Anti-Suit Injunctions in Foreign-Seated Arbitrations: Lessons from English Courts

[Kashish is a student at National Law University Delhi.]

On 18 September 2024, the UK Supreme Court (UKSC) issued a final anti-suit injunction in a Paris-seated ICC arbitration, displaying a classic example of how anti-suit injunctions (ASI) are being used to uphold arbitrations, as opposed to hindering them. 

The proceedings were between RusChemAlliance (RCA), a company incorporated in Russia and UniCredit, a German bank with assets in Russia. In 2021, UniCredit issued bonds worth EUR 420 million to RCA for the gas processing plants project it undertook with a third-party contractor. While the bonds state all this bond and other non-contractual obligations arising therefrom shall be construed under English law, all disputes were to be resolved by an ICC arbitration seated in Paris. In 2022, the Russian invasion of Ukraine left the contract with the third-party contractor unperformed. RCA sought recovery of the bond money from UniCredit by initiating proceedings before the St Petersburg Arbitrazh Court in Russia. Under Article 248.1 of the Arbitration Procedural Code of the Russian Federation, Russian courts have exclusive jurisdiction over any disputes arising out of sanctions on Russian companies in foreign arbitration agreements. UniCredit claimed an injunction for these proceedings before UK courts. 

On Governing Law of the Arbitration Agreements 

RCA, relying on Kabab-Ji SAL v. Kout Food Group, contended that French law governed the arbitration agreement since this was a Paris-seated arbitration. UniCredit contended that the arbitration agreement will be governed by English law given that English law was the governing law of the contract and will apply to the arbitration clause (Clause 12). The UKSC held that the broadly worded governing law clause was clear to show that it covered “all non-contractual or other obligations arising out of or in connection with it”, thereby extending to the arbitration clause as well. 

Complications arise when parties choose a foreign seat, and the relevant foreign law of the seat in turn allows parties to choose the law governing the arbitration agreement (as is the case across most legal systems) and the contract containing the arbitration agreement also contains a governing law clause. The UKSC steadily defended its position in Enka v. Chubb (Enka), it aptly stated that “the short answer...is...the correct answer” and held English law as the governing law, despite the Paris seat. Simply put, in the absence of any other choice of law, the law governing the contractual matrix governs the arbitration agreement, irrespective of the seat chosen. 

On Place of Arbitration to Bring the Claim

RCA contended that French courts were duty-bound to supervise proceedings initiated under the Bond. The UKSC agreed that using coercive power to stop proceedings in a foreign jurisdiction was beyond the scope of the supervisory functions left exclusively to a seat court, in accordance with IPOC International Growth Fund. Among other factors, crucial to the UKSC’s consideration was the manifest lack of competence for French Courts to issue ASIs. This was not a case where the French courts were or were likely to be, seized of the matter nor would the exercise of jurisdiction in granting ASIs by English courts give rise to issues of comity between French and English courts. RCA had not provided an undertaking to submit to the jurisdiction of French courts and Russian courts do not have exclusive jurisdiction over claims under bonds that initiate or pursue proceedings before a foreign court in connection with those claims is contrary to Russian law, nor do French courts have the coercive power to enforce an ASI or to determine a breach of the arbitration agreement. In situations where UniCredit was unable to secure an effective remedy from the French courts or an arbitral tribunal, given that it lacks the power to enforce ASIs, the UKSC held that the Court of Appeal correctly determined that England and Wales is the appropriate jurisdiction for pursuing this claim.  

