Anti-suit injunction: further practice development

The imposition of unilateral restrictive measures on citizens or companies of a country often not only brings their economic activities abroad to a standstill, but also impedes the effective protection of their rights. A number of challenges arise in international arbitration proceedings: the imposition of sanctions sometimes results in a party’s inability to participate and represent its interests during the proceedings. In such a situation, the rights of the party are brazenly violated. In order to protect the rights of those parties against whom sanctions are imposed by “unfriendly” states, provisions were included in the Russian APC on the possibility for Russian courts to prohibit the continuation of proceedings in international commercial arbitration involving such a Russian party (a so-called “anti-suit injunction”).

The practice of using this mechanism is still being shaped. However, one landmark decision of the Moscow District Arbitration Court of 1 March 2024Case No. А40-166725/2023 on this issue has already been commented on by our colleagues. Another significant decision was taken by the Arbitration Court of the City of St Petersburg and the Leningrad Region (Arbitration Court of St Petersburg and Leningrad Region) on 15 March 2024. In the foregoing decision, the court expressed the important position that the mere fact that restrictive measures have been imposed on a Russian party is presumed to be sufficient to conclude that the party’s access to justice has been restricted.

Background

On 30 June 2023, a joint statement of claim was filed against Gazprom Export, LLC (“Applicant”) by Uniper Global Commodities SE and METHA — Methanhandel GmbH (Germany) (jointly “Foreign Companies”) seeking to recover EUR 14.312 million in damages from the Applicant under the long-term gas supply contracts listed in the statement. The proceedings were initiated before an international ad hoc commercial arbitral tribunal with it seat in Stockholm, Sweden.

The Applicant believes that the restrictive measures taken against it in the EU territory, as well as the ban imposed by EU Regulation No. 833/2014 on the provision of legal services to Russian parties, prevent it from effectively protecting its interests in arbitration proceedings. Therefore, the Applicant referred to the Arbitration Court of St Petersburg and Leningrad Region seeking an injunction against the continuation of the proceedings in international commercial arbitration.

Court opinion

The court has satisfied the application and imposed a ban on Foreign Companies continuing the proceedings in international commercial arbitration outside Russia.

In substantiating its decision, the court stated that based on a comprehensive interpretation of articles 248.1 and 248.2 of the Russian APC and taking into account the explanatory note to the draft law on the introduction thereof, the mere fact of restrictive measures against a Russian party being a party to a dispute is presumed to be sufficient to conclude that such a party’s access to justice is restricted.

At the same time, the court rejected the Foreign Companies’ argument that in fact the foreign lawyers were providing services to the Applicant, as, in the court’s opinion, the mentioned argument “does not disprove that the Applicant’s ability to engage a qualified lawyer to protect its rights is limited.”

Unlike the decisions of the Moscow courts in case No. A40-166725/2023, the Arbitration Court of St Petersburg and Leningrad Region also ruled that in case of a violation of the foregoing ban, the Foreign Companies shall be charged EUR 14.312 million.

Comment

In this case, the Arbitration Court of St Petersburg and Leningrad Region continues to develop the idea previously formulatedRulings of the Russian Supreme Court of 9 December 2021 No. 309-ЭС21-6955(1-3) and of 29 June 2022 No. 305-ЭС22-6215 by the Russian Supreme Court, that the application of restrictive measures by a foreign state in itself creates obstacles to accessing justice for a Russian party, therefore a unilateral procedural declaration of will of such a party is sufficient to transfer the dispute to the jurisdiction of Russian arbitration courts.

The most important conclusion of the court in this case is that the mere fact that restrictive measures have been imposed on a Russian party by foreign states is sufficient in itself to conclude that such party’s access to justice has been restricted, and as a consequence, it serves as a sufficient ground to prohibit the other party from continuing the proceedings under international arbitration.

In doing so, the court emphasised that it is not necessary to prove the existence of circumstances indicating that the arbitration agreement is unenforceable. For example, we see from the background that the Applicant did not submit to the court refusals from foreign consultants to represent the Applicant in arbitration, but just provided printouts from the websites of law firms stating that they had ceased to provide services to Russian companies. This opinion has already been voiced by the Supreme Court earlier. These circumstances together form quite a favourable environment for Russian companies affected by restrictive measures of foreign states to transfer a dispute to the jurisdiction of Russian courts.

However, this approach of the state courts is, at the very least, questionable, as it essentially nullifies the “access to justice” criterion explicitly set out in the APC rule, and instead appeals only to the fact that sanctions were imposed irrespective of whether they had any effect on access to justice or not. In the case in question this is particularly clear: the court did not examine (at all) the Foreign Companies’ evidence on the Applicant’s ability to receive legal services in the EU, but simply referred to the imposition of sanctions. In addition, the court’s decision did not investigate whether the Applicant tried to receive legal services with reference to the exception to the general prohibition allowing services in connection with defence under arbitration proceedingsItem 6 of Article 5n of EU Council Regulation No. 833/2014.

A separate issue is the benefit of obtaining an anti-suit injunction from a Russian state court. Will a foreign tribunal dismiss the case on this ground? If the arbitration proceedings in Sweden are continued and a decision is rendered in favour of the Foreign Companies, the anti-suit injunction will only have real practical value in Russia and possibly in CIS countries: no execution may be levied on the Applicant’s assets in Russia on the basis of this foreign arbitration award, and the Applicant, in turn, may try to levy execution on the Foreign Companies’ assets in Russia, if any. Enforcement of an arbitration award by the Foreign Companies in other countries, such as the EU, despite the anti-suit injunction of the Russian state court, is very likely to be successful.

To reduce the risk of future contractual disputes falling under the jurisdiction of state courts, we recommend that alternative and waterfall arbitration clauses be included in contracts to allow access to other arbitration institutions in the event of obstacles to access to justice.