UK Supreme Court’s anti-suit ruling supports a foreign-seated arbitration

In the recent case of UniCredit Bank GmbH (Claimant) v RusChemAlliance LLC (Defendant), and in what is believed to be the first time that the UK Supreme Court has ruled on anti-suit injunctions (ASI) supporting a foreign-seated arbitration, the Supreme Court upheld an ASI preventing a Russian company from pursuing legal proceedings in Russia, in breach of a Paris-seated arbitration agreement.

Background

Under section 37 Senior Courts Act 1981, the High Court has the power to grant a final or interim injunction where it appears just and convenient to do so, including an ASI: an injunction which prohibits proceedings in a court or tribunal that are not in the jurisdiction agreed by the parties.

In this case, the Claimant, a German bank, issued performance bonds in favour of the Russian Defendant guaranteeing the obligations of two German contractors engaged to build gas processing plants in Russia. The bonds were governed by English law and contained an arbitration clause with a Paris seat. However, there was no express provision concerning the law relating to the bonds’ arbitration agreement.

When the EU imposed sanctions on Russia in 2022, both contractors ceased performance, and refused to return the advance payments due to the Sanctions prohibition.

The Russian Defendant commenced proceedings in the Russian courts, which ruled in their favour when the Claimant sought to dismiss the action on the basis of the bonds’ arbitration clause.

In response, the Claimant applied to the English courts for an ASI to prevent the Defendant from continuing the Russian proceedings.

To establish jurisdiction for an anti-suit injunction, the Claimant needed to prove:

1. That its claim fell within a permissible category for suing a foreign defendant, and
2. That England was the appropriate forum for the claim.

The High Court Proceedings

The English High Court held that it did not have jurisdiction to hear the matter but maintained the ASI pending appeals on that decision. The court concluded that it did not have jurisdiction to grant the injunction sought because:

1. Evidence indicated that French substantive rules (the law of the seat) applied;
2. Without English law governing the arbitration agreement, the Claimant had no jurisdictional basis (as required by the jurisdictional gateways in the Civil Procedural Rules; and
3. England was not the proper place in which to enforce the arbitration agreement¹.

The Court of Appeal Proceedings

The Claimant appealed and the Court of Appeal overturned the decision and granted the ASI, confirming that it is possible for the English court to grant an ASI for foreign seated arbitrations.

The court considered the principles set out in Enka v Chubb² to determine the governing law of the agreement. In Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb & Ors (Enka), it was held that where there is no express provision stating the choice of law for the arbitration agreement, the law governing the wider contract will generally apply. Consequently, English law would apply here.

The court also disagreed with the first instance decision that England would not be the appropriate forum for the claim.

The UK Supreme Court Proceedings

On appeal, the Supreme Court was required to determine whether the English court had jurisdiction to order an ASI. In order to determine this, it was required to consider whether the Court of Appeal was right to decide:

1. that the arbitration agreements were governed by English law (the ‘Governing Law’ issue); and
2. that England was the appropriate forum for the claim (the ‘Proper Place’ issue)

The ‘Governing Law’ issue

The Supreme Court needed to determine whether there was a ‘good arguable case’ that the claim fell within the jurisdictional gateways provided by the CPRs³ and under which the English court derives its jurisdiction.  For the following reasons, the Supreme Court found that the gateway was met.  

As there was no express law governing the arbitration clause, the Supreme Court considered the principles it previously established in Enka and concluded that, in accordance with the general rule set out in Enka, namely that in the absence of an express governing law clause in the arbitration agreement that the governing law of the main contract will by extension apply to the arbitration agreement- and therefore here, the governing law would be English law, which decision, affirmed the Court of Appeal’s finding.

The defendant argued that Enka established an exception where the law of the seat treated the arbitration agreement as governed by that law, which in this case would mean that the arbitration clause should be governed by French law. The Supreme Court dismissed this argument, confirming that no inference could be drawn from the choice of seat.

Having determined that it had jurisdiction to determine the question, the Supreme Court then needed to consider whether England was the correct forum for the dispute.

The ‘Proper Place/forum’ issue

In order to determine whether the English court had jurisdiction to grant permission for service out of the jurisdiction of the claim the Supreme Court was required to consider whether England was the proper place/forum for hearing the dispute, which required it to consider a number of authorities.

The Supreme Court concluded that the test in Spiliada Maritime Corp v Cansulex Ltd⁴, in which the court held that an English court should not exercise jurisdiction where another jurisdiction would be more appropriate, was not relevant here as the parties has agreed a forum in which to resolve their disputes- arbitration.

The Supreme Court rejected the Defendant’s argument that France rather than England was the proper forum for hearing the dispute, noting the court’s power to grant injunctive relief under Section 37 Senior Courts Act, and that the French courts would not have jurisdiction to determine the claim, and nor would they have power to order an ASI thus rendering the French court unable to hear the dispute.

The Supreme Court therefore concluded that England was the proper place to bring the claim.

Comment

The Supreme Court decision highlights the English courts’ commitment to supporting the arbitration choices made by the parties, including their choice of governing law.

The English court will support a party’s choice, even when a foreign seat is selected in the arbitration clause, providing that the English courts have jurisdiction, and that England is the proper place to bring the claim.

The UK Parliament is currently considering a new Arbitration Act, which if enacted will include a rule that the law of the arbitration seat will automatically apply as the governing law of the arbitration agreement, unless the parties have expressly agreed otherwise. Had the Arbitration Bill come into effect prior to the Supreme Court judgment in this case, it might have been that the court would have found that the French courts had jurisdiction to determine the claim, and that England was not the proper place to bring the claim after all.

The Supreme Court decision, and new Arbitration Act (if enacted) are a reminder to parties that when drafting contracts with an arbitration clause they should consider the law governing that clause as well as the main contract, as in the absence of making a clear choice  the courts may be forced to make the decision for them.

Research conducted by Danica Douglas, Paralegal.

Footnotes

1. CPR6.37(3)
2. [2020] UKSC 38
3. Rule 6.36
4. [1987] 1 AC 460, 476