Protecting foreign seated arbitrations: UniCredit and the draft Arbitration Bill

On 14 March 2024, we wrote about the Court of Appeal’s decision in UniCredit Bank GmbH v RusChemAlliance LLC [2024] EWCA Civ 64 in which the Court issued an anti-suit injunction to restrain court proceedings in Russia when the parties’ contract was: (i) governed by English law; and (ii) provided for arbitration seated in Paris under the ICC Rules. The Supreme Court recently upheld the Court of Appeal’s decision, confirming that the English courts have jurisdiction to issue anti-suit injunctions in support of foreign arbitration proceedings.

UniCredit and the governing law debate

In UniCredit, the Supreme Court upheld an anti-suit injunction that would prevent RusChemAlliance LLC from bringing court proceedings against UniCredit in Russia, instead prioritising the parties’ choice to resolve disputes through arbitration in Paris. The decision came in spite of various geopolitical complexities, such as Russian sanctions.

The decision was ultimately one addressing jurisdiction – could the English courts issue an anti-suit injunction when the underlying forum to resolve the dispute was in arbitration seated in Paris. However, the Court of Appeal and Supreme Court found that they did have jurisdiction, by considering the applicable law of the arbitration agreement. The Supreme Court examined its previous decision in Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38, in which the Supreme Court decided that, where the law governing arbitration agreements is not expressly or impliedly chosen by the parties, the applicable law will either be the law that is “most closely connected” to the arbitration agreement, or the law that applies to the main commercial agreement. Here, the parties did not explicitly identify a law applicable to the arbitration agreement and the Supreme Court found that the law applicable to the agreement as a whole also applied to the arbitration agreement – English law.

With that jurisdictional hook established, the Supreme Court held that the English courts do have the power here to issue an anti-suit injunction to uphold the parties’ agreement to arbitrate in Paris. It should be noted that an important factor the Supreme Court considered is that an anti-suit injunction is not available under French law. So, if the English courts did not issue an anti-suit injunction, Unicredit would have no remedy.

To find out more about the Enka decision and its effects, read this insight.

The draft Arbitration Bill

The question of the law applicable to an arbitration agreement is being addressed in legislation before Parliament (albeit it is not clear when the legislation will be passed). Under the Arbitration Bill, where the parties have not expressly chosen a law applicable to the arbitration agreement (the position in most cases), the applicable law will be the law of the seat of arbitration. Had this provision been in effect during the UniCredit case, French, not English, law would have governed the arbitration agreement, meaning the English courts would not have had jurisdiction to issue the anti-suit injunction.

Many in the arbitration community believe that the Arbitration Bill provides welcome clarity on the applicable law question. However, that view is not universal. Parties rarely state expressly a law applicable to the arbitration agreement and assume that the law applicable to the agreement as a whole applies to the arbitration clause. They may be surprised to later learn that is not the case in the UK when the place of the seat of the arbitration is not the same as the law that applies to the entire agreement.

In more serious cases, this could conflict with their broader contractual intentions.

Key takeaways

The Supreme Court’s decision reinforces the willingness of the English courts to support arbitration by issuing anti-suit injunctions to restrain court proceedings brought in breach of an arbitration agreement, even when the seat of the arbitration is not in England.

However, the decision may have limited practical relevance in light of the changes that will be introduced in the Arbitration Act, when passed. The Arbitration Bill is on the programme of legislation that the new UK Government intends to pursue in the current parliamentary session. What is clear from the proposed reform is that parties may want to consider stating expressly in their commercial agreement the law applicable to the arbitration clause, particularly if they want the benefit of the pro-arbitration stance of the English courts and the remedies English courts have to restrain proceedings brought in breach of an agreement to arbitrate.