

v) Indeed it was recognised in the judgment of Lloyd J in T & N v Royal & Sun Alliance [2002] CLC 1342 that there is strong merit in having one tribunal examine the full range of the relevant issues rather than a split between court and arbitration. Applying that principle in the present case it would lead to an adjournment or stay pending the outcome of the arbitration.

vi) Yet further, the outcome of the principal disputes between the parties with regard to WWIL's continued wrongful use of Enercon's technology and confidential information and the IPLA may have a bearing on the outcome of the issues with regard to the breach of the arbitration agreement. It is certainly Enercon's case in the arbitration that there came a point in time in 2008 onwards when WWIL behaved cynically in its denial of an arbitration agreement so as to delay or impede the bringing of claims in arbitration in order to enable WWIL to continue (as indeed it has done) to use Enercon's wind energy technology without restraint or any payment.

vii) The fact that one of the issues before the tribunal with respect to costs and damages for breach of the arbitration agreement is likely to involve set-off, makes it inherently unsuitable for one set of issues to be determined ahead of all the rest. If there is a right of set-off with respect to any portion of the costs (c.f. CPR 44.12) then this should operate as a defence to any payment. Having one set of issues (i.e. this application) determined ahead of the rest deprives the operation of set-off.

27. As to these submissions, I readily accept that this Court has a jurisdiction and indeed a wide discretion to adjourn the question of costs in circumstances such as the present. However, I remain unpersuaded that that is the just or appropriate course to take. In principle, it seems to me that this Court should deal with the costs involved in these proceedings as best it can. Once such costs are determined then, as I have already stated, it will be open for any party to seek to recover such costs as damages in the arbitration. It is fair to say that I was initially impressed by the "set-off" argument; and I should mention that Mr Joseph sought to bolster such argument by submitting that it was plain, in effect, that, on any view, WWIL owed Enercon substantial amounts under the IPLA. However, it would not, in my view, be appropriate for this Court to determine or indeed express any view one way or another as to the merits of the underlying dispute. These are matters for the arbitral tribunal including any question of "set-off". Thus, in the exercise of my discretion, it seems to me that the just and appropriate course is for this Court now to deal with the question of costs in these proceedings and to leave the parties to advance whatever claims they may wish to advance by way of damages in the arbitration reference.

No Order as to costs/no interim payment

28. Finally, Mr Joseph submitted that there should be no order for costs against Enercon; and, in any event, no order for any interim payment.
29. In essence, Mr Joseph submitted that Enercon has, in effect, prevailed on what he described as "the main issue" before both the English and Indian Courts namely whether or not there was an agreement to arbitrate; and that WWIL has merely prevailed on what he described as the sub-issue of "seat". I agree that this Court's supervisory jurisdiction depended, in effect, on two issues viz (i) whether there was an agreement to arbitrate; and (ii) whether the seat of such arbitration agreement was England. Further, I accept that the effect of the Indian Supreme Court is, indeed, that, contrary to the position taken by WWIL, there was a binding agreement to arbitrate; and that therefore Enercon has succeeded on that issue. However, in my view, this is largely irrelevant for present purposes. So far as the original hearing before me in March 2012, WWIL accepted shortly before the beginning of the hearing that there was, at least, a good arguable case that there was an arbitration agreement and although that question was addressed in the evidence it did not take up any time at that hearing. It is fair to say that subsequently it appears that WWIL withdrew that concession. However, such withdrawal of such concession does not appear to have had any impact so far as the subsequent hearings in England are concerned. The result is that although the decision of the Indian Supreme Court was a victory so far as Enercon is concerned in deciding that there was a binding agreement between the parties, the further decision of the Indian Supreme Court that the Indian Court had, in effect, exclusive supervisory jurisdiction necessarily means that the initiation and pursuit of the present proceedings by Enercon founded on the supposed supervisory jurisdiction of this English Court are, and have always been, without any proper foundation. That being the case, it seems to me inevitably to follow that WWIL are properly to be regarded as the successful party in these proceedings and that pursuant to CPR 44.2, the general rule is that Enercon must pay WWIL's costs. The only caveat I would make arises in respect of the costs incurred in relation to the issue as to whether there was a binding arbitration agreement. There is no doubt that that issue was dealt with at some length both in the evidence served prior to the hearing before me when it was accepted by WWIL that there was at least a good arguable case to such effect and also in the parties' skeleton arguments. As submitted by Mr Green, I accept that such evidence was of some relevance in relation to WWIL's application to discharge the freezing injunction. However, given that Enercon have, in effect, now succeeded on that issue, it seems to me just and appropriate that this should be reflected in the order for costs by a modest reduction which I would assess as 10%.
30. As to interim payment, Mr Joseph accepted that pursuant to CPR 44.2(8), where the Court makes an order for costs subject to a detailed assessment, it will make an on account order, unless there is good reason not to do so. However, he submitted that there is good reason not to do so here. First, he submitted that the material before the Court with regard to the amount of costs incurred by WWIL and the amount of any on account payment is "scant". In particular, he submitted that it amounted to little more than a bald assertion in the fifth witness statement of Mr Edward Allen that WWIL had issued invoices amounting to £830,000 rounded down. There was no schedule or detail in support of such figure. Mr Joseph is right that such material is much less than would ordinarily be provided. However, this objection was only raised at a relatively late stage and once the objection was raised WWIL's solicitors provided full invoices promptly. In such circumstances and although the position is not entirely satisfactory, it seems to me that I can and should make an on account payment. However, it also seems to me that in these circumstances the amount of the interim payment should be limited to £300,000. I should mention that Mr Joseph raised in this context a further reason why no interim payment should be made, viz that the Court should not order any payment to WWIL as the likelihood is that a far greater sum will be found due to Enercon in the arbitral reference. I have already dealt with this point above. In summary, it is not appropriate for this Court to determine or express any view whatsoever as to the merits of the underlying dispute. As it seems to me, that is a matter entirely for the arbitral tribunal.

Conclusion

31. For these reasons, it is my conclusion that WWIL is entitled to an order in its favour that Enercon must pay 90% of WWIL's costs previously reserved by this Court in its previous orders to be assessed unless otherwise agreed; and that Enercon should make a payment on account of such costs in the sum of £300,000. Counsel are accordingly requested to agree a draft Order for my approval to reflect the terms of this Judgment. Failing agreement, I will of course deal with any outstanding issues.
32. Needless to say, I very much hope that the arbitral tribunal which has now been constituted after so much delay will now proceed to determine the substantive issues between the parties.