UK Court Of Appeal Orders Mandatory Final Anti-Suit Injunction In Foreign-Seated Arbitration

• Published date: 29 February 2024
• Law Firm: Cooley LLP
• Author: Juan Nascimbene, Pia Pyrtek and Alex Radcliffe

In its recent judgment in UniCredit Bank GmbH v. RusChemAlliance LLC,¹ the Court of Appeal granted a mandatory final anti-suit injunction in support of a French-seated arbitration regarding proceedings brought by the RusChemAlliance (RCA) before Russian courts.

Background

RCA is a Russian entity which had entered into engineering, procurement and construction contracts with two German companies (Linde GmbH and Renaissance Heavy Industries LLC), where it agreed to pay an advance fee of two billion euros. As part of the contract, UniCredit Bank issued several bonds to RCA as performance guarantees, each of which provided for International Chamber of Commerce (ICC) arbitration in Paris.

Following Russia's invasion of Ukraine in 2022, the European Union imposed wide-ranging sanctions on Russia and Russian entities and persons. Whilst RCA itself was not subject to those sanctions, both German companies were instructed to halt performance of the contract by the German authorities. Subsequently, RCA sought to terminate the contract on the basis that UniCredit materially breached its obligations. UniCredit contested the payment on the basis of it being unlawful under EU sanctions, which RCA disputed.

RCA issued proceedings before the Russian arbitrazh (commercial) courts. It claimed that EU sanctions were contrary to public policy, and that the arbitration agreements were unenforceable, therefore requiring UniCredit to pay 444 million euros. A week later, UniCredit brought a claim before the English Commercial Court, in conjunction with an application for an interim anti-suit injunction for the Russian proceedings. RCA acknowledged service and stated its intention to challenge the jurisdiction. In the interest of urgency due to the imminent substantive Russian proceedings, the English court gave an ex tempore judgment, refusing the anti-suit injunction. UniCredit appealed this decision.

In parallel, the Russian judge presiding over the Russian proceedings initially held that pursuant to the Arbitration Procedural Code of the Russian Federation, Russian courts had exclusive jurisdiction over disputes arising out of sanctions, and held that the arbitration agreements were unenforceable. However, the judge also stayed the proceedings pending the outcome of the Court of Appeal's decision in England.

Decision of the Commercial Court

At first instance, the English Commercial Court held that it did not have jurisdiction to grant an anti-suit injunction to prevent...