English Court docket of Enchantment grants ultimate anti-suit injunction in help of Paris seated ICC arbitration | Germany | International regulation agency

Government Abstract

The substantive dispute considerations efficiency bonds issued by UniCredit in favour of RusChem. The bonds have been issued in relation to the development of fuel amenities in Russia by two German contractors. The efficiency bonds have been ruled by English regulation and offered for disputes to be settled by ICC arbitration seated in Paris. When UniCredit refused to pay RusChem beneath the efficiency bonds due to the EU sanctions regime, RusChem commenced proceedings earlier than the Russian Arbitrazh Courts. In response, UniCredit utilized to the English courtroom for an anti-suit injunction.

Two key points arose as regards the English courtroom’s jurisdiction to grant the anti-suit inunction:

1. What was the governing regulation clause of the related arbitration settlement; and
2. Whether or not the English courts have been the suitable discussion board.

Making use of the ideas established in Enka v Chubb, the Court docket of Enchantment held that the governing regulation of the related arbitration settlement was English regulation.

The Court docket of Enchantment additionally discovered that the English courts have been the suitable discussion board. Amongst plenty of components, the Court docket of Enchantment thought of the truth that an anti-suit injunction was not out there from the French courtroom and that an arbitration award wouldn’t be enforceable in opposition to RusChem in Russia.

Having established jurisdiction, the Court docket of Enchantment went on to grant the ultimate anti-suit injunction. While expressing warning that an anti-suit injunction could not all the time be applicable in respect of a overseas seated arbitration, the Court docket of Enchantment relied on the next when granting the ultimate aid:

1. The related arbitration settlement being ruled by English regulation gave the English courtroom enough curiosity in or connection to justify granting the anti-suit injunction;
2. The coverage of English regulation that those that comply with arbitration ought to adhere to their discount; and
3. The proof that the French courtroom wouldn’t regard an English courtroom anti-suit injunction to be an interference with its jurisdiction.

As a sensible measure, we’d all the time advocate that an specific governing regulation clause is included in an arbitration settlement. The willingness of an English courtroom to grant injunctive aid in help of a overseas seated arbitration (the place it has jurisdiction to take action) must be thought of as a related issue when deciding which governing regulation to decide on.

Factual Background

RusChemAlliance LLC (“RusChem”) is an organization integrated in Russia. In 2021, it engaged two German contractors to assemble LNG (liquefied pure fuel) and GPP (fuel processing plant) amenities in Russia beneath the phrases of EPC contracts.

The contractors offered sure efficiency bonds to RusChem (the “Efficiency Bonds”) via, on this case, Unicredit Financial institution GmbH (“UniCredit”). The Efficiency Bonds are ruled by English regulation and contained an arbitration settlement (the “Arbitration Settlement”) which specified that:

1. Disputes have been to be settled by ICC arbitration;
2. The seat of the arbitration can be Paris; and
3. The language of the arbitration can be English.

There was no specific governing regulation of the Arbitration Settlement.

On account of the EU sanctions regime launched in 2022, the German contractors halted efficiency beneath the EPC contracts and, in response, RusChem terminated these contracts and made calls for beneath the Efficiency Bonds. UniCredit rejected these calls for on the grounds that the EU sanctions regime prohibited cost and that refusal resulted within the substantive dispute between the events.

Procedural Background

RusChem commenced proceedings in August 2023 in opposition to UniCredit earlier than the Arbitrazh Court docket in Russia.

RusChem’s submission, which the Russian courtroom accepted, was that the Arbitration Settlement was unenforceable because of Article 248.1 of the Russian Arbitration Procedural Code. Article 248.1 confers unique jurisdiction to the Russian Arbitrazh Courts over disputes arising from overseas sanctions. With the substantive trial earlier than the Russian Arbitrazh Court docket mounted for 27 September 2023, on 22 August 2023 UniCredit obtained an interim anti-suit injunction on an ex parte foundation to restrain the Russian proceedings. The listening to for ultimate aid was held on 22 September 2023.

Authorized Rules – Check for Jurisdiction

As RusChem isn’t domiciled in England or Wales and has no presence there, the jurisdiction of the English courtroom relied on whether or not service will be effected on RusChem out of the jurisdiction. This requires three assessments to be happy:

1. There’s a severe challenge to be tried;
2. There’s a good controversial case that the declare falls inside one of many related gateways in Follow Course 6B, on this case that the contract was ruled by English Regulation (the “Gateway Check”); and
3. England is the right place wherein to convey the declare (the “Acceptable Discussion board Check”).

There was no dispute between the events that there was a severe challenge to be tried. The important thing points within the case involved the Gateway Check and the Acceptable Discussion board Check.

First Occasion Judgment

In his extempore judgment, Sir Nigel Teare discovered that UniCredit had not met both the Gateway Check or the Acceptable Discussion board Check and, accordingly, the English courtroom didn’t have jurisdiction over RusChem.

Gateway Check at First Occasion

On account of the doctrine of separability, the Arbitration Settlement is handled as a separate settlement from the Efficiency Bonds. Accordingly, the related contract for the needs of the Gateway Check is the Arbitration Settlement.

As to the governing regulation of an arbitration settlement typically, Sir Nigel Teare set out the steering from the main Supreme Court docket judgment of Enka v Chubb [2020] UKSC 38.

The place to begin beneath Enka v Chubb is that the place, as was the case within the Efficiency Bonds, the arbitration settlement doesn’t specify a selection of regulation, a selection of English regulation for the primary contract will typically additionally apply to the arbitration settlement.

