Bayerische Landesbank & Anor v Ruschemalliance LLC

The Banks' ASI claims arise from RCA’s commencement in August 2023 and its continued pursuit of proceedings in Russia, referred to as the Russian proceedings, by which it claims over €320 million under various bonds granted by the Banks. Those bonds relate, as I will say in more detail in due course, to a project for the construction of liquefied natural gas and gas processing plant facilities in Russia - which has been described in this trial as ‘the project’ - and guarantee the obligations of RCA's contractual counterparties, Linde GmbH ("Linde") and RenCons Heavy Industries LLC ("RCH") in connection with the project. The bonds are expressly governed by English law and contain Arbitration Agreements ("AAs") which provide for ICC arbitration in Paris. This trial forms part of a series of disputes which have been before this court arising from the project. This is because the Banks are only two of a number of financial institutions, including UniCredit, Deutsche Bank and Commerzbank, which were involved in the guaranteeing of Linde and/or RCH's obligations under the project, and which have turned to the English court seeking to protect their arbitral rights. It is, in that context, a matter of significance that at the time that Enyo were engaged to represent RCA, they said on RCA's behalf that the jurisdictional issues to which the Banks' ASI claims gave rise were materially identical to those in parallel proceedings brought by UniCredit against RCA under claim number CL2023000498, which have been referred to as ‘the UniCredit proceedings’.

It also emerges that the Banks' ASI claims are materially identical to those advanced by UniCredit as to their merits. Both sets of claims arise out of the same project and underlying facts and concern essentially identical contractual provisions and give rise to the same substantive issues. This is significant because, as I will explain, what appears to have been the only argument which had any prospect of success which was available to RCA to resist the grant of ASI relief against the Banks, was the jurisdictional point raised in the UniCredit proceedings, namely that the English court had no jurisdiction, in particular because the arbitration agreements were not governed by English law or that England was not the proper forum for the claim.

On 23 April 2024, however, the Supreme Court dismissed RCA's jurisdictional appeal in the UniCredit proceedings and upheld the declarations and final injunctive relief which had been granted by the Court of Appeal (Unicredit Bank GmbH v Ruschemalliance LLC [2024] EWCA Civ 64). The Supreme Court made an order to that effect; although it stated that a written judgment was to follow, which has not yet been made available. Since the decision of the Supreme Court, it appears that RCA has disengaged from the current claim for an ASI but has instead pressed on with the Russian proceedings. At a hearing in Russia on 14 May 2024, RCA's counsel said, apparently, and I quote:

RCA has also, apparently, very recently, namely on 5 June 2024, applied to the Russian court ex parte for freezing relief as security for its claims in the Russian proceedings. Such relief was granted on the following day, 6 June 2024, freezing or purporting to freeze the Banks' assets up to the total sum of some €324 million. A further hearing in the Russian proceedings is fixed for next Thursday, 4 July 2024. Evidence has been put before me from a Russian law expert, Mr Sergey Usoskin, to the effect and that there is a real prospect that the Russian court will grant judgment on the merits against the Banks at that hearing or shortly thereafter.

Finally, by way of introduction, I should refer to the fact that on 14 May 2024, which was after the Supreme Court's decision in the UniCredit proceedings to which I have referred, Jacobs J granted Commerzbank final anti-suit injunctive relief. His decision has a neutral citation number of [2024] EWHC 1474 (Comm). In para.8 of that judgment, Jacobs J referred to the fact that RCA's solicitors in that action, also Enyo, had said to Commerzbank that, and I quote:

At para.20, Jacobs J said that the impact of the Supreme Court decision would ordinarily, if RCA were minded to comply with it, be to dispense with any real need for further significant hearings in that case, and at para.39 that, and I quote:

At paras.40 to the first sentence of para.44, Jacobs J said:

As I will say, it appears to me that the same analysis applies here and that this is a clear case in which RCA has breached and continues to breach its promises to arbitrate, which were made in the arbitration agreements in the bonds, and that the justifications which it has put forward as reasons for not complying with those promises have been rejected by the Court of Appeal and by the Supreme Court.

The relevant factual background is helpfully summarised in the judgment of Males LJ in UniCredit at paras.5-12 as follows:

As I will set out in rather more detail, the choice of law and arbitration provisions quoted by Males LJ in that case in relation to UniCredit were in materially the same terms as in the bonds issued by the Banks.

