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Court of Appeal grants an ASI in respect of Russian proceedings - Unicredit Bank GmbH v RusChemAlliance LLC

Author: Syedur Rahman  9 February 2024
3 min read

Unicredit Bank GmbH v RusChemAlliance LLC [2024] EWCA Civ 64[1] is the latest decision in a flurry of recent case-law in which the English court has intervened to restrict foreign proceedings.

RusChemAlliance LLC (RCA) has been involved in two other applications, on materially identical facts:

However, the decision in the Unicredit case is the first in the trilogy to grant a final injunction for anti-suit relief.

Brief summary of facts

RCA is a Russian company. It contracted with two German firms for the construction of an LNG and GPP facility in Russia. The German firms received advanced payments and secured seven performance and repayment bonds from Unicredit, Deutsche Bank AG and Commerzbank AG. The bonds were governed by English law and contained ICC Paris-seated arbitration clauses.

The German contractors downed tools when the EU imposed sanctions on Russia. RCA terminated the contracts, sought damages from the German firms and demanded payment under the bonds.

Unicredit refused payment under the bonds (on account of the EU sanctions). RCA pursued a claim for payment in Russia, allegedly in breach of the arbitration clauses in the bonds.

The legislative change in Russia

RCA’s ability to initiate proceedings in Russia is derived from Russia's legislative reaction to the array of international sanctions levied against it (and various affiliated entities.)

This response notably includes the implementation of new civil codes, such as the Russian Commercial Procedure code. These codes enable Russian entities to bring disputes before Russian courts in instances where arbitration or litigation outside of Russia is rendered impractical due to "restrictive measures," such as sanctions.

In particular, in mid-2020 the Russian Federation brought in Article 248 of the Russian Arbitration Procedural Code. The article confers exclusive jurisdiction upon the Arbitrazh Courts (in St Petersburg and the Leningrad Region) to determine disputes where:

  • The person is affected by sanctions; or
  • The dispute involves the impact of sanctions

RCA relied on this law to claim that the arbitration clauses in the bonds were unenforceable.

Key questions

The key questions for the Court of Appeal were:

  1. Jurisdiction: Does the English court have jurisdiction to grant an anti-suit injunction to restrain the pursuit of proceedings in Russia? The parties’ contract is governed by English law, but provides for arbitration in Paris.
  2. Injunction: If the English court does have jurisdiction, should it grant a final injunction to restrain RCA from prosecuting its claims in the Russian proceedings, and to order it to bring those proceedings to an immediate end?

The first instance decision – refusing the injunction

At first instance, the High Court held that the English court does not have jurisdiction.

It decided that the arbitration agreement was not governed by English law as the governing law of the contract, but by French law as the law of the seat of arbitration.

Following that, it held that the English court is not the appropriate forum.

Court of appeal decision – overturning the High Court

The Court of Appeal reversed the High Court decision and granted the appeal. It held that the arbitration agreement in the bonds was governed by English law, and it ordered the mandatory final injunction.

One of the reasons given was that it would be highly unlikely that an arbitration in Paris would be allowed to proceed without the protection of an anti-suit injunction from the English court. The English court is the only court available and able to grant such an injunction (which is not available in France). There would be nothing to stop RCA from applying to the Russian court for an injunction to prevent Unicredit from pursuing any arbitration.

The Court of Appeal exercised caution over the decision to grant the injunction because the court in the country of the seat has primary responsibility for supervising any arbitration. In this case, that was France.

However, they found that there was no reason in principle why the English court, having jurisdiction over a defendant pursuant to an English law contract, should not grant an anti-suit injunction in support of an arbitration agreement providing for arbitration in a foreign seat.

There was no doubt that RCA had commenced and pursued Russian proceedings in breach of its agreement to arbitrate. The Court of Appeal granted the final injunction which required RCA to terminate those proceedings.

What happens in the Russian proceedings remains to be seen. A hearing is scheduled on 14 February 2024 in Russia, to consider their further progress.

Analysis

The judgment confirms that parties may be able to obtain an anti-suit injunction from the English Courts in foreign seated arbitrations. What is important is that the English court considers that it has personal jurisdiction over the respondent, which may be conferred through an arbitration agreement with a English law governing clause.


Sources:

  1. https://caselaw.nationalarchives.gov.uk/ewca/civ/2024/64
  2. https://caselaw.nationalarchives.gov.uk/ewca/civ/2023/1144
  3. https://caselaw.nationalarchives.gov.uk/ewhc/comm/2023/2510
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Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.

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