The Dekagram: 23rd October 2023

Articles, News

23/10/2023

As we’ve remarked before, it’s a quirky feature of travel and cross border claims that you wait ages for, say, a decision on jurisdiction, and then three or four come along at once. This week Francesca Kolar looks at two remarkably similar cases on Torpedoes, both French rather than Italian in these instances, but with different outcomes.

Meanwhile, we hear news of an intriguing decision by the European Court of Human Rights – not, it has to be said, our usual stomping ground, but this judgment relates to Turkish surgical outcomes, which very much does fall within our specialism (Dominique Smith having written the book on the subject). The ECHR has fined Turkey €8,523 for failing to provide a fair hearing in a clinical negligence case in which the medical report relied on by the Turkish courts in dismissing the claimant’s claim was considered to give an inadequate explanation on the matters on which the expert had been asked to opine. As a consequence the claim for clinical negligence had been dismissed on unsafe grounds. This decision opens up some interesting lines of enquiry, particularly in inquisitorial legal systems, and particularly in relation to claims brought against public bodies. We watch with interest to see how this fast-moving area of law develops – as always, we’ll keep our readers right up to date on all the developments as they happen.

French Torpedoes: Anti Suit Injunctions and Arbitration Agreements

Introduction

There have been two recent commercial judgments from the Court of Appeal in, Deutsche Bank AG v Ruschemalliance LLC [2023] EWCA Civ 1144, and the High Court in, G v R [2023] EWHC 2365 (Comm), both concerning applications for an anti-suit injunction, where the arbitration agreements provided for a seat in France.

The first matter was dealt with ex parte and the latter was an inter partes hearing. Prior to G v R, interestingly English Courts had not previously decided whether they have jurisdiction to grant injunctive relief in relation to an arbitration with a foreign seat, following an inter partes hearing. The decision also represented the first time that a lower court has had to apply the Supreme Court’s guidance in Enka v Chub [2020] UKSC 4 to determine the governing law of an arbitration agreement, particularly where the governing law in the main contract provides for one law, but the seat of the arbitration is in another country.

Anti-Suit Injunctions

Historically the English courts have been willing to grant anti-suit injunctions (“ASI”) restraining a party from commencing or continuing foreign court proceedings which are or would be in breach of an arbitration agreement.

Typically, ASIs have been granted by the English courts to restrain foreign proceedings brought in breach of an arbitration agreement that provides for arbitration seated in England and Wales, or in cases where no seat has yet been determined.

An anti-suit injunction will generally be granted if the claimant can demonstrate, with a high degree of probability, the existence of an arbitration clause to which the defendant is a party and which covers the dispute, and there are no exceptional circumstances that militate against the grant of relief.

Interestingly, contrary to the above, National courts in EU member states are effectively precluded from granting anti-suit injunctions restraining the pursuit of court proceedings commenced in another member state in breach of an arbitration clause. This is the result of the CJEU’s decision in Allianz SpA v West Tankers Inc (Case C-185/07).

Deutsche Bank AG v RusChemAlliance LLC

This case concerned a well-known German bank which appealed a Judge’s refusal to grant anti-suit and anti-enforcement injunctions restraining the respondent Russian company from continuing Russian court proceedings.

The respondent was a construction company that had entered into a contract in 2021 with a German company (L) for the construction of a natural gas plant in Russia. The contract provided for advance payments to L, accompanied by a guarantee. The bank issued one payment guarantee to the respondent. The guarantee was governed by English law, and any disputes were to be settled by arbitration in Paris.

Following the Russian invasion of Ukraine in 2022, and European sanctions against Russia, L suspended work, following which the respondent terminated the contract and claimed back its advance payment. L did not pay, and so the respondent made a demand on the German bank under the guarantee. The bank declined because the payment was prohibited by the EU sanctions.

