Do the UK courts support foreign seat arbitrations?

The UK Supreme Court in UniCredit Bank GmbH v RusChemAlliance LLC [2024] upheld a final anti-suit injunction (ASI) to restrain RusChemAlliance from continuing Russian court proceedings, in breach of arbitration agreements providing for ICC arbitration in Paris.

The Supreme Court was considering these questions: Are the courts of England and Wales the proper place for UniCredit to bring its claim for an anti-suit injunction against RusChemAlliance, or should the claim have been brought in France? Are the arbitration agreements between the parties governed by French law or English law?

Background

A dispute arose over guarantees between the parties and there was an arbitration provision. The dispute over the guarantees was linked to the construction of a liquefied natural gas plant in Russia by a German company. The deal was underpinned by three banks (Unicredit was one) giving payment guarantees to RusChemAlliance. However, after the Ukraine invasion and the imposition of financial sanctions on Russia, the contract was terminated, but RusChemAlliance made demands to be paid under the guarantees. The guarantees contained arbitration provisions for ICC arbitration in Paris. The guarantee was governed by English law, but the governing law of the arbitration agreement was not clear. The High Court initially granted UniCredit an interim injunction on an ex parte basis. However, following trial, the High Court declared it had no jurisdiction to hear the claim on the grounds that the arbitration agreements were governed by French law, and that in any event England was not the proper place for the claim. The Court of Appeal allowed UniCredit’s appeal and granted an injunction requiring RusChemAlliance to discontinue the Russian proceedings. RusChemAlliance then appealed to the Supreme Court.

The Judgment

The Supreme Court found that English law governed the arbitration agreements and so the anti-suit injunction could be granted.

The Court considered Enka v Chubb [2020] UKSC 38 and the principles it laid down for determining what law governs an arbitration agreement where the law applicable to the underlying contract differs from the law of the seat. The Court agreed with the Enka approach, and that where the governing law of contract and seat are different, the contract’s governing law should be construed as applying to the arbitration agreement. In this case, English law governs.

RusChemAlliance submitted that there is an exception to the general rule that the governing law of the contract governs the arbitration agreement, the exception being consideration of the law of the seat, where it treats the arbitration agreement as governed by that country’s law, and that in this case it would be governed by French law. The Supreme Court unanimously rejected this argument. The decision concluded that the fact courts of the seat might take a different view to the English court and regard their own law as the law governing the arbitration agreement, was not a good reason to depart from the general rule in Enka.

Lessons

English court support for arbitration has been boasted. They will grant injunctions in support of foreign arbitrations, and this all stems from the English willingness to hold parties to contractual agreements to arbitrate.

The case also shows the importance of being clear what law governs each part of the agreement. Remember there is a law for the contract, a law for the arbitration, and the seat law, and all should be considered.

This will be more important when the proposed UK Arbitration Bill 2024 becomes law, as it is expected to change the default position established on choice of law. It proposes that absent an express choice, an arbitration agreement will be governed by the law of the seat, not the law of the contract.

If you have questions about arbitration, please contact James Tumbridge.