SPOTLIGHT #8: Enforcing Arbitration Agreements Under English Law: Key Takeaways from UniCredit Bank GmbH v RusChemAlliance
At Lead up, we are committed to providing our clients with the most innovative dispute resolution solutions to fit their specific industry contexts. To do that, we have to stay on top of the recent developments in our clients’ sectors, and analyse these developments in line with our clients’ needs. Every month, in “Lead up Spotlight”, we share with you – our colleagues, clients, and prospective partners – our analysis on a recent development relating to dispute resolution in an industry that matters to us and to our clients.
This month’s Lead up Spotlight focuses on a recent decision of the UK Supreme Court in UniCredit Bank GmbH v RusChemAlliance LLC ([2024] UKSC 30) that upheld anti-suit injunctions regarding an international arbitration to be seated in Paris.
Background of the Dispute
This case arose following EU sanctions on Russia, which impacted two construction contracts between RusChem (a Russian company) and two German contractors. These contracts involved over €2 billion in advanced payments and were backed by on-demand bonds issued by UniCredit. When the German contractors could not perform their obligations due to the sanctions, RusChem sought to terminate the contracts and requested the return of the advanced payments.
The German companies and UniCredit refused RusChem’s demands, citing EU sanctions as the reason for not repaying the sums. In turn, RusChem initiated legal proceedings in Russia to recover the funds. UniCredit objected, arguing that the parties had agreed to resolve any disputes through arbitration in Paris, as per the contracts’ arbitration agreements.
Faced with the Russian courts’ refusal to suspend proceedings, UniCredit sought an anti-suit injunction from the English courts to prevent RusChem from pursuing the Russian litigation. The critical question was whether the English courts had jurisdiction to grant such an injunction, given that the agreed seat of arbitration was Paris, not London.
The Governing Law of the Arbitration Agreement: Confirmation of the Enka principles
RusChem argued that French law, as the law of the arbitration seat, should govern the arbitration agreements. UniCredit, on the other hand, contended that English law, chosen by the parties to govern the contract, should apply to the arbitration agreement as well. The UK Supreme Court, applying the principles from Enka Insaat Ve Sanayi AS v Chubb ([2020] UKSC 38), ruled that English law governed the arbitration agreements, as there was no clear intention by the parties to apply a different law.
The Supreme Court therefore upheld the anti-suit injunction, ruling that the English courts had the authority to enforce the arbitration agreements, even though the seat of arbitration was in Paris. This decision underscores that English courts can issue injunctions to uphold arbitration agreements governed by English law, regardless of the foreign arbitration seat. The ruling demonstrates the courts’ commitment to maintaining the integrity of arbitration agreements.
One of the key aspects of the ruling was the Court’s clarification that the choice of a foreign arbitration seat does not automatically exclude the jurisdiction of English courts. The Supreme Court emphasised that the arbitration seat does not limit the English courts’ ability to grant interim relief, such as anti-suit injunctions, particularly when no arbitration proceedings have commenced yet.
Reference to the Law Commission Report
The Court’s decision also referenced the Law Commission’s recent Report on the Arbitration Act 1996, which proposes an amendment to clarify that the law governing the arbitration agreement should be the law of the seat. However, in this case, the Supreme Court emphasised that the parties had explicitly chosen English law to govern the contract and, by extension, the arbitration agreements. This illustrates that clear party intentions can override the general rule proposed by the Law Commission.
Implications for International Arbitration
This judgment has significant implications for international arbitration, particularly for parties that choose English law to govern their contracts. It confirms that even when the seat of arbitration is in a foreign jurisdiction, English courts can still play a key role in enforcing arbitration agreements. The decision bolsters the UK’s position as a key jurisdiction for resolving cross-border commercial disputes.