At a Glance

• The three recent cases followed the same fact pattern, and all concerned applications for ASIs to restrain RusChemAlliance LLC from bringing proceedings in the Russian courts in breach of arbitration agreements between the parties.
• In these cases, the parties did not include an express choice of law provision for the arbitration agreements themselves.
• ASIs were eventually granted in all three of the RusChem cases, but these cases demonstrated the need for clarity in this area. The Arbitration Bill, which has now completed its second reading in the House of Lords, includes specific revisions to deal with this uncertainty.

The recent RusChemAlliance LLC cases in the English High Court considered the practical impact of EU sanctions on Russian entities and the interaction between English and French jurisprudence in international arbitration. The cases also demonstrated the different remedies that are available in relation to arbitral proceedings in each jurisdiction, and the importance of making an explicit choice of law in an arbitration agreement. 

Background

In a trilogy of cases brought before the English High Court — Deutsche Bank AG v RusChemAlliance LLC, UniCredit Bank AG v RusChemAlliance LLC and Commerzbank AG v RusChemAlliance LLC — differing applications of current case law on the granting of anti-suit injunctions (ASIs) in relation to foreign-seated arbitrations demonstrate the need for reform in this area. 

The three cases followed the same fact pattern, and all concerned applications for ASIs to restrain RusChem from bringing proceedings in the Russian courts in breach of arbitration agreements between the parties. The three applicant banks — Deutsche Bank, UniCredit and Commerzbank — argued that they were prohibited from making payments under certain bonds and guarantees provided to RusChem as a result of the EU sanctions against Russia. These bonds and guarantees were governed by English law, and all contained dispute resolution provisions for ICC arbitration seated in Paris. 

Enka v Chubb and the RusChem Cases

In these cases, the parties did not include an express choice of law provision for the arbitration agreements themselves. Therefore, the High Court had to consider which law should apply to the arbitration agreements and whether England and Wales was the appropriate forum to hear the applications in each case. 

The Supreme Court set out the guidelines to determine the governing law of an arbitration agreement in Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38. Where the parties have not made an express choice of law in the arbitration agreement, the general rule is that the law that governs the main contract will also apply to the arbitration agreement, subject to various caveats. The choice of a different jurisdiction as the arbitral seat is not, on its own, enough to displace this general rule.

At first instance, the High Court only granted an ASI in the Commerzbank case. The Court of Appeal then separately overturned both the Deutsche Bank and UniCredit judgments, and the ASIs were also granted in those proceedings. The initially conflicting analysis in each of these cases is set out below:

Commerzbank

Mr Justice Bryan found that English law governed the arbitration agreement, following the reasoning in Enka v Chubb. As a result, England and Wales was the proper forum to bring the claim. Accordingly, with no good reason not to and in consideration of the argument that an ASI was not available in the French courts, the ASI was granted.

Deutsche Bank

At first instance, Mr Justice Bright rejected the ASI application as he found that although English law governed the arbitration agreement, England was not the appropriate forum for the claim. Expert evidence on French law heard in the case informed the reasoning in the judgment that French law had a “philosophical objection” to ASIs. It was considered that to grant an ASI would be inconsistent with the approach of the French courts and that such a conflict with the law of the arbitral seat should be avoided. Mr Justice Bright also gave weight to the argument that in choosing Paris as the seat of arbitration, the parties must have done so knowing that the French courts would not grant an ASI. 

The Court of Appeal overturned this decision and granted the ASI, aligning the judgment with the Commerzbank case and finding that the English court was the appropriate forum to hear the claim. Lord Justice Nugee held that although the French courts do not have the ability to grant ASIs, they do not have any objection in principle to the granting or recognition of ASIs. The most appropriate forum for the claim was the English court as such a remedy could not be awarded in France.

UniCredit

At first instance, Sir Nigel Teare held that the general rule as set out in Enka v Chubb did not apply. This was because French law would not regard the choice of English law in the main contract as governing the arbitration agreement. Instead, it should be governed by the French substantive rules on international arbitration, and England was not the proper forum to hear the claim. The ASI was not granted, as Sir Nigel Teare found that substantial justice could be done in France.

The Court of Appeal recently overturned this decision, granting the ASI in line with the judgments in the Deutsche Bank and Commerzbank cases. Lord Justice Males found that the general rule in Enka v Chubb was not displaced, and that the governing law of the arbitration agreement was English law. A French court would not grant an ASI, and an order made by an ICC arbitrator would not be enforceable in Russia. Therefore, substantive justice could not be achieved in France, and England was found to be the proper forum to hear the claim. Accordingly, the ASI was granted.

The Arbitration Bill

ASIs were eventually granted in all three of the RusChem cases outlined above, but these cases demonstrated the need for clarity in this area. The Arbitration Bill, which has now completed its second reading in the House of Lords, includes specific revisions to deal with this uncertainty. As currently drafted, it provides that: ‘The law applicable to arbitration agreement is (a) the law that the parties expressly agree applies to the arbitration agreement, or (b) where no such agreement is made, the law of the seat of the arbitration in question.’ Under these revisions, it is likely that the courts would have found that French law (the law of the seat) applied to the arbitration agreements in the RusChem cases.

As explained in our previous alerts, responses to the Law Commission’s original consultation on reform of the Arbitration Act largely agreed that the rules in Enka v Chubb were overly complicated to apply and that the certainty of codifying a default rule on the governing law of arbitration agreements was desirable. Debate on these provisions considered the argument that where the parties agree upon a choice of law for the main contract, they are likely to expect that this choice of law will govern all of the clauses in the contract, especially where the relevant foreign law does not recognise the separability of arbitration agreements. 

However, the proposed revisions will bring certainty for parties: either expressly agree upon the law of the arbitration agreement, or it will be the law of the seat of the arbitration in question.