High Court grants anti-suit injunction to prevent Russian arbitration proceedings and clarifies scope of restriction on obtaining interim relief in LCIA Rules

David Whitehead

In Mace (Russia) Ltd v Retansel Enterprises Ltd, the Commercial Court discharged a without notice injunction to restrain continuation of Russian arbitration proceedings because of material non-disclosure by the claimant, but it granted a new on-notice injunction as the Russian proceedings were an improper attempt to subvert London arbitration proceedings.

Background

The claimant had agreed to supply the second defendant with project management services for a Russian residential development. The contract was recorded in two agreements, both governed by English law and providing for arbitration to be referred to the London Court of International Arbitration (LCIA).

After a dispute arose, the agreements were terminated and the claimant began an arbitration claim seeking payments due and damages. The tribunal was appointed and one week later the first defendant, who was the 100% shareholder of the second defendant, started arbitration proceedings in Russia seeking a declaration that the second of the agreements was invalid under Russian federal law. The hearing was fixed for 19 May 2016. The claimant then applied for and obtained, without notice, an anti-suit injunction to prevent the continuation of the Russian proceedings, arguing they were in breach of the arbitration agreement and vexatious as they had been brought by the first defendant in collusion with the second defendant (three of the first defendant’s shareholders were directors of the second defendant).

The claimant applied for the continuation of the anti-suit injunction; the defendants argued for it to be set aside on the basis that the claimant had failed to disclose to the court all material facts relating to its application. The alleged non-disclosures included advice the claimant had received from Russian lawyers that the hearing in Russia would be postponed if the claimant made an appearance in the Russian proceedings.

Furthermore, the second defendant argued that under article 25.3 of the LCIA Rules 2014, the arbitral tribunal’s consent had been required for an injunction application.

Judgment

The court found that there had been insufficient justification for a without notice application, and the injunction was accordingly discharged. The claimant had not drawn the judge’s attention to the legal advice it had obtained, or informed him of the imminent Russian hearing date.

The judge then granted a new on-notice anti-suit injunction, finding that the Russian proceedings were an attempt to subvert the London proceedings and the defendants had colluded to start the Russian proceedings in an attempt to assist the second defendant in resisting the London claim. The judge considered it fanciful to suggest that the decision to begin the Russian proceedings a few days after the appointment of the London arbitral tribunal had not been co-ordinated by the defendants. The claimant’s material non-disclosure in relation to the without notice application would not prevent the granting of a new injunction as it had caused no observable prejudice to the defendants.

Furthermore, while the LCIA Rules would be fatal to an application for an injunction under section 44 of the Arbitration Act 1996, anti-suit injunctions fell under section 37 of the Senior Courts Act 1981 and the court was accordingly not fettered by the restrictions in the LCIA Rules.

Comment

Parties will be grateful for the court’s clarification in this case that the restriction in article 25.3 of the LCIA Rules 2014 on obtaining interim relief without first seeking the tribunal’s consent only applies to the types of relief set out in section 44 of the Arbitration Act 1996.  It does not extend to the other forms of relief provided for in section 37 of the Senior Courts Act, such as anti-suit injunctions.  Where parties are seeking an injunction under section 44, they would be well-advised to obtain the tribunal’s consent before approaching the court.

Mace (Russia) Ltd v Retansel Enterprises Ltd (28 April 2016) (unreported)

Post By David Whitehead (5 Posts)

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