Arbitration Agreements and Applicable Law: Third Time’s a Charm? The Supreme Court decision in UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30

On 18 September 2024 the UK Supreme Court unanimously dismissed RusChemAlliance LLC’s (‘RusChem’) appeal against the Court of Appeal’s decision to grant an anti-suit injunction application brought by UniCredit Bank GmbH (‘UniCredit’). The injunction required RusChem to discontinue proceedings brought against UniCredit in the Russian Court.

Anti-Suit Injunctions

It is well-established that English courts are empowered to order a legal person to refrain from starting or continuing proceedings in a Court of law. There are two common grounds: (i) a litigant has agreed that a court of another jurisdiction is to determine its claim, and (ii) a litigant has promised that its claim should be referred to arbitration. English courts have been willing to make anti-suit injunctions to enforce these negative obligations.

Arbitration Agreements and Governing Law

An ‘arbitration agreement’ is law-speak for a contractual term which, typically, records an agreement to refer a dispute in connection with the contract to arbitration. Sometimes, parties will specify that the law which governs their obligations under the contract generally is different from that which governs the Arbitration Agreement (e.g., a contract governed by English law may include an arbitration agreement governed by Singaporean law). Such clause may also specify the ‘seat’ of arbitration (the jurisdiction whose laws will govern the arbitral procedure (eg, France)).

But what happens if an arbitration agreement does not specify which law governs it? In Enka v Chubb [2020] UKSC 38 the Supreme Court held that the governing law of the contract will generally (by implication or incorporation) also apply to the arbitration agreement. If the contract is silent as to the governing law of both the contract and the arbitration agreement, the courts may depart from this principle.

This approach was reiterated in Kabab-Ji v Kout Food Group [2021] UKSC 48. It was held that under English law, which impliedly governed the arbitration agreement, the clause did not apply, and an award could not be enforced. However, in parallel proceedings, the French Cour de cassation reached the opposite conclusion by applying French law (as the law of the seat). So, despite the well-intentioned designs of transnational conventions, the parties were left with an arbitral award recognised by one jurisdiction but not by another.

RusChem v Unicredit

Under bonds, which contained arbitration agreements, UniCredit agreed to guarantee certain payment obligations owed to RusChem by a third party. However, based on EU sanctions against Russian entities, UniCredit refused to make payment.

The Russian Court accepted jurisdiction over RusChem’s ensuing claim on the basis that Russian law permitted it to circumvent the Arbitration Agreement in the context of sanctions. 

Given the bonds (but not the arbitration agreement per se) were governed by English law, UniCredit applied to the English High Court for an anti-suit injunction. The Supreme Court reaffirmed the above principles, despite the best efforts of RusChem to displace them. At §§32-60 of the judgment, Lord Leggatt surgically deconstructs the notion that where: (i) the seat is specified and differs from the contractual governing law, and (ii) the law of the chosen country provides that the arbitration agreement should be interpreted according to its domestic law, English courts should defer to that authority. For Leggatt LJ, the obverse would impute to the parties ‘a degree of legal foresight which goes beyond what it may in practice be realistic to expect’ [§52] and ‘introduce significant complication’ regarding foreign law evidence [§55].

French law, the law of the seat of arbitration, does not empower its domestic Court to make anti-suit orders in its role as an arbitral ‘supervisor’, nor indeed would it have jurisdiction to resolve UniCredit’s claim for breach of arbitration agreement [§101]. RusChem would not be ordered to cease litigating in Russia by the French Courts.

Conclusion

These proceedings are the third in around four years to remit issues regarding arbitration agreements and governing law to the Supreme Court. Lord Leggatt’s expositions add considerable colour (and, hopefully, conclusiveness) to the applicable rules. The English Court’s ability and willingness to restrain litigation in breach of arbitration agreements where it has jurisdiction to do so was emphatically underlined.

Alexander Cheah is a Consultant Solicitor at Linklaters LLP.