Since the current proceedings were commenced, the following relevant events have occurred in relation to these proceedings. On 15 February 2024, interim ASIs were granted ex parte by Foxton J in favour of the Banks. Those interim orders provided inter alia that RCA should be restrained from seeking any interim or conservatory order or relief or remedy or measure from the Russian court inconsistent with the arbitration agreements or the Claimants’ steps to enforce such agreements. On 28 February 2024, by way of consent orders made by Bright J, to which I have already referred, these proceedings were stayed pending the written judgment of the Supreme Court on RCA's then-extant jurisdictional appeal in the UniCredit proceedings. The interim ASIs were continued and, in summary, RCA was obliged to take all steps necessary to seek an adjournment of the Russian proceedings until a return date or further order of this court in relation to the ASIs granted by the Interim Orders. On 29 February 2024, Enyo filed an acknowledgement of service on behalf of RCA in both sets of proceedings. RCA indicated an intention to dispute the court's jurisdiction.

On 16 April 2024, LBBW filed a request for ICC arbitration seeking declaratory relief upholding the validity of the arbitration agreement in its bond, and damages for legal costs of defending RCA's claims in the Russian proceedings.

On 23 April 2024, as I have already referred to, the Supreme Court dismissed RCA's jurisdictional appeal in the UniCredit proceedings. Then, as again I have already said, on 30 April 2024, RCA's legal representatives in England, Enyo, came off the record.

On 14 May 2024, a hearing took place in the Russian proceedings. Mr Usoskin's second expert report gives the details as to what occurred. In summary, RCA did not seek an adjournment of the Russian proceedings, but rather resisted BL's application for an adjournment. The judge, Judge Chekunov, invited RCA to explain why it had changed its attitude towards orders made by this court and in response RCA's counsel said:

RCA also filed evidence on the merits against both Banks and requested that the Russian court consider the merits of its claim against BL and render a judgment on the merits at the 14 May 2024 hearing. The Russian court did not in fact turn to consider the merits or give an immediate judgment at that hearing against either BL or LBBW because it decided, on its own motion, to add Linde and RCH as additional Defendants to RCA's action. It fixed the next hearing in the Russian proceedings for the date which I have already mentioned, namely 4 July 2024.

On 23 May 2024, RCA filed an answer in the LBBW arbitration. Its primary position was to challenge the jurisdiction of the Paris tribunal on the basis that under Art. 248.1 of the Russian Arbitrazh Procedural Code (or ‘APC’), the Russian courts have exclusive jurisdiction over the dispute.

On 28 May 2024, the Banks served on RCA an intended application seeking to lift the stay imposed by the consent orders and to fix a trial of their ASI claim for a date before the 4 July hearing in Russia. That has been called the on-paper application. It appears from the evidence before me that the on-paper application was served on RCA before being filed and it further appears that no response was received by the Banks to the proposed application.

Instead, on 5 June 2024, and in what appears to have been a clear breach of the interim ASIs, RCA made without notice applications in Russia for freezing order relief against the Banks seeking to secure its position prior to a judgment on the merits from the Russian court.

On 6 June 2024, those applications were granted by the Russian court. Specifically, the Russian court made an order which froze or purported to freeze certain of BL's and LBBW's assets up to the amount of €273 million-odd and €51 million-odd euros respectively, being the sums claimed by RCA against each of those two banks in the Russian proceedings. Among the specific assets frozen or purportedly frozen were each bank's rights to claim repayment of loans advanced under an agreement dated 28 May 2018 to PJSC Nizhnekamskneftekhim or NKNK, which, as I understand it, is a wholly unrelated transaction.

On 13 June 2024, and in light of those developments, Foxton J granted the Banks' on-paper application. The stay of these two sets of proceedings was lifted and this hearing was fixed to take place before the 4 July 2024 hearing in Russia. The directions which were proposed by the Banks and which were made by Foxton J were clearly put forward and granted on the basis that they would provide RCA with an opportunity to engage with and participate in these proceedings. However, as I have said, RCA has not engaged. Had it done so, it would have been obliged to file any evidence on which it wished to rely by 18 June 2024, but no such evidence was filed. I am, however, as I have already said, satisfied that this is not as a result of RCA being unaware of these proceedings. I am on the contrary satisfied that RCA is fully on notice at the trial of these proceedings and has been given a proper opportunity to participate in this trial.

Specifically, the on-paper application was served on RCA on 28 May 2024. It was served via the email addresses provided by RCA in the Notices of Change of Legal Representatives, which included three of the email addresses identified in the Alternative Service Order. One of the email addresses identified in the Notices of Change was rcadr@elwi.com; the same email address was provided in the equivalent notice filed in the Commerzbank proceedings and Jacobs J noted at para.33 of the judgment to which I have already referred that:

The on-paper application was also served via courier on addresses in Kingisepp, which is also identified in the alternative service order.

