In UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30 the Supreme Court has delivered an important judgment on the powers of the English court in support of foreign seated arbitrations. By confirming that, where an arbitration agreement is governed by English law, the English court has jurisdiction to issue an anti-suit injunction, notwithstanding the fact that the arbitration is to have a non-English seat, the court has emphasised its support for arbitration and demonstrated that it is ready and willing to compel parties to keep to their bargains.
Background
UniCredit, a German bank, had issued a number of bonds in favour of RusChemAlliance (RCA), a Russian company, in connection with the construction of LNG plants in Russia. The bonds were governed by English law and provided for disputes to be settled by Paris-seated arbitration under ICC Rules. Following the Russian invasion of Ukraine the construction contracts were terminated and RCA made demands under the bonds. However, UniCredit refused to pay on the grounds that payment was prohibited by EU sanctions. RCA commenced proceedings against it in Russia and in response, UniCredit commenced proceedings in England, seeking an anti-suit injunction to prevent RCA from continuing the Russian proceedings in breach of the arbitration agreement.
The case arose in the context of a series of inconsistent decisions, discussed in our earlier article. In UniCredit, at first instance the English court held that it lacked jurisdiction to hear the claim. However, the Court of Appeal disagreed and granted a mandatory order which required RCA to discontinue the Russian proceedings. RCA appealed to the Supreme Court.
The governing law issue
The first question for the Supreme Court was whether the claimant could satisfy one of the so-called gateways to service of the claim out of the jurisdiction. The answer rested on the issue of whether the arbitration agreements in the bonds were governed by English law.
Although the bonds were expressly governed by English law, the arbitration agreements were, as is often the case, silent as to governing law. The complex question of how to determine the governing law of an arbitration agreement where it is not specified was (in)famously considered by the Supreme Court in Enka v Chubb (2020). There the Court concluded that in such circumstances, where the parties have chosen a governing law for the contract of which the arbitration agreement forms part, that law will usually also apply to the arbitration agreement, even if a different country is chosen as the seat of the arbitration.
In UniCredit the governing law clause in the bonds was framed in particularly wide terms, covering not just the bonds themselves, but also "all non-contractual or other obligations arising out of or in connection with it" and so the Supreme Court was in little doubt that, applying Enka, the arbitration agreements were indeed governed by English law.
However, other jurisdictions take a different approach to the governing law of the arbitration agreement. In particular, the French courts apply French "substantive rules of international arbitration", unless a choice of national law is contained within the arbitration agreement itself. RCA therefore contended that, by choosing a Paris seat, the parties must be taken to have intended that the same rules should govern the arbitration agreement, wherever the question was looked at. The Supreme Court rejected that argument, holding that a rule which treats the arbitration agreement as governed by whatever law the courts of the seat would treat as the law which governs it would be very unsatisfactory, introducing significant complication.
The proper place issue
The next issue was whether England was the proper place to bring the claim and, again, the Supreme Court was in little doubt that it was.
The question was not whether the English court was the most appropriate forum to hear the claim, but rather whether the English court should enforce the parties' agreement to resolve their disputes in arbitration. Where the parties agree to arbitrate in England, the English courts will generally not hesitate to enforce that agreement by issuing an injunction to restrain the commencement or continuation of foreign proceedings brought in breach. However, in UniCredit RCA contended that, by choosing Paris as the seat of arbitration, the parties had chosen to be subject to the supervisory jurisdiction of the French courts. It therefore argued that it was for the French courts to determine whether there had been a breach of the arbitration agreements in the bonds and, if so, what relief to grant. Alternatively, it contended that, as the Commercial Court judge had found, substantial justice could be done in an arbitration in Paris.
However, the Supreme Court concluded that the power to grant anti-suit relief was not an aspect of either the supervisory or supporting jurisdiction of the English courts. Thus, the fact that the parties may have chosen to be subject to the supervisory jurisdiction of the French courts was not, in itself, a reason why the English court could not or should not uphold the parties' bargain by restraining a breach of the arbitration agreement. Moreover, the expert evidence on French law demonstrated that not only do the French courts lack the power to grant an anti-suit injunction, in this case they would lack jurisdiction to determine a claim of any kind brought by UniCredit to enforce the arbitration agreements in the bonds. There was therefore no risk that a clash of jurisdiction may give rise to any issue of comity.
The Supreme Court also rejected RCA's argument that UniCredit would be able to obtain substantial justice in arbitration proceedings. While a tribunal may be able to make an award in the same terms as an anti-suit injunction, unlike the court's order, such an award would lack coercive force. The French courts would have no power to enforce it, and it would not be enforceable in Russia. In the Court's of Appeal's words, such an award would be an "illusion".
There was therefore no reason why the English court should refrain from upholding UniCredit's English law contractual rights by granting an anti-suit injunction. RCA's appeal was dismissed.
Comments
The Supreme Court's decision is a strong example of the English court's pro-arbitration stance, and shows that, where jurisdiction can be established, it will be willing to hold parties to their bargains, even where the parties have chosen to arbitrate in a different jurisdiction.
It is, however, important to bear in mind that the Arbitration Bill, resurrected following the election and currently making its way through Parliament, will reverse the approach in Enka, with the effect that in future under English law the arbitration agreement will be assumed to be governed by the law of the seat, unless the parties expressly agree otherwise. The Supreme Court rejected any suggestion that this forthcoming legislative change should affect its decision in UniCredit. However, had the Bill been in force, and French law been inferred as the governing law of the arbitration agreements, then UniCredit is likely to have struggled to establish grounds on which it could establish jurisdiction before the English courts.
The case is therefore an important reminder to parties when drafting dispute resolution provisions of the need to give careful thought to where they wish their disputes to be resolved, and what powers that forum may have in relation to enforcing that agreement.