Judgement Briefs

Alternative Dispute Resolution

Nori Holdings Ltd. v. PJSC Bank Otkritie Financial Corporation

[2018] EWHC 1343 (Comm)

Citation
[2018] EWHC 1343 (Comm)
Court
High Court of Justice, Queen's Bench Division (Commercial Court)
Date
6 June 2018
Bench
Males, J.

Facts

  • Nori Holdings and related entities entered into share-pledge agreements with Bank Otkritie.
  • The agreements secured financing arrangements and contained LCIA arbitration clauses providing for London arbitration.
  • Disputes arose concerning:
  • termination of the pledges;
  • enforcement of security;
  • alleged repayment obligations; and
  • rights over the pledged shares.
  • Arbitration was commenced in London.
  • Bank Otkritie also pursued court proceedings in:
  • Russia; and
  • Cyprus.
  • Nori Holdings applied to the English Commercial Court for anti-suit injunctions.
  • It argued that the foreign proceedings breached the London arbitration clauses.
  • The Bank contended that:
  • some claims fell outside the clauses;
  • insolvency-related considerations applied;
  • EU law restricted injunctions against proceedings in another EU Member State; and
  • the English court should not interfere.

Issue

  • Whether English courts could restrain the Russian and Cypriot proceedings.
  • Whether the foreign claims breached the arbitration agreements.
  • How the Brussels Regulation and the West Tankers principle affected anti-suit relief.

Rule

  • English courts may restrain foreign proceedings brought in breach of an arbitration agreement where:
  • the agreement is valid;
  • the foreign claims fall within its scope;
  • the applicant acts promptly; and
  • no strong reason exists to refuse relief.
  • The injunction operates against the litigant, not the foreign court.
  • Under the EU law then applicable, West Tankers prohibited anti-suit injunctions restraining proceedings before courts of another EU Member State.
  • That restriction did not apply in the same way to proceedings outside the EU.
  • Insolvency or avoidance claims may require separate analysis where they arise from rights independent of the contract.

Application

  • The pledge agreements contained broad London arbitration clauses.
  • The Russian proceedings substantially sought determination of:
  • the same contractual termination;
  • security rights;
  • liability; and
  • transactions already placed before the LCIA tribunal.
  • Continuing those proceedings would undermine the agreed arbitration.
  • Russia was not an EU Member State.
  • The English court therefore retained its ordinary power to restrain the Bank from continuing the Russian case.
  • No strong reason justified allowing the contractual breach.
  • The position concerning Cyprus was different.
  • Cyprus was then an EU Member State subject to the Brussels Regulation Recast.
  • The Court held that West Tankers remained binding despite the Regulation’s arbitration exclusion and explanatory recital.
  • It therefore could not issue an anti-suit injunction restraining the Cypriot court proceedings.
  • This created an apparently uneven result:
  • relief was available against the Russian litigation;
  • relief was unavailable against the Cypriot litigation.
  • The difference arose from the institutional limits of EU law rather than the merits of the arbitration clause.
  • The Court also considered whether insolvency-related claims were independent statutory rights.
  • To the extent a claim arose solely from insolvency legislation and not from the pledge agreements, it might fall outside the arbitration clause.
  • However, ordinary contractual claims remained covered.
  • The decision illustrates the relationship between:
  • contractual arbitration;
  • anti-suit relief;
  • foreign court comity; and
  • supranational jurisdictional rules.
  • The EU restriction has different practical significance after Brexit, but the case remains important historically and for its analysis of non-EU proceedings.

Conclusion

  • The English Commercial Court granted an anti-suit injunction restraining the Russian proceedings insofar as they breached the London arbitration agreements.
  • It refused equivalent relief against the Cypriot proceedings because EU law and West Tankers prohibited it.
  • Use this case for: seat courts may restrain non-EU foreign litigation breaching arbitration, while supranational jurisdictional rules may limit such relief.