Significant UK Supreme Court judgment on anti-suit relief in support of foreign-seated arbitrations

A much-anticipated judgment on the jurisdiction of the courts of England and Wales to grant anti-suit relief in support of arbitrations seated outside England and Wales has been published (UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30¹). Due to the pressing nature of the issues at stake, the UK Supreme Court notified the parties of its decision to dismiss RusChemAlliance (RCA)’s appeal in April this year², and we now have access to the court’s reasoning, which makes for interesting reading.

 

What are the key takeaways?

• English courts may grant anti-suit relief in support of arbitrations seated abroad where it can be demonstrated that the court has jurisdiction over the defendant (for example, where English law governs an arbitration agreement) and it can be shown that England is the proper forum to bring such claims. The availability of such relief reflects the pro-arbitration reputation of the English courts.
• Where available, an anti-suit injunction (ASI) can assist parties seeking to ensure compliance with arbitration agreements. Under English law, failure to comply with a court-ordered ASI may result in serious penalties: a finding of contempt of court, which can result in imprisonment and/or a fine.
• Expressing the law governing an arbitration clause (particularly where different systems of law are chosen to govern the parties’ substantive obligations and the seat – legal place – of arbitration) remains best practice.
• The English courts will take a pragmatic and principled approach to interpreting and enforcing the parties’ contractual bargain, including their dispute resolution clauses.
• Sanctions-related disputes are increasingly occupying the English courts and arbitral tribunals, raising complex issues which require careful navigation.

 

What was the background?

As explained in: Anti-suit injunctions in support of foreign-seated arbitrations: where are we now? (England and Wales), underlying this litigation is a dispute about the impact of EU sanctions imposed on Russia in respect of a high-value energy project in Russia, and related subsequent demands by RCA for payment under bonds issued by UniCredit.

The bonds were governed by English law and provided for ICC arbitration seated in Paris, France. Neither the bonds nor the arbitration clauses contained explicit wording that the legally separable arbitration agreements would be governed by a specific law (English, French, or otherwise). 

In breach of the parties’ agreements to arbitrate, RCA commenced litigation proceedings in Russia. UniCredit sought anti-suit relief from the courts of England and Wales, as well as contesting jurisdiction in Russia.

The core issue all the way up to the Supreme Court has been whether the English courts had jurisdiction to grant the relief sought by UniCredit based on the parties’ contractual agreement. Jurisdiction was required to found the court’s ability to grant anti-suit relief and serve proceedings out of the jurisdiction.

At first instance, the Commercial Court declined to grant the relief sought, finding in favour of RCA that the arbitration agreements in the bonds were governed by French law, with the parties’ choice of Paris as a seat negating the starting point established by the UK Supreme Court in Enka v Chubb³, that where the law applicable to an arbitration agreement is not specified, the choice of governing law for the contract will generally apply to an arbitration agreement which forms part of that contract.

UniCredit appealed.

The Court of Appeal upheld UniCredit’s appeal, deciding that the arbitration agreements in the bonds were governed by English law, not French law. The court also held that England and Wales was the proper forum to hear UniCredit’s application for anti-suit relief in respect of litigation proceedings commenced in Russia by RCA in breach of the parties’ arbitration agreements.

RCA then appealed to the UK Supreme Court, which heard the appeal on an expedited basis.

 

What issues were before the court?

The central issue before the Supreme Court was jurisdiction, ie whether the Court of Appeal was correct to decide that:

• The arbitration agreements in the bonds were governed by English law; and,
• England and Wales was the proper place in which to bring the claim for anti-suit relief.

The Supreme Court dismissed RCA’s appeal.

The governing law issue

In short, the Supreme Court upheld the Court of Appeal’s decision that English law – the law governing the bonds – governed the arbitration agreements.

By reference to Enka v Chubb, the Supreme Court stated that where parties have chosen a governing law for a contract, and the contract contains an arbitration clause, it is “natural to interpret such a governing law clause as applying to the arbitration clause for the simple reason that the arbitration clause is part of the contract which the parties have agreed is to be governed by the specified system of law”, and that this is so even where the parties have chosen a place with a different system of law as the seat of the arbitration⁴. Later in the judgment, the court commented that an approach which treated the arbitration agreement as governed by whichever law the courts of the seat would consider to be the law governing it would not be clear or simple to apply. 

It is noteworthy that the Supreme Court stated that the parties’ choice in such circumstances is “express” rather than “implied” because it is identified by interpreting the express terms of the contract and is not based on any implied term. The court, however, said the distinction was of no legal significance: the only question of legal relevance was whether, on the proper interpretation of the documents, the parties have agreed on the law which is to govern the arbitration agreement⁵.