In June 2023 the respondent commenced proceedings against the German bank in a Russian court. The bank commenced arbitration proceedings in Paris, as had been provided for in the arbitration agreement, and applied to the High Court for an interim anti-suit injunction restraining the respondent from pursuing the Russian proceedings, and an anti-enforcement injunction (AEI) restraining it from enforcing any judgment obtained in those proceedings.

The Judge at first instance was concerned about whether it was right to grant an injunction when the arbitration’s seat was in France, and sought evidence of French law. The evidence obtained explained that it was not possible to obtain an ASI in France and therefore the Judge refused the injunctions on the basis that England was not the proper forum, and ASIs were contrary to public policy in the law of the seat.

In the Appeal additional evidence of French law was adduced. The judgment was handed down on 11th October 2023. The appeal was allowed. In summary, the Court of Appeal decided that although French courts did not grant anti-suit injunctions, they would recognise an ASI granted by a competent foreign court. Therefore, even though a contract governed by English law had provided for arbitration seated in Paris, a German bank was still entitled to an ASI restraining a Russian company from continuing Russian court proceedings. The English court was the proper forum to bring a claim for interim injunctive relief seeking to ensure that a party adhered to an English law contract.

Moving on to consider G v R [2023] EWHC 2365 (Comm).

G v R

The claimant (a German company) applied for an anti-suit injunction in connection with contracts that it had entered into with the defendant (a Russian company), to restrain proceedings issued by the defendant in Russia, which were alleged to be in breach of an arbitration agreement with its seat in France. [NB – you will have noticed by now that the fact pattern in both of these cases was very similar].

The contract terms provided that the contracts were to be construed and governed by English law and that any dispute was to be settled by arbitration in France. The defendants challenged the jurisdiction of the English courts to consider the claimant’s application. The issue was whether the arbitration agreement was governed by English law, and if it was, whether the English court was the proper forum for the anti-suit injunction claim.

Sir Nigel Teare (sitting as a Judge of the High Court) held that the English court did not have jurisdiction to grant the injunction sought. The Judge found that English law was not the governing law of the arbitration agreement. Instead, the governing law of the arbitration was the French substantive rules applicable to international arbitration. In choosing France as the seat of the arbitration, the parties must have been aware that French law would regard the arbitration as governed by the substantive rules of international arbitration, and having that in mind, they must have intended that the arbitration would be governed by those principles. 

The Judge was not persuaded that in this case England was the proper forum in which to enforce an arbitration agreement which provides for arbitration in another jurisdiction. The parties had chosen the French court to have supervisory or supporting jurisdiction over any arbitration. Furthermore, even though the anti-suit injunction remedy was only available in England, alternative remedies would be available in an arbitration in France. Although those remedies might be less advantageous than those available in England, it did not follow that England was the only forum where substantial justice could be obtained notwithstanding that coercive relief is unavailable in France.

Indeed, the parties had chosen Paris as the seat of the arbitration because it was a respected and neutral jurisdiction in which arbitration was supported. The court had no jurisdiction to hear the claim and the anti-suit injunction could not be granted.

Concluding remarks

Sir Nigel Teare in his judgment considered the case of Deutsche Bank AG v RusChemAlliance LLC to be of limited assistance, as that was an ex-parte appeal, where the defendant was not present and made no submissions. It is possible therefore that less weight may be given to rulings handed down in uncontested proceedings, where the defendant has not made representations to the Court.

Overall, it is clear that this is a fast-developing area of English jurisprudence. Shortly after the judgment was handed down in Deutsche Bank AG v RusChemAlliance LLC a further decision of the Commercial Court was released, again on similar facts where an ASI was granted – Commerzbank v Ruschemalliance LLC [2023] EWHC 2510. Watch this space. 

About the Author

Called in 2018, Francesca Kolar accepts instructions over all of chambers’ practice areas, including most particularly personal injury and clinical negligence. Prior to pupillage she spent two years teaching debating to students in inner-London secondary and primary schools, for the social mobility charity Debate Mate.

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Francesca Kolar

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