England's place in the strategic battlefield of UniCredit v RusChem 2024

By Hannah LeBor

The Paris International Chamber of Commerce, the original agreed seat of arbitration.

Last year’s UniCredit v RusChem (2024) was a significant reaffirmation of the attitude taken by English courts towards arbitrations, which arise out of contracts engaging English law. UniCredit v RusChem (2024) follows precedent Enka v Chubb (2020) by confirming that the English courts are willing to enforce English law on an arbitration clause, even if the arbitration seat selected is not located in England itself. This demonstrates a wider tendency of English courts to extend their jurisdiction’s law abroad, in stark contrast to other nations such as France. Although the legal consequences of the ruling are limited, given the passing of the Arbitration Act 2025, nullifying the key effect of the judgement, UniCredit v RusChem is nonetheless a clear indication of the UK Supreme Court’s attitude towards English law’s global potential.

Legal timeline

Russian company RusChemAlliance LLC (RusChem) hired German contractors to build large gas- processing plants and paid €2 billion upfront. To secure this advance payment the contractors obtained performance bonds from UniCredit as a financial guarantee. In the event of non-performance by the German contractors, these bonds would be issued by UniCredit to RusChem as compensation. The bond contracts contained two important choice of law clauses:

i)               English law governs the contract

ii)             Disputes resolved in the International Chamber of Commerce (ICC) arbitration with the seat in Paris.

However, in 2022, the war between Russia and Ukraine started and EU began issuing sanctions. The German contractors withdrew and refused to return the €2 billion. RusChem subsequently demanded compensation as per the bonds, but UniCredit refused to return the amount claiming that the EU sanctions prohibited the payment. In response, RusChem proceeded to sue UniCredit in Russia, violating the above choice of law clause which required ICC arbitration, to be undertaken in Paris. Ultimately the English Supreme Court had to address whether England had jurisdiction to grant an anti-suit injunction (ASI), preventing the continuation of suit in the Russian courts.

London’s legal gravity: Why was the case tried in England and not Paris?

RusChem initiated legal proceedings towards UniCredit in Russia but sought French law to govern the arbitration clause and subsequent ASIs. An ASI is a court order which stops a party from continuing or starting legal proceedings in another court when doing so would breach an existing arbitration agreement.  As a general rule, French courts do not grant ASIs in aid of arbitration, in contrast to English courts. This is important because UniCredit required an ASI to stop the Russian court proceedings.

Since the bonds chose English law as their governing law, English law governed the arbitration agreement, in line with recent precedent Enka v Chubb (2020). Enka v Chubb set an important precedent in contract law, namely, that if a contract has a choice of law clause, this law governs the arbitration agreement too unless the parties state otherwise. This was a significant ruling because it clarified the hierarchy in governing law. The precedent played a fundamental role in the ruling in favor of UniCredit, pulling the dispute into the orbit of English law.

The importance of the Seat

The seat is significant because determines numerous things such as the procedural law, court intervention in the arbitration process and challenges to the award. On the other hand, what the seat does not automatically determine is who enforces the promise to arbitrate, remedies for the breach (such as an ASI) and the governing law of the arbitration clause (unless this has been expressly stated). Even though this may seem like a legal nuance, the fight over the seat created a strategic battlefield.

The debate around the seat was of enormous importance because UniCredit’s use of an ASI depended entirely on what law governed the arbitration clause. For a ruling in their favor, the seat had to be separated from the law that governed the arbitration clause. However, RusChem argued fiercely that the Paris seat meant that French law governed the arbitration clause. French courts do not allow ASI because, broadly speaking, they maintain that ASIs have undue influence over foreign courts captured in the principle of ‘compétence-compétence’. This philosophy is a stark contrast to the English one. French courts prefer more of a ‘hands-off’ approach toward arbitration: tribunals decide their own jurisdiction (arbitration tribunals can proceed even if a party is litigating elsewhere) and awards are enforced at the end, with minimal initial interference.

In the verdict, the Supreme Court unanimously decided that the arbitration agreements in the UniCredit bonds are indeed governed by English law, as a result England was the proper forum to enforce the partie’s promise to arbitrate. Therefore, the ASI was upheld and RusChem was prevented from continuing proceedings in Russia. The dispute proceeded to ICC arbitration.

What can we learn?

UniCredit v RusChemAlliance serves as a stark reminder that arbitration is more than simply procedural choice. It resembles a carefully curated legal ecosystem in which the shift of one piece, the system drastically changes. There is a clear broader lesson one can take away from this court case: the battle begins before the conflict erupts Even in such high profile and crucial legal battles, knowing the contract can shift the entire legal balance of the case. 

Edited by Artyom Timofeev

Image source: https://iccwbo.org/news-publications/news/icc-hearing-centre-reopens-doors-for-physical-presence-dispute-resolution-hearings/