Mohamed Sadiq, Policy and Professional Practice Intern at Ciarb explores the The UK Supreme Court's decision in UniCredit Bank GmbH v RusChemAlliance LLC.

An anti-suit injunction (“ASI”) refers to an interim measure issued by an arbitral tribunal or national court to prevent parties from initiating or continuing any proceedings already initiated elsewhere. This tool in international arbitration has long been seen as indispensable by some jurisdictions, yet contentious by others. On the one hand, this may be considered understandable caution given the potential risk to comity or complex situations which may arise as a result of an ASI (such as the issuing of an anti-anti-suit injunction or an anti-anti-anti-suit injunction in response). On the other hand, English courts have historically been willing to grant such injunctions in order to protect the integrity of arbitration agreements. Nonetheless, there has existed some uncertainty as to whether English courts will grant such relief to support arbitral proceedings when the seat of arbitration is outside England and Wales.

The September 2024 UK Supreme Court (UKSC) judgment in UniCredit Bank GmbH v RusChemAlliance LLC offers welcome clarity on this issue, serving as the first time where English courts have acted to issue an ASI in support of a foreign-seated arbitration.

Background

RusChemAlliance LLC (“RusChem”) entered into two contracts with German companies for the construction of gas processing plants in Russia. The fulfilment of the obligations of these German contractors was guaranteed by UniCredit Bank GmbH (“Unicredit”), through several performance bonds.

Following the sanctions issued against Russia by the EU, the German contractors announced that they were unable to continue performance of their obligations. As a result, RusChem terminated the contracts and demanded the return of any advance payments, as well as payment under the performance bonds issued by UniCredit. UniCredit refused to pay on the grounds that it was prohibited by the EU sanctions.

Although the bond contracts were governed by English law and contained an express arbitration clause specifying Paris as the seat of ICC arbitration, RusChem initiated court proceedings in Russia against UniCredit.

UniCredit applied to the Russian court for dismissal on the basis of the arbitration clause, but the application was refused on the basis of Russian law which grants the Russian court in this case exclusive jurisdiction over this dispute[1].

UniCredit then turned to the English Commercial Court to seek injunctive and declaratory remedies against RusChem, including an application without notice for an interim injunction prohibiting RusChem from continuing the Russian proceedings until further order of the court. In response, RusChem submitted an application disrupting the English court’s jurisdiction to hear UniCredit’s claim.

The Commercial Court held that it did not have jurisdiction to hear the claim; however, it nonetheless maintained the injunction until the exhaustion of appeals of this decision.

Subsequently, the Court of Appeal granted final relief including a mandatory injunction requiring RusChem to discontinue the Russian court proceedings.

The key issue before the UKSC was whether an English Court has jurisdiction over UniCredit’s claim, and would therefore be permitted to grant the ASI restraining the Russian court proceedings.

The Judgment

For Unicredit to serve a claim on RusChem outside the jurisdiction, three cumulative requirements had to be met: the claim must fall within one of the Civil Procedure Rules (CPR) gateways for service out of the jurisdiction, it must have a real prospect of success, and England must be the proper forum for the claim.

Given that the prospect of success of this claim was not under contention, the UKSC narrowed its focused on the other two elements, considering: (1) the gateway of the claim and (2) the proper forum for the claim.

The "Contract Gateway": a discussion on the governing law of the arbitration agreement

Rule 6.36 of the Civil Procedure Rules (CPR) outlines a list of grounds, often known as “gateways”, at least one of which must be met for the claim to proceed.

When filing its claim, UniCredit relied solely on the “Contract Gateway” under paragraph 3.1(6)(c) of Practice Direction 6B of the CPR, which applies if the contract underlying the claim is governed by English law.

While the bond contracts were expressly governed by English law, the principle of separability in arbitration admits the possibility where the main contract may be governed by law different to that of the arbitration agreement Thus, the court had to determine whether the arbitration agreements found within the bonds were in themselves governed by English law.

