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If a party to an English seated arbitration agreement commences proceedings against third parties elsewhere are there circumstances where it might, on the basis of that agreement, be restrained from doing so?
This arose last year in the EuroChem case and, in the light of current geopolitical events, is a topical area that has now returned in a recent decision, Re Renaissance [2024] EWHC 2843 – albeit this time with a different outcome. Read on to understand more.
What happened in the Renaissance decision?
In these proceedings, the claimant (R) and the defendants were in dispute over assets held by R under an investment service agreement (ISA). The assets belonged to the defendants but the claimants had frozen them, asserting that the defendants were subject to sanctions. The ISA was subject to English law, and a London-seated LCIA arbitration agreement.
The defendants commenced proceedings against R in Russia, in respect of which R obtained an anti-suit injunction (ASI) from the English courts on the basis of a breach of the arbitration agreement. Certain of the defendants, however, also brought other proceedings in Russia against affiliates of R (described in the judgment as ‘the RREs’, for ‘Renaissance Russia Entities’). These were tortious claims under Russian law which, in summary, asserted that, although the RREs were separate entities, they were part of a corporate group which would benefit from the actions of R and that they should therefore be held responsible for losses caused by R to the defendants.
This led R to seek an amendment to the ASI to also restrain those actions against the RREs on the basis that (i) they were claims which, pursuant to the arbitration agreement in the ISA, the defendants had agreed to submit to arbitration; or (ii) they had been vexatiously brought as a collateral attack on that arbitration agreement.
As to the first, the judge found that, as a matter of construction of the arbitration agreement under English law, it could not be said that the defendants had made any such agreement in relation to the claims against the RREs. Drawing from cases on exclusive jurisdiction clauses, the judge noted that the starting point, absent express words, is that only disputes between the parties to such an agreement are covered by it; and that this was all the more likely to be the more correct approach given other particularities of the arbitration context [30-32]. The judge then turned to the construction of the arbitration agreement in the ISA and concluded that there were various features of it inconsistent with the proposition that its scope would encompass the claims against the RREs; for example a number of features were only applicable to the parties, and not non-parties [33-40].
The judge also rejected R's arguments on vexation. Although a little opaque, his reasons, shortly put, seem to have been that he regarded such an argument as difficult given that the proceedings against the RREs were not within the scope of the arbitration agreement. But, also, R had offered no case on why, in such a case, England should be the natural forum for the resolution of the dispute between the defendants and the RREs, being a necessary condition for an injunction based on vexation [41-46, 48].
A contrast with EuroChem?
Regular readers of ArbitrationLinks may recall the Court of Appeal’s decision in EuroChem of last year. In that case (see here for more) an ASI was found to prevent a party (T) to an arbitration agreement participating in Italian proceedings against a third party; one of the reasons being that conduct was within the scope of the arbitration agreement.
The gist of the reasoning for that conclusion was that in doing so, T was simply seeking to litigate, or conduct a “proxy war” on, the very issue forming part of the parties’ dispute before the tribunal. EuroChem does not appear to have been relied upon by R in Renaissance, so the decision doesn’t directly deal with the difference. But, as a point of contrast/distinction, there may be a view that the nature of the proceedings in the latter were somewhat more towards free-standing claims against third parties (which, for reasons including those given by the judge, might ordinarily not be thought to be within the scope of the arbitration agreement between the parties). That is a point somewhat evident in the judge’s attitude (at [44]) as to whether the case against the RREs involved an orchestrated attempt to take advantage of Russian legislation on jurisdiction over sanctions disputes: such a characterisation of the defendants’ conduct in this particular case was “wrong”, according to the judge.
This tends to suggest that a key point for a party in R’s position to focus on may be the degree to which the proceedings commenced by its counterparty against third parties are a contrived attempt to have the substance of the dispute between the parties to the arbitration agreement heard elsewhere; as it is possible that may then support an ASI either on a contractual basis, or, otherwise, on the basis that it is vexatious/oppressive.
In respect of that latter basis, it may be that, as in Renaissance, more focus is then put on the position of third parties from a proper forum angle. However, another interesting aspect of the judge’s decision is a hint (no more than that as R did not argue the point itself) that third party joinder provisions in arbitration rules may help convince the court that (English) arbitration is an appropriate forum (so long as the case is one where, as in Renaissance, the third party would be inclined to consent).
Note: In April 2025 the English Court of Appeal dismissed an appeal against the judge's refusal of the ASI, albeit based on a narrow ground that, since that ruling, two of the RREs had been sold. The basis of R's interest in obtaining the ASI had therefore changed, from those companies being its affiliates, to an assertion that R was obliged to indemnity them against the Russian proceedings. R, however had declined to provide any evidence, or explanation, to establish what the extent of this was. Accordingly, as that information was of material significance to whether the court should grant a discretionary remedy, the court declined to do so.
That being the case, the remainder of the Court of Appeal's judgment is technically obiter and the respective judgments of the LJs differ in length and emphasis. However, two points may be of interest: (i) It appears that the Court of Appeal regarded the judge as having adopted an incorrect approach in this case by imposing a “natural forum" assessment as part of R's application for an ASI based on non-contractual “vexation/oppression. In a “single forum" case (i.e. where the claim subject to the ASI can only be brought abroad), the court (subject to having personal jurisdiction over a defendant) had a discretion to grant an ASI on that basis, but natural forum was not part of the approach which should be applied to it; such a case instead requiring a “sufficient connection" with England. That contrasted with an “alternative forum" case (i.e. where the claim subject to the ASI could otherwise be brought in England) where natural forum would be a consideration (although the possibility of this case being an “alternative forum" case due to the RREs consent to arbitration, and joinder provisions in the relevant arbitration rules, was not considered in any further detail). (ii) On the point of construction, whilst one LJ essentially agreed with the judge, another, without deciding the point, thought that R's position might at least be arguable in “distinctive" circumstances where the only purpose of the proceedings against the RREs was to circumvent the arbitration agreement (in this there are, again, echoes of the Court of Appeal's approach in the earlier EuroChem case).
10 December 2024
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