On 18 September 2024 the Supreme Court handed down its judgment in UniCredit Bank GmbH (Respondent) -v- RusChemAlliance LLC (Appellant) [2024] UKSC 30. In a decision that may offer a useful precedent for commercial parties seeking to enforce arbitration agreements, the Supreme Court found that the English Courts may have jurisdiction to issue anti-suit injunctions to restrain a party in breach of an arbitration agreement, even where the only connection with the jurisdiction is that the parties have chosen English law to govern their substantive obligations.
1. The case was concerned with two contracts for bonds between UniCredit, a German company, and RusChem, a Russian company (the "Bonds Contracts"). The Bonds Contracts provided that the "Bond and all non-contractual or other obligations arising out of or in connection with it" were governed by English law (the "English Law Provision") and that "All disputes arising out of or in connection with the bond … shall be finally settled" by arbitration in Paris (the "Arbitration Agreement").
2. In October 2022 and April 2023 RusChem made demands to UniCredit for payment under the Bonds Contracts. UniCredit refused to pay on the ground that payment was prohibited by EU sanctions.
3. RusChem commenced proceedings against UniCredit before the Russian courts (the "Russian Proceedings"), relying upon a provision of Russian law which (a) conferred exclusive jurisdiction to the Russian courts over any dispute between foreign and Russian entities which arose out of foreign sanctions; and (b) rendered inoperable any clause providing for arbitration outside the Russian Federation.
4. UniCredit applied to the English Court for a final anti-suit injunction restraining RusChem from pursuing the Russian Proceedings in breach of the Arbitration Agreement.
5. At the return date hearing (an interim injunction having been granted ex parte), RusChem argued that the Court did not have jurisdiction over UniCredit's claim for a final anti-suit injunction. That argument was accepted by the Court, which held that (a) by choosing Paris as the seat of the arbitration the parties intended the Arbitration Agreement to be governed by French Law (even though the Bonds Contracts were governed by English); and (b) even assuming that the Arbitration Agreement was governed by English law, France and not England was the proper place for UniCredit's claim to be heard ([2023] EWHC 2365 (Comm)).
6. On appeal by UniCredit, the Court of Appeal overruled the first instance judgment and granted a final anti-suit injunction against RusChem. RusChem in turn appealed to the Supreme Court.
7. In order to establish the English Court's jurisdiction a party must (a) be able to rely on one of the "gateways" set out in CPR Practice Direction 6B that would allow the service of a Claim Form out of the jurisdiction; and (b) establish that "England and Wales is the proper place in which to bring the claim" (CPR 6.37(3)). UniCredit relied upon the gateway at Paragraph 3.1(6) of PD 6B, under which a party may serve the Claim Form out of the jurisdiction where "A claim is made in respect of a contract where the contract … is governed by the law of England and Wales".
8. The questions before the Supreme Court were therefore:
8.1 Was the Arbitration Agreement governed by English law, even though the parties had agreed that the seat of the arbitration was in Paris?
Was England the "
8.2 Was England the "proper place" for UniCredit's claim to be heard?
9. Under the principle of separability, an arbitration agreement is an agreement distinct from the contract within which it is included. It is therefore possible for an arbitration agreement to be governed by a law different to that governing the main contract. Further, an arbitration agreement establishes two very similar but distinct obligations, namely (a) a positive obligation to refer disputes under the main contract to arbitration; and (b) a negative obligation not to pursue claims other than in accordance with the arbitration agreement.
10. UniCredit's claim for an injunction was a claim under the Arbitration Agreement. By applying to the English Court for an anti-suit injunction, UniCredit was seeking to enforce RusChem's negative obligation under the Arbitration Agreement. UniCredit did not attempt to bring a claim under the Bonds Contracts.
11. In Enka Insaat ve Sanayi AS -v- OOO Insurance Company Chubb [2020] UKSC 38. the Supreme Court set out several methods for identifying the law applicable to an arbitration agreement when this is not expressly identified. It held that the general rule in these circumstances is that the law of the contract would also govern the Arbitration Agreement, subject to the construction of the wording of the governing law clause of the main contract.
12. However, the Supreme Court in Enka also held that this general rule may in some cases be displaced when the parties have chosen a seat for the arbitration which is not within the jurisdiction of the law of the contract, e.g. arbitration in Paris where the contract is governed by English law. In some of these cases, the Supreme Court said that it may be possible to imply that the law governing the arbitration agreement would be the law of the seat of the arbitration if the law of the seat "treats the arbitration agreement as governed by that country’s law".
13. RusChem sought to apply this passage to the present case, arguing that when dealing with an arbitration claim the French Courts applied "substantive rules of international arbitration" developed under French law. On this basis, RusChem argued that the Arbitration Agreement was governed by the law of the seat of the arbitration, i.e. by French law.
