Recent developments on applications for anti-suit injunctions and anti-enforcement injunctions for foreign-seated arbitrations in the English courts

Introduction

Generally, the English courts will grant anti-suit injunctions ("ASIs") in support of arbitration agreements with  a seat in England or where no seat has yet been determined, if: (a) the claimant can demonstrate with a high degree of probability, the existence of an arbitration clause to which the defendant is a party and which covers the dispute; and (b) there are no exceptional circumstances which militate against the grant of the relief. 

Furthermore, the English courts will occasionally grant anti-enforcement injunctions (“AEI”) in circumstances where enforcement would unduly interfere with the jurisdiction of an English seated arbitration or the jurisdiction of the English courts. 

However, the approach of the English courts to granting ASIs and AEIs in foreign-seated arbitrations has, until recently, been obscure. Applications for such relief in support of foreign-seated arbitrations have in recent times arisen in relation to claims initiated in Russian courts, notwithstanding arbitration agreements in the underlying contracts. This has been made possible by amendments to the Russian Arbitrazh (Commercial) Procedure Code which purports to establish exclusive jurisdiction of the Russian courts, irrespective of pre-existing arbitration agreements.

In Deutsche Bank AG v RusChemAlliance LLC [2023] EWCA Civ 1144, in a judgment handed down on 11 October 2023, the English Court of Appeal upheld an appeal against Mr Justice Bright's ("Bright J") judgment in SQD v QYP [2023] EWHC 2145 (Comm) (anonymising the parties' details) and granted an ASI and AEI in relation to Russian court proceedings brought in breach of an arbitration agreement which provided for an arbitration seated in Paris. In that case, the High Court refused to grant an ASI and AEI in favour of an arbitration seated in Paris on the basis that it would be inappropriate for the English court to grant an ASI in circumstances where the grant of such relief would be inconsistent with the approach of the law of the seat of the arbitration, which in this case was French law.

Facts of Deutsche Bank AG v RusChemAlliance LLC

The application for an ASI and AEI arose out of an advance payment guarantee ("the Guarantee") issued by German bank, Deutsche Bank AG ("DB") in favour of a Russian company, RusChemAlliance LLC ("RL"), which secured an advance payment made by RL under a contract with a German third party, Linde, for the construction of a liquefied natural gas plant in the Russian Federation ("the Contract"). The Contract was governed by English law and provided for any disputes to be resolved by arbitration in Paris under the ICC rules. 

Following the invasion of Ukraine by Russia and the resulting sanctions by the EU, Linde suspended work under the Contract. RL terminated the Contract and demanded repayment of the advance payment it had made to Linde in the amount of EUR738 million, Linde refused. RL later made the demand from DB for the full amount of EUR238,126,196.10 guaranteed. DB refused to make payment by reason of the sanctions.  RL then initiated proceedings against DB in the Russian courts under the Guarantee ("the Russian Proceedings")

DB commenced ICC arbitration seeking enforcement of the arbitration agreement, and a parallel English proceeding seeking an ASI and AEI under s. 44 of the Arbitration Act 1996 ("1996 Act"), alternatively under s. 37(1) of the Senior Courts Act 1981 ("1981 Act").

Judgment of the court of first instance

Bright J refused to grant the injunctions on the basis that England was not the proper place to claim the injunctions. Based on expert evidence of French law, he concluded that ASIs are not available in France and are not in the French legal "toolkit" and "it would not be appropriate for the English court to grant relief in the context of an arbitration with a foreign seat if to do so might give rise to a “conflict” or “clash”. He held that to grant an interim ASI would be inconsistent with the approach of the French courts, which the court must defer to in circumstances where France was chosen as the seat of arbitration by the parties. 

In dismissing DB's application, Bright J made the following comments:

1. He reiterated the Supreme Court’s decision in Ust-Kamenogorsk Hydropower Plant JSC v. AES Ust-Kamenogorsk Hydropower Plant LLP, that the power of the English courts to grant ASIs and AEIs in foreign-seated arbitrations is derived from s. 37(1) of the 1981 Act rather than s. 44 of the 1996 Act.
2. The grant of ASIs and AEIs, where there is no agreed English jurisdiction clause, is subject to the English courts establishing personal jurisdiction over the defendant. For parties outside the jurisdiction, this is established by reference to the jurisdictional gateways set out in CPR6.36/PD6B.
3. He found that the arbitration agreement was governed by English law because there had been no evidence to negate the inference that English law, being the governing law of the contract should not apply to the arbitration agreement. Such evidence includes showing that there is a provision of the law of the seat (French law) such that the choice of a French seat requires French law to govern the arbitration agreement.

Bright J however granted DB permission to appeal the decision.

The Appeal

Bright J granted permission to appeal on four grounds. The fourth ground was not pursued so the remaining three grounds are listed below:

1. The court should have held that England was the proper place to claim the injunctions, regardless of where the seat was, or whether an ASI or AEI was available from the French court (as the court of the seat of arbitration).
2. The court should have held that rule 29.7 of the ICC Rules made England a proper place to bring the claim even if (contrary to Ground 1) it otherwise would not be.
3. The court should not have held that the application was contrary to any French public policy.

In support of the third ground of appeal, DB applied and was allowed to introduce evidence on two fresh points of French Law. The evidence showed that although French law did not have the ability to grant ASIs as part of its procedural toolkit, it had no objection in principle to (and will recognise) the grant of ASIs by a court that can, by its own procedural rules, grant one, provided that the injunction was not obtained by fraud or contrary to international public policy.  On the basis of the evidence, the court held that ground 3 of the appeal was made out and the remaining question before the court was whether England was the proper place to claim the injunctions (Grounds 1 and 2).

In assessing whether  the English court had jurisdiction, the court found that the first two requirements, that (i) there is a serious issue to be tried on the merits and (ii) there is a good arguable case that the claim falls within one of the relevant gateways, were satisfied (the relevant gateway being PD6A para 3.1(6)(c), as the contract was governed by English law). The third requirement was that England and Wales was "proper place in which to bring the claim."

In determining the third requirement, the court considered various case law, stating: 

"[t]here is no difficulty in identifying what English Law regards as required by "the ends of justice" in a case such as the present. It is the policy of English law that parties to contracts should adhere to them, and in particular that parties to an arbitration agreement, who have thereby impliedly agreed not to litigate elsewhere, should not do so."

The court found that England was the proper place in which to bring the claim. Nugee LJ, giving the leading judgment held that the appropriate forum to bring applications for ASIs and AEIs was not necessarily restricted to the seat but that it was necessary to "identify the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice". The court therefore granted the ASI as well as an AEI, to prevent any judgment obtained in Russia from being enforced.

Key Takeaway

The Deutsche Bank AG v RusChemAlliance LLC is an important decision confirming that, in appropriate circumstances, and specifically where doing so is not contrary to public policy of the country in which the arbitration is seated, the English court will grant anti-suit injunctions and anti-enforcement injunctions in aid of foreign arbitrations.

Another key consideration in the court reaching its decision was that the governing law in this case was English law. In the absence of clarity in an agreement that the governing law of the arbitration agreement is English law, courts may apply the law of the country where the arbitration is seated, which in cases such as this, can make obtaining an ASI more challenging for the applicant. As such, it is crucial to ensure that arbitration agreements are properly and clearly drafted and fully informative. If you need assistance with an ASI or AEI, or with the drafting of an arbitration agreement, please contact Arish Bharucha or Duncan Bagshaw of this firm.

This article has been co-written by Sanchita Agrawal (Solicitor) and Toheeb Amuda (Paralegal).