Anti-suit injunctions in support of foreign-seated arbitrations: where are we now?

Anti-suit injunctions (ASIs) may provide parties with a powerful tool to hold counterparties to a contractual bargain to submit a dispute to arbitration when court proceedings are commenced or threatened in breach of the parties’ arbitration agreement. In the context of sanctions-related disputes, English courts have, in three related cases, recently considered the circumstances in which they may grant anti-suit relief in support of arbitrations seated outside England and Wales where such relief is not available from the courts at the seat of the arbitration.

 

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 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.
• Sanctions-related disputes are increasingly occupying the English courts and arbitral tribunals, raising complex issues which require careful navigation.

 

When may the English court grant an ASI?

The English courts have wide powers to grant relief, including interim injunctions, in support of arbitration under section 44 of the Arbitration Act 1996 (AA 1996)¹ and, more widely (including outside the arbitral context), under section 37(1) of the Senior Courts Act 1981 (SCA 1981)².

Broadly speaking, the court will ordinarily enforce a demonstrable agreement to arbitrate by granting an ASI, in the absence of strong reasons not to do so in all the facts and circumstances of the case³.

 

How has this area of law developed recently?

In three related cases, the English courts have considered whether England is the proper place to bring and determine a claim for (interim or final) anti-suit relief to enforce an arbitration agreement which specifies a foreign seat. In particular:

• In Deutsche Bank AG v RusChemAlliance LLC⁴, the Court of Appeal in October 2023 granted Deutsche Bank AG (DB) an interim ASI against the defendant, RusChemAlliance. The interim ASI restrained RusChemAlliance from continuing to pursue court proceedings in Russia in breach of the parties’ agreement to ICC arbitration seated in Paris, which was contained in an advance payment guarantee between the parties and governed by English law. The decision in DB v RusChemAlliance was made on a non-contested basis (i.e., the appeal was made without notice to the defendant, and the defendant did not appear before the court).
• In UniCredit Bank GmbH v RusChemAlliance LLC⁵, the Court of Appeal in February 2024 also granted UniCredit Bank GmbH (UniCredit) a final ASI against RusChemAlliance, in materially similar circumstances. In contrast with the decision in DB v RusChemAlliance, the UniCredit decision was made on a contested basis.
• A successful application for anti-suit relief against RusChemAlliance was also brought before the English Commercial Court by Commerzbank.

All of the applications in these cases arose out of disputes concerning bonds and guarantees issued by the banks in favour of a RusChemAlliance, which all contained materially identical governing law and arbitration clauses.

 

What was the factual background to these cases?

The factual background to the three cases is materially identical.

In summary, RusChemAlliance contracted with two German entities (the Contractor) for the engineering, procurement and construction (EPC) of liquified natural gas and gas processing plants in Russia. Under the EPC contracts, RusChemAlliance was obliged to pay the Contractor over EUR 10 billion, including advance payments of approximately EUR2 billion. The advance payments were made by RusChemAlliance. The Contractor was also obliged to provide on demand bonds/guarantees, which were arranged with UniCredit, DB and Commerzbank. The bonds/guarantees were all governed by English law and contained Paris-seated ICC arbitration clauses.

Following the Russian invasion of Ukraine, the Contractor suspended work on the project due to the impact of EU sanctions. RusChemAlliance purported to terminate the contracts with the Contractor, requested the return of the advance payments, and sought compensation for breach of contract. The Contractor declined to pay. RusChemAlliance made demands for payment under the bonds/guarantees. The banks declined to make the payments arguing that sanctions prohibited them from doing so.

RusChemAlliance started proceedings against the banks in the Russian courts, claiming the full sum due under the bonds/guarantees, plus interest. In order to justify pursuing its claim in the Russian courts as opposed to via ICC arbitration, RusChemAlliance asserted that the arbitration clauses in the bonds/guarantees were unenforceable under Russian law.⁶

While the applications in each case were slightly different, in general terms the banks applied to the English courts for anti-suit relief (interim or final) to prevent RusChemAlliance from pursuing the Russian court proceedings and for permission to serve out of the jurisdiction.

