The decision in UniCredit Bank GmbH v RusChemAlliance LLC addressed the proper jurisdiction for bringing an anti-suit injunction (“ASI”) application when the law governing the arbitration agreement differs from that governing the main contract. The decision also provides clarity on whether English courts will grant ASIs in support of foreign-seated arbitrations.
Background:
RusChemAlliance, (“RusChem”) a Russian company, had contracted with German companies to build LNG facilities, with UniCredit (“UniCredit”) providing a performance bond. Following the imposition of sanctions against Russia by the EU, the German contractors ceased work and RusChem terminated the contracts, demanding repayment of advance payments and payment under the bond. The bond was governed by English law and contained an ICC arbitration clause specifying a Paris seat, but RusChem commenced court proceedings in the Russian Arbitrazh Court, seeking payment under the bonds. While UniCredit challenged the Russian court’s jurisdiction, the Arbitrazh Court rejected the challenge but stayed proceedings[1] pending the outcome of UniCredit’s anti-suit injunction application in England. UniCredit secured an interim injunction from the Commercial Court to restrain RusChem from pursuing Russian proceedings. RusChem successfully challenged the English court’s jurisdiction, but the Court of Appeal overturned the decision, issuing a final injunction against RusChem. The Supreme Court (“SC”) upheld the Court of Appeal’s ruling.
Below we have outlined the key insights from the SC judgment.
1. Governing law of the agreement
UniCredit argued that its claim qualifies under a category involving contracts governed by English law. RusChem contended that the arbitration agreements should be governed by French law, citing the selection of Paris as the arbitration seat. However, the SC ultimately favoured UniCredit’s argument.
The SC emphasised principles from Enka v Chubb[2] and Kabab-Ji v Kout[3]. In Enka, it held that a governing law clause generally extends to arbitration agreements unless explicitly excluded, even if the arbitration seat follows a different legal system. In Kabab-Ji, it reaffirmed that typical governing law clauses apply to arbitration agreements unless clear exceptions are stated.
Applying these principles, the SC found that Clause 11 of the bonds comprehensively covered “all obligations arising out of or in connection with” the bonds, including the arbitration agreement in Clause 12. The bonds contained no language excluding Clause 12 from English law, and the choice of different arbitrationseat did not override it. Thus, the SC held the arbitration agreement was governed by English law.
2. Where should the ASI be sought?
To establish jurisdiction for an ASI, UniCredit needed to prove two points:
- its claim falls under a category permitting lawsuits against defendants abroad;
- England and Wales are the appropriate forum.
RusChem argued that the proper forum was the French courts, but this was rejected by the SC for reasons discussed below.
A distinction exists between “anti-suit relief” and “supervisory powers” of the court
The SC held that the role of the courts of the seat of arbitration is to supervise the arbitration itself. The SC analysed the scope of “supervision”, explaining that it includes such functions as appointing an arbitrator when parties fail to agree, addressing challenges to an arbitrator’s impartiality, providing a forum to confirm the validity of the award and addressing challenges based on jurisdictional, procedural or substantive issues. The SC held that preventing a party from breaching its obligation to arbitrate does not fall under the scope of supervisory jurisdiction.
The SC determined that the English court’s authority to grant an ASI stemmed from its equitable jurisdiction under Section 37 of the Senior Courts Act 1981. This power is independent of the court’s supervisory role under the Arbitration Act 1966.
In this case, the seat of the arbitration was Paris. However, even though the bond contained a clause providing for settlement of disputes under the rules of the ICC in Paris, it does not imply that the French courts have jurisdiction to grant interim injunction.
Additionally, expert evidence demonstrated that French courts lacked jurisdiction to hear any claim brought by UniCredit against RusChem and were unable to issue ASI. Consequently, it was appropriate for the English court to grant an ASI to prevent a breach of arbitration agreement.
The choice of a foreign arbitral seat should not prevent the English court from granting anti-suit relief. The question of whether to compel a party to comply with an arbitration agreement is not a supervisory issue to be left to the courts of the seat.
Furthermore, the SC upheld the Court of Appeal’s rejection of RusChem’s argument that UniCredit should have pursued arbitration under the agreements. It reasoned that arbitration would not ensure substantial justice for UniCredit because:
(i) an arbitrator’s order would lack coercive power and enforceability in Russia, as arbitrators do not have the authority to impose sanctions such as contempt of court; and
(ii) without an ASI from the English Court, RusChem was likely to seek a Russian court injunction to block UniCredit from initiating or continuing arbitration proceedings.
