UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30

A German bank sought an anti-suit injunction to restrain a Russian company from pursuing Russian court proceedings in breach of arbitration agreements governed by English law with a Paris seat. The Supreme Court upheld the injunction, confirming that a contractual choice of governing law for the contract applies to the arbitration clause, and that England was the proper forum for enforcement.

Facts

RusChemAlliance LLC (RusChem), a Russian company, entered into construction contracts with German contractors, guaranteed by bonds issued by UniCredit Bank GmbH. The bonds contained clauses specifying English law as the governing law and ICC arbitration in Paris for disputes. Following EU sanctions after Russia’s invasion of Ukraine, UniCredit refused to pay under the bonds. RusChem commenced proceedings in Russian courts, relying on Russian legislation (Article 248.1 of the Arbitrazh Procedural Code) which purported to render arbitration agreements inoperable in sanctions-related disputes and confer exclusive jurisdiction on Russian courts.

Issues

Governing Law of the Arbitration Agreement

Whether the arbitration agreements in the bonds were governed by English law (as UniCredit contended) or French law (as RusChem argued based on the choice of Paris as the seat of arbitration).

Proper Place to Bring the Claim

Whether England and Wales was the proper place to bring a claim for an anti-suit injunction, given that the seat of arbitration was Paris.

Judgment

The Supreme Court unanimously dismissed RusChem’s appeal. Lord Leggatt, delivering the judgment, applied the principles from Enka Insaat ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38 and Kabab-Ji SAL v Kout Food Group [2021] UKSC 48.

Governing Law

The Court held that the express choice of English law in clause 11 of the bonds applied to the entire contract, including the arbitration clause (clause 12). The choice of Paris as the seat of arbitration did not displace this conclusion.

“The term ‘this Bond’ in clause 11 is reasonably understood to mean the whole bond including clause 12 (the arbitration clause). There is nothing in the wording of the bonds which excepts clause 12 from the choice of English law as the governing law.”

The Court rejected the argument that French law applied merely because French courts would apply their own substantive rules of international arbitration. Lord Leggatt stated:

“What was said in para 170(vi)(a) [of Enka] should therefore in future be disregarded.”

Proper Place

The Court held that the Spiliada forum non conveniens test was inapplicable where parties had contractually agreed to arbitration. The principle of pacta sunt servanda applied. Strong reasons were required to decline enforcement of the arbitration agreement, and none existed here. The French courts could not grant an anti-suit injunction and lacked jurisdiction over RusChem. Arbitration would be ineffective as any award would be unenforceable in Russia.

“It is desirable that parties should be held to their contractual bargain by any court before whom they have been or can properly be brought.”

Implications

This judgment reinforces the principle that a choice of governing law for a contract applies to an arbitration clause within it, unless expressly excluded. It clarifies that the choice of a foreign seat does not automatically mean the arbitration agreement is governed by the law of that seat. The decision also establishes that English courts may grant anti-suit injunctions to enforce arbitration agreements even where the seat is abroad, provided there is sufficient connection (such as the agreement being governed by English law) and no considerations of comity militate against doing so. The case is significant for international commercial arbitration and the enforcement of contractual choices of forum.

Verdict: Appeal dismissed. The Court of Appeal’s order granting UniCredit a final anti-suit injunction requiring RusChem to discontinue its Russian proceedings was upheld.

Source: UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30