Ask, and you shall receive – English Court of Appeal grants anti-suit injunction in support of foreign arbitration
7 min read
In Deutsche Bank AG v RusChemAlliance LLC [2023] EWCA Civ 1144, the English Court of Appeal granted an anti-suit injunction to restrain Russian court proceedings brought in breach of an agreement to arbitrate in Paris, France. Because the French courts could not grant such an injunction, the court considered it appropriate to do so. The Court of Appeal thus overturned the decision of the High Court in SQD v QYP [2023] EHWC 2145 (Comm), which had rejected the application for an anti-suit injunction because England was not the proper forum.
Background
Deutsche Bank AG ("DB"; previously anonymised as "SQD" by the High Court in its decision1) issued an advance payment guarantee (the "Guarantee") in favour of RusChemAlliance LLC ("RCA"; previously anonymised as "QYD") in connection with an EPC contract between Linde GmbH, Linde Engineering ("Linde") and RCA. The Guarantee was governed by English law and provided for ICC arbitration in Paris.
Following the Russian invasion of Ukraine, Linde suspended works and eventually terminated the EPC contract. RCA sought to recover the advance payments it had made, and in lieu of payment by Linde, sought to recover those sums from DB pursuant to the Guarantee. DB refused to pay under the Guarantee because it was prohibited from doing so on the basis of international sanctions. Shortly thereafter, RCA commenced court proceedings in Russia.2 In response, DB issued a without notice application to the English High Court for an interim anti-suit injunction ("ASI") and anti-enforcement injunction ("AEI") to restrain RCA from pursuing the Russian court proceedings.
The High Court considered that the power to grant an ASI to restrain foreign proceedings will be exercised only where "it appears to the court to be just and convenient to do so"; if service out of the jurisdiction is required, the applicant must also show inter alia that England is the proper forum in which to bring the claim. The application of those principles to the issue arising in SQD v QYP (i.e., the grant of an ASI in the context of a foreign-seated arbitration and an overseas respondent) was a novel one.
At first instance, Bright J had invited expert evidence from DB which led him to conclude that ASIs were not available in France as a matter of principle. The evidence suggested that ASIs are considered contrary to the fundamental principle of legal action and constitutionally recognised limitations on the general powers of judges. Based on the expert evidence, the judge also concluded that French courts would not enforce an ASI granted by the English court, and may even issue an anti-ASI. As such, he considered that the grant of an ASI would lead to a "clash" or "conflict" between the English court order and the laws of the seat (as chosen by the parties): "It is generally right for the courts of England and Wales to support arbitration in this jurisdiction. It is not the job of the courts of England and Wales to support arbitration in France by granting ASIs, given the fundamentally inconsistent approach in France on whether such support is appropriate or desirable. Indeed, it seems that the support of this court would be unwelcome".
Accordingly, England was not the proper forum for the claim and DB's application for an ASI and AEI was dismissed.
DB subsequently appealed the High Court's decision.
Court of Appeal Decision
The Court of Appeal (Nugee, Snowden, Falk LJJ) overturned the decision and allowed the appeal. It based its decision on further ("fresh") expert evidence it had allowed DB to file in the appeal on the status of ASIs under French law; it viewed the High Court's decision as "hampered" by having had only limited evidence in this regard.
According to that fresh evidence – which included clarification from the expert on whom the High Court had relied – the French courts will recognise ASIs that restrain a breach of an arbitration agreement where this (i) is not contrary to international public policy, (ii) is issued by a foreign court that has sufficient links to the case, and (iii) was not acquired by fraud. Accordingly, the High Court's concern of a "clash" between the English and French courts would not materialise.
With that in mind, the Court of Appeal considered that England was the proper place in which to bring the claim: "the choice is between the English court where an ASI can be granted and a French court where it cannot, not because of any hostility to the concept, but because of a lack of domestic procedural rules permitting them". For the simple reason that the claim for an ASI could not be given effect in France, England was the appropriate forum.
Lastly, the Court of Appeal held that the English courts, faced with an English law governed arbitration agreement (following Enka v Chubb), will readily enforce the implicit promise not to commence litigation unless there is good reason not to. Unlike Bright J – who, on the evidence before him, considered that French law's hostility to ASIs provided a good reason – the Court of Appeal found none. Accordingly, it granted an interim ASI and AEI.
Comment
The Court of Appeal's decision paves the way for parties who are arbitrating anywhere in the world to apply to the English courts for an ASI, as long as the relevant arbitration agreement is governed by English law. No other connection to the English jurisdiction was necessary.
The decision thus appears to be an invitation for parties arbitrating outside of England (and thus the traditional reach of the supervisory jurisdiction of the English courts) to more regularly seek assistance in England. It remains to be seen whether this is confined to ASIs or extends to arbitration-supportive measures more widely. Russia's ongoing invasion of Ukraine and the increasingly prominent Russia-related disputes to which it is giving rise are likely to give ample opportunity for other similar applications before the English courts.
With that said, the Law Commission's recent draft bill to reform the Arbitration Act 1996 (see White & Case's summary here) includes a decisive change in English law. In short, the Law Commission has proposed that in the absence of an express choice by the parties, arbitration agreements are governed by the law of the seat of arbitration. In the present case, the arbitration agreement thus would have been governed by French law. As a result, the Court of Appeal could not have relied on the policy in favour of English courts restraining breaches of English law governed contracts. This would have left no connection to England at all. The Law Commission's proposed legislative change, made in the interest of certainty and predictability on the law governing arbitration agreements, may thus also provide certainty in this area.
For more than a decade, the English courts have – correctly – viewed ASIs as an important, valuable, and carefully developed tool to enforce arbitration agreements. Nevertheless, and while it has been delivered to protect the parties' contractual promise to arbitrate, international arbitration practitioners may argue that the Court of Appeal's decision is incompatible with international comity and amounts to judicial overreach.
On any view, however, Deutsche Bank AG v RusChemAlliance LLC is unlikely to be the last word on the issue. Several similar cases are currently before the English courts. For instance, the High Court granted interim ASIs in comparable circumstances in Commerzbank AG v RusChemAlliance LLC [2023] EWHC 2510 (Comm) and G v R (ex parte); it did not grant a final ASI in G v R (in an Arbitration Claim) [2023] EWHC 2365 (Comm) and expressly declined to follow the Court of Appeal's Deutsche Bank AG v RusChemAlliance LLC decision. Teare J considered that "that was an ex parte appeal. The defendant was not present and made no submissions. There is therefore a limit to the assistance which I can derive from that decision. By contrast, in this case I have had the benefit of submissions made on behalf of the defendant".
Although the Court of Appeal's decision indicates that the juridical advantage provided by ASIs may, in certain cases, be accessible more broadly (including in respect of foreign arbitrations), parties seeking to ensure that ASIs will be available to restrain any breach of their arbitration agreement should thus nevertheless consider selecting London as their arbitral seat. For the moment, it will require further juridical consideration to ascertain whether the expansive exercise of the court's discretionary powers in Deutsche Bank AG v RusChemAlliance LLC will become more commonplace.
1 SQD v QYP [2023] EHWC 2145.
2 In 2020, Russia adopted a new law (Federal Law No. 171-FZ) which enables sanctioned Russian entities to avoid arbitration and grants exclusive jurisdiction to the Russian state courts. Following Russia's invasion of Ukraine in 2022, the Russian courts are regularly entertaining claims which are subject to arbitration agreements.
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