The recent Court of Appeal decision in UniCredit -v- RusChemAlliance
In UniCredit, the Court of Appeal (overturning the decision of the High Court) issued a final ASI, restraining RusChemAlliance LLC (“RCA“) from pursuing court proceedings in Russia, in breach of a Paris-seated arbitration agreement between RCA and UniCredit. The Court of Appeal’s decision follows the judgments in Deutsche Bank2 and Commerzbank3 in 2023, where the Court granted interim injunctions on the basis of materially identical underlying facts. The Court of Appeal’s judgement in UniCredit was the first time that the English Courts had ordered on a contested basis that England is the proper place to bring a claim for an ASI in respect of a arbitration clause with a foreign seat.
In summary, the Court of Appeal had to deal with three key questions in determining whether the Court had jurisdiction over RCA (who was not domiciled in England or Wales): (1) whether there was a “serious issue to be tried”; (2) whether there was a “good arguable case” that the claim falls within one of the relevant jurisdiction gateways under the Civil Procedure Rules; and (3) whether England and Wales was the “proper place” to bring the claim.
The Court of Appeal answered “yes” to questions (1) and (3) (further detail as to why is set out in the Court of Appeal’s judgment). In relation to (2) and the jurisdictional gateways, UniCredit successfully relied on the gateway under paragraph 3.1(6)(c) of Practice Direction 6B – that the “claim is made in respect of a contract where the contract – is governed by the laws of England and Wales“. The Court of Appeal accepted that the relevant contract (i.e. the arbitration clause, which is separate from the main agreement) was governed by the laws of England and Wales. The Court of Appeal reached this conclusion by applying the Supreme Court’s decision in Enka -v- Chubb4 (“Enka“), which held that, absent an express choice by the parties, the governing law of an arbitration agreement will be the parties’ choice of law to govern the main contract (as compared to the law of the seat, for instance). An overview of this landmark decision can be found here: Arbitration agreements: Governing law.
RCA appealed the Court of Appeal’s decision and on 23 April 2024, the Supreme Court announced that it has dismissed the appeal. As a result, the declarations and injunctive relief granted by the Court of Appeal were upheld. In the interest of urgency, the Supreme Court issued a summary of its decision (reserving the reasons for its judgment, which will follow later), as the parallel proceedings in Russia had been adjourned to allow time for the Supreme Court to consider RCA’s appeal.
The future of ASIs – a closing door?
A corollary of the proposed section 6A, would be to bring an end to the legal basis on which the Court of Appeal was able to grant the ASI in UniCredit. The position in UniCredit was that the Russian proceedings were in breach of the arbitration agreement – i.e. that was the contract in question when determining jurisdiction. Applying the proposed section 6A to the facts of the UniCredit case, the arbitration clause in the bonds in question would have been governed by French law (as the arbitration was seated in Paris). Accordingly, UniCredit would not have (in theory) been able to rely upon the gateway under paragraph 3.1(6)(c) of Practice Direction 6B, which requires that the “claim” is made “in respect of a contract” where “the contract” is governed by the laws of England and Wales. As such, if the Arbitration Bill 2024 was to pass in its current form, it could severely limit the future ability of the English Courts to grant ASIs and other remedies in support of arbitration agreements seated abroad.
However, it might be possible to plug the gap created by the Arbitration Bill 2024 (if enacted) by seeking to argue that the gateway at paragraph 3.1(6)(c) is engaged where the underlying contract is governed by the laws of England and Wales (i.e. even if the arbitration clause itself is governed by foreign law). On a strict reading, this would be a stretch of paragraph 3.1(6)(c) because, as was recognised in UniCredit, the claim being made in the ASI context is for breach of the arbitration clause, which is separate to the main contract. Therefore, on this strict reading, it is the arbitration clause that would be required to be governed by the laws of England and Wales. All of that said, paragraph 3.1(6)(c) opens the gateway where the claim is made “in respect of” a contract governed by the laws of England and Wales. The words “in respect of” may offer sufficient breadth for the English Courts to find that an ASI in relation to a foreign seated arbitration is still “in respect of” a contract governed by the laws of England and Wales where the underlying contract is governed by the laws of England and Wales.
The English Courts are greatly supportive of arbitration and seek to ensure that those who agree to arbitrate should adhere to their bargain. This overarching approach may lead to a more policy driven reading of paragraph 3.1(6)(c) and, therefore, the broader interpretation referred to above. This might particularly be so where ASI relief is not available in the foreign seat (as was the case for Paris in UniCredit) and, therefore, a more limited interpretation by the English Courts would leave the applicant with no other recourse.
It will be interesting to see whether parties will (following enactment of the Arbitration Bill 2024) contend for a broader interpretation of paragraph 3.1(6)(c) and indeed whether it would be entertained by the English Courts.
Footnotes
- UniCredit Bank AG -v- RusChemAlliance LLC [2024] EWCA Civ 64 ↩︎
- Deutsche Bank AG v RusChemAlliance LLC [2023] EWCA Civ 1144 ↩︎
- Commerzbank AG v RusChemAlliance LLC [2023] EWHC 2510 (Comm) ↩︎
- Enka Insaat vs Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38. ↩︎
