THE AUTHOR:
Paul-Raphael Shehadeh, Associate at Duane Morris
A recent set of conflicting judgments from the High Court and Court of Appeal examined the availability of English anti-suit injunctions (“ASIs”) in support of foreign-seated arbitrations where a party has breached its agreement to arbitrate by initiating proceedings before the courts of a third State.
It is too early to draw many firm conclusions about the state of the law in this area, except to note that the topic is sure to exercise parties and the courts for some time yet. We take stock of developments so far.
Anti-Suit Injunctions
ASIs are in use in common law legal systems around the world and offer an in personam remedy, whereby a court in one jurisdiction enjoins a party from initiating or continuing parallel proceedings – often in another jurisdiction. Many civil law jurisdictions, by contrast, tend to view ASIs as an impermissible limit on parties’ free access to courts and an encroachment on the other court’s ability to determine its own jurisdiction.
In English law, the longstanding power of the High Court to grant ASIs derives from section 37(1) of the Senior Courts Act 1981, which states in relevant part: “The High Court may by order (whether interlocutory or final) grant an injunction […] in all cases in which it appears to the court to be just and convenient to do so”. Though the High Court enjoys a broad jurisdiction to grant injunctive relief pursuant to section 37(1), in practice, its exercise is informed by carefully calibrated common law rules and judicial self-restraint.
Pro-Arbitration ASIs
One use of the ASI is to restrain a party from pursuing an action before foreign courts contrary to its bargain to arbitrate found in a valid arbitration agreement. The ASI provides, as Lord Mance put it, a “highly efficient means to give speedy effect to clearly applicable arbitration agreements” (West Tankers Inc v. RAS Riunione Adriatica di Sicurta SpA & Ors [2007] UKHL 4, [2007] 1 All ER (Comm), at [29]). Whilst such ASIs have been granted in support of arbitrations having their seat in England and Wales (the articulation of the principles by Millett LJ in Angelic Grace [1995] 1 Lloyd’s Rep 87 remaining a classic formulation), the recent judgments have tested whether an agreement to arbitrate in a foreign seat precludes or otherwise renders inappropriate the English court’s grant of an ASI.
There is a common factual matrix across the recent cases: (1) there is a prima facie agreement to resolve disputes by Paris-seated ICC arbitration; (2) the underlying contracts are all governed by English law; (3) there is no express choice of law governing the arbitration agreement; (4) the defendant to the ASI application is based in the Russian Federation; and (5) that defendant has brought proceedings before the courts of the Russian Federation.
A 2020 change in Russian law is also worthy of note: Article 248 of the Arbitrazh (Commercial) Code of Procedure permits a party to bring proceedings before the Russian courts despite the existence of a valid dispute resolution clause mandating litigation or arbitration before the courts or an arbitral tribunal in a foreign state if that party is subject to sanctions in that foreign jurisdiction such that it cannot enforce the dispute resolution clause.
This has set a collision course between Russian courts’ exercise of jurisdiction, the arbitral tribunal’s competence, traditionally upheld by the courts of the seat of the arbitration (France), and English courts’ ASI jurisdiction.
Recent Case Law on Asis in Support of Foreign-Seated Arbitrations
The recent series of cases started on 21 August 2023 with the judgment of Mr Justice Bright in SQD v QYP [2023] EWHC 2145 (Comm). The parties have now been identified by the Court of Appeal as Deutsche Bank AG and RusChem Alliance LLC. Having satisfied himself (following Enka v Chubb [2020] UKSC 38) that the arbitration agreement was governed by English law, Bright J held that, since the ASI is unavailable in France, and “a tool that French law does not like”, both: (1) the imperative of judicial self-restraint with a view to avoiding the risk of a “conflict” or “clash” with the court of the seat of the arbitration; and (2) the parties’ objective intention that the arbitration be seated in France – where ASIs are not available – tipped the balance against the grant of ASI relief.
Reference by Bright J to “conflict” or “clash” is to the DAC’s Supplementary Report glossing what would become s. 2(3) of the Arbitration Act 1996 and to the sentiment of Lord Mustill’s dicta in Channel Tunnel calling for a “very cautious” approach to the exercise of ASI jurisdiction to try and ensure it does not “cut across the grain of the chosen curial law” (Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334, at p. 358F).