On 3 June 2024, the on-paper application was filed with the court and served on RCA on the same day, at the same email addresses. The orders made by Foxton J, dated 13 June 2024, were served on RCA on 14 June 2024 by means of the same email addresses.

I deal first with the issue of the jurisdiction of the court. RCA has not made any application challenging the jurisdiction of the English court in these two sets of proceedings, although it had intimated an intention to do so before the Supreme Court dismissed its jurisdictional appeal in the UniCredit proceedings. The absence of any actual challenge, might itself be said to be dispositive of this issue. Nevertheless, it is right to say rather more about this and to record that, in my judgment, any such challenge would be hopeless in light of the decision in UniCredit, and that I am satisfied that each of the requirements of CPR 6.37(1)-(3) is met. As to the merits test, for reasons which I will explain, the Banks have a good claim for the grant of final anti-suit and anti-enforcement relief against RCA.

As to the gateway required by CPR 6.37(1)(a), the Banks rely upon PD6B para.3.1(6)(c), "Claim in respect of a contract governed by English law," and the relevant contracts at issue are the arbitration agreements contained within the Bonds. Each of the Bonds is in materially identical terms to the instruments already considered in UniCredit.

The Court of Appeal in UniCredit and Foxton J in granting the Interim Orders considered that the arbitration agreements in the relevant instruments are governed by English law. That appears to me, given the analysis of the Court of Appeal in UniCredit, which, as I have said, has been upheld by the Supreme Court to be clearly right in relation to the arbitration agreements which are relevant to these proceedings.

In rather more detail, the position is as follows.

In relation to BL's three bonds, cl.11 of each provides "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." That clause and the arbitration agreements in cl.12 are identical to the equivalent provisions considered in UniCredit, and they also fall to be construed against a materially identical contractual matrix.

Accordingly, in conformity with the decision in UniCredit and its application of the decision of the Supreme Court in Enka v Chubb [2020] 1 WLR 4117, I consider it clear that the choice of law in cl.11 extends to the arbitration agreements cl.12, such that they too are governed in English law. As to LBBW's bond, the choice of law clause is similar but with one, in my view, immaterial difference. The LBBW bond provides, at cl.10:

Those references to the URDG in cl.10 do not, in my view, affect the express choice of English law in the bonds, nor its extension to the arbitration agreements. Article 34A of the URDG provides:

Here, in my view, the bonds do provide otherwise. By virtue of the opening words in clause 10 of the LBBW bond, ‘Except to the extent it is inconsistent with the expressed terms of this bond,’ and by reason of Article 34(a) of the URDG, ‘Unless otherwise provided in the guarantee,’ the express choice of English law governs. Thus, in my view, the choice of English law in the Bonds is materially identical to that considered in UniCredit and extends to the arbitration agreements in cl.11.

As to proper forum, the requirement under CPR 6.37(1)(c), I consider that England is the proper forum for the Banks' claims, just as it was found to be the proper forum for the equivalent claims in UniCredit and in Deutsche Bank v RusChemAlliance [2023] EWCA Civ 1144, and that is for the following reasons. First, the essential question at this stage of the analysis is where the present claims can suitably be tried in the interests of all the parties and the ends of justice. In my judgment, the answer to that question is in the courts of England and Wales. The relevant claim at issue is the Banks' claim for coercive relief to enforce RCA's promise to arbitrate, and only to arbitrate, all disputes arising out of or in connection with the bonds.

England is, in my judgment, the natural forum for such an ASI claim, because an ASI is not a remedy that is available in the curial courts of the arbitration, namely those of France. That is apparent from the expert evidence which I have of Jean Christophe Honlet but is also the same as the position which was recognised in UniCredit. There is, in my judgment, no problem as to comity with other courts in this respect. The evidence is that the French court would not regard an English ASI as an interference with its own jurisdictionand would probably also recognise the grant of an ASI by a court which can order one.

While it is no doubt the case that an ICC arbitration tribunal seated in Paris could make an award requiring RCA to refrain from or terminate Russian proceedings, that does not mean that England is not the proper place for the Banks’ ASI claims. I should say, first, that it would, in my judgment, be impermissible for RCA to raise such an argument. I would consider it unconscionable for RCA to act in breach of the arbitration agreements by suing the Banks in Russia and seise jurisdiction there on the basis that the arbitration agreements are said to be inoperable, whilst simultaneously suggesting that the pursuit of arbitration in France supplies the correct remedial answer and renders England an inappropriate forum for the Banks' own claims. The position appears to me to be the same as that which Males LJ considered in UniCredit at [78], namely that ‘it is abusive for RCA to rely on the availability of substantial justice in France as the seat of arbitration, while simultaneously seeking to pursue proceedings in Russia on the basis that the arbitration clause is unenforceable’.

