English High Court refuses anti-suit injunction as wrong forum to assess arbitration clause breach

In Enka Insaat Ve Sanayi AS v OOO “Insurance Company Chubb” & Ors [2019] EWHC 3568 (Comm), the English High Court considered an application for an anti-suit injunction to restrain proceedings in Russia. The case illustrates that, ultimately, such a remedy is discretionary and that applicants need to consider the circumstances of their case carefully.

 

The application was brought by Enka, a Turkish engineering firm which was party to a contract for the construction of a power plant in Russia (the “Contract”). In 2016, a fire caused significant damage to the plant. Chubb Russia paid an insurance claim by the plant owner. On 25 May 2019, Chubb Russia commenced subrogation proceedings against Enka and ten others in the Moscow Arbitrazh (commercial) Court (the “Moscow Claim”).

 

The procedural history of the Moscow Claim is complex. It was formally permitted to proceed on 3 September 2019. Enka did not involve itself in the early stages of the Moscow Claim.

 

Enka’s application to the English Court was filed on 16 September 2019. It also applied to the Moscow Arbitrazh Court on 17 September 2019 to stay the proceedings in favour of arbitration (pursuant to Article II(3) of the New York Convention).

 

The relevant arbitration agreement was set out in Clause 50.1 of the Contract and provided for arbitration under the ICC Rules, with place (seat) in London. The contract itself did not contain a conventional governing law clause, although it was asserted by Chubb (and initially accepted by Enka in the Moscow Claim) that certain provisions of the Contract constituted such a choice in favour of Russian law. There was no express choice of law in respect of the (English seated) arbitration agreement.

 

 

The question for determination by Baker J was whether he ought to grant an anti-suit injunction against Chubb Russia. In resolving that question, the judge considered three principal questions:

 

(a) was the arbitration agreement governed by Russian or English law?

(b) if the arbitration agreement was governed by Russian law, could, in principle, an anti-suit injunction be granted?

(c) was it appropriate for the English court to grant the injunction?

 

Although it was common ground that the arbitration agreement was valid and binding regardless of whether Russian, or English, law applied to it, the main reason for the point being argued was because Chubb asserted that, if Russian law applied, the English court could not grant an anti-suit injunction, and that the relevant disputes in issue (due to their tortious nature) would in any event fall outside its scope.

 

 

As to the applicable law of the arbitration clause, Enka argued that the express choice of seat implied a choice of English law, notwithstanding that the Contract itself may have been governed by Russian law.  Baker J noted that an arbitration agreement was separable and could be governed by different law from the main contract, and that a choice of seat may imply a choice of governing law of the arbitration clause. Whether (in the absence of express choice) the law of the main contract, or that of the arbitration seat, governed the arbitration clause, however, was in his view, a matter of contractual interpretation and he decided that, in the circumstances, the English seat did not warrant a conclusion that English law governed the clause.

 

As to the impact of a foreign law governed arbitration clause on the power of the English court to grant an anti-suit injunction, Enka argued that (subject to well-known EU law restrictions) an anti-suit injunction should be awarded to enforce an arbitration agreement where it has been breached irrespective of its governing law. Baker J agreed, it was not a principle confined to the enforcement of English law contractual obligations.

 

That left the question of whether the English court should intervene in this case. On this ground, however, Enka’s application was denied. In that respect, Baker J determined that Chubb Russia had proceeded with the Moscow Claim in good faith on the reasonably arguable bases that the arbitration agreement was governed by Russian law (Enka had initially agreed with this proposition) and that it claims were therefore outside the scope of the arbitration agreement. In this case, Baker J noted that Enka also had only engaged the English court at a late stage after initially seeking a stay in Russia. In the circumstances, the proper course for Enka was to have sought dismissal by the Moscow Arbitrazh Court promptly so as to avoid the “rolled-up hearing”, or if it was not minded to argue its position before a Russian court, to constitute an arbitral tribunal under the Contract and seek injunctive relief from the tribunal or, if it were urgent, to seek relief from the court. Instead Enka had not acted until a very late stage.

 

 

The outcome of this case was determined on its facts, which distinguished the matter from a simple application of the Angelic Grace principles. The Moscow Claim involved a reasonably arguable proposition in an appropriate court (those issues arguably being a question of Russian law) in circumstances where the applicant had petitioned that court for a stay and left it until a late stage to come to the English court.  The Court will be reticent to interfere in such circumstances despite the parties’ choice of seat.

 

Separately, the case is a further illustration why, in situations where the governing law of the contract and the seat of arbitration do not “match”, parties are well advised to provide expressly for the law that governs their arbitral agreement. Doing so can significantly reduce or eliminate disputes over such matters.

 

Click here for a copy of the judgment.