The SC judgment reflected the English court’s commitment to upholding the principles of the New York Convention 1958, which mandates contracting states to enforce arbitration agreements when there is a sufficient connection with England and Wales. In this instance, this connection was satisfied given that the bonds were governed by English law.
Proposed changes to the Arbitration Act 1996 under the Arbitration Bill
Although the SC has provided clarity on long-awaited issues on the proper place to bring an ASI in case of foreign arbitration proceedings and clarified its position in Enka, emphasising the principle that the law governing the main contract typically extends to the arbitration agreement, this position is about to change in accordance with the proposed changes to the Arbitration Act 1966. The draft Arbitration Bill currently proposes a default rule that the arbitration agreement should be governed by the law of the seat unless otherwise agreed by the parties. This legislative change could introduce uncertainty, particularly regarding the availability of ASIs for arbitration agreements seated abroad and governed by foreign law under the new rule.
Grant of ASI in various jurisdictions in support of foreign-seated arbitrations
EU
In accordance with the EU law, courts in one Member State are barred from issuing ASIs to prevent proceedings in another Member State’s courts to maintain mutual judicial respect and judicial cooperation among Member States. This prohibition was firmly embedded in the Lugano Convention and the Brussels Regulation, which prioritised judicial certainty by requiring courts to defer to the Member State court where proceedings were first initiated, effectively disallowing interference from other Member State courts.
However, this position has changed following Brexit. The UK High Court has reasserted its ability to grant ASIs, even in cases where proceedings are initiated in EU Member State courts in violation of the UK’s exclusive jurisdiction clause. The analysis of recent cases illustrates the English courts’ readiness to issue ASIs to uphold the parties’ contractual agreements, applying the same approach as they do with disputes involving other non-EU jurisdictions. This approach was endorsed in various cases such as QBE Europe SA/NV v Generali España de Seguros Y Reaseguros[4] and Ebury Partners Belgium SA/NV v Technical Touch BV[5].
While the general issuance of ASIs by EU Member States is considered incompatible with EU regulations, below is a brief summary of the policies in certain EU countries and their approach to granting ASIs in support of proceedings in non-EU jurisdictions.
Austria
Austrian law does not permit anti-suit injunctions in support of arbitration. The court intervention is restricted to matters explicitly outlined in Chapter 4 of the Austrian Civil Code of Procedure[6], which does not include the issuance of anti-suit injunctions.
France
French courts have traditionally been hesitant to issue ASIs, viewing them as contrary to state sovereignty and a limitation on their ability to determine a jurisdiction. This position is in line with the European Court of Justice prohibition to use ASIs within the EU in its 2004 ruling, citing their incompatibility with Regulation No.44/2001 (the Brussels I Regulation). However, this position does not preclude French courts from issuing ASIs to restrain proceedings in non-EU jurisdictions.
Germany
German courts, consistent with the approach of other EU Member States, do not grant anti-suit injunctions to restrain proceedings in Germany that violate an arbitration agreement. Moreover, they will not enforce such injunctions issued by foreign courts, including those from EU Member States. However, arbitral tribunals seated in Germany can issue anti-suit injunctions, and it is likely that German courts would enforce such injunctions if issued by a tribunal.
Switzerland
Swiss law has not definitively resolved the admissibility of ASIs. Swiss state courts, including the Geneva court in 2004, have rejected such requests[7], deeming them inconsistent with the fundamental principles of the Swiss legal order. Most Swiss legal scholars oppose anti-suit relief outright. The Swiss Federal Court has acknowledged this majority view, but has yet to make a conclusive ruling on the matter.
Updated: November 2024
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[1] Decision of the Arbitrazh court of Saint Petersburg and Leningrad region A56-60809/2023
[2] Enka Insaat ve Sanayi AS v OOO Insurance Company Chubb [2020], UKSC 38.
[3] Kabab-Ji SAL v Kout Food Group [2021] UKSC 48.
[4] QBE Europe SA/NV v Generali España de Seguros Y Reaseguros [2022] EWHC 2062
[5] Ebury Partners Belgium SA/NV v Technical Touch BV [2022] EWHC 2927 (Comm)
[6] S. 578 ACCP
[7] Decision of the first instance court of the Canton of Geneva of 2 May 2004, ASA Bulletin 2005, 728 et seq.