It is true that one potential point of difference between the position of LBBW and the facts in UniCredit is that here, LBBW - albeit not BL - has commenced ICC arbitration proceedings against RCA, seeking declaratory relief as to the validity of the arbitration agreement and damages. That, however, in my judgment cannot affect the jurisdictional analysis. As was said by Lord Mance in AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] 1 WLR 1889 at para.48, an interim or final ASI is:

Furthermore, and by analogy with what was said in UniCredit, it seems to me that it would be abusive for RCA to seek to rely here on the fact of the LBBW arbitration, whilst at the same time denying the jurisdiction of the LBBW tribunal and pursuing the Russian proceedings in breach of the arbitration agreement.

Moreover, I consider that it would be both unrealistic and illusory to consider that the pursuit of anti-suit injunctive relief through Paris arbitration would provide the Banks with substantial justice on the facts of this case. In particular, there is a real risk that the Russian court will grant judgment on RCA's claims against the Banks on 4 July 2024 or shortly thereafter, and obtaining an award against RCA in the ICC arbitration is likely, by contrast, to take months, and on any view will not realistically happen before the 4 July 2024 hearing in Russia. In any event, an award made against RCA is, on the evidence of Mr Usoskin, unlikely to be enforceable in Russia. Furthermore, an award will not carry the coercive effect of a court order, and the curial court in France has no power to convert a tribunal’s ASI into a coercive court order.

In addition, there is a real risk that RCA may not permit a Paris arbitration to proceed in any event. The evidence of Mr Usoskin is that if RCA were to apply for an anti-arbitration injunction from the Russian court, there is a significant probability that it would obtain that relief.

For all those reasons, I consider that England has been shown to be the proper forum for the Banks' present claims.

Turning to the merits of the claim for ASIs, these appear clear: in the UniCredit proceedings, the Court of Appeal found the equivalent claim for final relief to be straightforward and, once it had allowed UniCredit's appeal on jurisdiction, it granted the ASIs being sought without any separate oral argument on that issue. I have been informed that RCA did not even deny that its equivalent Russian litigation in that case was in breach of the arbitration agreements. The Supreme Court refused to grant RCA permission to appeal the merits aspect of the Court of Appeal’s decision in UniCredit.

The merits of the claim can be dealt with relatively briefly, therefore, as follows. The principles governing the grant of an ASI are well known and were summarised inter alia by Males LJ in UniCredit, para.81. In summary, the court proceeds on the basis that where court proceedings are brought in breach of an agreement to arbitrate, the court will generally grant an ASI, unless there are strong reasons not to do so. That power is derived from s.37 of the Senior Courts Act. It does not require an arbitration to be on foot or in contemplation, and 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 such agreement. Under s.37, the injunction must also be just and convenient in all the circumstances.

Taking those matters in turn, the first issue is whether there was or will be a breach of the arbitration agreements. I have already mentioned the relevant terms of the bonds. Each arbitration agreement was governed by English law and required that all disputes arising out of or in connection with the bond be finally settled by way of ICC arbitration in Paris. As was said in Enka v Chubb [2020] 1 WLR 4117, at [174], ‘A promise to arbitrate is also a promise not to litigate.’ The pursuit of RCA's Russian proceedings appears to me to be an obvious breach of that promise. Specifically, RCA's statements of claim in the Russian proceedings bring a claim under the bonds. They invoke Russian law to allege the arbitration agreements are unenforceable; but that of itself, as it seems to me, acknowledges the initial applicability of the arbitration agreements. The prayers for relief expressly seek recovery under the bonds.

Furthermore, following the dismissal of RCA's appeal in the UniCredit proceedings by the Supreme Court, RCA has engaged in further breaches of the arbitration agreements by seeking and obtaining the freezing orders, which I have mentioned, against the Banks. Those freezing orders were obtained to facilitate the enforcement of judgments which, if granted, will have been made in violation of the arbitration agreements. Thus, there appears to me no doubt that there have been, and are likely to be further breaches of the arbitration agreements.

There is, by contrast, turning to the second aspect, no strong reason to refuse an ASI. The burden to show such a strong reason is on RCA. That burden has not been met and, in my judgment, could not be met, particularly in circumstances where the Court of Appeal rejected the three matters which were relied on by RCA in front of the Court of Appeal in UniCredit as constituting strong reasons as to why a final ASI should not be granted.

