On 18 September 2024, the UK Supreme Court handed down its judgment in UniCredit Bank GmbH v RusChemAlliance LLC following an earlier announcement of its decision to dismiss RusChem’s appeal, and uphold the judgment of the Court of Appeal and the final mandatory anti-suit injunction it granted requiring RusChem to withdraw proceedings it commenced in Russia in breach of an arbitration agreement.
In what is an authoritative, pro-arbitration decision, the Supreme Court has provided much-needed clarity on the circumstances in which English anti-suit relief will be available in support of foreign-seated arbitrations. Taking this opportunity to revisit – and effectively recast a portion of – its decision in Enka v Chubb [2020] UKSC 38, the court found that, on the facts of this case, English anti-suit relief was available in support of Paris-seated arbitration.
Background
RusChem, a subsidiary of Gazprom, entered into EPC contracts with a contractor for the construction of liquified natural gas and gas processing plant facilities in Russia. RusChem made advance payments to the contractor to the tune of some €2bn. The contractor’s obligations were guaranteed by on-demand bonds issued by several international banks, including UniCredit. Those bonds were governed by English law and provided for disputes arising out of them to be resolved via Paris-seated ICC arbitration.
Following the sanctions imposed on Russia by the EU, construction was halted and RusChem subsequently terminated the contracts and requested return of the advance payments. Having been told by the contractor that it could not return the advance payments on account of sanctions, RusChem requested payment under the bonds from UniCredit. UniCredit also refused to pay on the basis that it too was restrained by EU sanctions. RusChem then issued proceedings against UniCredit in the Russian courts seeking payment under the bonds.
In response, UniCredit applied to the English courts for an anti-suit injunction prohibiting RusChem from pursuing the Russian proceedings, on the basis that those proceedings were a breach of the parties’ agreement to arbitrate any disputes in Paris.
Procedural history
The English High Court initially granted Unicredit’s ex parte interim anti-suit injunction on 24 August 2023, prohibiting RusChem from continuing the Russian proceedings. RusChem applied to challenge this decision on jurisdictional grounds and the High Court found on 8 September 2023 that the English courts did not have jurisdiction to hear the claim (although the interim anti-suit injunction remained in place pending appeals).
The Court of Appeal reversed this decision and granted UniCredit a final mandatory anti-suit injunction. It found, applying the principles in Enka, that the Paris-seated arbitration agreements in the bonds were governed by English law – the “general rule” in Enka being that where the law applicable to the arbitration agreement is not specified, a choice of governing law for the contract will generally apply to an arbitration agreement within it.
The Court of Appeal also found that England and Wales was the proper place to bring the claim, including because an anti-suit injunction was not available from the French courts.
Supreme Court decision
The sole issue for the Supreme Court was whether the English court had jurisdiction over UniCredit’s claim. This turned on two questions: First, are the arbitration agreements governed by English law? Second, are the courts of England and Wales the proper place for UniCredit to bring its claim for an anti-suit injunction?
Governing law
To confirm the English court’s jurisdiction, it was necessary for UniCredit to show that it had a “good arguable case” that the claim fell within one of the relevant gateways for service under paragraphs 3.1 of Practice Direction 6B. UniCredit relied solely on the “contract gateway”, which applies where a claim is made in respect of a contract governed by English law. It was in that context that the court was asked to decide whether the bonds were governed by English law.
The Supreme Court considered its earlier decision in Enka which dealt, in some detail, with the issue of what system of law governs an arbitration agreement when the law applicable to the contract containing it differs from the law of the seat of the arbitration. Per Enka, the starting point is it is natural to interpret a governing law clause in a contract as also applying to any arbitration clause within that agreement. The reason for this is straightforward: the arbitration clause is part of the contract which the parties have agreed is to be governed by a particular system of law. The fact the parties may have chosen a different seat is not, by itself, enough to displace an express governing law clause which – having applied the rules of contractual interpretation of English law as the forum– applies to the contract as a whole. This means that generally where the law applicable to the arbitration agreement is not separately specified, the governing law clause for the overall contract will generally apply to the arbitration agreement which is part of the contract.
