Three recent (and closely related) decisions have left the door open for parties to request an anti-suit injunction (ASI) from an English court in support of an arbitration that is seated abroad. The three decisions are Deutsche Bank AG v RusChemAlliance LLC, Commerzbank AG v RusChemAlliance LLC, and Unicredit v RusChemAlliance LLC.
This is a complex area of law because of three competing jurisdictions:
- the law of the contract;
- the law of the seat; and
- the law of the arbitration agreement.
So, what have the courts said in relation to these cases, and how might parties navigate these issues and wield an ASI?
In 2021, Linde Engineering entered an engineering, procurement, and construction contract with Russian-owned joint venture company, RusChemAlliance LLC (RCA), to construct a liquified natural gas processing plant in Russia. Each of Deutsche Bank, Commerzbank, and Unicredit issued bonds to guarantee Linde Engineering’s performance under the contract. The bonds were governed by English law and contained arbitration agreements referring disputes to ICC arbitration seated in Paris.
In May 2022, following the Russian invasion of Ukraine, Linde Engineering suspended work under the contract due to the imposition of EU sanctions. That caused RCA to call in the bonds from the banks. The banks, predictably, refused to pay because of the sanctions.
Contrary to the arbitration agreements in the bonds, RCA began proceedings in Russia against the banks. The banks, in response, sought to restrain the Russian proceedings by making applications for ASIs in England. Those applications were made in England – notwithstanding the fact that the arbitrations were to be seated in Paris – because ASIs are not available under French law. England was, therefore, the only other available jurisdiction with a connection to the arbitration agreements.
What did the courts decide?
The Deutsche Bank decision
In Deutsche Bank, at first instance, the Court followed Enka v Chubb – ie, where the governing law of the arbitration agreement has not been specified, the governing law of the contract will (generally) apply to it. That made it English law.
Nonetheless, the Court did not grant an ASI because it found England was not the proper forum. This was because an ASI would be inconsistent with the approach that would be taken by the courts of the seat (ie, France). In addition, the Court decided that granting relief which is unavailable under the law of the seat would clash with the intention of the parties who had chosen that same seat.
Unusually, the Court of Appeal heard fresh evidence and reversed the decision. That evidence showed that although the French courts cannot grant an ASI, they would still recognise the grant of one from England. This meant, in the Court of Appeal’s view, there was sufficient harmony between an English ASI and the law of the seat so as not to cause a problem.
On a more granular level, but of particular interest to practitioners, Deutsche Bank confirmed that when seeking an ASI or AEI, the application needs to be brought under s37(1) Senior Courts Act 1981 rather than s44 of the Arbitration Act 1996. This means that the applicant will have to meet the usual (and often difficult) criteria for service out of the jurisdiction.
The Commerzbank decision
Commerzbank was handed down before the Court of Appeal’s decision in Deutsche Bank. The Court granted an ASI but for slightly different reasons: it decided that England and Wales was the proper forum for the ASI because both the arbitration agreement and the bond were governed by English law. Moreover, ASIs are not available in France, so that could not be the proper place to obtain one.
The Judge distinguished Deutsche Bank because he had the benefit of more detailed evidence of French law. He found there to be no conflict with the law of the seat because there were no philosophical objections to ASIs under French law, and the French courts would in fact welcome an ASI issued by the English courts to safeguard an arbitration agreement.
The Unicredit decision
In Unicredit, the Court refused to grant an ASI. The Court concluded that in choosing Paris as the seat of the arbitration, the parties would have been aware of the French law position on ASIs (ie, you cannot have one) and would have intended that the arbitration be governed by those principles.
The Court also considered proper forum and decided that England was not the only place the applicant could achieve “substantial justice” just because it would have been the only place an ASI could have been granted. The Court doubted the precedential value of the Court of Appeal’s decision in Deutsche Bank because that it was an ex parte appeal with no submissions by RCA.
There is, in some places, broad daylight between elements of these decisions. It is risky to extract principles from them for now, though it does appear to be the case that:
- English courts may grant ASIs in favour of an arbitration seated abroad;
- an ASI is more likely if the law of the seat is not actively hostile to them in principle; and
- the parties’ intentions remain relevant and will be considered.
We await the inevitable further decisions – if not appeals, particularly in Unicredit – with interest.
With special thanks to Daniel Pearce, a current trainee in the dispute resolution team, for their contribution to this article.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, December 2023