Commerzbank AG v Ruschemalliance LLC
| Jurisdiction | England & Wales |
| Judge | Mr Justice Bryan |
| Judgment Date | 31 August 2023 |
| Neutral Citation | [2023] EWHC 2510 (Comm) |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | No. CL-2023-000516 |
[2023] EWHC 2510 (Comm)
THE HON. Mr Justice Bryan
No. CL-2023-000516
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURT
OF ENGLAND & WALES
COMMERCIAL COURT (KBD)
Rolls Building
Fetter Lane
London, EC4A 1NL
Mr P McGrath KC and Mr M Gregoire (instructed by Allen & Overy LLP) appeared on behalf of the Claimant.
THE DEFENDANT did not appear and was not represented.
Hearing date: 31 August 2023
APPROVED JUDGMENT
There is before me this afternoon an urgent without notice application under section 37(1) of the Senior Courts Act 1981 (“the SCA 1981”) for an interim anti-suit injunction (“ASI”) seeking to restrain the Respondent (“RusChem”) from pursuing proceedings before the Arbitrazh Court of St. Petersburg and Leningrad Oblast (“the Arbitrazh Court”) against Commerzbank in breach of an arbitration agreement (“the Arbitration Agreement”) contained in an On Demand Performance Bond dated 1 October 2021 (“the Bond”).
The background to this application is set out in the first witness statement of Andrew Alaistair William McGregor of 30 August 2023. Commerzbank is a financial institution incorporated under the laws of the Federal Republic of Germany. The defendant, RusChem, is a company incorporated under the laws of the Russian Federation.
On 25 October 2011, Commerzbank entered into a German law governed guarantee and a letter of credit facility with Linde GmBH (“Linde”), which has been amended several times (“the Guarantee Facility Agreement”). Pursuant to clause 1 of the Guarantee Facility Agreement, Commerzbank guaranteed a facility of €466,800,000 to Linde in connection with Linde's Ust-Luga GPP and LNG project (“the Ust-Luga Project”).
On 28 September 2021, pursuant to the Guarantee Facility Agreement, Linde sent Commerzbank an instruction to issue an on-demand performance bond in the amount of €93,477,156.55 in favour of RusChem. The instruction refers to an engineering, procurement and construction contract entered into by Linde and RusChem on 9 September 2021 in relation to a liquified natural gas processing plant in the Leningrad region of the Russian Federation, as part of the Ust-Luga project (“the EPC Contract”).
In terms of the draft provided by Linde, Commerzbank issued the Bond on 1 October 2021. The Bond was transmitted via Swift to Gazprombank as RusChem's bank. The key terms of the Bond include clauses 11 and 12. Clause 11 provides:
“This bond and all non-contractual or other obligations arising out of or in connection with it shall be construed under and governed by English law.”
Clause 12 provides:
“In case of dispute arising between the Parties about the validity, interpretation or performance of the Bond, the Parties shall cooperate with diligence and in good faith to attempt to find an amicable solution. All disputes arising out of or in connection with the Bond (which cannot be resolved amicably) shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce (ICC) by one or more arbitrators appointed in accordance with the said ICC's Rules. The place of arbitration shall be Paris and the language to be used in the arbitral proceedings shall be English.”
It will be seen therefore that English law is the law governing the Bond, per Clause 11, and, per Clause 12, if the parties are unable to resolve a dispute arising out of or in connection with the Bond amicably, they had agreed to refer such dispute to arbitration seated in Paris, conducted in English with an arbitral tribunal appointed in accordance with the ICC Rules.
At the time of the issuance of the Bond, no EU sanctions applied to any of the entities involved in the transaction or the sector at issue. However, that changed in 2022 following the Russian invasion of Ukraine.
The evidence before me from Mr McGregor, on information from his German colleagues, is that, due to changes in the sanctions regime, Linde suspended work on the Ust-Luga Project as of 28 May 2022, after it received confirmation from the German Federal Office for Economic Affairs and Export Control that the export of liquefied natural gas from the processing plant was prohibited from 28 May 2022 under Article 3(b) [3] of Council Regulation (EU) 833/2014.