 

The first case: DB v RusChemAlliance: ASI refused at first instance but granted on appeal

Mr Justice Bright in the Commercial Court declined to grant an ASI on the grounds that – considering the evidence before the court on relevant French law – England was not the proper forum for the claim. Based on the (limited) evidence before him, Bright J concluded that French law had a philosophical objection to granting ASIs and would only recognise ASIs granted by non-French courts in very limited circumstances.

DB appealed the decision on three⁷ grounds:

1. The court should have held that England was the proper place to seek the injunctions, irrespective of the location of the seat of the arbitration, or whether ASIs or anti-enforcement injunctions (AEIs) were available from the French courts;
2. The court should have held that Rule 29.7 of the ICC Arbitration Rules (i.e., that emergency arbitrator provisions do not prevent any party from seeking urgent interim measures from a competent judicial authority) made England a proper place to bring the claim (if it would otherwise not be); and
3. The court should not have held that the application was contrary to French public policy.

The decision of the Court of Appeal in DB v RusChemAlliance

In October 2023, the Court of Appeal⁸ overturned Bright J’s ruling, granted DB both an ASI and AEI, and granted DEB permission to serve out of the jurisdiction:

1. The Court of Appeal was satisfied that there was a serious case to be tried on the merits and a good arguable case that the claim fell within one of the relevant service gateways⁹.
2. The Court of Appeal was also satisfied that England and Wales was “the proper place in which to bring the claim” (CPR 6.37(3)). The task of the court was to “identify the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice”¹⁰. The Court of Appeal found that the “ends of justice” required the court to hold the parties to their contractual agreement to arbitrate, which it would “readily and usually” do by granting an injunction.
3. Additional expert evidence before the Court of Appeal (which expanded on the limited evidence before Bright J that French law had a philosophical objection to the grant of ASIs) strongly suggested that while French law does not grant courts the ability to grant an ASI as part of its procedural toolkit, it has no objection in principle to (and will recognise) the grant of an ASI by a court which can by its own procedural rules grant one (at any rate where the basis for the ASI is the parties’ contractual agreement to submit disputes to a particular forum). On the basis that DB’s claim could not be given effect to in France, the English court was the proper forum in which a claim for an interim ASI could be suitably tried in the interests of all the parties and for the ends of justice.

Based on the above conclusions, the Court of Appeal exercised its discretion to grant the ASI and AEI, having found no good reason not to.

 

The second case: UniCredit v RusChemAlliance (formerly known as G v R): ASI granted at first instance, refused following a contested final trial, and then granted by the Court of Appeal

Three days after Bright J’s decision in Deutsche Bank v RusChemAlliance (or SQD v QYP, as it was then known), Mr Justice Robin Knowles CBE in the High Court granted an ASI in favour of UniCredit (an Italian bank) in relation to a bond it had provided to RusChemAlliance. As with the DB case, the relevant contract was governed by English law and the parties had agreed to ICC arbitration seated in Paris.

In a first instance decision, Knowles J noted – following a without notice hearing – that the evidence of French law before Bright J in Deutsche Bank v RusChemAlliance differed to the evidence before him in the UniCredit case, which, in his view, justified his decision to grant the claimant an ASI. Knowles J noted that “both the English court and the French court are likely to have the same objective of seeking to make the bargain between the parties work (…).”¹¹

However, in a subsequent on notice hearing for final ASI relief, Sir Nigel Teare (sitting as High Court Judge) refused to grant an ASI¹². Interestingly, Sir Teare reached his decision on different grounds to those relied on by Bright J in Deutsche Bank v RusChemAlliance; concluding that the arbitration agreement in question was not governed by English law (the law governing the underlying bond)¹³ . In doing so he held that the parties’ choice of Paris as the seat of the arbitration negated the starting point established by the UK Supreme Court in Enka v Chubb, that where the law applicable to the 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. Instead, he determined that French law would give precedence to the law of the seat when determining the law of the arbitration agreement, and as such, the law applicable to the arbitration agreement was French law.¹⁴

While not required to do so, Sir Nigel Teare went on to consider whether, if he was wrong on the applicable law of the arbitration agreement, England was the proper place for the ASI claim, ultimately deciding it was not. For example, he disagreed that England was the only forum where “substantial justice (could) be done” only because there is no ASI relief under French law. Sir Nigel noted that damages for breach of the arbitration agreement would “no doubt” be available in French-seated arbitration.

