The Supreme Court has blocked Russian proceedings brought in breach of an arbitration agreement, in a decision that appears to lower the bar on jurisdiction
In UniCredit Bank v RusChemAlliance [2024] UKSC 30, five justices unanimously upheld the Court of Appeal’s decision to grant an anti-suit injunction restraining the proceedings.
Russian company RusChem agreed contracts with German companies for the construction of gas processing plants in Russia, and paid the advance payments of about €2bn. After the EU imposed sanctions on Russia in response to the invasion of Ukraine, the German companies said they could not fulfil the contracts nor return the advance payment due to the sanctions.
The contracts had been guaranteed by bonds issued by German bank UniCredit. RusChem therefore demanded payment of the bonds but UniCredit refused on the grounds this was also prohibited by the sanctions. The contracts provided for disputes to be governed by English law and settled in Paris under International Chamber of Commerce rules.
However, RusChem sued UniCredit in the Russian courts. In response, UniCredit successfully applied for an interim injunction blocking RusChem from continuing the Russian proceedings.
Joel Seager, partner, and Robaidh Allighan, associate, at Fladgate, said: ‘A key takeaway from the judgment is that a party seeking injunctive relief to enforce an arbitration agreement will no longer have to show that England is the most appropriate forum.
‘Instead, parties may be held to their agreement by any court which can reasonably assume jurisdiction. The judgment lowers the threshold for parties seeking extra-territorial injunctive relief, opening the door to future litigants who have been deprived of their contractual right to arbitrate a dispute.’
Seager and Allighan said the court ‘emphasised the importance of having a clear and simple rule that, where the law of an arbitration agreement is not specified, the governing law of the main contract will apply’.
However, they noted there was ‘tension’ between the common law position and the new draft Arbitration Act, which currently provides the governing law of an arbitration agreement will be the law of the arbitral seat.
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