Originally from World Arbitration and Mediation Review (WAMR)

ABSTRACT

This article discusses how a liquidated damages clause for noncompliance with an antisuit injunction can improve the options of existing remedies against the breach of an arbitration agreement. It posits that liquidated damages for noncompliance with an antisuit injunction provide the innocent party with reasonable compensation and help prevent the negative impacts stemming from parallel proceedings. Furthermore, by assessing different advantages for considering the inclusion of a liquidated damages clause in an arbitration agreement, we conclude that its inclusion can prove more efficacious regarding its deterrent and compensatory functions than a liquidated damages clause for breach of an arbitration agreement.

I.   INTRODUCTION

Antisuit injunctions are important remedies against the breach of an international agreement to arbitrate.  However, especially in common law jurisdictions, antisuit injunctions have not gained their deserved recognition and acceptance.  As a result, sanctions for noncompliance with injunctions issued in support of an arbitration agreement in jurisdictions that consider them as alien remedies, tend to be ineffective.  On the other hand, a newly developed body of jurisprudence regarding the award of damages in lieu or in addition to antisuit injunctions has generally gained credence. The difficulty of ascertaining how much to award in damages in such a case might justify the recommendation of awarding a fixed amount in the form of liquidated damages for breach of the arbitration agreement.

As a result of the above, at first blush, agreeing on a fixed amount in damages for noncompliance with an antisuit injunction may not appear to be a novel contractual stipulation. Nonetheless, on a closer look and as we will explain throughout this article, that is not the case. As we will also describe, a liquidated damages clause serves several unique and useful purposes.

This article is structured as follows: Section II sketches out the available remedies against a possible breach of an arbitration agreement. Section III expounds on how liquidated damages for breach of an antisuit injunction can fill the existing gaps in blocking parallel proceedings and how the clause might provide the innocent party with appropriate compensation. Section IV focuses on the arbitral tribunal’s competence to decide the consequences for non-compliance with an antisuit injunction and why it matters. Section V examines the impact of the proposed clause  on the parties’ fundamental right of access to justice. Section VI gives guidance as to what triggers the proposed clause, and finally, Section VII concludes with a brief commentary on the advantages of the liquidated damages clause for breach of an antisuit injunction.