If you have an Arbitration Agreement in place that allows for arbitration to be brought in England and Wales in the event of a dispute, you can apply for an Anti-Suit Injunction (ASI) from an English Court. This will stop the other party to the Arbitration Agreement from bringing a claim in another jurisdiction.
In The Angelic Grace [1995] 1 Lloyd’s Rep 87, Lord Millet gave his reasons for granting ASIs (at page 96):
“There is no good reason for diffidence in granting an injunction to restrain foreign proceedings on the clear and simple ground that the defendant has promised not to bring them.”
This article provides a helpful toolkit and FAQs on bringing an ASI. If you require further information, please get in touch with us so we can help.
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What is an injunction?
An injunction is a court order that requires a party:
- To do a specified act (mandatory injunction) or
- To refrain from doing a specified act (prohibitory injunction).
Whether or not to grant an injunction is at the Court’s discretion. Interim injunctions can be made while other Court proceedings are pending or can be a final remedy to a dispute.
Why would I want to bring an Anti-Suit Injunction?
There are several reasons why Applicants for ASIs want to prohibit someone from bringing Court proceedings in another country. You may believe, rightly or wrongly, that you will not get a fair trial in a foreign forum. You may also see clear advantages in terms of costs and ease of enforcement of the judgment (presuming you are successful) if a court in England and Wales hears your case.
However, one of the main reasons for obtaining an ASI is that, as mentioned above, legal proceedings breach an existing agreement to arbitrate.
English Courts can bring an ASI concerning any proceedings in any country.
What are the penalties for breaching an ASI?
The penalty for breaching any injunction, including an ASI, is severe. A breach is classed as Contempt of Court. The Court can impose significant fines and even impose a custodial sentence. Therefore, it is doubtful that a person, especially if they have significant personal and/or professional ties to the UK, would risk breaching an ASI.
What is an Anti-Anti-Suit Injunction (AASI)?
An AASI will provide a mechanism to guarantee actions taken by the Applicant to protect and uphold their legal rights, including the operation of an ASI, are not made useless by pre-emptive measures or counteractions taken by the Respondent. The principles governing the issuance of an AASI are similar to those of an ASI.
In cases where foreign proceedings have been brought despite the existence of an Arbitration Agreement, the Courts have granted an AASI to make the Respondent stop any ongoing proceedings.
Examples of Anti-Anti-Suit Injunctions
Renaissance Securities (Cyprus) Ltd v Chlodwig Enterprises Ltd & Others
An example of an ASI and AASI can be found in the case of Renaissance Securities (Cyprus) Ltd v Chlodwig Enterprises Ltd & Others [2023] EWHC 2816 (Comm), where the English High Court granted an ASI and an AASI to a company to stop the Respondents, who were subject to UK and US sanctions, from bringing proceedings in Russia under Article 248 of the Russian Arbitrazh Procedural Code (APC).
Linde GMBH v. Ruschemalliance LLC
Shortly before the Renaissance Securities decision, a Hong Kong Court in Linde GMBH v. Ruschemalliance LLC [2023] HKCFI 2409 continued an ASI to stop legal proceedings initiated by a company in Russia. The proceedings breached an Arbitration Agreement based in Hong Kong. The Court rejected arguments that Russian jurisdiction laws, particularly Article 248.1 of the Russian Arbitration Procedural Code, invalidated the Arbitration Agreement.
Airbus Canada Limited Partnership v Joint Stock Company Ilyushin Finance Co
Another clear example of where the Courts saw clear reasons for granting an ASI was in Airbus Canada Limited Partnership v Joint Stock Company Ilyushin Finance Co [2024] EWHC 790 (Comm), which involved a contract for the supply of aircraft. The Defendant, (Ilyushin Finance), was a sanctioned entity under Canadian and UK law. It wanted to recover a part payment made to the Claimant (ACLP). ACLP stated that it was unable to pay any money to Ilyushin Finance because of the sanctions.
The contract between the parties was governed by New York law and stated that disputes should be determined by LCIA arbitration seated in London. But the Arbitration Agreement did not say what law governed the Arbitration Agreement.
Rule 16.4 of the LCIA Arbitration Rules (LCIA Rules) states that the law applicable to the Arbitration Agreement and the Arbitration should be the same law as is used in the seat of arbitration unless the parties agree otherwise.
Ilyushin Finance brought legal proceedings in a Russian Court asking for the contract to be terminated and the part payment to be returned. It relied on Russian law provisions which gave Russian Courts jurisdiction to decide claims brought by sanctioned parties, irrespective of jurisdiction and Arbitration Agreements (Russian Law Provision).
