Supreme Court upholds anti-suit injunction in RusChemAlliance

The Supreme Court has again shown the willingness of the English courts to uphold parties’ agreements to arbitrate, even when the seat of arbitration is not England. The decision (given orally) in Unicredit Bank GmbH v RusChemAlliance was the result of a fast track appeal to the Supreme Court in the UK, following a Court of Appeal decision in February. No judgment was handed down and the reasons for the decision will follow, but the effect is that the declarations and anti-suit injunction granted by the Court of Appeal remain in effect.

Since sanctions were imposed on a wide range of Russian companies following the invasion of Ukraine in 2022, we have seen numerous court cases started by Russian parties in Russia, contrary to agreements to arbitrate disputes. Where the parties had agreed to an arbitration seated in England, it is possible for the non-Russian party to apply to the English court for an anti-suit injunction, prohibiting the Russian party from continuing to take steps in the Russian proceedings started in breach of the agreement and, ultimately, requiring the Russian party to withdraw those proceedings.

However, many of the agreements in question specified Paris as the seat of any arbitration. The French courts do not grant anti-suit injunctions and the Russian courts are unlikely to heed any submissions attempting to prevent them taking jurisdiction, particularly in light of Russian legislation passed in 2020 which confers exclusive jurisdiction on the Russian courts where the dispute involves a Russian party subject to sanctions, even in the face of a valid arbitration agreement. Non-Russian parties are therefore left with no remedy other than resisting enforcement of any resulting Russian judgment and commencing an arbitration against the Russian party for breach of contract. Parties in this position have sought help from the English courts, raising the question as to whether English courts can grant anti-suit injunctions in support of arbitrations seated in other jurisdictions.

Unicredit v RusChemAlliance

RCA, a Russian company, had contracted with German companies to build LNG facilities, with Unicredit providing a performance bond. Following the imposition of sanctions against Russia by the EU, the German contractors ceased work and RCA 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 RCA commenced court proceedings in Russia.

After an application by Unicredit for an anti-suit injunction was refused at first instance, the Court of Appeal granted it. It held that English courts had jurisdiction because:

1. the English governing law clause provided a gateway for service out of the jurisdiction; and
2. the English courts were the proper place to seek the anti-suit relief.

The first of these points was complicated by the fact that an arbitration clause constitutes an “agreement within an agreement” and the governing law of an arbitration clause may be different to that of the surrounding agreement. The bond contained no express choice of governing law for the arbitration clause, as distinct from the rest of the agreement. It was argued by RCA that in France the governing law of an arbitration clause is that of the seat, while Unicredit relied upon English authority (Enka v Chubb) that the governing law of an arbitration clause will usually be the same as for the rest of the agreement. The Court of Appeal held that the French law position was that the governing law of the arbitration clause depended upon the parties’ common intention and that this did not displace the presumption that English law governed the arbitration clause.

On the second point, the Court of Appeal held that there was no interference with the jurisdiction of the French courts, as the courts of the seat, because they could not grant an anti-suit injunction and the interests of justice were that the parties be held to their agreement to arbitrate. RCA’s argument that Unicredit should start an arbitration and obtain an injunction from an emergency arbitrator was dismissed as “abusive”, given that it had argued before the Russian courts that the arbitration agreement was void.

What next?

Following the Supreme Court ruling, we expect the English courts will continue to see parties seeking anti-suit injunctions in support of arbitrations seated in Paris and other seats where the courts do not grant such relief. However, there is a notable development to watch.

The Arbitration Bill is making its way through Parliament, implementing changes to the Arbitration Act 1996 recommended by the Law Commission (see more here). This includes a provision to overturn the rule in Enka v Chubb, so that where parties do not expressly specify a governing law for the arbitration agreement, it will be the law of the seat. As many arbitration clauses do not specify a governing law, this will impose a further hurdle for parties seeking to argue that the English courts are the appropriate forum for anti-suit relief where the breached arbitration agreement specified a seat in another jurisdiction.