UniCredit v RusChemAlliance
| Jurisdiction | England & Wales |
| Judge | Lord Justice Males,Lord Justice Lewis,Lord Justice Bean |
| Judgment Date | 02 February 2024 |
| Neutral Citation | [2024] EWCA Civ 64 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2023-001933 |
Lord Justice Bean
Lord Justice Males
and
Lord Justice Lewis
Case No: CA-2023-001933
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
Sir Nigel Teare (sitting as a High Court Judge)
Royal Courts of Justice
Strand, London, WC2A 2LL
Stephen Houseman KC & Stuart Cribb (instructed by Latham & Watkins (London) LLP) for the Appellant
Sa'ad Hossain KC & Alexander Brown (instructed by Enyo Law LLP) for the Respondent
Hearing date: 25 January 2024
Approved Judgment
This judgment was handed down remotely at 10.30am on 2 nd February 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
The issue in this appeal is whether the English court has jurisdiction to grant an anti-suit injunction to restrain the pursuit of proceedings in Russia when the parties' contract is governed by English law but provides for arbitration in Paris in accordance with the rules of the International Chamber of Commerce; and if so, whether such an injunction should be granted. That issue arises because the respondent, RusChemAlliance LLC (‘RCA’), is pursuing a claim for payment before the Arbitrazh Court of St Petersburg and the Leningrad Region under certain on demand bonds issued by the appellant bank, notwithstanding that each of the bonds contains an arbitration clause. It does so contending that the agreement to arbitrate is unenforceable under Russian law, although it has never contended that the arbitration agreement is governed by Russian law.
Sir Nigel Teare, sitting as a judge of the Commercial Court, held that the English court does not have jurisdiction, for two reasons: first, because the arbitration agreement is not governed by English law as the governing law of the contract, but by French law as the law of the seat of arbitration; and second, because the English court is not the appropriate forum on the ground that the claimant bank could obtain substantial justice in an arbitration in France, notwithstanding that any order by an arbitral tribunal would not be reinforced by the coercive powers of the English court. The bank appeals on both issues.
The judge's decision on jurisdiction meant that he did not have to consider whether, if there had been jurisdiction, a final injunction should be granted. As to that, the bank submits that it should, while the defendant company submits that the issue should be remitted to the Commercial Court to decide.
At the conclusion of the hearing on 25 th January 2024 we announced that the appeal would be allowed and that a mandatory final injunction would be granted (in short) to restrain the respondent from prosecuting its claims in the Russian proceedings and to order it to bring those proceedings to an immediate end. After giving the parties an opportunity to make submissions on the form of the order, we made such an order on 29 th January 2024. We refused an application by RCA that the order should be stayed until after any further appeal to the Supreme Court. This judgment sets out my reasons for joining in those decisions.
Background
RCA is a company incorporated under the laws of the Russian Federation. In July and September 2021 it entered into two Engineering Procurement and Construction contracts for the construction of LNG (liquefied natural gas) and GPP (gas processing plant) facilities in Russia. Its contractual counterparties were German companies, Linde GmbH and Renaissance Heavy Industries LLC, together described as ‘the Contractor’.
Under the EPC contracts RCA was obliged to pay, in stages, a total of approximately €10 billion. The Contractor was entitled to advance payments of approximately 20% of that sum, i.e. €2 billion. Those advance payments have been made.
The contracts also provided for the Contractor to provide on demand bonds guaranteeing the performance of its obligations. It arranged for some of those bonds to be provided by the claimant, UniCredit Bank GmbH, then known as UniCredit Bank AG, a German bank. Further bonds were provided by other banks, including Deutsche Bank and Commerzbank.
UniCredit issued seven bonds. Four of them were to guarantee the performance of the Contractor's obligations under the contract. Three of them were to secure the repayment of the advance payments.
Each of the bonds provided for English law and ICC arbitration in Paris, as follows:
‘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, the 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 extended its existing sanctions and imposed new sanctions on Russia, and on specified Russian legal entities and persons, although these did not include RCA. This led the Contractor to seek clarification from the German Federal Office for Economic Affairs and Export Control whether it could continue to perform the EPC contracts. It was instructed that it could not. As a result, the Contractor halted performance of the contracts, citing EU sanctions as its reason for doing so.
On 23 rd September 2022 RCA terminated or purported to terminate the first contract on the ground that the Contractor had materially breached its obligations. On 7 th April 2023 it terminated or purported to terminate the second contract on the same basis. It requested the Contractor to return the advance payments which it had made and sought compensation for damage caused by the breach.
Following the termination of the contracts, RCA made demands on UniCredit for payment under the on demand bonds. Initially UniCredit declined to pay on the ground that the demands did not comply with formalities required by the terms of the bonds. However, RCA submitted revised demands which appear to have cured any formal defects. The position now is that demands for payment have been made under all seven bonds, which UniCredit has rejected on the grounds that such payment was prohibited by EU sanctions, specifically Articles 3b(2)(b) and 11(1) of Regulation (EU) 833/2014. UniCredit has not advanced any other ground for its refusal to pay.
RCA disputes that these sanctions afford a valid ground for UniCredit's refusal to make payment under the bonds. Accordingly that is an issue which ought to be decided, and which the parties have agreed should be decided, by ICC arbitration in Paris, by one or more arbitrators applying English law.
