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England and Wales Court of Appeal (Civil Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Unicredit Bank GmbH v Ruschemalliance LLC [2024] EWCA Civ 64 (02 February 2024) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2024/64.html Cite as: [2024] EWCA Civ 64, [2024] 1 Lloyd's Rep 350 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
Sir Nigel Teare (sitting as a High Court Judge)
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE MALES
and
LORD JUSTICE LEWIS
____________________
UNICREDIT BANK GmbH (a company incorporated under the laws of Germany) |
Appellant/ Claimant |
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- and - |
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RUSCHEMALLIANCE LLC (a company incorporated under the laws of the Russian Federation) |
Respondent/Defendant |
____________________
Sa'ad Hossain KC & Alexander Brown (instructed by Enyo Law LLP) for the Respondent
Hearing date: 25 January 2024
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Crown Copyright ©
Lord Justice Males:
Background
'11. This Bond and all non-contractual or other obligations arising out of or in connection with it shall be construed under and governed by English law.
12. In case of dispute arising between the parties about the validity, interpretation or performance of the Bond, the parties shall cooperate with diligence and in good faith, to attempt to find an amicable solution. All disputes arising out of or in connection with the bond which cannot be resolved amicably, shall be finally settled under the rules of arbitration of the International Chamber of Commerce, the ICC, by one or more arbitrators appointed, in accordance with the said ICC's rules. The place of arbitration shall be Paris and the language to be used in the arbitral proceedings shall be English.'
Procedural history
'Therefore, by virtue of the provisions of paragraph 2 of part 1 of article 248.1 of the APC RF [the Arbitration Procedural Code of the Russian Federation], this dispute belongs to the exclusive competence of arbitration courts in the Russian Federation, therefore the arbitration agreement cannot be performed.'
Article 248 of the Russian Arbitration Procedural Code
No arbitration has been commenced
The judgment
Governing law of the arbitration agreement
'170. It may be useful to summarise the principles which in our judgment govern the determination of the law applicable to the arbitration agreement in cases of this kind:
i) Where a contract contains an agreement to resolve disputes arising from it by arbitration, the law applicable to the arbitration agreement may not be the same as the law applicable to the other parts of the contract and is to be determined by applying English common law rules for resolving conflicts of laws rather than the provisions of the Rome I Regulation.
ii) According to these rules, the law applicable to the arbitration agreement will be (a) the law chosen by the parties to govern it or (b) in the absence of such a choice, the system of law with which the arbitration agreement is most closely connected.
iii) Whether the parties have agreed on a choice of law to govern the arbitration agreement is ascertained by construing the arbitration agreement and the contract containing it, as a whole, applying the rules of contractual interpretation of English law as the law of the forum.
iv) Where the law applicable to the arbitration agreement is not specified, a choice of governing law for the contract will generally apply to an arbitration agreement which forms part of the contract.
v) The choice of a different country as the seat of the arbitration is not, without more, sufficient to negate an inference that a choice of law to govern the contract was intended to apply to the arbitration agreement.
vi) Additional factors which may, however, negate such an inference and may in some cases imply that the arbitration agreement was intended to be governed by the law of the seat are: (a) any provision of the law of the seat which indicates that, where an arbitration is subject to that law, the arbitration agreement will also be treated as governed by that country's law; or (b) the existence of a serious risk that, if governed by the same law as the main contract, the arbitration agreement would be ineffective. Either factor may be reinforced by circumstances indicating that the seat was deliberately chosen as a neutral forum for the arbitration.
vii) Where there is no express choice of law to govern the contract, a clause providing for arbitration in a particular place will not by itself justify an inference that the contract (or the arbitration agreement) is intended to be governed by the law of that place.
viii) In the absence of any choice of law to govern the arbitration agreement, the arbitration agreement is governed by the law with which it is most closely connected. Where the parties have chosen a seat of arbitration, this will generally be the law of the seat, even if this differs from the law applicable to the parties' substantive contractual obligations.
ix) The fact that the contract requires the parties to attempt to resolve a dispute through good faith negotiation, mediation or any other procedure before referring it to arbitration will not generally provide a reason to displace the law of the seat of arbitration as the law applicable to the arbitration agreement by default in the absence of a choice of law to govern it.'