However this beginning place, Sir Nigel Teare discovered that this was negated by a non-statutory precept of French regulation beneath which the existence and effectiveness of an arbitration settlement is to be decided in accordance with the events’ frequent intention.

In his judgment, by selecting Paris because the seat of the arbitration, the events will be taken to have been conscious of this precept of French regulation, thereby negating the place to begin beneath Enka v Chubb. Sir Nigel Teare discovered that the governing regulation of the Arbitration Settlement was French regulation and consequently UniCredit didn’t fulfill the Gateway Check.

Acceptable Discussion board Check at First Occasion

As to the Acceptable Discussion board Check, Sir Nigel Teare discovered that the suitable discussion board was ICC arbitration, via which damages for breach of the Arbitration Settlement can be out there to UniCredit. In his judgment, this was the case however:

1. an anti-suit injunction isn’t out there from a French courtroom; and
2. an award in damages could also be troublesome to implement in Russia.

UniCredit due to this fact didn’t fulfill the Acceptable Discussion board Check.

Continuation of the Interim Anti-Go well with Injunction

However the refusal of ultimate aid, the interim anti-suit injunction remained in place pending UniCredit’s attraction. Within the meantime, the Russian Arbitrazh Court docket suspended the Russian substantive proceedings pending the attraction to the Court docket of Enchantment.

Court docket of Enchantment Judgment

Gateway Check within the Court docket of Enchantment

The Court docket of Enchantment said that the precept of French regulation relied upon by Sir Nigel Teare doesn’t go as far as to imply that having Paris because the seat of the arbitration should imply that the arbitration settlement is ruled by French regulation. Relatively, this all relies on the events’ frequent intention and is due to this fact no completely different to the place beneath English regulation.

Accordingly, this precept was not sufficient to negate the beginning place beneath Enka v Chubb. It was held that the governing regulation of the Arbitration Settlement was English regulation, and the Gateway Check was thus happy.

Acceptable Discussion board Check within the Court docket of Enchantment

Referring to the case of Vedanta Sources Plc v Lungowe [2019] UKSC 20, the Acceptable Discussion board Check could contain two components. The primary is which is the pure discussion board and the second is whether or not there’s a actual danger that justice can be unobtainable in that discussion board.

It was this second issue that was crucial on this case, it being famous that the courtroom of the seat (the French courtroom, on this case) has major duty for supervising any arbitration. However, the Court docket of Enchantment discovered that the English courtroom was the suitable discussion board for the pursuits of the events and the ends of justice for the next causes:

1. An anti-suit injunction was not out there from the French courtroom;
2. The French courtroom wouldn’t regard an anti-suit injunction granted by the English courtroom to be an interference with its jurisdiction;
3. An arbitration award for damages and/or requiring RusChem to terminate Russian courtroom proceedings wouldn’t be enforceable in Russia;
4. It’s probably that the Russian courtroom would itself grant an injunction to stop UniCredit from pursuing arbitration in Paris;
5. With out an English courtroom anti-suit injunction in place, it should be extremely probably {that a} judgment from the Russian courtroom in favour of RusChem might be obtained in brief order;
6. It’s abusive for RusChem to: (i) depend on the provision of considerable justice in France because the seat of arbitration; however (ii) on the similar time argue that the Arbitration Settlement is unenforceable.

Briefly, the Court docket of Enchantment mentioned it was “an phantasm” to counsel that substantial justice might be obtained by UniCredit in France. In consequence, the English courtroom was discovered to be the suitable discussion board.

Ought to a Remaining Anti-Go well with Injunction be Granted?

Having concluded that the English courtroom has jurisdiction, the Court docket of Enchantment then thought of whether or not a ultimate anti-suit injunction must be granted.

Warning was expressed relating to the English courtroom granting an anti-suit injunction in circumstances the place the seat of the arbitration is overseas. It will not be applicable if, for instance, the courtroom of the seat would regard the injunction as an unwarranted interference with its personal jurisdiction.

However, the Court docket of Enchantment said that there isn’t any cause in precept why the English courtroom mustn’t grant an injunction the place it has jurisdiction over a defendant pursuant to an English regulation contract. In reaching its choice to grant ultimate aid, the Court docket of Enchantment relied on:

1. The truth that the Efficiency Bonds and the Arbitration Settlement have been ruled by English regulation. This offered the English courtroom with enough curiosity in or connection to justify granting the anti-suit injunction;
2. The proof that the French courtroom wouldn’t regard an English courtroom anti-suit injunction to be an interference with its personal jurisdiction; and
3. The coverage of English regulation that those that comply with arbitration ought to adhere to their discount.

Impression of the Regulation Fee’s Evaluation of the Arbitration Act 1996

Of curiosity, and as referred to by Lord Justice Males in his judgment, the Regulation Fee has advised that the regulation in Enka v Chubb is “complicated and unpredictable” and recommends {that a} default rule be launched to the impact that an arbitration settlement can be ruled by the regulation of the seat.

The brand new arbitration act is at present going via parliamentary approval and is anticipated to obtain royal assent through the early a part of this yr. Underneath the brand new arbitration regulation as drafted, the governing regulation of the Arbitration Settlement can be French regulation, which might have resulted in a really completely different final result on this case.

Sensible Steering

As Lord Justice Males famous, however the Regulation Fee’s suggestions, the present regulation is as said by the Supreme Court docket in Enka v Chubb. Upfront of a brand new arbitration act coming into impact, to keep away from any argument, we’d advocate that arbitration agreements embody an specific governing regulation clause. When deciding which governing regulation to decide on, the events ought to contemplate the willingness of the English courtroom to grant aid (the place it has jurisdiction) as a way to maintain events to their settlement to arbitrate.