14. The Supreme Court rejected this argument. Importantly, in doing so the Supreme Court overruled the passing comment it had made previously in Enka. It held that that rule or option proposed in Enka would create uncertainties and confusion when identifying the applicable law of the arbitration agreement. To the contrary the Court upheld the general rule previously set out in Enka that the law governing the contract should be the law governing the Arbitration Agreement (subject to the construction of the contract).
15. In so doing, the Court identified that the general rule in Enka was contrary to that proposed by the Law Commission in their Arbitration Bill for the review of the Arbitration Act 1996 (which is currently being reviewed by the Parliament). In Section 1(2) of the Arbitration Bill, the Law Commission has proposed that if the parties have agreed that the seat of the arbitration is not in England, the law governing the arbitration should be the law of the seat.
16. The Court noted that the rule proposed in Enka and the rule proposed by the Law Commission are the only options which could offer sufficient certainty. However, insisting on the application of the rule in Enka, the Supreme Court held that the law governing the Arbitration Agreement between RusChem and UniCredit was English law; therefore, UniCredit's claim was subject to English law.
17. The traditional test which must be satisfied to establish that England and Wales is the "proper place" to bring the claim, is that set out in Spiliada Maritime Corpn v Cansulex Ltd [1987] 1 AC 460. The application of what is called the "Spiliada test" (also known as the test of the forum non conveniens) in cases where the defendant disputes the jurisdiction of the English Court was stated to be that "the defendant has the burden of satisfying the court that there is another available forum which is clearly more appropriate than England and Wales for the trial of the action."
18. However, on this occasion the Supreme Court did not apply the Spiliada test (and disregarded the requirement to satisfy CPR 6.37(3)). It found that the Spiliada test is not appropriate where the parties have agreed upon a forum for disputes. The starting point for deciding whether the Court should exercise its jurisdiction to grant an anti-suit injunction, the Court said, is the principle that "[i]t is desirable that parties should be held to their contractual bargain by any court before whom they have been or can properly be brought”. It followed that the issue was whether the Court should exercise its jurisdiction to grant an anti-suit injunction to uphold a contractual choice of forum.
19. The reasoning of the Court does not fully support its conclusion:
19.1 The Court said that the reason it did not apply the Spiliada test was because the parties had agreed on a contractual forum for disputes, i.e. arbitration under the Arbitration Agreement (paras. 73-74).
19.2 The parties had agreed that they would refer to arbitration substantive claims under the Bonds Contracts. However, the question for the Court was whether it had jurisdiction over the claim to enforce the Arbitration Agreement; not whether it should exercise such jurisdiction.
19.3 As the Court noted, the parties had not agreed to refer claims for the enforcement of the Arbitration Agreement to any contractual forum.
19.4 Accordingly, the Court should have applied the Spiliada principle (and the test of proper place under CPR 6.37) to determine whether it had jurisdiction over the claim, before it could determine whether it should exercise such jurisdiction.
20. The essence of the Court's decision therefore is that, where there is an arbitration agreement governed by English law which is applicable on the substantive dispute, it is not appropriate to ask whether the English Court has jurisdiction to enforce the agreement (para. 75), but whether it must exercise it. In these cases there is "a presumption which treats the courts of England and Wales as the proper place in which to bring the claim for an anti-suit injunction unless the fact that the arbitration has a foreign seat makes it inappropriate to do so."
21. The essence of the Court's reasoning was that "There is a substantial connection with England and Wales in the fact that the contractual rights which UniCredit is asking the court to enforce are rights governed by English law."
22. Accordingly, the Supreme Court's view was that the fact that the Arbitration Agreement was governed by English law was sufficient to establish the jurisdiction of the English Courts over a claim to enforce that agreement. On the basis of that reasoning, an anti-suit injunction will be available from the English Courts even when the contract provides for arbitration in a different jurisdiction as long as the arbitration agreement is governed by English law (by extrapolation, as long as the main contract is governed by English law and the parties have not expressly chosen another law to govern the arbitration agreement.
23. The Court therefore found in favour of the English Courts' jurisdiction, dismissed RusChem's appeal and upheld the Court of Appeal's decision ordering a final anti-suit injunction against RusChem.
24. The findings of this technical decision of the Supreme Court may offer a useful precedent for parties seeking to enforce arbitration agreements. The judgment can be summarised in two principles:
24.1 As the law stands, the arbitration agreement is an agreement governed by the law of the contract, unless the parties have agreed otherwise. This is so even if the law of the seat of the arbitration is different from the law of the contract.
24.2 The fact that a contract is subject to English law may be a sufficient basis for the English courts to grant an anti-suit injunction even if there is no other connection whatsoever between the parties, the contract or the dispute and the English jurisdiction.
25. In commercial terms: when parties choose English law as the governing law of their contract, they may be conferring to the English courts the right to grant injunctions to enforce an arbitration agreement, irrespective of the seat chosen for the arbitration.
26. It must however be noted that this position may well change in due course, if Section 1(2) of the Arbitration Bill is accepted and made law by the English Parliaments.
