The Applicants and Respondents in Zim Integrated Shipping Services Ltd v European Container KS [2013] EWHC 3581 (Comm) were parties to an arbitration, in which the Applicants sought to recover loans made to part-fund the Respondents’ purchase of four vessels. The vessels had been sold by the Applicants to the Respondents, then leased back on bareboat charters.

The Applicants applied without notice under s.44(3) Arbitration Act 1996 for an injunction restraining the Respondents from assigning or terminating the charters, thereby protecting assets against which the Applicants could enforce any award or judgment. The assets which they sought to protect were their contractual rights to payment under the loan agreements and to deduct from charter hire in the event of default.

The application was refused.

The Court first had to consider whether the Applicants’ contractual rights amounted to “assets” within the meaning of s.44(3). It found that they did, although with some hesitation. Treating such contractual rights as “assets” stretched the term very nearly to breaking point. Such a wide interpretation would enable the court to grant an injunction in a very wide range of cases.

Secondly, the Court had to consider whether it should exercise its discretion to grant the injunction. It stated that it should be wary in exercising its discretion when an injunction came close to determining a matter which it was for the arbitrators to decide. Here, the injunction would interfere with matters such as whether the Applicants were entitled to payment of the loans and to withhold charter hire, which were matters for the Tribunal.

Whilst it was possible that the Respondents might not be able to satisfy any award or judgment against them, this was a risk which the Applicants had accepted in dealing with a company which was a special purpose vehicle. Further, the Applicants had made no attempt to show that the Respondents were actually taking steps to render an award unenforceable by disposing of assets.

This case evidences the court’s acceptance that it cannot interfere with matters which are for the arbitrators to decide. It will also carefully consider all the circumstances before exercising its discretion to grant injunctions. This includes taking into account the risks inherent in dealing with special purpose vehicles, a common company structure in the shipping industry. Parties must, to an extent, be deemed to have accepted the risk that such companies will have few or no assets.