Anti-Suit Injunctions and Arbitrations

An arbitration agreement is an election by parties to have certain disputes (as defined in that agreement) determined by arbitration.

When a party seeks to disregard or ignore an arbitration agreement and bring a court claim to resolve a dispute outside of arbitration, the other party can apply for an ‘anti-suit injunction’; to restrain a party from commencing or continuing those court proceedings.

How far can an anti-suit injunction stretch, when connected proceedings are brought against a third party who is a non-party to the arbitration agreement?

This was an issue considered by the English Commercial Court in the recent case of Renaissance Securities (Cyprus) Ltd v ILLC Chlodwig Enterprises and others [2024] EWHC 2843 (Comm).

From Russia With Assets

 A group of six companies including ILLC Chlodwig Enterprises and others (“ Defendants”) had provided the Claimant Renaissance Securities (Cyprus) Limited (“Renaissance”) with assets to hold, under the terms of a series of Investment Service Agreements.

Those agreements contained an arbitration clause, which stated that any dispute arising in relation to the agreements and not resolved by negotiation within 30 days must be resolved by arbitration under LCIA Rules in London.

The parties’ relationship broke down when the Defendants demanded the return of the assets and Renaissance refused to do so.

Renaissance argued that they could not return the assets because the Defendants had become either directly or indirectly sanctioned, claiming that their ultimate beneficial owner was Andrey Guryev, a Russian billionaire who became a designated person in both the US and UK.

In October 2023, the Defendants commenced proceedings in the Russian courts to demand the return of the assets.

In response, Renaissance successfully made a without notice application in England for an anti-suit injunction against the Defendants, to force the dispute into arbitration.

Creative Manoeuvres

The Defendants then identified Russian-incorporated companies which were part of the same corporate group as Renaissance but which were not party to the agreements (“the Renaissance Group Companies”).

The Defendants brought tort claims in Russia to recover damages for a sum equivalent to the assets frozen by the claimant against separate Renaissance Group Companies.

The Court had to determine whether the existing anti-suit injunction could and should be extended to restrain the Defendant’s tort claims brought against the Renaissance Group Companies.

Renaissance made two principle arguments in support of their anti-suit injunction being extended:

1. As a matter of construction, the Renaissance Group Companies claims fell within the arbitration clause; or
2. The Renaissance Group Companies claims had been brought vexatiously or oppressively, for the purpose of circumventing the arbitration agreements.

The Anti-Suit Stretch

It was accepted in principle that the Defendants could have agreed with Renaissance that any claim it had against the Renaissance Group Companies would only be brought in arbitration. Therefore the “only question that remains is whether, as a matter of construction, that is the effect of the relevant agreement”.

The Court endorsed the approach taken in the Clearlake [2019] EWHC 2284 (Comm) case, which dealt with an anti-suit injunction in the context of a jurisdiction clause. Clearlake held that:

• absent express words regarding claims against non-parties, the starting point will be that only the parties to the contract are covered;
• however, where there is an alleged joint tort committed in relation to a contract by a contracting party and a non-contracting party, the interpretation will tend to include a tort claim against the non-party;  
• ultimately, it will turn on the interpretation of the particular contract in the light of the particular facts.

Considering the difference between arbitration and jurisdiction clauses, the Court did stress that “requiring a third party who is a stranger to the contract to arbitrate against its will at significant cost and in a foreign seated arbitration is something that should be approached with great caution”.

Applying those principles to the agreements, the Court concluded that the arbitration clause did not apply to non-party claims for a number of reasons, including:

1. The requirement to negotiate “between the parties” and the arbitration award being “final and binding on both parties”;
2. Third party rights under the Contracts (Rights of Third Parties) Act 1999 were excluded.

Vexatious Behaviour

The Court then turned to the alternative argument, that an anti-suit injunction should cover the Renaissance Group Companies’ claims given they were “vexatious or oppressive”.

The Defendants successfully argued that there were two steps in wrestling with this argument:

1. Are the English courts clearly the more appropriate forum for the claim; and
2. Is it necessary in the interests of justice to grant the injunction?

It was confirmed that the tort claims against the Renaissance Group Companies were brought before the Russian courts by Russian claimants against Russian registered domicile or resident defendants, for which it is alleged to be an actionable civil wrong according to the laws of Russia, and the arbitration agreement was found not to apply to the Renaisance Group Companies. The Court concluded that “[o]n the arguments advanced before me there is no answer to the point that there is no alternative jurisdiction available” and as such, the initial forum hurdle was insurmountable for Renaissance. The fact that the Renaissance Group Companies could consent to arbitration was found to be nothing to the point unless there was agreement between all parties that the claims be referred to arbitration.

Conclusion

The Renaissance judgment shows that, unsurprisingly, it will be difficult to stretch an arbitration clause to cover a non-party, even where a claim brought against that non-party originates from the relevant contract.

Consequently, care should be taken to consider the potential issues that may arise at three different stages in particular:

1. When the arbitration clause is being drafted, consider the parties’ wider corporate structures to ensure that the clause is sufficiently wide to cover potential claims that may arise
2. If a claimant has had their preferred approach blocked off by an anti-suit injunction, consider whether there are other claims which attack the same contractual or tortious ill, while not falling foul of the anti-suit injunction.
3. If such satellite litigation is instigated, consider whether the relevant arbitration rules provide an opportunity to protect a non-party which is being targeted by that satellite litigation.

further information

If you have any questions regarding this blog, please contact a member of our International Arbitration team.