On the 24th February 2025, the UK Government announced that 107 new sanctions would be imposed, targeting Russia, entities in third countries who support Russia, and the supply networks that it relies on. In addition, the Government is sanctioning the Kyrgyzstan-based OJSC Keremet Bank, which is the first example of the UK’s using [TO BE INSERTED]. This is aimed at disrupting Russia’s use of the international financial system. These new sanctions are likely to cause further challenges to organisations who have or had business dealings with Russian sanctioned entities.
The recent Supreme Court decision in UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30 is just one of many cases related to Russian sanctions winding their way through the English courts. In this case, a final anti-suit injunction (ASI) was granted to prohibit RusChemAlliance LLC from bringing legal proceedings in Russia. This was despite the fact that the agreed arbitration seat was in Paris.
The case is still ongoing, as you will see below.
Background to the decision
RusChemAlliance (RCA) is a Russian company and UniCredit is a German bank with assets in Russia. RCA entered into contracts with a third party (the contractor) to build gas processing plants in Russia. Under the contracts, RCA was obliged to pay the contractor approximately €10 billion, with €2 billion in advance. The advance was duly paid.
UniCredit issued seven on-demand bonds in favour of RCA to a total value of approximately €420 million, four of which were to guarantee the performance of the contract and three of which were to secure repayment of the advance payments.
Each bond contained a clause stating:
“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”.
The bond clauses also stated that any disputes must be resolved by an ICC arbitration seated in Paris.
Following EU sanctions being imposed on Russia, the contractor informed RCA that it was now unable to perform the contracts and would not return any of the €2 billion advance. RCA was not designated under or otherwise subject to EU or UK sanctions.
RCA brought proceedings against UniCredit in the Russian courts seeking recovery of €448 million under the bonds. UniCredit issued a claim in England and Wales, alleging that the proceedings commenced by RCA in Russia breached the Arbitration Agreements contained in the bonds. It sought, among other things, an ASI to stop the Russian court proceedings. The High Court initially granted UniCredit an interim injunction on an ex parte (without notice) basis. But following a trial, the High Court ruled that because the arbitration seat was in Paris, it did not have jurisdiction, and England was not the right place to bring a claim. The Court of Appeal allowed UniCredit’s appeal and granted an ASI.
RCA appealed to the Supreme Court.
Supreme Court’s decision in UniCredit Bank GmbH v RusChemAlliance LLC
The Supreme Court upheld the Court of Appeal’s decision, stating that the Arbitration Agreements were governed by English law and England was the proper place to bring a claim for an ASI.
In giving the judgment, Lord Leggatt (with whom Lord Reed, Lord Sales, Lord Burrows, and Lady Rose agreed), considered the case in Enka Insaat ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38; [2020] 1 WLR 4117 (Enka). The central issue on that appeal was which system of law governs an Arbitration Agreement when the law applicable to the contract containing it differs from the law of the seat of the arbitration?
He then went on to comment that it was rare for an Arbitration Agreement to separately specify a governing law; however, it was common for the cross-border commercial contracts to do so. Where a contract includes an Arbitration Agreement, it makes sense to interpret that the governing law of the latter is the same as the former, given that the Arbitration Agreement forms part of the overall commercial contract. The decision in Enka confirmed this to be so, even if the parties chose a seat of arbitration with a different law code from the contract’s governing law.
Regarding whether an English court was the right forum to bring the claim, Lord Leggatt referred to Spiliada Maritime Corp v Cansulex Ltd [1987] 1 AC 460), the leading case on this issue which states that the English Court should not exercise jurisdiction if there is “some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice”.
This principle is known as forum non conveniens. Where the Court’s permission is required to serve out of the jurisdiction, the Claimant must satisfy the court that England is the appropriate forum.
Lord Leggatt confirmed that the object of the test in Spiliada is to ensure the case is heard in the most appropriate forum. Under Rule 6.36 of the Civil Procedure Rules (CPR), the Claimant may serve a claim form on a Defendant out of the jurisdiction with the Court’s permission if any of the grounds (commonly known as gateways) set out in para 3.1 of Practice Direction 6B applies. The gateway relied on by UniCredit is the contract gateway, as per para 3.1(6)(c) of Practice Direction 6B which applies where a claim is made in respect of a contract which is governed by the law of England and Wales.
Regarding whether an English court was the appropriate institution to decide such an issue, Lord Leggat concluded that because UniCredit could rely on the contract gateway, there was a sufficient connection to England to justify intervention by the English courts to enforce the Arbitration Agreement.
Given that the Arbitration Agreements between the parties were governed by English law and the English Court was an appropriate place to bring the claim, it naturally followed that the ASI should be granted.
Stop the press
On 25th February, the Arbitration Act 2025 (the 2025 Act) received its Royal Assent. The 2025 Act introduces a new section 6A to the 1996 Act, which provides that an Arbitration Agreement will be governed by the law expressly agreed by the parties to apply. If there is no terms regarding the governing law contained in the Arbitration Agreement, the Agreement will be governed by the law of the seat of the arbitration. Therefore, if UniCredit was decided after 25th February 2025, the Arbitration Agreement would be governed by French law because Paris was the seat of arbitration.
Why did the case go back to the Court of Appeal in 2025?
In response to UniCredit obtaining an ASI, RSC obtained an anti-anti-suit (AAS) injunction from the Arbitrazh Court in Russia under the much publicised Article 248 of Russia’s Arbitrazh Code. This prohibited UniCredit from pursuing arbitration or court proceedings outside Russia and imposing a €250 million penalty. In addition, UniCredit was required to take every step possible to cancel the effects of the ASI it had been granted.
The Court of Appeal had to decide whether it had the power to revoke or vary the ASI. It ruled that the English Courts had jurisdiction over UniCredit’s application and revoked the ASI as it could see no public policy considerations against doing so.
The decision by UniCredit to apply to have the ASI revoked demonstrates that by imposing harsh financial penalties, Russian Courts have the power to undermine decisions by the Courts of England and Wales and other jurisdictions. With more sanctions being imposed and more contracts being caught up in them, this case illustrates the complexity and high stakes involved in such situations.
To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.
This article does not constitute legal advice. For further information, please contact our London office.
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