Deutsche Bank AG v Ruschemalliance LLC
| Jurisdiction | England & Wales |
| Judge | Lord Justice Nugee,Lord Justice Snowden,Lady Justice Falk |
| Judgment Date | 11 October 2023 |
| Neutral Citation | [2023] EWCA Civ 1144 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2023-001697 |
[2023] EWCA Civ 1144
Lord Justice Nugee
Lord Justice Snowden
and
Lady Justice Falk
Case No: CA-2023-001697
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
Mr Justice Bright
Royal Courts of Justice
Strand, London, WC2A 2LL
Paul Key KC (instructed by Baker & McKenzie LLP) for the Appellant
Hearing date: 7 September 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on 11 October 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction
A guarantee issued by a German bank in favour of a Russian company is governed by English law and provides for arbitration in Paris. When a dispute arises, the Russian company issues proceedings in Russia in apparent breach of the arbitration agreement. Should the English court grant an anti-suit injunction ( “ASI”) to restrain those proceedings in circumstances where no such injunction could be obtained in France? That is the question raised by this appeal.
The guarantee was issued by Deutsche Bank AG ( “DB”) in favour of RusChemAlliance LLC ( “RCA”). DB applied to the Commercial Court without notice for an ASI against RCA which had started proceedings in Russia. The application was heard by Bright J on 17 and 18 August 2023. On 21 August 2023 he handed down judgment (under the name SQD v QYP [2023] EHWC 2145 (Comm)) dismissing the application on the basis that England was not the proper forum and that the English court should not grant the injunctive relief that DB sought.
DB appealed to this Court (again without notice). We heard the appeal on an expedited basis on 7 September 2023. We allowed the appeal and granted an ASI, giving very brief reasons. I now give fuller reasons for agreeing to this course.
Facts
The facts as they appear from the material before the Court at this stage are as follows.
RCA is a Russian company. On 9 September 2021 it entered into a contract with a German construction company, Linde GmbH, Linde Engineering ( “Linde”) for the engineering, procurement and construction of an LNG plant in Ust-Luga in the Leningrad Region of the Russian Federation. The contract provided for advance payments to be made to Linde, and for an advance payment guarantee to be provided to RCA in respect of each such advance payment.
On 24 September 2021 DB issued one such advance payment guarantee to RCA ( “the Guarantee”). By clause 1 DB undertook to pay RCA the amount demanded by RCA up to a maximum of €238,126,196.10. By clause 11 the Guarantee was to be construed under and governed by English law. By clause 12 in case of disputes the parties were to co-operate and attempt to find an amicable solution, failing which such disputes were to be settled by arbitration in Paris under the Rules of Arbitration of the International Chamber of Commerce ( “the ICC” and “the ICC Rules”).
Following the Russian invasion of Ukraine and the adoption of sanctions by the EU (among others), Linde suspended work under the contract on 27 May 2022. On 7 April 2023 RCA gave Linde notice terminating the contract and claimed back the advance payments it had made in a total sum of over €738m. Linde did not pay and on 2 May 2023 RCA made a demand on DB under the Guarantee for the full amount of €238,126,196.10 guaranteed. DB declined to pay on the grounds that it was prohibited by sanctions from doing so. On 31 May 2023 DB received a dispute notice from RCA triggering the dispute resolution mechanism in clause 12 of the Guarantee.
On 27 June 2023 RCA commenced proceedings against DB in the Arbitrazh Court of Saint Petersburg and Leningrad Region ( “the Russian proceedings”). It claimed the full sum due under the Guarantee together with interest. It also claimed execution of any judgment on DB's shares in two wholly-owned Russian subsidiaries, Deutsche Bank LLC and Deutsche Bank Technology Centre LLC. In its statement of claim, it referred to the arbitration clause contained in the Guarantee but asserted that it was unenforceable for a number of reasons.
DB received notification of the Russian proceedings on 20 July 2023. On 14 August 2023 it commenced arbitration in Paris under the ICC Rules by filing a request for arbitration. At the date of the hearings before Bright J and this Court the arbitral tribunal had not yet been established. In its request for arbitration DB claimed among other things a final order specifically enforcing the arbitration agreement by requiring RCA not to pursue, and to take steps to discontinue, the Russian proceedings.
