Linde GMBH v. Ruschemalliance LLC  HKCFI 2409
In this article we will discuss the impact of Russian sanctions on commerce and trade, particularly situations where there is an Arbitration Agreement between the parties.
Anti-Suit and Anti-Anti-Suit Injunctions in UK Law
In our previous article, we discussed the decision in Renaissance Securities (Cyprus) Ltd v Chlodwig Enterprises Ltd & Others  EWHC 2816 (Comm), where the English High Court granted an anti-suit injunction (ASI) and an anti-anti-suit injunction (AASI) to a company to prevent the defendants in the case, who were subject to UK and US sanctions, bringing proceedings in Russia under Article 248 of the APC.
Shortly before the Renaissance Securities decision, the Hong Kong Court of First Instance maintained an anti-suit injunction to prevent legal proceedings initiated in Russia that violated an Arbitration Agreement based in Hong Kong. Notably, the Court dismissed assertions that Russian jurisdiction laws should dissuade this decision, underscoring its commitment to honouring the agreement between the parties.
EU Sanctions and Contractual Obligations
Due to EU sanctions, Linde GMBH (‘Linde’), a German contractor, temporarily halted its obligations under an engineering, procurement, and construction contract aimed at building a gas processing complex (the ‘Contract’) with Russian owner Ruschemalliance LLC (‘RCA’). The Contract, governed by English law, included an Arbitration Agreement explicitly subject to Hong Kong law and specifying HKIAC arbitration seated in Hong Kong.
In response, RCA terminated the Contract, alleging Linde’s independent actions constituted a significant breach. RCA then initiated proceedings in Russia under Article 248.1 of the Russian Arbitration Procedural Code (‘Article 248.1’), which, as was explained our previous article, claims to establish exclusive jurisdiction over disputes involving Russian-sanctioned entities.
Concurrently, Linde initiated a HKIAC arbitration and subsequently secured an anti-suit injunction (‘ASI’) from the Hong Kong court in support of arbitration, preventing RCA from pursuing the Russian legal action. RCA attempted to lift the ASI by applying to the Hong Kong court.
The Hong Kong Court’s Decision: Upholding the Arbitration Agreement
The Hon. Madam Justice Mimmie Chan rejected RCA’s application and upheld the ASI. She confirmed that there was a fundamental principle that unless there were powerful reasons to the contrary, when it comes to proceedings designed to breach an agreement to arbitrate, the Court will use its discretion to restrain such proceedings via granting an injunction.
RCA relied on Article 248.1 to argue that granting the ASI was not just and convenient because:
- Article 248.1 meant the Russian courts had exclusive jurisdiction; and
- Under Russian law, the Arbitration Agreement in the Contract was invalid, and any award would therefore be unenforceable.
The Hon. Madam Justice Mimmie Chan rejected argument (a), stating that Article 248.1 only applies if the application of foreign sanctions created access to justice obstacles for a party in the dispute. In this case, RCA had a means of accessing justice through the Arbitration Agreement.
Furthermore, EU sanctions did not apply in Hong Kong, and RCA had access to excellent lawyers there. Case law had established that provided an Arbitration Agreement is valid and can be applied under the law chosen by the parties and stated in the agreement (in this case Hong Kong), the fact that a foreign court has jurisdiction under its own law did not prevent granting an ASI. In addition, the Contract had been entered into whilst EU sanctions were in force, therefore, terms had been drafted to cater to their potential impact.
Regarding point (b), the Hong Kong court concluded that the Arbitration Agreement was valid and Article 248.1 did not apply in this case. And even if EU sanctions prevented an Arbitration Award being enforced in the EU, it could be enforced in other jurisdictions.
Implications of Anti-Suit Injunctions in International Trade and Sanctions
The Hong Kong court’s ruling and the decision in Renaissance Securities is important for companies aiming to withdraw or vary Russia-related contracts that include arbitration clauses due to the impact of US, EU, and UN sanctions.
These entities are increasingly confronting Russian legal actions based on Article 248.1. In these cases, obtaining an Anti-Suit Injunction (ASI) from relevant courts is sometimes the best option and one that is becoming increasingly popular.
To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at email@example.com.
Note: The points in this article reflect sanctions in place at the time of writing, 27 December 2023. This article does not constitute legal advice. For further information, please contact our London office.
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