UK Supreme Court confirms English law governs arbitration agreement seated in Paris

UniCredit Bank GmbH v RusChem Alliance LLC [2024] UKSC 30

In this recent case, the UK Supreme Court examined two key issues: the governing law of the arbitration agreement and the appropriate forum for granting an anti-suit injunction.

Background: 

UniCredit Bank issued seven on-demand bonds governed by English law in favour of RusChemAlliance (RCA). Due to EU sanctions on Russia, UniCredit refused payments under these bonds. In response, RCA initiated legal proceedings in the Russian courts to enforce the bonds, despite the arbitration agreements in the bond contracts providing for ICC arbitration with Paris as the seat. UniCredit sought an anti-suit injunction from the English courts to prevent RCA from continuing the Russian proceedings, arguing that RCA’s actions breached the arbitration agreement.

Key issues: 

1. Governing law of the arbitration agreement: The Supreme Court confirmed that English law governed the arbitration agreement, even though the arbitration was seated in Paris. Following the principle established in Enka v Chubb, it confirmed that the governing law of the main contract (in this case, English law), also applies to the arbitration agreement unless expressly stated otherwise. The Court rejected RCA’s argument that French law should apply simply because the arbitration was seated in Paris.

2. Proper place for the anti-suit injunction claim: The Court held that England was the correct forum to issue an anti-suit injunction, as the arbitration agreement was governed by English law and the French courts (as the supervisory court of the arbitration) could not grant such an injunction.  The Supreme Court noted that section 37 of the Senior Courts Act 1981 allows English courts the authority to issue injunctions, including anti-suit injunctions, in cases involving breaches of arbitration agreements.

This decision affirms the English Court’s pro-arbitration stance and their readiness to grant anti-suit injunctions to prevent breaches of arbitration clauses, even in foreign seated arbitrations. Furthermore, it established that English law will govern the arbitration agreement, in foreign-seated arbitrations, if it governs the underlying contract and there is no explicit contrary agreement.  

The decision also highlights the importance of ensuring that if the parties to a contract wish for any arbitration agreement to be governed by a law other than the law governing the main contract, the arbitration agreement should be carefully drafted so as to reflect this.

It should be noted that an Arbitration Bill is currently before the UK Parliament, proposing an amendment to the Arbitration Act 1996 which would stipulate that arbitration agreements are governed by the law of the seat unless otherwise specified by the parties. The amendment follows recommendations from the Law Commission, which reviewed the Act and received feedback indicating that the law as outlined in Enka v Chubb case was "complex and unpredictable." Meanwhile, in this case the Supreme Court has opted not to reconsider existing principles while the draft legislation is pending.