RusChem, for its part, maintained that paragraph 170(vi)(a) of Enka established an exception to the general rule, the effect of which was said to be that where the law of the seat treats the arbitration agreement as governed by that country’s law, it may be inferred that the arbitration agreement was intended to be governed by the law of the seat. Here, RusChem argued, French law provides that arbitration agreements are governed by French law. The Supreme Court provided some welcome clarification on this so-called exception, which has been the subject of much recent debate. Cautioning against treating sentences in judgments “as if they had textual authority in the same way as an Act of Parliament”, the court noted that the exception language in Enka was permissive rather than prescriptive – it did no more than note that, in some cases, the law of the seat “may” imply that the arbitration agreement was intended to be governed by the laws of the seat. In any event, following detailed consideration of the issues, the Supreme Court found that in fact no inference can properly be drawn from the law of the seat which is capable of displacing the general principle. Accordingly, the court clarified that this potential exception discussed in Enka should be disregarded in the future.
Proper place
Having dealt with the issue of governing law, the Supreme Court turned to the second question of the proper forum of the claim – it being clear under CPR 6.37(3) that the “court will not give permission [to serve out] unless satisfied that England and Wales is the proper place in which to bring the claim.”
The Supreme Court made several points in this regard:
- The forum non conveniens principle – that an English court should not exercise its discretion if there is another, more suitable forum available – was not relevant to this appeal. This is because forum non conveniens considerations are relevant where the parties have not contractually agreed a forum. In this case, the parties had contractually agreed on a forum through the arbitration agreement.
- The Supreme Court also addressed RusChem’s arguments that the proper forum for the claim was the French courts or, in the alternative, arbitration. The Supreme Court found that it was not incompatible with the supervisory authority of the French courts over any future Paris-seated arbitration for the English courts to uphold the parties’ agreement to arbitrate – as in this case with an anti-suit injunction. In addition, it pointed out that the French courts do not have any general power to grant an anti-suit injunction and, on the specific facts, the French courts would not have jurisdiction to hear any such claim. Therefore the French courts were not even an available forum, let alone the proper forum.
- In relation to RusChem’s alternative claim that the proper forum was arbitration, the Supreme Court highlighted that an order from an arbitrator preventing RusChem from continuing proceedings would be “wholly ineffectual” – arbitrators lack the powers a court has to enforce its orders (including sanctions for contempt of court). Put another way, an order made by an arbitrator only creates a contractual obligation and RusChem’s existing contractual agreement to arbitrate had done nothing to deter it from bringing the Russian proceedings.
Takeaways
This judgment is significant. It has been clear for some time that the English court will readily grant anti-suit relief in support of English-seated arbitration. It is now apparent that parties will often be able to secure such relief where the dispute arises out of a contract which is governed by English law, even where the arbitration clause provides for a foreign seat, as long as there is not a separate governing law clause in respect of the arbitration agreement itself or another reason to suggest the English courts are not the proper place for the claim to be brought.
This will be welcome news to many, particularly given Article 248.1 of the Russian Arbitrazh Procedure Code, which purports to allow Russian courts to disregard foreign arbitration agreements and to exercise exclusive jurisdiction over disputes arising out of the imposition of sanctions. An English anti-suit injunction – the breach of which can have grave consequences, such as fines and even prison time for individuals – can cause a counterparty to think twice.
However, the effects of this decision may be short-lived due to the reforms set out in the draft Arbitration Bill (see our blog post on the wider reforms in the Arbitration Bill here). The Bill in its current form proposes to change the position under Enka and in Unicredit so that, absent an express choice of law in the arbitration agreement, the law governing the arbitration agreement will be the law of the seat of the arbitration. In these circumstances, parties seeking an anti-suit injunction in support of arbitrations without an English seat would need to show that the parties expressly agreed that the arbitration agreement is subject to English law or show that their claim fits within one of the other jurisdictional gateways. As such, where contracting parties intend their arbitration agreement to be subject to English law, they would be well-advised to say so in express terms.