Navigating Legal Complexities: Impact of Proposed Reforms on Governing Law in Arbitration Agreements

Reading this decision in line with impending amendments produces absurd results. In Enka v. Chubb, the UKSC held that the agreement to arbitrate is governed by the law chosen by the parties and in the absence of a choice, it is governed by the law chosen to govern the main contract – unless, for example, that law would invalidate the agreement to arbitrate. In line with the common law principle introduced here, the Law Commission Review in 2023 sought to introduce Section 6A to the UK Arbitration Act 1996, while appreciating the law laid down in Enka as “complex and unpredictable”. The proposed Section 6A(1) provides that the law governing the arbitration agreement would be the law expressly chosen by the parties, or if not, it would be the law of the seat. Section 6A(2) provided that any law chosen to govern the main contract does not count as an express choice of law to govern the agreement to arbitrate. Lord Leggatt took 15 pages to explain why English law governed this unexceptional arbitration agreement which was crucial to English courts having jurisdiction. The Law Commission’s proposed reform based on Enka would have meant that English courts would not have had jurisdiction in the present case since the arbitration agreement would be governed by the law of the seat i.e., French law. 

In any case, from a purely pro-arbitration perspective, the willingness of English courts to restrain foreign proceedings violating an arbitration agreement is appreciable, it is imperative to the UKSC that the parties’ bargain is upheld. In SQD v. QYP and  Commerzbank v Ruschemalliance LLC, ASIs were granted based on determinations of the personal jurisdictions of the claimant companies and identification of the forum where the interests of all parties can be served and interests of justice can be met. The essence was that, while French courts lack the jurisdiction or procedure to issue an ASI, French courts are not fundamentally opposed (in non-EU cases) to other courts doing so, and they may even recognize an ASI granted by English courts.

However, several questions remain unanswered, primarily whether alternatives to ASIs must be considered at all? In September 2023, when the commercial court was deciding on UniCredit, Judge Teare J found that “substantial justice” was available in France. Even if French courts were reluctant to issue ASIs, the award of damages, albeit less advantageous, was nevertheless a remedy which could be taken recourse to. The weight and measure of how much “substantial justice” can a seat court do and what remedy satisfies this threshold, thereby not allowing another court to grant an ASI – is a question the UKSC did not consider in UniCredit. 

Lessons for Indian Jurisprudence: Putting ASIs to Better Use 

This is a fast-developing area of law; after BALCO and the 2016 amendment to the Arbitration and Conciliation Act 1996, Indian parties can choose a foreign seat of arbitration and avail of interim measures under Section 9 of the Civil Procedure Code 1908. However, the types of interim measures are limited to the preservation of property which forms the subject matter of the arbitration. It cannot extend to granting anti-suit injunctions, which may be traced to the equity jurisdiction of Indian courts. 

Indian courts have steadfastly protected their jurisdiction by holding that once courts in India are courts of exclusive jurisdiction, no action can be pursued in a foreign court. However, ASIs have sparingly been used to restrain parties from proceeding with an action in a foreign court, limiting them to cases where foreign proceedings are “oppressive or vexatious” i.e., essential to ensure the “interests of justice”. In Modi Entertainment Network & Another v. WSG Cricket, the Supreme Court refused an ASI where the contract granted non-exclusive jurisdiction to English courts, even though English law had no connection or nexus with the parties, ordinarily no ASI will be granted in regard to proceedings in such a forum conveniens. It was held that unless good and sufficient reasons are not shown by parties seeking the ASI, the intention of the parties as stated in the contract ought to be upheld. In Board of Control v. Essel Sports (P) Limited, the Delhi High Court highlighted issues related to the grant of ASIs against foreign parties, based on issues of lack of compliance by parties in foreign jurisdiction. 

Quite apart from UniCredit, Indian courts generally handle cases where they have either exclusive or non-exclusive jurisdiction or personal jurisdiction over one or more parties. The latter allows them to decide whether to grant or deny relief, even in cases where another court has been given exclusive jurisdiction. In conclusion, the UKSC in UniCredit upheld the enforcement of ASIs to protect arbitration agreements, demonstrating a pro-arbitration stance. In contrast, Indian courts, while recognizing the utility of ASIs, apply them sparingly, limiting their use to cases where foreign proceedings are deemed oppressive or vexatious. Notably, while PASL Wind Solutions (P) Limited opened doors for Indian parties to choose foreign seats, we are yet to see a case where an Indian court granted an ASI in support of a foreign-seated arbitration.