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What the EWCA Civ 64 ruling means for international trade and dispute resolution
In this article, we will discuss the recent decision of the Court of Appeal in UniCredit Bank GmbH v RusChemAlliance LLC [2024] EWCA Civ 64, which is a landmark case on the enforcement of foreign seated arbitration agreements by the English court through anti-suit injunctions.
Background
The case arose from a dispute between UniCredit Bank GmbH (UniCredit), a German bank, and RusChemAlliance LLC (RCA), a Russian company, over the performance of two contracts for the construction of LNG and GPP facilities in Russia. The contracts required RCA to provide on-demand bonds guaranteeing its performance, which were issued by UniCredit. The bonds were governed by English law and contained an arbitration clause providing for ICC arbitration in Paris. However, the arbitration clause did not specify the law governing the arbitration agreement itself.
In 2023, following Russia's invasion of Ukraine and the imposition of EU sanctions on Russia, the contractor halted its performance of the contracts, claiming that it was prohibited by the German authorities from continuing. RCA then terminated the contracts and demanded payment from UniCredit under the bonds. UniCredit refused to pay, citing the EU sanctions as a defence.
Instead of commencing arbitration, RCA brought proceedings against UniCredit in the Russian courts, arguing that the arbitration clause was invalid and unenforceable under Russian law. The Russian courts accepted jurisdiction and fixed a hearing date for the trial.
The English court proceedings
In response, UniCredit applied to the English court for an anti-suit injunction (ASI) to restrain RCA from pursuing the Russian proceedings in breach of the arbitration agreement. An ASI is a remedy that prohibits a party from initiating or continuing legal proceedings in another jurisdiction that are contrary to a contractual obligation to arbitrate or litigate in a specific forum.
The main issue before the English court was whether it had jurisdiction to grant an ASI in respect of an arbitration agreement that had a foreign seat (Paris) and no express choice of law. This was a novel question that had not been decided by the English court before on a contested basis.
The High Court granted an interim ASI in favour of UniCredit, holding that it had jurisdiction to do so under section 37 of the Senior Courts Act 1981, which gives the court wide discretion to grant injunctions where it is just and convenient. The High Court applied the recent Supreme Court decision in Enka v Chubb [2023] UKSC 38, which held that, in the absence of any contrary indication, an arbitration agreement is governed by the same law as the main contract. Therefore, since the bonds were governed by English law, so was the arbitration agreement. The High Court also found that England was clearly and distinctly the appropriate forum to determine whether RCA had breached its obligation to arbitrate, as it had a strong connection with the dispute and no other court had been seised of the issue.
RCA appealed against the High Court's decision to the Court of Appeal.
The Court of Appeal's decision
The Court of Appeal dismissed RCA's appeal and upheld the High Court's decision to grant a final ASI in favour of UniCredit. The Court of Appeal agreed with the High Court that:
- The arbitration agreement was governed by English law, following the Supreme Court's approach in Enka v Chubb;
- The English court had jurisdiction to grant an ASI under section 37 of the Senior Courts Act 1981;
- England was clearly and distinctly the appropriate forum to decide whether RCA had breached its obligation to arbitrate;
- It was just and convenient to grant an ASI to prevent RCA from undermining or frustrating the arbitration agreement;
- There was no reason to refuse an ASI on grounds of comity or respect for foreign courts.
The Court of Appeal also rejected RCA's argument that UniCredit had waived its right to seek an ASI by participating in the Russian proceedings. The Court of Appeal held that UniCredit had made clear throughout that it objected to the Russian court's jurisdiction and reserved its right to seek an ASI from the English court.
Implications
The Court of Appeal's decision is significant for several reasons:
- It confirms that the English court will enforce foreign seated arbitration agreements by granting ASIs where appropriate, even if there is no express choice of law governing the arbitration agreement;
- It reinforces the Supreme Court's ruling in Enka v Chubb that an arbitration agreement is presumed to be governed by the same law as the main contract unless there is a clear indication otherwise;
- It demonstrates that the English court will not hesitate to intervene where a party seeks to evade its obligation to arbitrate by bringing proceedings in another jurisdiction that does not respect or recognise arbitration agreements;
- It shows that the English court will not be deterred by arguments of comity or respect for foreign courts, especially where those courts have adopted a hostile or inconsistent approach to arbitration;
- It highlights the importance of specifying the law governing the arbitration agreement in cross-border contracts, to avoid uncertainty and potential conflicts of laws.
- The Court of Appeal upheld the High Court's decision to grant summary judgment in favour of UniCredit Bank GmbH against RusChemAlliance LLC
- The case concerned a loan agreement governed by English law and subject to an arbitration clause in favour of the LCIA
- The Court of Appeal rejected RusChemAlliance's arguments that the loan agreement was invalid under Russian law and that UniCredit had breached its duty of good faith
