UK court refuses to grant anti-suit injunction

UK courts have on various occasions granted anti-suit injunctions (ASI) to block proceedings in Russia if an arbitration agreement in place for the parties to a dispute has been breached. However, if the arbitration agreement is not in any way connected to English law, an English court, logically, can deny an ASI.

One such decision was adopted recently in a dispute between UniCredit banks and FH Holding Moscow (FHM), to which UniCredit granted a loan. The transaction was documented in two parts – a loan facility agreement and a mortgage agreement for real estate to secure the loan.

Both parties to the dispute have a “Russian element” – the Italian UniCredit has a Russian subsidiary, UniCredit Bank JSC, and the Cyprus-based FHM does business in Russia through a local subsidiary. The subject of the mortgage were assets specifically in Russia.

That said, the loan agreement is governed by English law, but with arbitration in Vienna, and the English court saw the arbitration agreement as being governed by Austrian law, while the mortgage agreement was governed by Russian law. UniCredit Bank filed a lawsuit in Russia to enforce the mortgage agreement based on FHM’s default. FHM, however, stated that it is unable to perform the loan agreement due to Russian counter-sanctions restrictions and filed for an ASI in England to ban the Russian proceedings.

English courts of the first and appeal instances refused to grant the ASI to FHM for the Russian process, noting that even though the loan agreement is governed by English law, the arbitration agreement is governed by Austrian law. The courts determined that in the case at hand there is no English connection: no British participant, the mortgage agreement is governed by Russian law, the mortgaged asset is in Russia, and the arbitration clause of the loan agreement provides for arbitration in Austria. Accordingly, an English court would have no place to ban proceedings in Russia. It follows then that English courts will examine the whole set of factors when making a decision on circumstances that allow granting an ASI for a process in Russia.

In the meantime, the Russian process also took an unexpected turn as the Russian commercial arbitration court indicated that the transaction itself is subject to Russian presidential decrees on counter-sanctions restrictions that apply to companies controlled by residents of “unfriendly” states. Since UniCredit Bank did not submit to the court a consent of the Russian Central Bank or approval of the Government Commission for the enforcement in question, i.e. transfer of the asset, the claim was denied.

If follows from the Russian case docket that UniCredit Bank filed an appeal, and at the beginning of May the Russian appeal instance court left the decision of the first instance without change.

This leads to the interesting conclusion that the court’s discretion as concerns enforcement on assets by companies from “unfriendly” states is not just subject to Russian law, but is complicated by Russia’s counter-sanctions restrictions currently in effect.

It is quite possible that this case will be continued, whether in form of approval from Russia’s Government Commission or Central Bank or in the cassation instance of the commercial arbitration court.