Dispute Resolution | Singapore Court issues anti-suit injunction to restrain claims in breach of a multi-tiered dispute resolution clause

Background

Techteryx brought proceedings in Hong Kong against Finaport, an investment manager, stemming from a Discretionary Investment Management Agreement (“DIMA”) between Finaport and First Digital Trust Ltd (“FDT”). Although Techteryx was not a signatory to the DIMA, it claimed beneficiary rights under a trust arrangement in which FDT served as trustee. The DIMA contained a clause obliging the contracting parties first to attempt negotiation, then mediation, before resorting to litigation. Finaport argued that Techteryx’s lawsuit violated the DIMA by bypassing these mandatory steps.

The parties’ arguments

Finaport sought an anti-suit injunction, arguing Techteryx effectively procured a contractual breach where FDT should have followed the multi-tiered dispute resolution clause.

Techteryx asserted, on the other hand, that, as a beneficiary under the trust, it was not personally bound by the DIMA, claiming the multi-tiered dispute resolution clause imposed no obligations on non-signatories, arguing that compliance was impossible without FDT’s full cooperation. It further distinguished a multi-tiered dispute resolution clause from more absolute arbitration or exclusive jurisdiction clauses, suggesting the latter are “substantive” in nature.

The Court’s analysis

The Court partially granted Finaport’s application, finding that even though Techteryx was a non-party, the DIMA’s procedural restrictions still applied if Techteryx was seeking to enforce FDT’s contractual rights. Techteryx could not bring a DIMA claim without satisfying the negotiated / mediated route that FDT itself was bound to observe, even though Techteryx was a non-signatory beneficiary under the trust.

Rather than an outright injunction on all Hong Kong proceedings, the Court limited the restraint to Techteryx’s pursuit of the DIMA-based claims until compliance with the multi-tiered dispute resolution clause. Finaport’s further request for a broad anti-suit injunction was denied. The Court found no evidence that Techteryx’s lawsuit was vexatious or oppressive. Merely showing that claims “might fail” is insufficient to warrant a wide-ranging injunction, as comity demands restraint before interfering with foreign proceedings.

BAHR’s perspective

Under Norwegian law, courts do not generally entertain anti-suit injunctions, that is, orders restraining a party from pursuing or continuing proceedings in a foreign jurisdiction. Consequently, a Norwegian court would be unlikely to grant relief equivalent to what the Court did. However, the findings remain relevant to Norwegian clients and practitioners.

First, even if Norwegian law does not provide for anti-suit injunctions, courts in other jurisdictions, including Singapore, may still issue them to halt proceedings brought (or threatened) elsewhere. That means foreign parties could, in theory, seek an injunction before their home courts to restrain actions filed in Norway if the parties have a multi-tiered dispute resolution clause (or similar) mandating pre-litigation steps. Norwegian litigants, accordingly, should be aware that failing to observe such clauses might prompt foreign courts to restrain Norwegian proceedings.

Second, though anti-suit injunctions are not an available remedy in domestic courts, the underlying principle, that contractual dispute-resolution steps must be followed, stands. When Norwegian firms operate cross-border or are subject to contracts governed by foreign law, failing to abide by multi-tiered dispute resolution clause requirements can result in adverse rulings or anti-suit injunctions against them abroad. This underscores the importance of clear drafting and compliance with step-by-step dispute resolution clauses, even where Norwegian law itself does not contemplate the same anti-suit injunction mechanisms. We also note that, even though the Norwegian Supreme Court has held that Norwegian procedural law generally does not permit parties to agree on procedural pre-conditions to litigation,[1] this does not undermine the general philosophy that such clauses should generally be complied with in a global context where anti-suit injunctions are a reality. We further note that the prohibition under Norwegian law applies only to pre-litigation steps, not pre-arbitration steps (although clear evidence is required for pre-arbitration steps to be established and they cannot depend on the opposing party’s cooperation).[2]

Third, an attempt to commence proceedings in breach of a multi-tiered dispute resolution clause before a foreign court or arbitral tribunal might be met with a refusal to institute such proceedings by the judicial body until such time that the steps in the multi-tiered dispute resolution clause have been complied with. Thus, unwarranted commencement of actions may simply lead to delay, additional time and expense, and irritated foreign courts or arbitral tribunals.

Finally, Norwegian parties mighty still be held liable for litigation costs by both the Norwegian court and the foreign judicial body if they are found to have commenced proceedings in breach of a multi-tiered dispute resolution clause. Unfounded commencement of proceedings in Norwegian court where a multi-tiered dispute resolution clause is in play therefore carries risk that must be factored into any cross-border litigation strategy.

From a Norwegian perspective, the case thus serves as a timely reminder that cross-border enforceability of multi-tiered dispute resolutions clauses can have very real practical ramifications, even if Norwegian courts themselves do not issue anti-suit injunctions or generally recognise or enforce agreements on pre-litigation steps.

[1] HR-1999-493-K.

[2] LB-2016-190180; HR-2019-402-U.