Application to Bright J
On 16 August 2023 DB applied to the Commercial Court for an interim ASI restraining RCA from pursuing the Russian proceedings, and an anti-enforcement injunction ( “AEI”) restraining RCA from enforcing any judgment obtained in the Russian proceedings together with permission to serve RCA out of the jurisdiction. The application was made without notice to RCA and was therefore in the first instance for injunctive relief pending a return date on which there could be an on notice hearing, but as was made clear by DB, the relief then sought would also be interim pending the ability of the arbitral tribunal to grant relief.
The application came before Bright J on 17 August 2023. At the outset of the hearing he was able to give a number of indications, as set out in his Judgment at [17(i)-(vii)]. These were as follows:
(1) He was satisfied to a high degree of probability that the Guarantee existed and contained clauses providing that it was to be governed by English law and was subject to ICC arbitration in Paris.
(2) He was satisfied that so far as the English court is concerned the arbitration agreement itself was subject to English law: see Enka Insaat ve Sanayi AS v OOO “Insurance Company Chubb” [2020] UKSC 38, [2020] 1 WLR 4117 (“ Enka”) at [170(iv)]) per Lord Hamblen and Lord Leggatt JJSC. See also Kabab-Ji SAL v Kout Food Group [2021] UKSC 48 where it was held, applying the principles laid down in Enka, that an arbitration agreement in a contract governed by English law and providing for arbitration under the ICC Rules in Paris was itself subject to English law.
(3) He was satisfied to a high degree of probability that the Russian proceedings were in breach of the arbitration agreement.
(4) In principle agreements should be honoured; if the Court has jurisdiction it will generally give support to a party wising to ensure that an agreement is honoured by its counterparty. This includes arbitration agreements.
(5) He was satisfied that DB had acted promptly and that delay was not a factor.
(6) He was not persuaded that RCA would not have access to justice in the context of the arbitration in Paris.
(7) In principle if the case had involved an arbitration with its seat within the jurisdiction, he would be very likely to grant an ASI and probably an AEI (after some discussion of its terms).
Mr Paul Key KC, who appeared on the appeal for DB (but did not appear below) unsurprisingly did not take issue with any of these, and we did not require any submissions on them. Nevertheless I have considered them for myself and I am satisfied that the conclusions stated by Bright J were all justified by the evidence before him, or by the relevant legal principles. I do not think it necessary to go into more detail.
The point that concerned Bright J, however, was whether it was appropriate to grant an injunction given that the seat of the arbitration was in Paris. Rather to his surprise, it would appear, the evidence did not explain why the application was being made in England rather than in France. In particular DB had not furnished the Court with any evidence of French law. In those circumstances he adjourned the hearing to the next day.
When the hearing resumed on 18 August 2023, DB had obtained evidence of French law. I will have to look at this evidence in more detail below, but for present purposes it is sufficient to note that it explained that it would not be possible to obtain an ASI in France.
Judgment of Bright J
Bright J reserved judgment and handed down a clear, thorough and commendably quick judgment dismissing the application on 21 August 2023. Having set out the background and having identified the critical point as being what the effect was of the fact that the seat of the arbitration was not within the jurisdiction, he first dealt with an issue on the source of the Court's jurisdiction to grant an ASI.
Counsel then appearing for DB focussed primarily on s. 44 of the Arbitration Act 1996 ( “AA 1996”) which by s. 44(1) and (2)(e) confers on the Court “for the purposes of and in relation to arbitral proceedings” the same power of granting interim injunctions as it has for the purposes of and in relation to legal proceedings. But Bright J did not accept that s. 44 was the source of the power to grant an ASI, holding that the relevant power arises solely under s. 37(1) of the Senior Courts Act 1981 ( “SCA 1981”) and not under s. 44 AA 1996 (at [23] and again at [34]). That was on the basis of what Lord Mance JSC said in Ust-Kamengorsk Hydropower Plant JSC v AES Ust-Kamengorsk Hydropower Plant LLP [2013] UKSC 35 (“ Ust-Kamengorsk”) at [48] as follows:
“The better view, in my opinion, is that the reference in section 44(2)(e) to the granting of an interim injunction was not intended either to exclude the Court's general power to act under section 37 of the 1981 Act in circumstances outside the scope of section 44 of the 1996 Act or to duplicate part of the general power contained in section 37 of the 1981 Act. Where an injunction is sought to restrain foreign...
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