The Commercial Court (Foxton J) today handed down judgment in RiverRock Securities Limited v. International Bank of St. Petersburg (Joint Stock Company) [2020] EWHC 2483 (Comm). The judgment deals with the arbitrability of so-called ‘avoidance’ claims created by foreign insolvency legislation and the impact of international public policy on the arbitrability of contractual invalidation claims as a matter of English law.
The claimant (‘RSL’) sought and obtained an interim anti-suit injunction (‘ASI’) to restrain the pursuit of proceedings before the Arbitrazh Court of St. Petersburg and Leningrad Region (“St. Petersburg Action”) brought by and in the name of the defendant (‘IBSP’) through its official bankruptcy receiver, the Deposit Insurance Agency of the Russian Federation (‘DIA’). The claim, commenced after IBSP was declared bankrupt by the St. Petersburg Court in October 2019, sought invalidation and unwinding of nine contracts for the sale and purchase of credit-linked notes in the aggregate sum of US$140 million. The contracts each contained an express choice of English law and LCIA arbitration with English seat in identical terms. The basis of invalidation was alleged unequal consideration and/or intent to harm creditors under Article 61.2 of Federal Law No.127-FZ (“Bankruptcy Law”) and/or Article 10 and other provisions of the Civil Code of the Russian Federation.
IBSP resisted interim injunctive relief on the basis that: (i) DIA, not IBSP, was the real party to the St. Petersburg Action and DIA was not bound by the arbitration agreements; (ii) the claims under the Bankruptcy Law were (a) outside the scope of the arbitration agreements and/or (b) not arbitrable as a matter of law or public policy; and, in any event (iii) there were strong reasons not to grant interim ASI relief to restrain pursuit of the St. Petersburg Action.
Foxton J concluded that there was a sufficiently strong case in favour of RSL on each of (i) & (ii), together comprising the ‘breach’ issue, consistent with the approach of Males J (as he then was) in Nori Holding Ltd v. PJSC Bank Otkritie Financial Corp [2018] 2 Lloyd’s Rep 80: see here. The invalidation claims were in substance contractual in nature, all relevant remedies were available from an arbitral tribunal and there was no compelling public interest to the contrary (Judgment, paragraphs [34] to [87]). As to (iii), Foxton J held that there were no strong reasons or other discretionary factors justifying refusal of interim ASI relief to enforce the parties’ arbitral bargain (Judgment, paragraphs [88] to [109]).
As a separate and preliminary matter, Foxton J dismissed an application by IBSP to stay the ASI proceedings on the grounds of forum non conveniens, citing and following the Court of Appeal decision in Enka Insaat Ve Sanayi v. OOO “Insurance Co Chubb” & others [2020] 3 All ER 577 (Judgment, paragraphs [27] to [32]).
A full copy of the judgment can be found here.
Stephen Houseman QC, instructed by Lee Coffey of Jones Day, acted for the claimant.
