The Supreme Court has published its written judgment explaining the unanimous decision to dismiss RusChemAlliance LLC’s appeal on 23 April 2024.
The result of the decision is that RusChemAlliance LLC (RusChem) must cease court proceedings in Russia against UniCredit Bank GmbH (UniCredit) because the parties have agreed in a contract governed by English law that any disputes between them shall be settled by arbitration in Paris.
The sole issue in this appeal was whether the English court had jurisdiction over UniCredit’s claim. That depended on whether the Court of Appeal was right to decide:
- that the arbitration agreements in the bonds were governed by English law and
- that England and Wales was the proper place in which to bring the claim.
We wrote about the Court of Appeal decision in an earlier article, which includes the summary of the background facts.
The governing law of the arbitration agreements
The first point about the governing law is that the bond contracts are expressly governed by English law. However, in theory, it is possible for the agreement to arbitrate to be governed by a different system of law from the rest of the contract.
UniCredit argued that the arbitration agreements are governed by English law because the choice of English law in clause 11 (as the governing law) applies to clause 12 (the arbitration clause) as well as all the other clauses of the contract.
RusChem said that the arbitration agreements should be governed by French law, because the arbitration agreements designated Paris as the seat of the arbitration.
The Court considered the leading Supreme Court decision in Enka Insaat Ve Sanayi AS vs OOO Insurance Company Chubb [2020] UKSC 38, which held that:
- a choice of law to govern the contract should generally be construed as applying to an arbitration agreement set out (or incorporated by reference) in a clause of the contract; and
- this is so even where the parties have chosen a place with a different system of the law as the seat of the arbitration.
RusChem argued that there were circumstances in which the law of the seat of the arbitration could in fact govern the arbitration agreement, and raised Kabab-Ji SAL v Kout Food Group [2021] UKSC 48 as an example.
However, the Supreme Court held that a different jurisdiction does not, on its own, displace the governing law of the contract unless it is stated explicitly. There was nothing in the wording of the bonds which excepted clause 12 from the choice of English law as the governing law.
In particular, the governing law clause in the bonds was framed in particularly wide terms and covered not only the bond itself but “all non-contractual or other obligations arising out of or in connection with it.”
Accordingly, the choice of a different country for the seat of the arbitration did not justify reading “this Bond” as excluding the arbitration agreement in clause 12. The arbitration agreements were therefore held to be governed by English law.
Is England and Wales the proper forum?
RusChem contended that England was not the proper place in which to bring the claim made by UniCredit and that the proper place was France.
On this point, the Supreme Court justices said that the only question is whether the English courts can and should exercise their coercive power to restrain RusChem from continuing the Russian proceedings.
To determine that issue, they considered the role of the seat of the arbitration; it has a supervisory function. How far does the supervisory function go? It does not go as far as exercising coercive power, so the arbitration tribunal in France would lack the coercive powers necessary to enforce an anti-suit injunction.
Further, the French courts could not provide a remedy for RusChem’s breach of the arbitration agreement. Not only do the French courts have no power to grant anti-suit injunctions, but the French courts would not have jurisdiction to determine a claim brought by UniCredit complaining of a breach by RusChem of the arbitration agreements in the bonds.
On that bases, the Supreme Court agreed with the Court of Appeal, and said that it was entitled to make the order that it did granting final relief to UniCredit which includes a mandatory injunction requiring RusChem to discontinue its Russian proceedings.
Read the judgment in full: UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30