Sir Nigel Teare did refer to the Court of Appeal decision in Deutsche Bank v RusChemAlliance where, as discussed, the ASI was granted, but decided not to rely on that decision as it was an ex parte appeal and therefore presented limitations in assisting him to reach a decision.

The decision of the Court of Appeal in UniCredit v RusChemAlliance

In February 2024, the Court of Appeal¹⁵ overturned Sir Nigel Teare’s decision. The court found that it had jurisdiction over the defendant, and it was appropriate to grant final anti-suit relief.

To establish jurisdiction, three requirements needed to be satisfied by UniCredit¹⁶ :

1. A serious issue to be tried on the merits (which the court accepted was clearly satisfied without discussion in the judgment);
2. A good arguable case that the claim fell within one of the relevant service gateways; and
3. That England was “the proper place in which to bring the claim”.

The service gateway: a contract governed by English law

UniCredit relied on CPR PD 6B, para 3.1(6)(c), i.e., that the claim was in respect of a contract governed by English law. As the arbitration agreement contained in the relevant bond was legally separable from the rest of the contract¹⁷ and did not contain an express choice of governing law, the court needed to determine (which it did on a final and not preliminary basis) the governing law of the arbitration agreement.

Applying the principles laid down in Enka v Chubb, the Court of Appeal found that English law (the law governing the relevant bond) also governed the arbitration agreement in that bond.

The court was clear that the general rule, in a case such UniCredit where the main contract is expressly governed by English law, and the arbitration agreement contained within that contract provides for arbitration with a foreign seat but does not say anything specific about the governing law of the arbitration agreement, is that the parties are taken to have made a choice of English law as the law applicable to the arbitration agreement. This general rule is said to be based on principles such as certainty, consistency, the avoidance of complexity and artificiality, and legal coherence.

The court accepted that additional factors may lead to the disapplication of the general rule and imply that the arbitration agreement was intended to be governed by the law of the seat, including by virtue of any “provision” of the law of the seat which indicates that, where an arbitration is subject to that law, the arbitration agreement will also be treated as governed by that country’s law. RusChemAlliance contended that French law contains a provision that where an arbitration is governed by French law, the arbitration agreement will also be treated as governed by French law (in the absence of the parties’ express choice).

However, the Court of Appeal concluded that the evidence before it indicated that French law contains a provision that the law governing an arbitration agreement is to be determined in accordance with the parties’ common intention¹⁸, but does not contain a provision which indicates, in short, that the law of the seat would always govern the parties’ arbitration agreement.¹⁹

Noting that it did not matter that a French court may reach a different view on the law governing the arbitration agreement applying their own conflict of law rules, the Court of Appeal determined the exception to the “general rule” in Enka v Chubb had not been made out, and the arbitration agreements in the bonds were governed by English law.

England as the proper place to bring the claim

The Court of Appeal stated that the issue of appropriate forum concerns where the case “can be suitably tried for the interests of all parties and for the ends of justice”²⁰. In short, the Court of Appeal agreed with the Court of Appeal in DB v RusChemAlliance that the English court was the appropriate forum for the ASI claim on the basis that the claim couldn’t be given effect to in France (i.e. the French court would not itself grant an ASI but would not regard such an injunction as an interference with its own jurisdiction). The court described as “an illusion” the suggestion that substantial justice could be obtained by UniCredit in France, whether in court or in arbitration.

Should a final injunction be granted?

The court was content to grant the ASI on a final (as opposed to interim) basis, finding no strong reasons not to do so²¹. The court referred to established English public policy that those who agree to arbitrate should abide by their agreement to do so.

The court did note that where a seat of arbitration is outside England, the English court will need to “be more cautious”. For example, if the courts of the seat would view the granting of an ASI as an unwarranted interference with its own jurisdiction, it may not be appropriate to grant relief (although that was not the case here).

 

The third case: Commerzbank AG v RusChemAlliance LLC: ASI granted

In an ex tempore judgment given on 31 August 2023, Mr Justice Bryan in the Commercial Court agreed with Knowles J in UniCredit v RusChemAlliance on materially the same facts and granted an ex parte application by Commerzbank for an interim ASI under section 37 of the SCA 1981²².