'24. In choosing France as the seat of the arbitration, the parties can fairly be taken as being aware of that aspect of French law and having it in mind and to have intended that the arbitration would be governed by those principles. For that reason I consider that the inference relied upon by claimants cannot be drawn in the present case. It is negatived in the way that the Supreme Court has suggested is possible in an appropriate case.
25. It follows that English law is not the governing law the arbitration agreement. Instead the governing law of the arbitration is the French substantive rules applicable to international arbitration. It is true that they are not French domestic law, but they are nevertheless provisions of French law which apply to international arbitration.'
Appropriate forum
The Deutsche Bank case
'40. The only claim in the present case is a claim for interim injunctive relief based on these well-established principles of English law. Such relief, regarded by English law as a valuable tool to uphold and enforce the arbitration agreement, can only in practice be obtained in England and not in France. Bright J, as explained above, thought, on the basis of the evidence before him, that that was because French law had a philosophical objection to the grant of ASIs. The evidence before us is to a different effect and strongly suggests that while French law does not have the ability to grant an ASI as part of its procedural toolkit, it has no objection in principle to (and will recognise) the grant of an ASI by a court which can by its own procedural rules grant one, at any rate where the basis for the ASI is the parties' contractual agreement to submit disputes to a particular forum.
41. In those circumstances it seems to me that the forum in which the claim for an interim ASI can be suitably tried for the interests of all the parties and for the ends of justice is the English court, on the simple basis that such a claim cannot be given effect to in France. I do not think it necessary to consider what the position would have been had Bright J's understanding been correct that is, if the French court would regard the grant of an ASI by the English court as inappropriate and unwelcome which raises questions of some difficulty and on which we have heard very little argument. On the position as it appears to us, 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. Since it is not to be supposed that DB would take the futile step of applying to a French court for an ASI which it has been repeatedly and clearly advised the French court cannot grant, the real choice is not between two competing forums, but between the English court entertaining the claim and the claim not being brought at all. Seen in this light, I would hold that the English court is indeed the proper place to bring the claim. I would therefore grant DB permission to serve the claim out of the jurisdiction.'
The Commerzbank case
Jurisdiction
The governing law of the arbitration agreement
The nature of the issue
'iv) Where the law applicable to the arbitration agreement is not specified, a choice of governing law for the contract will generally apply to an arbitration agreement which forms part of the contract.
v) The choice of a different country as the seat of the arbitration is not, without more, sufficient to negate an inference that a choice of law to govern the contract was intended to apply to the arbitration agreement.'
'vi) Additional factors which may, however, negate such an inference and may in some cases imply that the arbitration agreement was intended to be governed by the law of the seat are: (a) any provision of the law of the seat which indicates that, where an arbitration is subject to that law, the arbitration agreement will also be treated as governed by that country's law; or (b) the existence of a serious risk that, if governed by the same law as the main contract, the arbitration agreement would be ineffective. Either factor may be reinforced by circumstances indicating that the seat was deliberately chosen as a neutral forum for the arbitration.'
The parties' submissions in outline
'viii) In the absence of any choice of law to govern the arbitration agreement, the arbitration agreement is governed by the law with which it is most closely connected. Where the parties have chosen a seat of arbitration, this will generally be the law of the seat, even if this differs from the law applicable to the parties' substantive contractual obligations.'
Analysis
'11. This Bond and all non-contractual or other obligations arising out of or in connection with it shall be construed under and governed by English law.'
"69. Whether a choice of the curial law carries any implication that the parties intended the same system of law to govern the arbitration agreement -- and, if so, the strength of such implication -- must depend on the content of the relevant curial law."
