ASIs in favour of foreign seated arbitrations: Order restored by the English Court of Appeal?

In UniCredit Bank GmbH v Ruschemalliance [2024] EWCA Civ 64, the Court of Appeal (“CoA”) has overturned the High Court’s earlier decision in GvR meaning that another anti-suit injunction (“ASI”) has been granted by the English courts in support of a foreign seated arbitration in the context of Russia-related disputes. The case is the first, fully authoritative, appellate court judgment on the point.

Background

In UniCredit, at first instance (see the anonymised case of GvR), Teare J refused to grant an ASI to restrain proceedings brought by Ruschemalliance (“RCA”) in Russia in breach of an ICC arbitration agreement (Paris seat) contained in English law governed bonds. That case was part of a series of disputes (including the Deutsche Bank and Commerzbank cases) in which RCA is seeking payment on performance bonds (relating to a gas project in Russia), which the banks say cannot be paid due to the impact of EU sanctions. Instead of arbitrating the disputes in Paris, RCA has commenced proceedings in Russia relying on Article 248 of the Russian Arbitrazh (Commercial) Procedure Code.

In response, the banks have sought ASIs from the English court. In GvR/UniCredit, Teare J’s initial refusal was based on the English court lacking jurisdiction to grant the ASI; primarily because he found French law applied to the arbitration agreement but also because he viewed France as the proper forum for supervisory relief.

UniCredit appealed this ruling, and the CoA overturned Teare J’s judgment on the following basis.

Jurisdiction to grant the ASI

As RCA was not present in the jurisdiction; the CoA acknowledged that this turned on there being (i) a serious issue to be tried; (ii) a good arguable case that a gateway for service out exists, and (iii) England being the appropriate forum. (i) was not in issue.

Service out gateway – applicable law of arbitration agreement

Here, the “gateway” relied upon by UniCredit was CPR6B 3.1(6)(c) - that the claim relates to a contract governed by English law. In the ASI context this meant that UniCredit had to show that the arbitration agreement was so governed. Answering that question then involved the CoA applying aspects of the UKSC’s interpretative principles in Enka; in particular that (where the law applicable to the arbitration agreement is not otherwise specified) an express choice of law for the main contract (here, English law) will generally be taken to be the choice of law of the arbitration agreement.

This, however, is subject to contextual factors that might negate such a conclusion; one being where the law of the seat contains a provision that a choice of that seat will also lead the arbitration agreement to be governed by that law. UniCredit, therefore, raised the issue of whether French law contained such a rule. If so, that would displace the presumption in favour of English law (and thereby defeat UniCredit’s ASI application). In the CoA’s view, although such a rule did not have to be in a statutory or legislative provision and could be established through sufficiently clear case law, French law did not contain such a rule; it only provided that the parties’ “common intention” was to be applied – which was not the same as a rule that a choice of Paris seat meant that French law applied. [59-65]

The CoA was comforted in this conclusion by the UKSC’s Kabab-Ji decision, in which the UKSC concluded, in relation to a similar English law/Paris seat situation in a different context, that English law applied. In that case it did not appear to occur to the UKSC to apply the above exception making it, in the CoA’s view a “striking case of the dog which did not bark” [64].

Appropriate forum

Here, the CoA saw the question as being where “the case can be suitably tried for the interests of all the parties and for the ends of justice”. Agreeing with the earlier Deutsche Bank decision, it held that this was England as a French court could not grant an ASI (and, on the evidence, would also not object to the English court doing so). Furthermore, supposing that the tribunal could act effectively was unrealistic since:

• Although an ICC tribunal could grant UniCredit an ASI, it would likely be unenforceable in Russia, particularly in circumstances where the Russian court has already held the arbitration agreement between the parties to be unenforceable; [76] and
• Without the protection of an ASI from the English court, it was unlikely an arbitration could proceed. RCA would likely obtain an ASI from the Russian courts to restrain UniCredit from pursuing it, and the Russian courts could then determine the merits against UniCredit (with its orders being able to be enforced against its Russian assets) [77].

Discretion

Finally, the CoA rejected any suggestion that there were “strong reasons” for it not to grant the ASI. Although, where the seat was foreign the English court might have to exercise more “caution” – particularly if the courts of the seat saw an ASI as unwarranted interference – this was not the case here as evidence of the French court’s attitude was not to that effect [82]. Furthermore, this approach was supported by the structure of the Arbitration Act 1996, and policy more generally [83]

Comment

The CoA’s judgment is important, first and foremost, in providing appellate level guidance of the approach that the English courts should take to ASIs in favour of foreign seated arbitrations; this being the first, fully contested, determination of the matter by the CoA (its earlier decision in Deutsche Bank being ex parte). It indicates that a pragmatic approach will be taken to issues of appropriate forum and discretion and, although the possibility of further UKSC consideration can’t be ruled out, should provide some comfort to parties looking, in like circumstances, to the English courts for countermeasures to concurrent proceedings in Russia.

As to applicable law, the judgment also offers further consideration, and clarity, as to the operation of one aspect of Enka’s interpretative approach to determining applicable law. In this case, the result was that English law could apply so as to help establish jurisdiction. That being said, the extent to which, in a like case, English courts might be so free to intervene in future seems open to some doubt. The Arbitration Bill’s proposed new rule on applicable law might seemingly require a different conclusion - although even that may ultimately depend on how much space the finalised rule, currently subject to debate in the House of Lords, leaves for principles of contractual interpretation to operate.

Click here for the CoA’s judgment

On 17-18 April 2024 the UKSC heard an appeal against the Court of Appeal’s judgment in this case. Shortly thereafter, on 23 April, the UKSC announced that the appeal would be dismissed. The UKSC’s full judgment is, however, still pending and we are planning to report on it once available.