Bryan J’s view on the applicable law of the arbitration agreement was consistent with the approach of the Court of Appeal in Deutsche Bank v RusChemAlliance and Knowles J at first instance in UniCredit v RusChemAlliance (but was contrary to the approach of Sir Nigel Teare in UniCredit). Bryan J was satisfied that English law governed the arbitration agreement (as well as the bond in which it was contained), even though it was possible that a French court might take a different view. This was because he was satisfied that England and Wales was the proper place to bring the claim for an ASI as: (a) both the bond and the arbitration agreement were governed by English law; (b) English law provided a “juridical advantage” in the form of an ASI which the French courts do not; and, (c) neither Russia nor France are the proper place to obtain the type of relief sought. Such factors were not “trumped” by the fact that Paris had been chosen as the seat of the (putative) arbitration.

 

Where do these decisions leave us?

The decisions illustrate the pro-arbitration approach of the English courts in upholding English public policy that those who agree to arbitrate are held to their bargain.

Subject to any final say on the matter by the UK Supreme Court,²³ the Court of Appeal decisions in DB and UniCredit confirm that parties may be able to obtain anti-suit relief from the English courts for foreign-seated arbitrations provided that court has jurisdiction over the defendant (e.g. the arbitration agreement is governed by English law) and the court is satisfied England is the proper forum for the claim.

The decisions do not, however, provide definitive guidance on the full range of circumstances in which English courts may grant anti-suit relief in support of arbitrations seated outside England and Wales. For example, if the courts of the foreign seat were empowered to issue anti-suit relief (for example, in Hong Kong), would an English court be prepared to grant its own ASI even if the dispute were otherwise connected with England via the law governing the parties’ contract and arbitration agreement? Further, as noted above, the Court of Appeal in UniCredit suggested that it would likely not be appropriate to grant ASI in support of foreign-seated arbitration if to do so would be seen as an unwarranted interference with the jurisdiction of the seat courts.

The decisions also highlight the key role played by expert evidence (of French law) in these cases. Evidence on the French courts’ inability to grant ASIs and their approach to recognising ASIs issued by competent courts in other jurisdictions (outside of the EU) was critical in informing several of the decisions as to whether England was a proper place for the claimants’ claims. When more wide-ranging expert evidence on French law on these issues was before the courts, the judges were generally inclined to order the relief sought. The decisions illustrate the crucial importance of properly framing the content and scope of expert evidence of foreign law.

A further key issue impacting the various judgments was the contrasting decisions regarding the law applicable to the arbitration agreements. While all of the judges recognised that, in circumstances such as those in these cases where the arbitration agreements and applicable arbitration rules were silent as to the law to be applied to the arbitration agreement, the Supreme Court’s decision in Enka v Chubb must be applied; the principles were applied with different results, with greater and lesser significance attached to the parties’ designation of the seat of the arbitration. As such, although practitioners had hoped the Enka v Chubb decision had given clients a degree of certainty as to how the issue of the applicable law of the arbitration agreement would be determined, it appears that there is still significant ambiguity on the issue, even if the Court of Appeal’s judgments were broadly aligned on the approach. This is something clients and advisors should bear in mind both when agreeing the terms of an arbitration agreement, and when considering the possible outcomes of any jurisdiction or ASI applications, because, as these cases show, any ambiguity in this regard can dramatically increase the costs of resolving such matters.

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 cases discussed in this article. The decisions reflect and play 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 applications for ASIs.

 

What’s next?

The impact of, and any uncertainty stemming from, the decision in Enka v Chubb may well be mitigated by proposed changes to English arbitration law. As noted by Court of Appeal in UniCredit, 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 otherwise²⁴.

As regards the – hypothetical - effect of this element of the Arbitration Bill on the outcome of the above-discussed cases, the judges would have determined that French law governed the arbitration agreements. This is because the parties had chosen Paris, France, as the seat of the arbitration but had not included an express choice as to the law governing the arbitration agreements. For those drafting arbitration agreements, best practice remains to express the governing law of the main contract and the arbitration agreement.

We will continue to monitor the development of the law in this area.

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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