Introduction
The UK Supreme Court has now provided its reasons for an earlier decision to uphold a decision by the English Court of Appeal (“CoA”) in UniCredit Bank GmbH v RusChemAlliance [2024] EWCA Civ 64, in which the CoA granted an anti-suit injunction (“ASI”) against RusChemAlliance LLC (“RCA“), a Russian entity in which Gazprom has a direct interest, despite the foreign seat of the arbitration (in Paris).
The CoA had overturned the decision of the English Commercial Court, where the lower court had refused to issue an ASI in the context of an English law governed arbitration agreement that expressly provided for ICC arbitration in Paris (i.e. not seated within the jurisdiction), and had granted the requested ASI. An ASI is a court order that prohibits a party from commencing or continuing with proceedings in a jurisdiction or forum other than that contractually agreed, and is available as a matter of English law.
This case relates to proceedings RCA initiated in Russia in breach of the relevant arbitration agreements and is part of a trilogy of applications for ASIs in England. We initially covered all of these cases in a previous blog post (see here). All of the applications relate to proceedings brought by RCA in Russia in breach of the contractually agreed arbitration forum. The injunction requires RCA to terminate proceedings brought in Russia in breach of an English-law governed arbitration agreement providing for arbitration seated in Paris.
The Supreme Court agreed with the CoA that England was the most appropriate forum to consider and determine a request for ASI in the circumstances, particularly given that whilst French courts would not themselves issue ASIs, they would recognise them. The CoA and Supreme Court therefore disagreed with the Commercial Court that an ASI should not be granted in circumstances where it is not a remedy available under the law of the seat (i.e., French law).
Factual Background
RCA, a Russian company, and UniCredit, a German bank, are involved in a complex legal dispute. RCA entered into contracts with third parties, Linde GmbH and Renaissance Heavy Industries LLC (collectively referred to as the “Contractor”), to build gas plants in Russia at a total cost of around EUR 10 billion. The Contractor received an advance payment of EUR 2 billion from RCA.
To secure the contract’s performance and the repayment of the advance, UniCredit issued in RCA’s favour seven bonds worth around EUR 420 million. The bonds included a clause that all obligations arising out of or in connection with them were to be governed by English law and that disputes were to be resolved by ICC arbitration seated in Paris.
Following the Ukraine invasion, the Contractor informed RCA that they could no longer honour the contracts due to various EU sanctions. The Contractor refused to return the advance payments issued. It is important to note that RCA itself is not subject to UK or EU sanctions.
In response, RCA filed proceedings against UniCredit in Russia, seeking recovery of EUR 448 million under the bonds. The proceedings were brought in reliance on a Russian Federal Law passed in 2020 that gives the Russian state arbitrzah courts exclusive jurisdiction over disputes involving Russian sanctioned individuals and entities, including foreign entities controlled by them.
UniCredit reacted by filing a claim in the English Commercial Court, contending that RCA’s Russian lawsuit violated the arbitration agreement clause in the bonds, seeking an ASI to halt the Russian proceedings Initially, the Court granted an interim injunction to UniCredit on an ex parte basis, but refused to make the interim injunction final following further deliberation on the basis that the governing law of the arbitration was French law, not English law, principally because of the selection of Paris as the seat of arbitration, and that as such an ASI should not be granted in the circumstances. In any event, the Court held that even if English law governed the arbitration agreement, England was not the appropriate forum for ASI purposes because the “arbitration agreement [] provides for arbitration, not in England, but in another jurisdiction“. The Court was not convinced that not granting the ASI would prevent substantial justice being done in the circumstances.
The Court of Appeal’s decision
As explained above, the Commercial Court’s decision was overturned on appeal and the ASI granted.
As RCA was not domiciled nor had any presence in England and Wales, the CoA considered whether there was (i) a strong arguable case for a ‘jurisdictional gateway’ that would allow service out of the jurisdiction, and (ii) was England forum conveniens.
CPR6B 3.1(6)(c) was relied upon for the relevant jurisdictional gateway – whether the contract is governed by the law of England and Wales. To determine whether the arbitration agreement was governed by English law, the CoA applied the Supreme Court’s decision in Enka v Chubb [2020] UKSC 38 . This decision established the following general rule: if the law applicable to the arbitration agreement is not specified, the governing law chosen for the main contract (in this case, English law) will be considered the law of the arbitration agreement, even if the arbitration clause provides for a seat elsewhere.