ACLP secured an without notice ASI to stop the Russian legal proceedings. Ilyushin Finance ignored the English proceedings and commenced fresh proceedings in Russia seeking an AASI in respective of the ASI granted to ASI. ACLP applied to the English Court for a final ASI, and for a mandatory injunction requiring Ilyushin Finance to discontinue the Russian court case, as well as an order barring any enforcement of the Russian Court proceedings.
ACLP was granted every requested application as it proved that the Russian proceedings breached the Arbitration Agreement. Ilyushin Finance tried to argue that it could not access justice through an LCIA arbitration due to sanctions, a claim that was firmly rejected. Under the general licences issued by the Office of Financial Sanctions Implementation (OFSI), a sanctioned entity can access frozen assets for the purpose of covering LCIA costs, and UK legal advisors can be paid from frozen assets as they were providing legal services to a sanctioned entity. In addition, special licences covering additional expenditure could be obtained for litigation or arbitration in England.
It was significant that an anti-enforcement injunction was granted to ACLP. The Court concluded there was a real risk the Russian Court would continue proceedings and give a judgment despite an ASI being in place. Therefore, it was a practical to grant an anti-enforcement injunction to protect ACLP’s interests.
EU Sanctions Against Russia
In June 2024, the EU published its 14th package of sanctions against Russia. The package introduced a provision that (subject to certain exceptions) bans direct or indirect engagement in any transaction with a party that has lodged a claim against an EU operator in the Russian Court to obtain an injunction, judgment, or other relief in reliance on Article 248 of the APC, relating to a contract or transaction that has been impacted by sanctions.
But this August, Russian Courts struck back. The Commercial Court of the Sverdlovsk Region (CCSR) refused to enforce an Arbitration Institute of the Stockholm Chamber of Commerce (SCC) award in PESA v UralTransMash. The case involved a dispute about a supply contract between JSC PESA Bydgoszcz (PESA) and JSC UralTransMash (UralTransMash). The contract contained an SCC arbitration clause. PESA alleged that UralTransMash did not pay for goods that had been supplied and brought arbitration proceedings in the SCC. UltraTransMash applied to the Russian Courts for an ASI to halt the SCC arbitration.
The Russian Supreme Court ruled that a presumption existed that a sanctioned entity was obstructed from getting justice via arbitration and therefore, Russian Courts had exclusive jurisdiction not only over the dispute but the granting of an ASI.
The SCC continued with the arbitration and ruled in PESA’s favour. PESA applied to the CCSR for the Arbitration Award to recognised and enforced in Russia. The CCSR refused on the grounds of public policy. It stated that breach of the exclusive jurisdiction of Russian Courts under article 248.1 of the Civil Procedure Code provides grounds for the non-enforcement of an award. It also stated that recognising and enforcing an award against a Russian strategic company in the context of “legal aggression by unfriendly countries” went against Russian private and public interests.
The PESA case makes clear that an Arbitration Award made despite the fact the Russian Courts issued an ASI will not be recognised or enforced in Russia. But that does not mean it cannot be recognised and enforced in another jurisdiction.
How do I apply for an ASI?
Once you understand that an ASI is required, you must act fast. The longer foreign proceedings go on, the more challenging it will be to get an injunction.
An ASI application is made under section 37(1) of the Senior Courts Act 1981, which gives the High Court the power to grant an injunction in all cases where it is just and convenient to do so. As the Applicant, you must provide evidence that shows legal proceedings have begun in a foreign country or are imminent.
Except in rare cases, ASI applications are made ‘on notice’, which means the Respondent will be informed of the application and given a chance to appear in Court and argue why the Court should not grant the ASI.
If an ASI is granted on an interim basis, you will typically be required to give an undertaking to pay the Respondent damages if the ASI is subsequently discharged and its implementation caused the Respondent loss.
Concluding comments
If you have an Arbitration Agreement you need to be confident that you can use arbitration as a dispute resolution method so you can take advantage of its benefits, for example, the ability to enforce an award in another country. An ASI and AASI are legal tools that can be used to force the Respondent honour the terms of an Arbitration Agreement and ensure they do not bring Court action in another country.
Following the CCSR in PESA v UralTransMash, problems will occur if an ASI has been issued by Russian Courts because any subsequent Arbitration Award will not be recognised or enforced in Russia. If you are facing this particular challenge, you need to speak to an experienced international arbitration specialist immediately.
To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.
Note: The points in this article reflect sanctions in place at the time of writing, 25 August 2024. This article does not constitute legal advice. For further information, please contact our London office.
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