UniCredit Bank GmbH v RusChemAlliance LLC

Heard on 17 and 18 April 2024

Lord Leggatt ( with whom Lord Reed, Lord Sales, Lord Burrows and Lady Rose agree):

This judgment gives the reasons for the court's unanimous decision, announced on 23 April 2024, to dismiss this appeal. The appeal is from an order made by the Court of Appeal on 29 January 2024 requiring the appellant, RusChemAlliance LLC (“RusChem”), to cease court proceedings in Russia against the respondent, UniCredit Bank GmbH (“UniCredit”), in circumstances where the parties have agreed, in a contract governed by English law, that any disputes between them shall be settled by arbitration in Paris. The result of this court's decision is therefore that the Court of Appeal's order is undisturbed.

RusChem is a Russian company which in July and September 2021 entered into two contracts with German companies (together described as “the Contractor”) for the construction of liquefied natural gas and gas processing plants in Russia. Under these contracts RusChem agreed to pay, in stages, approximately €10 billion, including advance payments of around €2 billion. RusChem made the advance payments to the Contractor.

Performance of the Contractor's obligations was guaranteed by bonds payable on demand. Seven such bonds have been issued by the respondent, UniCredit, a German bank. Each of the contracts contained in these bonds provides (in clause 11) that the bond is governed by English law and (in clause 12) that all disputes are to be settled by arbitration in Paris under the rules of the International Chamber of Commerce (“ICC”). Here is the full wording of these clauses:

“11. 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.

12. 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.”

Following Russia's invasion of Ukraine in February 2022, the European Union imposed sanctions on Russia and on designated Russian legal entities and individuals. The designated entities did not include RusChem. Even so, in May 2022 the Contractor announced that, because of EU sanctions, it could not continue to perform the construction contracts. As a result, RusChem terminated the contracts and requested the return of the advance payments. The Contractor stated that it could not return the advance payments, again giving EU sanctions as the reason.

In October 2022 and April 2023 RusChem made demands on UniCredit for payment under the bonds. UniCredit refused to pay on the ground that payment was prohibited by EU sanctions, in particular article 11 of Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine. UniCredit has not relied on any other reason for its refusal to pay.

On 5 August 2023 RusChem issued proceedings against UniCredit before the Arbitrazh Court of the St Petersburg and Leningrad Region in Russia, claiming payment of €448 million under the bonds. In its statement of claim in those proceedings RusChem relied on article 248.1 of the Arbitrazh Procedural Code, introduced by the Russian Federation in 2020. The effect of article 248.1 is, among other things, to confer exclusive jurisdiction on Russian Arbitrazh Courts over disputes between Russian and foreign persons arising from foreign sanctions; to treat an agreement providing for arbitration of such a dispute outside the territory of the Russian Federation as inoperable. Article 248.2 enables Russian persons affected by foreign sanctions to apply to a Russian Arbitrazh Court for an anti-suit injunction prohibiting the other party from initiating or continuing proceedings before a foreign court or international arbitration tribunal located outside the territory of the Russian Federation.

UniCredit applied to the Arbitrazh Court to dismiss RusChem's claim on the ground that the parties have agreed that all disputes arising out of the bonds are to be settled by arbitration in Paris under the rules of the ICC.

On 1 November 2023 the judge in the Russian proceedings, SS Saltykova, announced the decision of the Arbitrazh Court to dismiss that application. Judge Saltykova ruled that, by virtue of article 248.1(2)(1) of the Arbitrazh Procedural Code, the dispute falls within the exclusive competence of the Arbitrazh Courts of the Russian Federation, so that the arbitration agreements cannot be enforced. The judge stayed the proceedings, however, and has since adjourned the matter pending the outcome of the present proceedings. Lord Reed PSC has formally expressed this court's gratitude to Judge Saltykova for taking this course and enabling these proceedings to be dealt with in an orderly way.

These proceedings were begun in the Commercial Court in London by UniCredit on 22 August 2023. The claim was for injunctive and declaratory remedies for RusChem's commencement and pursuit of the Russian proceedings in breach of the arbitration agreements in the bonds. UniCredit applied without notice for an interim injunction prohibiting RusChem from continuing the Russian proceedings until further order of the court, which was granted on 24 August 2023.

On 8 September 2023 RusChem issued an application disputing the English court's jurisdiction to hear UniCredit's claim.

On 22 September 2023 the hearing of RusChem's challenge to the English court's jurisdiction and an expedited trial of UniCredit's claim took place in the Commercial Court before Sir Nigel Teare sitting as a High Court judge. For reasons given in an ex tempore judgment, the judge held that the English court did not have jurisdiction to hear the claim; but he continued the interim anti-suit injunction until the process of appeal from his order had been exhausted: [2023] EWHC 2365 (Comm).

The Court of Appeal granted UniCredit permission to appeal from the judge's decision and the appeal was heard on 25 January 2024. At the end of the hearing, the court (Bean, Males and Lewis LJJ) announced its decision to allow the appeal and to grant a final anti-suit injunction, with reasons to follow. On 29 January 2024 the order of the Court of Appeal was made granting final relief including a mandatory injunction requiring RusChem to discontinue the Russian proceedings. The reasons for the Court of Appeal's decision were given by Males LJ in a judgment handed down on 2 February 2024: [2024] EWCA Civ 64; [2024] 1 Lloyd's Rep 350.

In the Court of Appeal the issues were: (1) whether the English court has jurisdiction over UniCredit's claim; and (2) if so, whether the Court of Appeal should grant the final injunction claimed by UniCredit or should remit that question to the Commercial Court. In summary, the Court of Appeal decided that the English court has jurisdiction over the claim because: (a) the arbitration agreements in the bonds are governed by English law; and (b) England and Wales is the proper place in which to bring the claim. The Court of Appeal also decided that the question whether to grant a final injunction should not be remitted to the Commercial Court and granted the injunction.

On 12 February 2024 this court gave RusChem permission to appeal from the decision of the Court of Appeal on the jurisdiction issue. RusChem was refused permission to appeal on the question whether, if the English court has jurisdiction over UniCredit's claim, the Court of Appeal was entitled to grant a final injunction rather than remit the matter to the Commercial Court. Permission to appeal on that issue was refused because it did not raise a point of law of general public importance.

The sole issue in this appeal is therefore whether the English court has jurisdiction over UniCredit's claim. This depends on whether the Court of Appeal was right to decide (a) that the arbitration agreements in the bonds are governed by English law and (b) that England and Wales is the proper place in which to bring the claim. I will refer to these issues, respectively, as “the governing law issue” and “the proper place issue” and will address them in turn.

Under rule 6.36 of the Civil Procedure Rules (CPR), the claimant may serve a claim form on a defendant out of the jurisdiction with the permission of the court if any of the grounds (commonly known as “gateways”) set out in para 3.1 of Practice Direction 6B applies. The sole ground, or gateway, on which UniCredit relies is that set out in para 3.1(6)(c) of Practice Direction 6B (the “contract gateway”). The contract gateway applies where a claim is made in respect of a contract which is governed by the law of England and Wales.

When applying for permission to serve proceedings out of the jurisdiction, it is only necessary for the claimant to satisfy the court that there is a “good arguable case” that the claim...