LLC Eurochem North-West-2 v Tecnimont S.P.A
| Jurisdiction | England & Wales |
| Judge | Lady Justice Carr,Lord Justice Nugee,Lord Justice Lewison |
| Judgment Date | 21 June 2023 |
| Neutral Citation | [2023] EWCA Civ 688 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2023-000478 |
[2023] EWCA Civ 688
Lord Justice Lewison
Lady Justice Carr
and
Lord Justice Nugee
Case No: CA-2023-000478
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURTS OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
Mr Justice Henshaw
CL-2022-000420
Royal Courts of Justice
Strand, London, WC2A 2LL
Alan Maclean KC and Tom Leary (instructed by Curtis, Mallet-Prevost, Colt & Mosle LLP) for the Appellants
Justin Fenwick KC and George McDonald (instructed by Vinson & Elkins LLP) for the Respondent
Hearing date: 23 May 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on Wednesday 21 June 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction
Anti-suit injunctions are a discretionary remedy granted under s. 37 of the Senior Courts Act 1981 to restrain a party over whom the court has jurisdiction from commencing (or continuing) foreign proceedings, where it is necessary in the interests of justice to do so. They carry penal notices confirming, amongst other things, that a respondent who fails to comply may be held to be in contempt of court. They are a powerful tool in the court's armoury and have long been sought and granted in order to protect and uphold English jurisdiction and arbitration agreements.
This appeal relates to an anti-suit injunction obtained by the Respondent, LLC EuroChem North-West-2 (“EuroChem NW”) against the Appellants, Tecnimont SPA (“Tecnimont”) and LLC MT Russia (“MT Russia”), by order of Bryan J on 23 August 2022 (continued by order of HHJ Pelling KC on 6 October 2022) (“the ASI”). In broad terms, the ASI prohibited the Appellants from commencing or pursuing any foreign claims or proceedings for the purpose of restraining, delaying or otherwise impairing payment of certain bonds (other than with the written consent of EuroChem NW or further order).
Following a hearing on 2 March 2023, Henshaw J (“the Judge”) ruled on 6 March 2023 that Tecnimont had acted in breach of the ASI by applying to intervene in proceedings in the Regional Administrative Court of Lazio between EuroChem Agro SpA (“EuroChem Agro”) and the Italian Ministry of Economy, Treasury Department, Financial Security Committee (and others) (“the Italian Proceedings”). He also declined to vary the ASI so as to permit Tecnimont to pursue such intervention.
On this appeal, Tecnimont challenges both the Judge's finding of breach and the refusal to vary.
Background facts
EuroChem NW, a Russian company, and EuroChem Agro, an Italian company, are subsidiaries of EuroChem Group AG (“Eurochem AG”), a Swiss fertilizer producer. Tecnimont, an Italian company, and MT Russia, a Russian company, are subsidiaries of Maire Tecnimont SPA, another Italian company.
In June 2020 EuroChem NW engaged the Appellants as offshore and onshore engineering, procurement and construction contractors on the development of the “North-West 2” ammonia and urea production plant in Kingisepp, Russia (“the Project”). The relevant (three) contracts were as follows: a Coordination and Interface Agreement between EuroChem NW and Tecnimont and MT Russia; an Offshore Engineering and Procurement Contract between EuroChem NW and Tecnimont; and an Onshore Engineering, Local Procurement and Construction Contract between EuroChem NW and MT Russia (“the Contracts”). All were subject to materially identical London (ICC) arbitration clauses (“the London arbitration clauses”). (The arbitration clause in the Coordination and Interface Agreement was at Clause 7.5; in the other two contracts it was at Clause 21.3.)
Taking it as the exemplar, Clause 7.5 provided:
“ 7.5 Arbitration
7.5.1. Any Dispute arising between Owner and one or more Contractor, or between EP Contractor and EPC Contractor, in relation to this Agreement or in any way connected therewith, which is not settled amicably in accordance with clause 7.1 within forty five (45) Days from the date written notice of such Dispute is issued by one Party to the other Party may be submitted by either Party for binding resolution by arbitration under the Rules of Arbitration of the International Chamber of Commerce such as are then in force (the “Rules”) by three (3) arbitrators…
7.5.2 The place of the arbitration shall be London, England and the language of the arbitration shall be the English language. The seat of the arbitration shall be London, England…”
“Dispute” was defined as:
“…any question, dispute or difference arising out of or in connection with this Agreement including any dispute as to its existence, validity, interpretation, performance, breach or termination or the consequences of its nullity (each a “ Dispute”)…”
Pursuant to the Contracts, the Appellants caused various banks to advance on-demand payment, performance and retention bonds to EuroChem NW. The bonds each contained an exclusive English jurisdiction clause (“the English jurisdiction clauses”) as follows:
“11. Governing Law
This bond, and any non-contractual obligations arising out of or in connection with this bond, shall be governed by and construed in accordance with the laws of England and Wales. Each party irrevocably submits to the exclusive jurisdiction of the courts of England with regard to all matters arising from or in connection with this bond and agrees that a judgment on any proceedings brought in the courts of England shall be conclusive and binding upon them and may be enforced in the courts of any other jurisdiction.”
