Since 2020, pursuant to the amendments to the Russian Arbitrazh (Commercial) Procedural Code and the newly introduced Article 248.1, Russian courts have exclusive jurisdiction over cases involving sanctioned Russian companies and individuals. This is despite the fact that:
- the parties may have agreed to an exclusive dispute resolution clause providing for the jurisdiction of courts or arbitral tribunals of a foreign country;
- the matter falls under the exclusive jurisdiction of a foreign Court, e.g. proceedings concerning the winding-up of a foreign company.
Worse, the same law allows Russian courts to grant anti-suit injunctions to restrain foreign parties from pursuing proceedings as envisaged by their contract, and instead compel them to pursue proceedings in Russia. A recent example is Case No. A40-197598/2023 where the Commercial Court in Moscow granted an injunction prohibiting the continuation of a SIAC arbitration against Rosneft, to which both parties agreed.
The law was introduced in 2020 but has significantly grained in relevance since, because of the vast array of sanctions introduced against Russian companies and individuals since Russia’s full-scale invasion of Ukraine in February 2022.
This article discusses measures which may be taken in English and Cypriot Courts to restrain Russian parties from relying on Article 248.1 of the Russian Arbitrazh (Commercial) Procedural Code and bringing proceedings in Russia in breach of arbitration clauses or the exclusive jurisdiction rules of foreign Courts.
Anti-Anti-Suit Injunction in Cyprus
Evripides Hadjinestoros and George Antoniades, both Of-Counsel at Fortior, acted for a client in Cyprus in two sets of proceedings, both involving Russian defendants and deals concluded before the start of Russia’s initial invasion of Ukraine in 2014. In one of the claims, Evripides’s and George’s clients sought the winding-up of a Cypriot company in which their client was a shareholder. In the other, they pursued the client’s opponents for conspiracy to defraud the client of its shareholding in a Cypriot company.
The Russian defendants sought to commence torpedo proceedings in Russia on the basis of Article 248.1, arguing that from now on Russian courts should exercise exclusive jurisdiction over them, since the industry in which they worked (although not they personally) was subject to sanctions in the European Union.
Evripides and George countered this by applying, without notice, for an urgent anti-anti-suit injunction to restrain the Russian proceedings. This was on the basis that: (i) the Cypriot Courts had exclusive jurisdiction to wind up Cypriot companies; (ii) had jurisdiction to consider fraudulent conspiracy claims involving shareholding in a Cypriot company; (iii) needed to protect their own jurisdiction against unjustified torpedo proceedings elsewhere; and, further, (iv) that the relevant defendants were not subject to sanctions as required by Article 248.1.
In this pioneering case, the Cypriot Court, for the first time, granted the anti-anti-suit injunctions sought in both proceedings against the Russian defendants. The injunctions restrain them from further participating in the proceedings in Russia, failing which they could be committed to prison for contempt of the Cypriot Court. The injunctions may be challenged by the defendants in an on-notice hearing, but they demonstrate the Cypriot Courts’ willingness to protect their own jurisdiction against the defendants seeking to encroach upon it in reliance on the Russian Article 248.1.
Anti-Anti-Suit Injunctions in England
This case follows similar developments in England, where several anti-anti-suit injunctions were granted against Russian entities.
On 3 November 2023, Mrs Justice Dias issued an anti-suit injunction against the defendants in Renaissance Securities (Cyprus) Limited v Chlodwig Enterprises Ltd and ors [2023] EWHC 2816 (Comm). The judgment seeks to protect the parties’ choice of forum/arbitration clause by restraining the Russian proceedings relying on Article 248.1. It applies the usual principles on the basis of which English Courts are willing to grant anti-suit injunctions:
- It is just and convenient to grant the injunction.
- The injunction would normally be granted where foreign proceedings are brought in breach of the arbitration clause.
- The applicant can demonstrate to a high degree of probability that there is an arbitration clause which governs the dispute in question.