Within days the Court of Appeal (composed of Nugee, Snowden, Falk LJJ) allowed an urgent appeal against Bright J’s decision in Deutsche Bank AG v RusChem Alliance LLC [2023] EWCA Civ 1144. The Court of Appeal agreed with Bright J’s analysis that the policy of English law is to hold parties to their bargains, including the “negative promise contained in the arbitration agreement not to bring foreign proceedings” (as per Lord Mance in Ust-Kamenogorsk Hydropower v AES [2013] UKSC 35, at [48]). However, unlike Bright J, the Court of Appeal held that England was the proper place to bring the ASI application, in part because the French courts could not grant ASI relief themselves. The Court of Appeal stressed that it had the benefit of much fuller evidence of French law than had been before Bright J. Accordingly, the Court of Appeal also held that the French courts were not only capable of recognising an ASI order but would be likely to do so in the circumstances of the case. For the Court of Appeal this meant that there need not be a “conflict or clash” between the English and French courts.
In the short time between Bright J’s judgment and that of the Court of Appeal, at least two further applications for ASI relief with similar facts were considered by Knowles J in UniCredit Bank AG v RusChem Alliance LLC (judgment not available at the time of writing) and Bryan J in Commerzbank AG v RusChem Alliance LLC [2023] EWHC 2510 (Comm). In both cases, ASI relief was granted.
Knowles J (hearing dates 24 August, 6 September, 22 September 2023) appears to have reasoned as follows: the UK, France and Russia are all parties to the New York Convention (“NYC”). Russian procedural law (specifically Article 248 of the Arbitrazh (Commercial) Code of Procedure) no longer fully complies with Article II(3) of the NYC. In such circumstances, both the English and French courts likely share the objective of upholding the parties’ agreement to arbitrate (in accordance with Article II(3) NYC) such that granting an ASI does not risk “conflict or clash” with the French courts, but rather a supportive exercise of judicial comity.
As for Bryan J, he was willing to grant an ASI, applied for in like circumstances as in Commerzbank AG v RusChemAlliance LLC, after finding that English law governed the arbitration agreement, by virtue of which the English Court had personal jurisdiction over the respondent under one of the classic jurisdictional gateways in the English Civil Procedure Rules. This, in turn, rendered the English courts the proper forum (“forum conveniens”) in which to seek ASI relief. Since no other competent forum could step in to protect the claimant’s right to arbitral proceedings, it was just and convenient to grant an ASI against the respondent party.
This appearance of an increasingly settled approach was short-lived. One day after the Court of Appeal’s decision in Deutsche Bank AG v RusChem Alliance LLC, Sir Nigel Teare handed down a judgment in G v R [2023] EWHC 2365 (Comm) in which he dismissed an application for ASI relief in substantially similar circumstances. Teare applied one of the exceptions in Enka v Chubb and held that French law governed the arbitration agreement and that the English court had no jurisdiction to hear an application for ASI relief. The conclusion that the arbitration agreement was governed by French law is noteworthy since Teare concluded that though the matrix contract was governed by English law, the choice of France as the seat, and thus French law as the proper curial law, implied (as a matter of French arbitration law) a choice of French governing law for the arbitration agreement (“the French substantive rules applicable to international arbitration”). The English-law-governed-contract jurisdictional gateway was, therefore, unavailable.
The decision of Sir Nigel Teare (sitting as a High Court Judge) to dismiss the claim for lack of jurisdiction has since been overturned by the Court of Appeal. Publication of the judgment is awaited.
Comment
The same issues are likely to come before the courts again in the near future, whether by way of (further) appeal or further applications. It is hoped that a uniform approach will begin to emerge.
As for the existing judgments, in each case where ASI relief was granted, the arbitration agreements were deemed to be governed by English law by operation of English common law rules for determining the governing law in default of positive party choice (Enka v Chubb), such that the English courts had personal jurisdiction over the parties to the arbitration agreement, and were competent to consider granting ASI relief at all.
It is clear that the English courts regard the parties’ choice of an arbitral seat as an important (if not decisive) factor in both determining the parties’ implied choice of law governing their arbitral agreement in the case of French-seated arbitrations, and in deciding whether to grant pro-arbitration ASI relief. Parties negotiating contracts should pay close attention not only to the choice of seat, but also to the governing law of the arbitration agreement: if recourse to tools such as ASI relief is desired, seating an arbitration in England (best achieved by expressly specifying England as the “place” or “seat” of the arbitration) offers a means of avoiding the difficulties of the kind surveyed above.
ABOUT THE AUTHOR:
Paul-Raphael Shehadeh is an Associate at Duane Morris where he specialises in international arbitration and commercial litigation. His arbitration practice comprises investor-state and international commercial arbitration in disputes proceeding under ICSID, UNCITRAL, ICC, SIAC and LCIA rules advising claimant and respondent parties in technology, energy and infrastructure related disputes. He has assisted parties with the recognition and enforcement of arbitral awards and challenges against arbitral awards before national courts in matters relating to both the New York and ICSID Conventions.