(With the exception of the Onshore Advance Payment Bond, where Clause 11 did not include the additional phrase “and any non-contractual obligations arising out of or in connection with this bond”.)
On 4 August 2022 EuroChem NW gave notice to terminate the Contracts following the suspension of work by Tecnimont and MT Russia on the Project, and between 4 and 11 August 2022 it attempted to draw down on the bonds. Payments out on two of the bonds (issued by Russian banks) were made; but, on the remaining six Bonds (“the Bonds”), the relevant (French and Italian) Banks (“the Banks”) refused payment, with the following explanation:
“…we are unable to honour the claim due to the presence of international sanctions directly impacting the transaction. Payment under the above-mentioned claim will indeed constitute a breach of these international sanctions.”
The Banks' position was that satisfaction of the demands would be contrary to the asset-freezing sanctions regime introduced as a response to Russia's invasion of Ukraine and earlier annexation of Crimea under EU Council Regulation 269/2014 (as amended by EU Council Regulations 2022/396 and 2022/878) (“Regulation 269”) and EU Regulation 833/2014 (together “the Regulations”). It was said that EuroChem NW was owned and/or controlled by Mr and/or Mrs Melnichenko, who are “Designated Persons” for the purpose of the Regulations. The total sum unpaid under the Bonds is approximately EUR 212,000,000.
The Arbitration Proceedings
On 15 August 2022 the Appellants commenced arbitration proceedings under the Contracts against EuroChem NW (“the Arbitration Proceedings”). They sought declaratory relief to the effect, amongst other things, that EuroChem NW's calls on the Bonds were unlawful, in reliance (like the Banks) on the alleged involvement of Mr and/or Mrs Melnichenko in EuroChem NW. At the same time they applied for the appointment of an Emergency Arbitrator to restrain payment under the Bonds, contending that EuroChem NW's calls on the Bonds were “tantamount to fraud”. It was said that the representation to the Banks that the Appellants had defaulted was false, and wilfully so.
The Emergency Arbitrator dismissed that application on 20 August 2022, on the basis that the Appellants had failed to establish a good arguable case that it was unlawful for EuroChem NW to demand payment. There was nothing to suggest that the demands on the Banks were made dishonestly.
Also in the Arbitration Proceedings, EuroChem NW claimed that Tecnimont had acted in breach of obligations said to have arisen following termination of the Contracts. Tecnimont denied breach on the basis that it cannot lawfully perform any such obligations because of the alleged involvement of Mr and/or Mrs Melnichenko in EuroChem NW. Performance would be tantamount to providing economic resources to EuroChem NW, in breach of the sanctions regime.
In its Reply to Counterclaims Tecnimont referred to and relied on a Decree of the Italian Treasury Ministry of Economy and Finance dated 27 September 2022 (“the Decree”), whereby the Italian authorities concluded that EuroChem Agro was ultimately owned or controlled by Mrs Melnichenko through EuroChem AG (and other companies). As a result, EuroChem Agro was subject to an asset freeze. The Decree noted that:
“a.…the Italian company [EuroChem Agro] and controlled through foreign corporate vehicles ([EuroChem AG], based in Switzerland, as well as AIM CAPITAL PLC, LINEA (CY) LTD and LINETRUST PTC LTD based in Cyprus) by the FIRSTLINE Trust, established in Bermuda;
b. effective owner of FIRSTLINE Trust, starting March 9, 2022, and Ms Aleksandra Melnichenko who succeeded, in the same capacity, Mr Andrey Igorevich Melnichenko resigned from quality on 8 March 2022…”
and considered that EuroChem Agro fell within the freezing measures under Regulation 269 “as indirectly attributable to Ms Aleksandra Melnichenko”. It went on to declare the freezing of EuroChem Agro's assets on that basis.
Tecnimont has applied to join EuroChem AG to the Arbitration Proceedings, which are ongoing.
The Bank Proceedings
On 19 August 2022 EuroChem NW commenced Commercial Court...
To continue reading
Request your trial
-
Zephyrus Capital Aviation Partners 1D Ltd and Others v Fidelis Underwriting Ltd and Others
...the order is granted, it will interfere with the workings of a foreign court and is likely to end the foreign proceedings ( LCC Eurochem North-West-2 v Tecnimont SpA [2023] EWCA Civ 688 § 113 per Nugee LJ; Ecobank Transnational Inc v Tanoh [2015] EWCA Civ 1309 §§ 89–91). 142 The All Risks......
-
Euronav Shipping NV v Black Swan Petroleum DMCC
...v Michael Wilson & Partners Ltd [2018] 1 Lloyd's Rep 299 per Sir Terence Etherton MR at [39] and, most recently, LLC Eurochem North-West-2 v. Tecnimont SPA and another [2023] EWCA Civ 688 per Nugee LJ at [106] and [113], dissenting in the result but not on these points. If that requirement......
-
AB and Ors v Cd and Ors
...Again there was no dispute between the parties. I was taken to various authorities but it suffices to follow the guidance in LLC Eurochem North-West-2 v Tecnimont [2023] EWCA Civ 688 at [45]: “i) The terms of an injunction, given the penal consequences of breach, are to be construed strict......