- It is not a pre-condition to the anti-suit injunction that the arbitration proceedings are actually on foot.
- Where foreign proceedings are commenced in breach of the arbitration clause, damages are not an adequate remedy.
- The applicant must act promptly before the foreign proceedings are too far advanced.
In its judgment in Unicredit Bank GmbH v RusChemAlliance LLC [2024] EWCA Civ 64, issued on 2 February 2024, the English Court of Appeal issued an anti-suit injunction (overruling the first instance decision of Sir Nigel Teare) to restrain Russian proceedings against UniCredit brought in reliance on the same Article 248.1. This case went far beyond Renaissance Securities in that:
- The applicable arbitration clause agreed by the parties provided for arbitration in Paris, not in London. The only connection to England was the parties’ choice of English law.
- One would have thought (as Sir Nigel Teare did) that in these circumstances the English Courts had no jurisdiction to grant any sort of injunctions in support of the arbitration, insofar as they did not involve English assets.
- However, the Court of Appeal considered that English Courts had jurisdiction because:
- the performance bonds (under which the dispute arose) and the arbitration agreement were governed by English law, which meant that the English Court had sufficient connection to the dispute to grant anti-suit relief;
- the French Court would not regard the English anti-suit injunction as an interference with its own jurisdiction; and
- English law required those who agreed to arbitration to adhere to their bargain.
In addition, the Court noted that by relying on Article 248.1, the Russian courts were acting contrary to their obligation under Article II(3) of the New York Convention to stay domestic court proceedings commenced in breach of exclusive arbitration.
On 26 February 2024 a Russian tycoon, Ziyavudin Magomedov, obtained an anti-anti-suit injunction against Transneft. Magomedov started proceedings against Transneft when his shareholdings in valuable Russian port operators were seized, which he considered to be a state-backed conspiracy. In reliance on Article 248.1, Transneft asked a Moscow court to prohibit Magomedov from continuing proceedings in England. Magomedov in turn applied for an anti-anti-suit injunction in London ordering Transneft to adjourn the Russian claim. Mr Justice Foxton granted the injunction, as a result of which Transneft de-jure and de-facto directors may be liable for contempt of court, and may face prison sentences in England, if they continue with their Russian proceedings.
There appear to be several other cases currently pending before English Courts on similar issues, and further guidance is likely to be available shortly on the principles applicable to such injunctions.
Conclusion
English and Cypriot Courts are willing to issue anti-suit injunction to protect the parties’ choice of forum clauses and restrain proceedings in Russia or elsewhere for this purpose. As the Cypriot case run by Evripides Hadjinestoros and George Antoniades demonstrates, Cypriot, and likely English, Courts will also issue anti-suit injunctions to protect their own jurisdiction even where the parties have not explicitly agreed to resolve their disputes in English or Cypriot Courts. Where Russian parties seek to commence torpedo proceedings on the basis of Article 248.1 of the Russian Arbitrazh (Commercial) Procedural Code, opposing foreign proceedings, Cypriot and English Courts will restrain Russian parties from continuing those proceedings if they view them as an interference with their jurisdiction or the jurisdiction of an arbitral forum agreed by the parties. The main requirements are that to grant the injunction would be just and convenient (which will normally be the case where the Russian proceedings interfere with Cypriot or English jurisdiction) and that the application is brought promptly.
If you are facing a Russian party who seeks to take your case to Russia in breach of an arbitration clause or in breach of the jurisdiction rules of the foreign Court you are in, please contact us to consider whether you can seek an anti-suit injunction in England or Cyprus. You can contact our London team at [email protected] and our Cypriot team at [email protected]. Similar injunctions may be available in other jurisdictions – to discuss, please write to [email protected].
Fortior Law is an international dispute resolution practice. We regularly act in English, Cypriot and Swiss Courts and have obtained multiple interim injunctions in support of arbitration and Court proceedings in various jurisdictions. For more information, visit www.fortiorlaw.com.