'94. While a choice of seat and curial law is capable in some cases (based on the content of the relevant curial law) of supporting an inference that the parties were choosing the law of that place to govern the arbitration agreement, the content of the Arbitration Act 1996 does not support such a general inference where the arbitration has its seat in England and Wales.'
'70. In Carpatsky Petroleum Corpn v PJSC Ukrnafta [2020] EWHC 769 (Comm); [2020] Bus LR 1284, the claimant applied to enforce in England and Wales an arbitration award made in Sweden. Enforcement was resisted on the ground (among others) that there was no valid arbitration agreement in the contract between the parties. This argument depended on the assumption that the validity of the arbitration agreement was governed by the law of Ukraine. The contract provided for the "law of substance of Ukraine" to apply "on examination of disputes". Butcher J held (at paras 67-71) that this was not a choice of Ukrainian law to govern the arbitration agreement and that, in the circumstances, the choice of Stockholm as the seat for any arbitration demonstrated an implied choice that the validity and interpretation of the arbitration agreement should be governed by Swedish law. His reasons were that: (1) it was reasonable to infer that the parties had deliberately chosen a neutral forum to resolve their disputes and hence "intended the law of that jurisdiction to determine issues as to the validity and ambit of that choice"; and (2) by choosing Sweden as the seat for the arbitration, the parties agreed to the application of the Swedish Arbitration Act, including section 48 which provides that, in the absence of agreement on a choice of law to govern an arbitration agreement with an international connection, the arbitration agreement shall be governed by the law of the country in which, by virtue of that agreement, the arbitration proceedings have taken place or will take place. It follows that, by providing for a Swedish seat, the parties were impliedly agreeing that Swedish law should govern the arbitration agreement.
71. A similar inference could also be drawn where a contract contains an agreement for arbitration in Scotland. Section 6 of the Arbitration (Scotland) Act 2010 provides:
"Where - (a) the parties to an arbitration agreement agree that an arbitration under that agreement is to be seated in Scotland, but (b) the arbitration agreement does not specify the law which is to govern it, then, unless the parties otherwise agree, the arbitration agreement is to be governed by Scots law."
72. There is, however, no similar provision in the Arbitration Act 1996. '
'15. In this case, the defendant has responded to the suggestion that the court has jurisdiction by reason of English being the proper law of the arbitration agreement by saying that in the present case such inferences negated by the law of the seat, which is French, and which provides that the French courts would regard the arbitration agreement as being subject to what its expert describes as French substantive rules applicable to international arbitration. This, indeed, appears to be common ground.
16. Counsel for the claimant has summarised the matter in this way at paragraph 39(b) of the claimant's skeleton argument. "The experts agree that the French court would follow the approach in Municipalit้ de Khoms El Mergeb v Soci้t้ Dalico and apply 'a substantive rule of international law of arbitration', whereby the existence and effectiveness of the arbitration agreement is to be determined in accordance with the parties' common intention."
17. It is also common ground that there is no statutory provision to this effect in French law, rather, the relevant principles have been worked out via courts. '
'The French Cour de cassation (the highest French Court for civil, commercial and criminal matters) provided guidance on how to determine the law applicable to the arbitration agreement in the Dalico ruling in 1993. In that case, the Cour de cassation ruled that: "Pursuant to a substantive rule of international arbitration law, the arbitration agreement is legally independent directly or by reference and its existence and effectiveness are to be assessed, subject to the mandatory rules of French law and or the international public policy, based on the common intent of the parties, without any reference to State law". Although the exact wording has varied over the years, this guidance has remained untouched for the last 30 years.'
'Either factor may be reinforced by circumstances indicating that the seat was deliberately chosen as a neutral forum for the arbitration.'
'(viii) In the absence of any choice of law to govern the arbitration agreement, the arbitration agreement is governed by the law with which it is most closely connected. Where the parties have chosen a seat of arbitration, this will generally be the law of the seat, even if this differs from the law applicable to the parties' substantive contractual obligations.'