Thus, in paras.84-85 of the UniCredit, Males LJ said:

Thus, the only three matters which were relied on by RCA in those proceedings as constituting strong reasons for refusal of an injunction were trenchantly rejected as such by the Court of Appeal. I should, nevertheless, deal with certain additional arguments which were drawn to my attention by the Banks' counsel as arguments which RCA might conceivably put forward as reasons for the refusal of relief.

First, there is the fact that, as I have already mentioned, LBBW has commenced an ICC arbitration against RCA, but BL has not. However, as I have already said, it is not of significance in a case such as this whether an applicant for an ASI has commenced, or intends to commence, an arbitration. It is to be noted that in the Commerzbank case, final relief was granted by Jacobs J against RCA in circumstances where that bank had commenced arbitration.

Second is that in the ICC arbitration, which LBBW has commenced, RCA seeks to contest the jurisdiction of the ICC Arbitral Tribunal based on the application of Russian law and, in particular, Article 248.1 of the APC, the argument being that, pursuant to that provision, the Russian court has exclusive jurisdiction over the dispute between the parties. That point has not, in fact, been raised by RCA to resist enforcement of the arbitration agreements and was not raised by RCA in the Court of Appeal in UniCredit.

I should nevertheless express my view that any reliance by RCA on Article 248.1 of the APC, or on an alleged public policy arising from the application of Russian law, would be misplaced. Applying English conflicts of law rules, the arbitration agreements are governed by English, not by Russian, law. It is English law that must determine whether the arbitration agreements can or should be enforced. Under English law, there are no considerations of public policy which would render the arbitration agreements invalid, inoperable, or otherwise unenforceable. On the contrary, there is a strong presumption in English law in favour of upholding arbitration agreements.

A further possible argument is that the Court should not grant relief because RCA will not abide by any order made. However, any difficulty in enforcement of an order which I may make is not, in my view, a strong reason against the grant of an ASI. As Foxton J said in RiverRock Security v International Bank of St Petersburg JSC [2020] 2 Lloyd's LR 591 at para.108:

The fact that RCA may pursue the Russian proceedings does not, in my judgment, mean that the final relief sought by the Banks would be futile or otherwise lack any practical utility. On the contrary, on the basis of the evidence before me, I consider that final anti-suit injunctive relief is likely to help to maximise the protection afforded to the Banks, particularly if RCA attempts to enforce the Russian judgments against the Banks in other jurisdictions.

As to a potential argument about comity, I have already largely dealt with this. There are, in my judgment, no comity concerns which would justify the Court's refusal to grant anti-suit injunctive relief. As has been said on many occasions, in a contractual ASI case such as this, comity is of little, if any, relevance. Certainly, I do not consider that the Russian courts would have any legitimate grounds for taking offence at the grant of an ASI. If the Russian courts fail to grant a mandatory stay of the Russian proceedings and assert jurisdiction, it appears to me that that would be a breach of Russia's obligations under the New York Convention. In my judgment, what comity requires in this case is that the arbitration agreements should be enforced.

As to the French courts, as I have said, there does not appear to me to be any comity concern. I consider it likely, in fact, that the French courts would welcome the grant of an ASI, the effect of such relief being to uphold the New York convention, to which France is a party, and to support arbitration in Paris, being the seat provided for in the arbitration agreements. In any event, whether or not I am right as to the welcome which the French courts might give its grant, the evidence before me is that the French court would not be hostile to or offended by such relief. I have already mentioned the evidence of Monsieur Honlet and the fact that that was the position recognised in UniCredit.

Finally, in relation to whether the application has been prompt, Foxton J held in his ruling on the interim orders that there had been no appreciable delay on the part of the Banks in this case. I agree. The interim orders were obtained on 15 February 2024, which was substantially in advance of the first substantive hearings in the Russian proceedings on 14 March 2024, and shortly after the Court of Appeal on 25 January 2024 reversed the decision of Sir Nigel Teare given in late September 2023 in the UniCredit proceedings, thereby clarifying that the English Court did have jurisdiction to grant such relief in this sort of case.

Thus, I turn to the last issue, which is whether it is just and convenient to grant an order. Given all that I have already said, and in the absence of any other considerations or circumstances which militate in the other direction, I consider that it is clearly just and convenient to grant an order of final anti-suit injunctive relief.

I will consider now in rather more detail the terms of the order, albeit it is right to say, as I have already said, that the order made by the Court of Appeal in UniCredit was upheld by the Supreme Court, and that that of itself goes a long way towards establishing the appropriateness of significant parts of the order which is sought.