Further to its order made earlier this week, the Court of Appeal (Bean, Males & Lewis LJJ) has today handed down its written judgment in UniCredit Bank GmbH v. RusChemAlliance LLC [2024] EWCA Civ 64.
Amongst other things, the judgment contains discussion of the effect of the legislative change made in the Russian Federation in mid-2020 which – through Article 248 of the Arbitrazh Procedural Code (APC) – confers exclusive jurisdiction upon the arbitrazh courts to determine disputes where a person is affected by sanctions or the dispute involves the impact of sanctions. Such provisions have been interpreted broadly in Russia. They include powers to grant pre-emptive remedies to restrain pursuit of foreign court or arbitral proceedings, as well as providing a defence to enforcement of foreign judgments or awards where applicable.
In the present case, a Russian-domiciled entity (RCA) commenced proceedings in the arbitrazh court of St. Petersburg and Leningrad Region in early August 2023 seeking payment of c.€450m from the bank pursuant to seven bonds governed by English law and providing for ICC arbitration in Paris. RCA invoked art.248 APC to ground jurisdiction, effectively denouncing the enforceability of the arbitration agreements or any future arbitral awards on the basis that EU sanctions were contrary to public policy in Russia.
The bank commenced anti-suit (ASI) proceedings in England on the basis that RCA had breached and was continuing to breach its jurisdictional promise contained in each of the seven arbitration agreements. Having obtained interim negative injunctive relief without notice on 24 August 2023, the claim for final relief was set for expedited determination on 22 September 2023. RCA challenged jurisdiction in parallel with resisting the grant of ASI relief. The Russian court subsequently dismissed the bank’s jurisdiction challenge, accepting RCA’s invocation of art.248 APC to establish exclusive jurisdiction of the arbitrazh court.
The present appeal was against the decision of Sir Nigel Teare (sitting as a High Court Judge) to dismiss the claim for lack of jurisdiction at that expedited final hearing: [2023] EWHC 2365 (Comm). The Court of Appeal announced its decision in public at the conclusion of RCA’s submissions on Thursday 25 January, allowing the appeal and stating that it would grant final mandatory ASI relief against RCA.
In summary, the Court of Appeal concluded as follows:
- The Paris-seat arbitration agreement in each of the bonds is governed by English law, addressing the so-called ‘Enka point’ as to governing law of the arbitration agreement where the main contract contains a choice of English law: see [42]-[70].
- England is the proper place to bring and determine the ASI claim to enforce RCA’s jurisdictional obligations, given the absence of an effective or equivalent coercive remedy elsewhere and RCA’s own denunciation of arbitration before the Russian court: see [71]-[78].
- Final ASI relief is justified under s.37 of the Senior Courts Act 1981, there being no ‘strong reason’ for refusing such coercive relief: see [79]-[85].
- The final mandatory ASI should not be stayed or suspended, as requested by RCA, given the balance of prejudice and obvious risk to the bank in the Russian court process: see [86]-[87].
The Court of Appeal’s judgment is likely to be of interest to practitioners involved in international arbitration as well as those who deal with disputes affected by or arising out of international sanctions regimes involving Russia.
As regards the sanctions perspective, specific risks posed by legislative and procedural counter-measures in the Russian legal system underpin the proper forum analysis, as explained by the Court of Appeal in paragraphs [21]-[23] and [76]-[77] of their judgment. It was held to be abusive for RCA to adopt a contradictory position before the English court as to the enforceability and efficacy of arbitration rights: see [72] and [78]. Furthermore, even if assumed that a Russian court would ignore sanctions when adjudicating upon liability under the bonds, whereas an ICC tribunal might not, such differential could not be a ‘strong reason’ for refusing ASI relief to hold RCA to its jurisdictional obligations – put simply, this is “a matter which the parties have agreed should be decided by arbitrators in Paris applying English law”: see [84].
Stephen Houseman KC and Stuart Cribb represent UniCredit Bank, instructed by Charles Claypoole, Ram Mashru and Alexander Cox of Latham & Watkins LLP.
As noted previously, the UniCredit case is one of a trio of pending foreign-seat anti-suit claims in the English court all arising from a major European bank’s exposure to proceedings commenced unlawfully by RCA before the Russian arbitrazh court. All three claimant banks are represented by leading and junior counsel from Essex Court Chambers, including Paul Key KC and Edward Batrouney (instructed by Baker & Mackenzie) for Deutsche Bank; Paul McGrath KC and Matthieu Gregoire (instructed by Allen & Overy) for Commerzbank.
Less than four months ago, the Court of Appeal gave its important judgment in PJSC National Bank Trust & another v. Mints & others [2023] EWCA Civ 1132 (see here) concerning the impact of sanctions on the pursuit of litigation within this jurisdiction. The claimants in that action are represented by Nathan Pillow KC, David Davies KC and Bibek Mukherjee (instructed by Steptoe & Johnson).
The nine counsel involved in these sanctions-related matters will be involved in various talks and events taking place this year, including during London International Disputes Week.
Read the judgment here once it becomes available.
