Clifford Chance

Supreme Court hands down judgment on the English court's jurisdiction to issue anti-suit injunctions in support of foreign seated arbitrations

On 18 September 2024, the Supreme Court handed down a judgment in UniCredit Bank GmbH v. RusChemAlliance LLC¹. The judgment sets out the reasons for a decision it made in April 2024 to grant final injunctive relief to restrain proceedings commenced in Russia, where the contract in issue is governed by English law and provides for ICC arbitration seated in Paris.

Facts

In 2021, RusChemAlliance LLC ("RCA") entered into two contracts with German counterparts (together the "Contractor") for the construction of natural gas and gas processing facilities in Russia. UniCredit Bank GmbH ("UniCredit") issued several bonds in connection with these contracts, which were governed by English law and provided for ICC arbitration in Paris.

The Contractor ceased performance in 2022, citing EU sanctions against Russia as the reason for doing so. RCA terminated both contracts and sought to call on the bonds issued by UniCredit. UniCredit rejected these demands on the basis that payment was prohibited by EU sanctions.

Notwithstanding the arbitration clauses in the bonds, RCA commenced proceedings against UniCredit in the Russian courts (the Arbitrazh Court of St Petersburg and the Leningrad Region), claiming the total value of the bonds (and interest). RCA asserted that the Arbitrazh Court has jurisdiction as the arbitration clause was unenforceable pursuant to Article 248 of the Russian Arbitration Procedural Code. The Arbitrazh court accepted jurisdiction. In response, UniCredit applied in the English courts for an anti-suit injunction ("ASI") restraining the Russian proceedings.

Supreme Court's Decision

The Supreme Court unanimously dismissed the appeal against the Court of Appeal's decision to grant a final ASI. It considered whether the English court had jurisdiction over UniCredit's claim, comprising two issues:

1. Whether the arbitration agreements are governed by English law; and
2. Whether England and Wales is the proper place in which to bring the claim.

Governing Law

Applying the principles identified in Enka Insaat Ve Sanayi A.S. v OOO Insurance Company Chubb², the Supreme Court held that nothing in the language of the governing law clauses exempted the arbitration agreements from the choice of English law. In particular, the reference in each such clause to "this Bond" was reasonably understood to refer to the whole bond, including the arbitration clause. English law therefore governed the arbitration agreements, and UniCredit's claims fell within the gateway for service out of jurisdiction.

The judgment also noted that there was "no legal significance" as to the distinction between an "implied" or "express" choice of law. Rather, the only question of legal relevance is whether on the proper interpretation of the contractual documents the parties have agreed on the law governing the arbitration agreement.

The Supreme Court clarified that the exemption contemplated at paragraph 170(vi)(a) of Enka should be disregarded. No inference could therefore be drawn from the choice of seat even where the law of the seat contained a provision treating the arbitration clause as being governed by the law of the seat.

England and Wales as the proper place

The Supreme Court rejected the Spiliada test of forum non conveniens as the applicable test for determining this issue. The correct starting point was instead the principle that it was desirable for parties to be held to their contractual bargain by any court before whom they have been, or properly can be, brought. The judgment drew support from the decision of the Court of Appeal for Bermuda in IPOC International Growth Fund Ltd v OAO CT-Mobile LV Finance Group³, in which the Bermudian court granted an ASI to restrain a defendant incorporated in Bermuda from continuing Russian proceedings brought in breach of agreements to arbitrate in Switzerland and Sweden, on the basis of its personal jurisdiction over the defendant alone.

Service out of jurisdiction for interim relief in relation to an arbitration with a foreign seat, should in principle, be permitted unless it would be inappropriate to do so (as per the principle expressed in Section 2(3) of the Arbitration Act). This would require showing that there is a strong reason why the court should refrain from exercising its jurisdiction.

The Supreme Court rejected RCA's argument that England was not the proper place because the parties had chosen the supervisory jurisdiction of the French courts:

1. The power to grant injunctive relief to prevent a breach of an arbitration agreement is not an aspect of the supervisory or supportive jurisdiction of an English , but rather, its general equitable jurisdiction under Section 37 of the Senior Courts Act 1981.
2. In the present case, no issue of comity arises as the French courts would not have jurisdiction to determine such a claim and the evidence of French law before the court was that the French courts would not object to the grant of an ASI by an English court.
3. The choice of a French seat does not amount to a reason which would make it inappropriate for an English court to order injunctive relief.

The Supreme Court also rejected RCA's argument that the proper place for UniCredit's claims is instead arbitration commenced in France, agreeing with the Court of Appeal's determination that UniCredit would not be able to obtain substantial justice in arbitration proceedings.

The Supreme Court therefore found that England and Wales is the proper place to bring the claim, whether by the principle set out in Section 2(3) or, in the alternative, by applying the Spiliada test.

Comment

The Supreme Court's decision is another illustration of the English courts' pro-arbitration stance. The courts remain committed to protecting and enforcing arbitration agreements (even for those arbitrations seated abroad), including by issuing ASIs to protect the parties' agreement, where not inappropriate to do so. Through its endorsement of the Bermuda Court of Appeal's judgment in IPOC, the Supreme Court has also recognised the possibility of a claimant obtaining an ASI against an English defendant on the basis of the defendant's domicile alone, even where the arbitration agreement in question provides for a foreign seat and foreign governing law.

The forthcoming Arbitration Bill 2024 ("Bill"), proposes to amend the Arbitration Act 1996 so that the default law of an arbitration agreement in a contract is the law of the seat, unless explicitly stated otherwise. This change follows the Law Commission recommendation, which found that the law set out in Enka was "complex and unpredictable". For an overview of these proposals, see our briefing.

In its judgment, the Supreme Court declined to revisit the principles established in Enka given that the Bill puts the issue squarely before Parliament. Until the Bill is enacted, Enka (and the clarifications provided by the Supreme Court in this case) remains good law. Parties should seek to minimise the risk of disputes by explicitly specifying the governing law of their arbitration agreements.

Our longer briefing is available here.