On 27 April 2023, Commerzbank received a SWIFT message from Gazprom, on behalf of RusChem, demanding full payment under the Bond. In response, Commerzbank stated, on 4 May 2023, that it was legally prohibited from making the payment due to EU sanctions, in particular Article 11 of Council Regulation (EU) 833/2014. RusChem disagreed with Commerzbank's position and issued a notice of dispute on 26 May 2023, stating that the non-payment was a violation of the terms of the Bond and English law (as its applicable law). Commerzbank responded to this notice on 2 June 2023, stating that, as an international bank, it was aware of the nature of its obligations under the Bond, but could only fulfil them within the framework of the applicable law.
Following the exchange between RusChem and Commerzbank, on or about 29 June 2023, RusChem commenced the Russian proceedings. In the Russian proceedings, RusChem invites the Arbitrazh Court of St. Petersburg and Leningrad Oblast to assume jurisdiction over the dispute and grant the following reliefs:
(a) an order requiring Commerzbank to pay €93,477,156.55 under the Bond;
(b) an order requiring Commerzbank to pay a late payment interest of €211,283.98 (as of the date of the filing of the statement of claim); and
(c) an order requiring Commerzbank to pay further interest for delay in making payments under the Bond for the period from the date of filing the statement of claim to the date of the actual fulfilment of obligations by Commerzbank.
In its statement of claim in the Russian Proceedings, RusChem also makes explicit reference to the existence of the Arbitration Agreement. RusChem expressly recognises that the Arbitration Agreement was agreed by the parties and implicitly recognises it covers the dispute which is the subject matter of the Russian Proceedings. However, RusChem maintains that the Arbitration Agreement is unenforceable because it impairs RusChem's access to justice. In this regard, RusChem specifically argues that:
(a) the existence of sanctions imposed on it is sufficient for it to unilaterally transfer any disputes to Russia;
(b) it has serious doubts that the resolution of the dispute in a State applying sanctions against Russian (i.e. France) will be fair and impartial; and
(c) its legal representation would be impaired due to restrictions on cross-border payments from Russia.
The evidence before me is that RusChem sent the statement of claim by courier, which Commerzbank received on 17 July 2023. Again, the evidence before me, which is recounted by Mr McGregor in relation to another fee-earner qualified to give advice on Russian law, Igor Gorchakov, is that this does not qualify as valid service of process under Russian law. Mr Gorchakov has accessed the publicly available Russian court database and the Arbitrazh Court of St Petersburg and Leningrad Oblast accepted the statement of claim on 11 July 2023 and scheduled a preliminary hearing for 24 January 2024.
However, by order of 28 July 2023, at RusChem's request, the Arbitrazh Court rescheduled the date of the preliminary hearing to 18 October 2023 and then, on 24 August 2023, Commerzbank were served by the Local Court, Frankfurt, through judicial assistance, in accordance with the procedure to effect valid service of process. According to the court order served, the preliminary hearing is scheduled for 24 January 2024, but the evidence before me is that, as at the date of the witness statement of Mr McGregor, Commerzbank would be compelled to appear in the Russian proceedings currently scheduled for 18 October.
The evidence before me from Mr Gorchakov, as recounted by Mr McGregor, is that if Commerzbank were not to appear at such a hearing, there is a risk that the Arbitrazh Court of St Petersburg and Leningrad Oblast may issue its judgment ex parte. Mr McGregor makes clear that Commerzbank has not taken any steps in respect of the Russian proceedings and has no intention to submit to the jurisdiction of the Arbitrazh Court of St Petersburg and Leningrad Oblast. The consequence though of a potential hearing on 18 October is that that court could grant some relief to RusChem as at that time.
Commerzbank is also concerned that there is a possibility that even those proceedings could further be brought forward. It is against that background that Commerzbank submitted that unless RusChem is restrained from continuing those proceedings, Commerzbank will be denied its English law contractual right to have the dispute resolved as per the Arbitration Agreement and runs the very real risk of being subject to some form of default judgment unless Commerzbank is forced to submit to the Russian jurisdiction.
It is against that backdrop that Commerzbank submits to me, firstly, that this matter is urgent and should be heard urgently and, secondly, that it should be heard on a without notice basis. I am satisfied that this matter is urgent and should also be heard on a without notice basis, because if the matter was on notice to RusChem and/or indeed was on an inter partes basis with RusChem, there would be a real risk that RusChem would take steps to prevent anti-suit relief being granted by taking steps in Russia to obtain an order seeking to prevent any such steps being taken. In those circumstances, I have heard this matter urgently today as the Vacation Commercial Court Judge, and have also been satisfied that it is appropriate to proceed on a without notice basis.
The applicable principles in relation to granting anti-suit relief are well known. It is...
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