With no explicit choice made by the parties in respect to the arbitration agreement, UniCredit argued that the choice of English law to govern the main contract should extend to the agreements found within them. On the other hand, it was put forth by RusChem that given the arbitration agreements listed Paris as the seat of arbitration, it is French law which governs them.

In order to reach a decision, the Supreme Court examined its previous decision of Enka Insaat Ve Sanayi AS v OOO “Insurance Company Chubb” & Ors [2020] UKSC 38 (“Enka”).

In Enka, the court held that where there is no express choice of law for the arbitration agreement and the seat differs from the law governing the main contract, the law of the main contract is “ordinarily and reasonably understood”[2] to apply to the arbitration agreement.

RusChem argued the proper reading of Enka includes an exception to this general rule. When the law of the seat itself specifies that an arbitration agreement is governed by that country’s law, the choosing of the parties of that place as the seat of arbitration is an implicit choosing of the governing law.

However, this analysis of Enka was rejected by the UKSC, on the basis that first, it placed too much focus on what is found to be permissive language rather than prescriptive, and second, that the argument failed to consider the underlying reasoning behind Enka. In the present case, as it was in Enka, the clause which identified the governing law of the bond contract included language which implied that English law governs all the provisions of the contract, including the arbitration agreement provisions.

As a result, the UKSC found that the general rule extending the choice of law for the main contract to the arbitration agreement was applicable, resulting in English law being the governing law of the arbitration agreement. It is for that reason that the gateway requirement found in the CPR was found to be fulfilled.

Proper forum for the claim

The UKSC considered whether England was the “most appropriate forum/proper place” for the claim, noting that the test in Spiliada Maritime Corpn v Cansulex Ltd[3] did not strictly apply here. This case was not about determining the appropriate forum for the underlying dispute (i.e. RusChem’s claim under the bonds), but rather enforcing the arbitration agreement underpinned by the principle that parties be “held to their contractual bargain by any court before whom they have been brought”.[4]

RusChem argued that the French court, as the court of the seat, was the proper place for such a claim. In response, Supreme Court Justice Lord Leggat held that, although the court of the seat does maintain a supervisory function, the English court’s use of its coercive powers to enforce the arbitration agreement does not encroach on the role of the court with supervisory responsibility. Moreover, ASIs issued by English courts as interim measures were not found to be incompatible with arbitration agreements, even when the arbitration is seated abroad, irrespective of other available forums.[5]

The alternative argument put forth by RusChem was that the appropriate forum would be the arbitral tribunal itself. However, the UKSC rejected this, affirming the Court of Appeal’s view that an ASI issued by the arbitral tribunal would have no coercive force[6] and leave the claimant in a position unable to obtain “substantial justice”.

As a result, it was found that there is no reason which can be said to make an English court an inappropriate forum to restrain a breach of arbitration agreements by granting an injunction.

Arbitration Bill to overturn Enka v Chubb?

The potential impact of the Arbitration Bill, which is currently progressing through Parliament, on future cases similar to UniCredit v RusChem is important to note.

The Bill proposes the introduction of clause 6A, overturning the established conflict of law rules in Enka. Under the proposed provision, should no governing law be explicitly chosen for an arbitration agreement, the governing law will default to that of the seat of arbitration. Had this clause been in place at the time of this case, RusChem’s argument contesting the English Court’s jurisdiction through the “Contract Gateway” might have been viewed differently. As a result, one may ask whether the outcome of this case might have been different if the new Bill were in force. In the end, only time will tell how these changes will be treated by the English judiciary.

[1] Art 248.1(2)(1) of the Arbitrazh Procedural Code of the Russian Federation.

[2] UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30 [39]

[3] Spiliada Maritime Corpn v Cansulex Ltd [1987] 1 AC 460

[4] Ibid [75].

[5] Ibid [87].

[6] Ibid [108].

Mohamed Sadiq is currently working at Ciarb as a Policy and Professional Practice Intern. He holds an LLM in International Business Law from King’s College London and an LLB from Sorbonne University Abu Dhabi. Passionate about international commercial and investment arbitration, as well as both national and international litigation, he aims to make impactful contributions to international dispute resolution.