In its recent judgment in UniCredit Bank GmbH v. RusChemAlliance LLC,1 the Court of Appeal granted a mandatory final anti-suit injunction in support of a French-seated arbitration regarding proceedings brought by the RusChemAlliance (RCA) before Russian courts.
Background
RCA is a Russian entity which had entered into engineering, procurement and construction contracts with two German companies (Linde GmbH and Renaissance Heavy Industries LLC), where it agreed to pay an advance fee of two billion euros. As part of the contract, UniCredit Bank issued several bonds to RCA as performance guarantees, each of which provided for International Chamber of Commerce (ICC) arbitration in Paris.
Following Russia's invasion of Ukraine in 2022, the European Union imposed wide-ranging sanctions on Russia and Russian entities and persons. Whilst RCA itself was not subject to those sanctions, both German companies were instructed to halt performance of the contract by the German authorities. Subsequently, RCA sought to terminate the contract on the basis that UniCredit materially breached its obligations. UniCredit contested the payment on the basis of it being unlawful under EU sanctions, which RCA disputed.
RCA issued proceedings before the Russian arbitrazh (commercial) courts. It claimed that EU sanctions were contrary to public policy, and that the arbitration agreements were unenforceable, therefore requiring UniCredit to pay 444 million euros. A week later, UniCredit brought a claim before the English Commercial Court, in conjunction with an application for an interim anti-suit injunction for the Russian proceedings. RCA acknowledged service and stated its intention to challenge the jurisdiction. In the interest of urgency due to the imminent substantive Russian proceedings, the English court gave an ex tempore judgment, refusing the anti-suit injunction. UniCredit appealed this decision.
In parallel, the Russian judge presiding over the Russian proceedings initially held that pursuant to the Arbitration Procedural Code of the Russian Federation, Russian courts had exclusive jurisdiction over disputes arising out of sanctions, and held that the arbitration agreements were unenforceable. However, the judge also stayed the proceedings pending the outcome of the Court of Appeal's decision in England.
Decision of the Commercial Court
At first instance, the English Commercial Court held that it did not have jurisdiction to grant an anti-suit injunction to prevent proceedings from moving forward in Russia.
In particular, the Commercial Court acknowledged that the general rule of Enka v. Chubb2 would require that where the law applicable to the arbitration agreement is not specified, the governing law of the contract should apply (in this case, English law) – but this was displaced by a specific provision of the seat of the arbitration (French law). Specifically, French arbitration law determines that the law of the seat of the arbitration (France) also should apply to the arbitration clause. Accordingly, the Commercial Court interpreted that in choosing Paris as the seat of the arbitration, the parties had intended that French law (and not English law) also would apply to the arbitration clause.
Alternatively, even if English law governed the arbitration clause, the judge considered whether England was the appropriate forum "where the case may be tried suitably for the interests of all the parties and the ends of justice". As a starting point, the judge noted that other than the bond agreements, there was no other connection with England, and that it was French courts which would have supervisory jurisdiction over the arbitration. The Commercial Court did acknowledge that anti-suit injunctions were not available as a remedy under French law. However, since the claimant could still obtain substantial justice via French-seated arbitration proceedings in the form of damages, there was no need for the English courts to exercise jurisdiction over UniCredit's claim for an anti-suit injunction.
Court of Appeal decision
The Court of Appeal reversed the Commercial Court's decision and granted the anti-suit injunction in favour of UniCredit.
1. Jurisdiction of the court
The Court of Appeal noted that RCA was not domiciled in England and Wales, and therefore the court's jurisdiction depended on whether service can be effected beyond the jurisdiction. To meet this burden, UniCredit had to satisfy three requirements:
- There is a serious issue to be tried on the merits.
- There is a good arguable case that the claim falls within one of the relevant gateways.
- England and Wales is "the proper place in which to bring the claim".3
The Court of Appeal found the first limb to be satisfied. For limbs 2 and 3, UniCredit relied on paragraph 3.1(6)(c) of Practice Direction 6B that the claim is being brought in an instance where English law governs the contract. As the arbitration agreement is separable from the underlying contract, the Court of Appeal stated that it first had to decide which law governs the arbitration agreement in this particular case.