Appropriate forum
'66. CPR 6.37(3) provides that: "The court will not give permission [to serve the claim form out of the jurisdiction] unless satisfied that England and Wales is the proper place in which to bring the claim" (my emphasis). The italicised phrase is the latest of a series of attempts by English lawyers to label a long-standing concept. The best known fleshed-out description of the concept is to be found in Lord Goff of Chieveley's famous speech in the Spiliada case, summarised much more recently by Lord Collins in the Altimo case at para 88 as follows: "The task of the court is to identify the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice; " That concept generally requires a summary examination of connecting factors between the case and one or more jurisdictions in which it could be litigated. Those include matters of practical convenience such as accessibility to courts for parties and witnesses and the availability of a common language so as to minimise the expense and potential for distortion involved in translation of evidence. Although they are important, they are not necessarily conclusive. Connecting factors also include matters such as the system of law which will be applied to decide the issues, the place where the wrongful act or omission occurred and the place where the harm occurred.
88. Even if the court concludes (as I would have in the present case) that a foreign jurisdiction is the proper place in which the case should be tried, the court may nonetheless permit (or refuse to set aside) service of English proceedings on the foreign defendant if satisfied, by cogent evidence, that there is a real risk that substantial justice will not be obtainable in that foreign jurisdiction. The same test was, prior to Owusu v Jackson [2005] QB 801, applicable in the context of an application for a stay of English proceedings against a defendant served within the jurisdiction. The question whether there is a real risk that substantial justice will be unobtainable is generally treated as separate and distinct from the balancing of the connecting factors which lies at the heart of the issue as to proper place, but that is more because it calls for a separate and careful analysis of distinctly different evidence than because it is an inherently different question. If there is a real risk of the denial of substantial justice in a particular jurisdiction, then it seems to me obvious that it is unlikely to be a forum in which the case can be tried most suitably for the interests of the parties and the ends of justice.'
The parties' submissions in outline
Analysis
'38. There is no difficulty in identifying what English law regards as required by "the ends of justice" in a case such as the present. It is the policy of English law that parties to contracts should adhere to them, and in particular the parties to an arbitration agreement, who have thereby impliedly agreed not to litigate elsewhere, should not do so. The English court, faced with an English law governed contract containing a promise by a party not to do something and a threat by a party to do the very thing he has promised not to do, will readily and usually enforce that promise by injunction. '
Should a final injunction be granted?
'28. The legal framework within which this application has to be determined is well established. Where court proceedings are brought (otherwise than in the courts of an EU or Lupugano Convention state) in breach of an agreement to arbitrate, the court will generally grant an anti-suit injunction to prevent any further breach unless there are strong reasons not to do so: see The Angelic Grace [1995] 1 Lloyd's Rep 87, per Millett LJ at 96, cited with approval by the Supreme Court in AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] UKSC 35, [2013] 1 WLR 1889. The court's power to grant such an injunction is derived from section 37 of the Senior Courts Act. It does not depend on whether an arbitration has been or is about to be commenced. When such an injunction is sought, it is for the court to determine whether there is a binding arbitration agreement and whether the pursuit of the foreign proceedings constitutes a breach of the agreement. Moreover, an arbitration agreement is distinct from the contract of which it forms part and will be binding notwithstanding the invalidity of the main contract unless the ground for invalidating the main contract applies equally to the arbitration agreement: see section 7 of the Arbitration Act 1996 and Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40, [2008] 1 Lloyd's Rep 254.'
'35. It does not follow that, if the personal jurisdiction arises from the presence of the defendant, that only the courts of the seat of the arbitration can issue the anti-suit injunction. The role of the courts of the seat of arbitration is to supervise the arbitration itself. They are not the only courts that can prevent a party breaking his contract to arbitrate.'
Refusal of a stay
Conclusion
Lord Justice Lewis:
Lord Justice Bean: