In a ground-breaking ruling, the Court of Appeal has confirmed that English courts have the authority to issue final anti-suit injunctions in support of arbitration agreements governed by English law, even when the seat of the arbitration is outside of England. The landmark judgment in Unicredit Bank GmbH v Ruschemalliance LLC [2024] EWCA Civ 64, which follows three earlier lower court decisions arising on substantially the same fact[1], reinforces the robust protection of arbitration rights under English law and solidifies the position of English courts as a bastion for arbitration.
Background
The dispute revolved around Italian bank UniCredit, which, along with Deutsche Bank and Commerzbank, issued performance bonds in favour of RusChemAlliance (RCA), a Russian operator of an LNG facility in the Leningrad Oblast, in relation to construction contracts between RCA and German engineering contractors. These bonds were governed by English law and provided for arbitration in Paris under the ICC rules.
Following Russia’s invasion of Ukraine in February 2022 and the subsequent imposition of wide-ranging EU sanctions, the German companies halted work under the construction contracts after receiving confirmation from German authorities that they deemed such work to be prohibited under Regulation (EU) 833/2014. RCA terminated the contracts and sought compensation from the contractors while demanding UniCredit to redeem the performance bonds. UniCredit, in turn, refused, citing the EU sanctions.[2]
Under amendments made to the Russian Arbitrazh (Commercial) Procedure Code (APC) in mid-2020, disputes related to sanctions or arising out of sanctions against Russian parties fall under the exclusive jurisdiction of the Arbitrazh courts. Taking advantage of this law, RCA initiated proceedings against UniCredit in the St. Petersburg Arbitrazh Court, seeking payment under the bonds and denying the enforceability of the arbitration agreements on the grounds that the EU sanctions violated public policy in Russia.
In response, UniCredit filed anti-suit proceedings in England. UniCredit argued that the arbitration agreement was governed by English law, allowing service out on RCA and conferring jurisdiction on the English courts. UniCredit further argued that RCA’s initiation of proceedings in Russia constituted a breach of the arbitration agreement, making it appropriate to restrain them. RCA countered, challenging the jurisdiction of the English courts, asserting that although the bonds were governed by English law, they provided for arbitration outside of England.
Teare J, at first instance, found against UniCredit, holding that the English courts did not have jurisdiction, and that UniCredit’s remedy lay in damages, which it could obtain through the French-seated arbitration.[3]
Decision
UniCredit appealed. The question before the Court of Appeal was whether the English courts had jurisdiction to grant an anti-suit injunction to restrain foreign proceedings when the contract, although governed by English law, included an agreement to arbitrate outside of England.
RCA is not an English domiciliary, and therefore the jurisdiction of the English courts depended on whether service could be effected on RCA out of the jurisdiction. To establish this, UniCredit needed to show that there was a good arguable case falling under one of the jurisdictional gateways and that England was the proper place in which to bring the claim. [4]
UniCredit relied on the ‘governing law’ gateway (i.e., the fact that the bonds were governed by English law). To determine whether that gateway was available, the Court considered the governing law of the arbitration agreement. The Court applied the presumption established in Enka v Chubb [2020] UKSC 38 (Enka) that the law governing the contract also governed the arbitration clause, unless the law of the seat of arbitration dictated otherwise. Since the law of France, the chosen seat, did not contain such a rule, the Court concluded that the arbitration agreement was governed by English law.
To establish that England was the appropriate venue for the claim, UniCredit argued that it was abusive for RCA to renounce the arbitration agreement before the Russian courts only to assert in England that substantial justice could be achieved through arbitration in Paris. Additionally, because the French courts would not grant their own anti-suit injunction, without intervention from the English courts, RCA could obtain an injunction from the Russian courts, effectively preventing UniCredit from pursuing arbitration altogether. That, UniCredit said, risked injustice. The Court of Appeal agreed, dismissing the notion that UniCredit might achieve justice in France as an “illusion”.
Having found that the English courts had jurisdiction to grant a final mandatory anti-suit injunction, the Court then turned to the question of whether it should do so. While acknowledging the need for caution when the arbitration in question is seated abroad, the circumstances in this case did not militate against granting an anti-suit injunction. The parties had agreed that any dispute should be resolved through arbitration in France, applying English law. As a matter of English public policy, parties who agree to arbitration should abide by that agreement. And English law, which governed the agreement, had sufficient interest in enforcing these commitments to justify the indirect interference with a foreign court that an anti-suit injunction would entail.
Implications
This landmark decision confirms that parties may be able to obtain anti-suit injunctive relief from the English courts in support of arbitrations seated abroad, provided the court has personal jurisdiction over the respondent party. An arbitration agreement governed by English law may be sufficient to meet this requirement, even if the English courts have no curial role. The court must still be satisfied that England is the appropriate forum for the claim, but it appears willing to consider that requirement met in circumstances where the operation of foreign laws, such as Russia’s counter-sanctions laws, or the lack of an alternative forum in which effective relief could be obtained may deprive a party of a remedy.
It is important to note, however, that the Court’s decision heavily relied on the rule established in Enka that the governing law of the contract also governs the arbitration agreement. This may not remain the case for much longer. Proposed reforms to the Arbitration Act 1996 would see the Enka rule displaced in favour of a rule under which, in the absence of any express agreement to the contrary, the law of the seat governs the arbitration agreement. Consequently, parties seeking to avail themselves of the jurisdiction of the English courts to grant anti-suit injunctive relief in support of a foreign-seated arbitration should expressly state that the law of the arbitration agreement is English or that the English courts have jurisdiction for this purpose.
[1] This case was taken on appeal from G v R [2023] EWHC 2365 (Comm). Deutsche Bank AG v RusChemAlliance LLC [2023] EWCA Civ 1144 and Commerzbank AG v RusChemAlliance LLC [2023] EWHC 2510 (Comm) involved similar orders for anti-suit injunctions. We previously wrote about the former decision here.
[2] Specifically, Articles 3b(2)(b) and 11(1) of Regulation (EU) 822/201, relating to the liquefaction of natural gas and ancillary measures preventing the satisfaction of certain claims arising from compliance with EU sanctions laws.
[3] G v R [2023] EWHC 2365 (Comm).
[4] There was also a requirement that there is a serious issue to be tried on the merits. In the event, the Court found that there was no difficulty satisfying that requirement, and it was not analysed in detail.