2. Governing law of the arbitration agreement
The Court of Appeal considered that the applicable rule to
determine the governing law of the arbitration agreement had been
set in Enka v. Chubb, but it disagreed with the Commercial
Court on the application of the exception related to a
French-seated arbitration.
The Court of Appeal held that in order to displace the general rule
in Enka, it would require a "sufficiently clear rule
of the law of the seat". The provision relied upon in this
instance was a principle derived from case law stating that the
governing law of the arbitration agreement "depends on the
parties' common intention". The Court of Appeal considered
this not to be sufficient to satisfy this requirement. Furthermore,
the Court of Appeal stated that the parties could not have been
aware of such a provision, and that if they had been, they should
have made this clear by explicitly selecting French law as the
governing law of the arbitration agreement. It therefore held that,
in applying the general Enka principle, the governing law
of the arbitration agreement should be English law.
The Court of Appeal acknowledged that in the upcoming reform to the Arbitration Act, the law will codify the principle that unless otherwise expressly agreed, the law of the seat of the arbitration shall govern the arbitration agreement (and not, as in this case and Enka, the governing law of the underlying contract). However, it concluded that the general principle in Enka still prevails until the bill is passed into law – and therefore should be followed.
3. Appropriate forum to bring the claim
The Court of Appeal then considered whether England and Wales was "the proper place in which to bring the claim" in accordance with Civil Procedure Rules (CPR) 6.37(3). In doing so, it had to assess whether England and Wales was the natural forum, and subsequently whether there is a real risk that justice will not be obtained absent the exercise of English courts' jurisdiction. To analyse whether this requirement was satisfied, the Court of Appeal turned to its previous decision in Deutsche Bank AG v. RusChemAlliance LLC.4 In this case, the Court of Appeal relied on the fact that under English law, parties which agree to be contractually bound should abide by those agreements. It therefore stated that parties which agree to arbitrate should do so and should be precluded from bringing a claim elsewhere. The court in Deutsche Bank also maintained English law as the appropriate forum, on the "simple basis" that the same claim "cannot be given effect to in France".
The Court of Appeal finally proceeded to state that the English court is the "only court available and able" to grant an anti-suit injunction since this is not possible in France. Moreover, it called the suggestion that substantial justice could be obtained in France an "illusion".
4. Anti-suit injunctions in foreign-seated arbitrations
The Court of Appeal issued a final anti-suit injunction, given that the governing law of the underlying contract and the arbitration clause was English law. In doing so, it applied the principle derived from section 44 of the Arbitration Act 1996, a section which usually covers interim injunctions. The Court of Appeal agreed that whilst anti-suit injunctions arise from section 37 of the Senior Courts Act 1981, it saw no reason for these principles not to be applicable here. The Court of Appeal further considered that "the fact that the contract, including the agreement to arbitrate, is governed by English law, together with the policy of English law that those who agree to arbitrate should adhere to their bargain provides [the English courts with] a sufficient interest or connection in this case".
The Court of Appeal thereafter decided that the proceedings in the Russian arbitrazh court had been brought in breach of the arbitration agreements, and therefore it was just for a final anti-suit injunction to be granted, ultimately requiring the Russian proceedings to be terminated.
Key takeaway
The judgment confirms that English courts may be willing to grant anti-suit injunctions in support of foreign-seated arbitrations if they have personal jurisdiction over the parties and English law governs the arbitration clause. Therefore, the question of which law governs the arbitration agreement also will be relevant in connection with the issuance of anti-suit injunctions in support of arbitrations by English courts.
As it stands, absent the parties' inclusion of the governing law of the arbitration clause, the rule of Enka mandates that the applicable law is that of the governing law of the agreement. However, once reforms to the Arbitration Act are adopted by Parliament, the rule of Enka will be replaced, and the law of the seat of the arbitration shall govern the arbitration agreement. To avoid uncertainty, parties will be well served by explicitly stating which law governs the arbitration agreement.
Footnotes
1. [2024] EWCA Civ 64.
2. Enka Insaat Ve Sanayi AS v. OOO Insurance Company Chubb [2020] UKSC 38.
3. Altimo Holdings & Investment Ltd v. Kyrgyz Mobil Tel Ltd [2011] UKPC 7.
4. [2023] EWCA Civ 1144.
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