This rule may be overridden by certain factors. For instance, if the law of the seat includes a provision that the choice of seat dictates the governing law of the arbitration agreement. Upon hearing expert evidence, the CoA found that French law did not have such a provision. French law simply states that the law applicable to the arbitration agreement depended on the parties’ ‘common intention’. This was not enough to trigger the exception the Supreme Court had in mind in Enka. As a result, English law applied to the arbitration agreement.
In its decision, the CoA also upheld the reasoning in one of the mirroring proceedings that England was forum covneniens to grant an ASI, Deutsche Bank v Ruschemalliance LLC [2023] EWCA Civ 1144. It was of particular importance that whilst French courts would not themselves issue ASIs, they would recognise them. In that decision, the CoA disagreed with the Commercial Court that an ASI should not be granted in circumstances where it is not a remedy available under the law of the seat (i.e., French law).
RCA subsequently appealed to the Supreme Court.
The Supreme Court’s decision
The Supreme Court upheld the ASI restraining RCA from pursuing proceedings against UniCredit in Russia and dismissed RCA’s appeal. The decision upholds the Court of Appeal’s declaration that the English courts have jurisdiction over claims for ASIs where English law was chosen (expressly or impliedly) to govern the contract and arbitration agreement, regardless of the law of the seat of arbitration. The Supreme Court’s judgment was initially delivered orally and in summary form. On 18 September 2024, the Supreme Court delivered its reasoned judgment. The judgment was delivered by Lord Leggatt, with whom the other judges (Lords Reed, Sales and Burrows and Lady Rose) agreed. The judgment may be accessed here.
The Supreme Court’s reasoning in upholding the ASI was as follows:
- Lord Leggatt explained that in considering whether the English courts should exercise jurisdiction over a foreign defendant to grant anti-suit relief in circumstances where the seat is abroad, the correct approach is not to resort to the usual test of forum non conveniens, as that test focuses on the substantive jurisdiction and which venue would be the most appropriate forum for the particular dispute at hand. Instead, his Lordship reasoned, the focus ought to be on ensuring that “parties [are] held to their contractual bargain [and this may be done] by any court before whom they have been or can properly be brought” [75].
- Lord Leggatt remarked that the exercise of coercive powers by courts to enforce contractual bargains in such manner that restrains proceedings brought in breach of contract is “not a supervisory function which ought therefore to be left to the courts of the seat” [98]. Accordingly, English (and possibly other) courts could restrain uncontractual behaviour without usurping the functions of the courts of the seat.
- Lord Leggatt also explained that comity concerns were unfounded and that in this particular case there were no reasons not to grant the ASI; not only do French courts have no power to grant ASIs, they lacked the jurisdiction determine any claim relating to the breach of the arbitration agreement [101].
- Finally, Lord Leggatt attached some important to the fact that in the particular circumstances substantial justice could not be obtained by the innocent party in the arbitration given that “any award or order made by an arbitrator [would have] no coercive force” [108]. Refusing the ASI would have left UniCredit without a proper remedy.
The Supreme Court also considered RCA’s argument that the arbitration agreement was governed by French law, as opposed to English law. RCA argued that French courts regarded an arbitration agreement as being subject to French law where the arbitration was seated in France, arguing that this triggers the Enka exception (click here for our GAN article on Enka). The Supreme Court rejected that argument, holding that the selection of Paris as a seat was not sufficient demonstration of party intent as regards the law applicable to the arbitration agreement [31 et seq].
Conclusion and key takeaways
The Supreme Court’s decision is a significant development. It confirms that ASIs may be issued by English courts in cases where the arbitration is foreign seated but English law applies to the agreement to arbitrate. The judgment would allow parties to seek and obtain ASIs against Russian proceedings brought under fresh Russian laws to allow proceedings to be brought in that jurisdiction as part of Russia’s counter-sanction measures.
However, whatever the roadmap created by the Supreme Court in this case will be, it may quickly be superseded by the Arbitration Bill that is currently being considered by the UK Parliament. The Bill contains a statutory provision that arbitration agreements are to be governed by the law of the seat by default. Applying the proposed new law to the facts of this case, the arbitration agreement would be governed by French law, thus removing the ‘jurisdictional gateway’ relied upon by the CoA for forum conveniens. As such, if the Arbitration Bill was to pass in its current form it may limit the ability of the English judiciary to grant ASIs and other remedies in support of arbitration agreements not seated in the UK.
