Executive Summary
The substantive dispute concerns performance bonds issued by
Two key issues arose as regards the English court's jurisdiction to grant the anti-suit inunction:
- What was the governing law clause of the relevant arbitration agreement; and
- Whether the English courts were the appropriate forum.
Applying the principles established in Enka v Chubb, the
The Court of Appeal also found that the English courts were the appropriate forum. Among a number of factors, the
Having established jurisdiction, the
- The relevant arbitration agreement being governed by English law gave the English court sufficient interest in or connection to justify granting the anti-suit injunction;
- The policy of English law that those who agree to arbitration should adhere to their bargain; and
- The evidence that the French court would not regard an English court anti-suit injunction to be an interference with its jurisdiction.
As a practical measure, we would always recommend that an express governing law clause is included in an arbitration agreement. The willingness of an English court to grant injunctive relief in support of a foreign seated arbitration (where it has jurisdiction to do so) should be considered as a relevant factor when deciding which governing law to choose.
Factual Background
The contractors provided certain performance bonds to RusChem (the "Performance Bonds") through, in this case,
- Disputes were to be settled by ICC arbitration;
-
The seat of the arbitration would be
Paris ; and - The language of the arbitration would be English.
There was no express governing law of the Arbitration Agreement.
As a result of the EU sanctions regime introduced in 2022, the German contractors halted performance under the EPC contracts and, in response, RusChem terminated those contracts and made demands under the Performance Bonds.
Procedural Background
RusChem commenced proceedings in
RusChem's submission, which the Russian court accepted, was that the Arbitration Agreement was unenforceable as a result of Article 248.1 of the Russian Arbitration Procedural Code. Article 248.1 confers exclusive jurisdiction to the Russian Arbitrazh Courts over disputes arising from foreign sanctions. With the substantive trial before the Russian Arbitrazh Court fixed for
Legal Principles - Test for Jurisdiction
As RusChem is not domiciled in
- There is a serious issue to be tried;
- There is a good arguable case that the claim falls within one of the relevant gateways in Practice Direction 6B, in this case that the contract was governed by English Law (the "Gateway Test"); and
England is the proper place in which to bring the claim (the "Appropriate Forum Test").
There was no dispute between the parties that there was a serious issue to be tried. The key issues in the case concerned the Gateway Test and the Appropriate Forum Test.
First Instance Judgment
In his extempore judgment, Sir
Gateway Test at First Instance
As a result of the doctrine of separability, the Arbitration Agreement is treated as a separate agreement from the Performance Bonds. Accordingly, the relevant contract for the purposes of the Gateway Test is the Arbitration Agreement.
As to the governing law of an arbitration agreement generally, Sir
The starting point under Enka v Chubb is that where, as was the case in the Performance Bonds, the arbitration agreement does not specify a choice of law, a choice of English law for the main contract will generally also apply to the arbitration agreement.
Notwithstanding this starting position, Sir
In his judgment, by choosing
Appropriate Forum Test at First Instance
As to the Appropriate Forum Test, Sir
- an anti-suit injunction is not available from a French court; and
-
an award in damages may be difficult to enforce in
Russia .
Continuation of the Interim Anti-Suit Injunction
Notwithstanding the refusal of final relief, the interim anti-suit injunction remained in place pending
Gateway Test in the
The Court of Appeal stated that the principle of French law relied upon by Sir
Accordingly, this principle was not enough to negate the starting position under Enka v Chubb. It was held that the governing law of the Arbitration Agreement was English law, and the Gateway Test was thus satisfied.
Appropriate Forum Test in the
Referring to the case of Vedanta
It was this second factor that was critical in this case, it being noted that the court of the seat (the French court, in this case) has primary responsibility for supervising any arbitration. Nevertheless, the
- An anti-suit injunction was not available from the French court;
- The French court would not regard an anti-suit injunction granted by the English court to be an interference with its jurisdiction;
-
An arbitration award for damages and/or requiring RusChem to terminate Russian court proceedings would not be enforceable in
Russia ; -
It is likely that the Russian court would itself grant an injunction to prevent
UniCredit from pursuing arbitration inParis ; - Without an English court anti-suit injunction in place, it must be highly likely that a judgment from the Russian court in favour of RusChem could be obtained in short order;
-
It is abusive for RusChem to: (i) rely on the availability of substantial justice in
France as the seat of arbitration; but (ii) at the same time argue that the Arbitration Agreement is unenforceable.
In short, the
Should a Final Anti-Suit Injunction be Granted?
Having concluded that the English court has jurisdiction, the
Caution was expressed regarding the English court granting an anti-suit injunction in circumstances where the seat of the arbitration is abroad. It may not be appropriate if, for example, the court of the seat would regard the injunction as an unwarranted interference with its own jurisdiction.
Nevertheless, the
- The fact that the Performance Bonds and the Arbitration Agreement were governed by English law. This provided the English court with sufficient interest in or connection to justify granting the anti-suit injunction;
- The evidence that the French court would not regard an English court anti-suit injunction to be an interference with its own jurisdiction; and
- The policy of English law that those who agree to arbitration should adhere to their bargain.
Impact of the
Of interest, and as referred to by Lord
The new arbitration act is currently going through parliamentary approval and is expected to receive royal assent during the early part of this year. Under the new arbitration law as drafted, the governing law of the Arbitration Agreement would be French law, which would have resulted in a very different outcome in this case.
Practical Guidance
As Lord
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
3 More London Riverside
SE1 2AQ
URL: www.nortonrosefulbright.com
© Mondaq Ltd, 2024 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source