Court of Appeal confirms the availability of anti-suit relief for foreign arbitrations
21 March 2024The Court of Appeal (CoA) has confirmed in Unicredit Bank GmbH v RusChemAlliance LLC [2024] EWCA Civ 64 that it is possible for the English court to grant an anti-suit injunction (ASI) in support of foreign seated arbitrations.
We previously commented on a set of decisions made in summer and autumn 2023 all relating to disputes arising out of the same facts concerning the construction of a liquefied natural gas plant in Russia by a German construction company. Three banks, Deutsche Bank (DB), Commerzbank and UniCredit issued advance payment guarantees (the Guarantees) on behalf of the German construction company, to RusChemAlliance (RCA), which owns the plant. Following the imposition of financial sanctions and the termination of the construction contract, RCA has sought recovery of the advance payments by making demands under the Guarantees. The banks have declined to pay due to the financial sanctions in place.
RCA has issued proceedings against each bank in Russia, in breach of the arbitration agreements contained in each Guarantee, which provide for ICC arbitration seated in Paris. Whilst the Guarantees are governed by English law, there is no express provision as to the governing law of the arbitration agreement in each Guarantee.
The banks have each sought ASIs from the English court to restrain RCA from pursuing its cases in Russia, initially with varying results.
- DB was declined an interim ASI at first instance in the High Court. However, the CoA overturned the first instance decision and granted the interim ASI.1
- After the first instance decision but prior to the CoA’s decision in Deutsche Bank, Commerzbank was granted an interim ASI at first instance.2
- After the CoA’s decision in Deutsche Bank, the High Court declined to make final an interim ASI that had been obtained on an ex parte basis by UniCredit.
UniCredit at first instance
In the first instance decision on UniCredit’s application for a final ASI3, Sir Nigel Teare distinguished the CoA’s ruling in Deutsche Bank on the basis that appeal had been heard ex parte and in contrast Sir Nigel Teare had the benefit of submissions from RCA.
Sir Nigel Teare declined to grant a final ASI on the basis that.
- Governing law: The presumption that English law is the governing law of the arbitration agreement, on the grounds that English law is the governing law of the wider contract (i.e. the Guarantee), could be rebutted on the basis that the parties had chosen France as the seat of the arbitration. The French court would regard the arbitration as subject to French substantive rules applicable to international arbitration and therefore the parties could be taken as intending that the arbitration agreement would be governed by French law; and
- Proper forum: If that conclusion were incorrect, England would not be the proper forum in which to enforce the arbitration agreement. Despite the fact that ASIs do not exist in France, Sir Nigel Teare considered that substantial justice could still be done in the arbitration there, for example by an award of damages.
Despite the apparent clarity provided by the CoA in Deutsche Bank on the availability of ASIs for foreign-seated arbitrations, the decision in UniCredit meant that uncertainty remained.
UniCredit in the CoA
In a judgment given by Males LJ, the CoA has overturned the first instance decision in UniCredit and ordered a final ASI to restrain RCA from pursuing proceedings in Russia.
The CoA noted that the jurisdiction of the English court depends on whether service can be effected out of the jurisdiction, requiring (1) a serious issue to be tried on the merits; (2) a good arguable case that the claim falls within one of the relevant gateways; and (3) England and Wales is the proper place in which to bring the claim. The first requirement did not present any difficulty and so the judgment focussed on the second and third requirements.
1.
Governing law
As with the Deutsche Bank and Commerzbank cases, UniCredit’s position was that the arbitration agreement in the Guarantee was governed by English law, being a relevant gateway for service of its claim for an ASI out of the jurisdiction (and the only gateway on which it would be able to rely on in this case).
As with the first instance decision, the CoA referred to the principles set out in Enka v Chubb4 to determine the governing law of the arbitration agreement. As a starting point, the governing law will either be the law chosen by the parties; or where there is no such choice, the system of law with which the arbitration agreement is most closely connected.
In determining this question, the fourth principle identified in Enka is that where there is no express choice of law for the arbitration agreement, the law chosen to govern the wider contract will generally apply to the arbitration agreement that forms part of the same contract. At first instance, Sir Nigel Teare decided that the presumption outlined in the fourth principle in Enka had been displaced by the fact that the arbitration itself is governed by French law as the law of the seat and that in those circumstances the arbitration agreement would also be treated as governed by French law. This is the analysis on which RCA relied during the appeal.
The CoA noted that the fifth principle in Enka states that the choice of a different country as the seat of the arbitration is not, without more, sufficient to negate an inference that a choice of law to govern the main contract was intended to apply to the arbitration agreement. The CoA considered the parties’ submissions and expert evidence on this point, in which it was effectively common ground that the French court would determine the existence and effectiveness of the arbitration agreement in accordance with the parties’ common intention. Consequently, the CoA found that French law does not contain a rule that, where an arbitration is subject to French law, the arbitration agreement will also be treated as governed by French law, but rather that the law governing the arbitration agreement falls to be determined by reference to the parties’ common intention. This was insufficient to rebut the presumption that English law, as the governing law of the Guarantee, governs the arbitration agreement.
2.
Appropriate forum
The CoA also disagreed with the first instance decision in respect of whether England would be the appropriate forum in which to seek an ASI. At first instance, Sir Nigel Teare considered that UniCredit would be able to obtain justice in the arbitration. However, the CoA noted that an award made in an ICC arbitration, whether an award of damages or ordering RCA to refrain from pursuing proceedings in Russia, would in any event not be enforceable in Russia, where the Russian court has already held that the arbitration agreement is unenforceable. In addition, and perhaps more fundamentally, Males LJ found it highly unlikely that an ICC arbitration in Paris would be allowed to proceed. Without an ASI, there would be nothing preventing RCA from applying to the Russian court for an injunction to prevent UniCredit from pursuing an arbitration (and RCA did not offer an undertaking not to seek such an injunction).
Having reached these conclusions with respect to governing law and appropriate forum, the CoA considered it appropriate to order a final ASI. The CoA did not find any merits in the arguments advanced by RCA as to why a final ASI should not be ordered and in doing so emphasised that (i) whilst a French court might not enforce an English ASI, it would at the same time not consider it to be an interference with its own jurisdiction; and (ii) the English court will take an interest in disputes relating to English law governed contracts and upholding the policy that those who agree to arbitrate should adhere to their contractual bargain.
What next?
This decision finally provides clarity on the ability for the English court to grant ASIs in support of arbitrations in other jurisdictions and emphasises the English court’s pro-arbitration approach. As noted in our previous article, proposed reforms to the Arbitration Act 1996 will effectively reverse the decision in Enka v Chubb such that where there is no express choice of law for an arbitration agreement, it will be governed by the law of the seat rather than the governing law of the broader contract, with the effect that it may not be possible to obtain an ASI where the only relevant gateway for service out is based on the governing law of the arbitration agreement and that agreement itself is silent as to governing law, but provides for arbitration seated in another jurisdiction. However, even once those amendments come into effect, the English court otherwise appears to be amenable to granting supportive relief for arbitrations in other jurisdictions where it is able to do so, which would include scenarios in which parties expressly agree that the arbitration agreement is governed by English law or possibly where the respondent to such an application is based in England, such that the English court has personal jurisdiction over them. The English court’s pro-arbitration approach is something that parties should take into account when drafting arbitration clauses if they wish to potentially make use of that support.
1 Deutsche Bank AG v RusChemAlliance LLC [2023] EWCA Civ 1144
2 Commerzbank AG v RusChemAlliance LLC [2023] EWHC 2510 (Comm)
3 G v R [2023] EWHC 2365 (Comm)
4 Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38
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