Procedural history
Instead of commencing such an arbitration, however, on 5 th August 2023 RCA issued proceedings against UniCredit before the Arbitrazh Court of St Petersburg and the Leningrad Region, claiming payment of €443,767,755.29, the total value of the bonds, together with interest. Its pleaded case in the Russian proceedings is that the EU sanctions invoked by UniCredit violate Russian public policy and therefore do not provide a ground for non-payment, and that the Arbitrazh Court is competent to determine the dispute because the arbitration clause contained in the bonds is unenforceable as a matter of Russian law.
On 14 th August 2023 the Arbitrazh Court formally accepted RCA's claim and fixed 27 th September 2023 for a hearing to consider not only preliminary matters, but also the substantive trial of the claim.
On 22 nd August 2023 UniCredit issued a claim in the English court, together with an application for an interim anti-suit injunction to restrain the pursuit of the Russian proceedings. That application was heard urgently and without notice to RCA by Mr Justice Robin Knowles on 24 th August 2023 and an interim injunction was granted. RCA was served with the proceedings and the order on the following day. Mr Justice Robin Knowles also gave directions fixing the hearing of the claim for final relief for 22 nd September 2023.
On 1 st September 2023 RCA acknowledged service and indicated its intention to challenge jurisdiction.
The trial of the claim for final anti-suit relief and the challenge by RCA to the jurisdiction of the English court were heard together by Sir Nigel Teare on 22 nd September 2023. In view of the urgency, with a hearing in Russia which was potentially the substantive trial of RCA's claim fixed for 27 th September 2023, the judge gave an extempore judgment.
In the event the substantive trial of the claim in the Russian proceedings did not take place on 27 th September 2023. Instead, on 1 st November 2023, Judge Saltykova dismissed UniCredit's challenge to the jurisdiction of the Russian court, holding (in translation) that:
‘Therefore, by virtue of the provisions of paragraph 2 of part 1 of article 248.1 of the APC RF [the Arbitration Procedural Code of the Russian Federation], this dispute belongs to the exclusive competence of arbitration courts in the Russian Federation, therefore the arbitration agreement cannot be performed.’
In addition, Judge Saltykova, who...
To continue reading
Request your trial
-
Ziyavudin Magomedov v PJSC Transneft and Others
...as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards: cf. Unicredit Bank GmbH v RusChemAlliance [2024] EWCA Civ 64, per Males LJ at 43 It may be that Art. 248 can be invoked and applied in circumstances that are a long way from those used to justify the ......
-
UniCredit Bank GmbH v RusChemAlliance LLC
...bring a claim for redress is in an arbitration commenced under them. In response to a similar argument advanced by the respondent in AES[2024] EWCA Civ 64 Appellant Alexander Gunning KC Alexander Brown (Instructed by Enyo Law LLP) Respondent Stephen Houseman KC Jonathan Harris KC (Hon) Stua......
-
Bayerische Landesbank v Ruschemalliance LLC
...the declarations and final injunctive relief which had been granted by the Court of Appeal ( Unicredit Bank GmbH v Ruschemalliance LLC [2024] EWCA Civ 64). The Supreme Court made an order to that effect; although it stated that a written judgment was to follow, which has not yet been made ......
-
Barclays Bank Plc v VEB.RF
...Plant JSC [2013] UKSC 35, Donohue v Armco [2001] UKHL 64 at [24] and, most recently, UniCredit Bank GmbH v RusChemalliance LLC [2024] EWCA Civ 64 at [39] and 37 With the burden of proof well in mind, I turn now to the two grounds advanced by Mr Majumdar on the basis of which the Interim ......
-
Anti-Suit Injunctions From The English Court For Foreign Seated Arbitrations?
...LLC Introduction On 2 February 2024, the Court of Appeal handed down its written judgment in UniCredit Bank AG -v- RusChemAlliance LLC [2024] EWCA Civ 64, in which it issued a final anti-suit injunction ("ASI") restraining RusChemAlliance LLC ("RCA") from pursuing court proceedings in Russi......
-
UK Court Of Appeal Orders Mandatory Final Anti-Suit Injunction In Foreign-Seated Arbitration
...To avoid uncertainty, parties will be well served by explicitly stating which law governs the arbitration agreement. Footnotes 1. [2024] EWCA Civ 64. 2. Enka Insaat Ve Sanayi AS v. OOO Insurance Company Chubb [2020] UKSC 3. Altimo Holdings & Investment Ltd v. Kyrgyz Mobil Tel Ltd [2011] UKP......
-
UK Weekly Sanctions Update - Week Of February 5, 2024
...in breach of its agreement that such disputes should be decided by ICC arbitration in Paris. (Unicredit Bank GmbH v Ruschemalliance LLC [2024] EWCA Civ 64 (02 February 2024) UK House of Lords European Affairs Committee publishes Russia-Ukraine report: On January 31, 2024, the UK House of Lo......
-
Mixed-Interventionist Approach to Cross-Jurisdictional Issues arising from Sanctions
...EWCA Civ 1144. [2] SQD v QYP [2023] EWHC 2145 (Comm). [3] G v R [2023] EWHC 2365 (Comm). [4] Unicredit Bank GmbH v Ruschemalliance LLC [2024] EWCA Civ 64 (2 February 2024). [5] Mints v PJSC National Bank Trust [2023] EWCA Civ 1132. See Cleary Gottlieb, Court of Appeal Gives Judgment on Effe......