The Supreme Court disagreed with RCA’s arguments that French law (the law of the arbitral seat) governed the arbitration agreements. In this regard, RCA relied on one of the factors which the Supreme Court in Enka v Chubb stated “may” negate the inference that a choice of governing law for a contract also governs the arbitration agreement⁶. Significantly, the Supreme Court noted that its comment in Enka v Chubb on this point should be disregarded⁷. The Supreme Court said that there was no basis for imputing to parties a different intention as to choice of governing law by reason of their choice of arbitral seat. The Supreme Court also stated that the fact that the courts of the seat (here, the French court) would take a different view and regard their own law as the law governing the arbitration agreement was “not a good reason to reach a different conclusion”.

As English law governed the arbitration agreement, UniCredit was able to satisfy one of the jurisdictional gateways to serve the anti-suit proceedings out of the jurisdiction on RCA (ie Civil Procedure Rules, rule 6.36 and para 3.1(6)(c) of Practice Direction 6B (the “contract gateway”⁸)).

The proper place issue

In short, the Supreme Court upheld the Court of Appeal’s decision that England and Wales was the proper place for UniCredit to bring the claim for anti-suit relief.

RCA argued that, rather than England and Wales, the proper place to bring the claim was either the French courts (ie the courts of the seat of the arbitration), or in ICC arbitration commenced in accordance with the parties’ agreement.

The Supreme Court rejected the suggestion that UniCredit needed to show that England and Wales was a “more appropriate” forum than any other to bring the claim. That approach only applied where no forum had been agreed, which wasn’t the case here. Instead, the parties should be held to their contractual bargain to arbitrate, including by injunction, particularly given the public policy of upholding arbitration clauses contained in the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), although it would still be necessary to consider whether the agreement on a foreign arbitral seat may make it inappropriate to grant the relief sought. The court stated that preventing a party from breaking its contract to arbitrate does not fall within the supervisory function of the court of the seat. In England and Wales, the court’s power in this regard is contained in section 37 of the Senior Courts Act 1981. In any event, it was clear on the evidence that the French courts would not have jurisdiction over RCA and did not have power to grant anti-suit injunctions.

As for the argument that a Paris-seated ICC arbitration tribunal would be able to make an order akin to an anti-suit injunction, the court noted that such an order would create a contractual obligation only and lack coercive force (ie the French courts would, on the undisputed evidence, have no power to enforce such a tribunal order). The court stated that a tribunal order would be ineffectual against RCA in circumstances where the existence of an arbitration agreement had not deterred RCA from commencing litigation in Russia.

 

Why is the judgment significant?

The judgment demonstrates the pro-arbitration approach of the English courts in upholding public policy that those who agree to arbitrate should be held to their bargain.

It is also now beyond doubt that parties may be able to obtain anti-suit relief from the English courts for foreign-seated arbitrations provided that the court has jurisdiction over the defendant (eg the arbitration agreement is governed by English law) and the court is satisfied that England is the proper forum for the claim.

The extensive regime of sanctions currently targeting Russia, which have been imposed by the US, UK and EU (among others), provides important context to the judgment discussed in this article. The judgment reflects and plays into broader debate on the proper role of both English and French (and other) courts in deciding sanctions-related matters, particularly given anti-sanctions measures such as the Russian law authorising the Russian court proceedings, which prompted the application for anti-suit relief in this case.

What’s next?

In its judgment, the court referred to the pending reforms to the Arbitration Act 1996. The Arbitration Bill currently passing through the UK Parliament includes a proposed “default rule” that the law of the arbitration agreement shall be the law of the seat unless the parties have agreed otherwise, and that party choice of a governing law for the contract in which an arbitration agreement forms part does not constitute express agreement that such law also applies to the arbitration agreement⁹. The Supreme Court declined – rightly, in our view – an opportunity to pre-empt any reform in its judgment.

If the Act had been reformed as currently envisaged, the English court would very likely have determined that French law governed the arbitration agreements. This is because the parties chose Paris as the seat of the arbitration and did not include an express choice of law governing the arbitration agreements. However, a comment in the judgment¹⁰ raises at least a possibility that, even if the “default rule” applied, there could be scope for argument that an English court may still take jurisdiction. Counsel for UniCredit suggested that even if the law of the seat (French law) governed the arbitration agreements, UniCredit’s claim for relief may still fall within the “contract gateway” for service out of the jurisdiction on the basis that English law governed the bonds generally and it could be said that UniCredit’s claim was made in respect of those contracts. The Supreme Court did not address this argument (which was raised late in the day), but it will be interesting to note if similar arguments are raised by parties in the future.

For those drafting arbitration agreements, best practice remains to express the governing law of the main contract and the arbitration agreement to avoid any costly and time-consuming satellite litigation.

If you have any questions regarding the matters discussed in this article or more broadly, please contact the authors or your usual DLA Piper contact.

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