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7KBW team defend Chubb Group against anti-suit injunction: English Courts not the appropriate forum to determine whether Russian proceedings were brought in breach of London arbitration agreement

8th Jan 2020

Enka Insaat Ve Sanayi AS v OOO “Insurance Company Chubb” & Ors [2019] EWHC 3568 (Comm)

David Bailey QC, Marcus Mander and Clara Benn have successfully defended members of the Chubb Group in an expedited trial of a claim for injunctive and declaratory relief brought by Enka, a Turkish engineering company involved in the construction of the Berezovskaya power plant in the Russian Federation. Following a catastrophic fire at the plant in February 2016, which caused approximately US$400m-worth of damage, Chubb Russia paid an insurance claim made by the owner and was subrogated to the owner’s rights against Enka. In May 2019, Chubb Russia commenced proceedings against Enka and ten other defendants in the Moscow Arbitrazh (i.e. commercial) Court.

In September 2019, Enka brought a claim in the English High Court for anti-suit injunctions and related relief against Chubb Russia and other members of the Chubb Group who were said to be ‘mixed up’ in breaching a London arbitration clause contained in the construction contract between Enka and Chubb Russia’s insured (the “Construction Contract”). It was common ground between the parties that the arbitration agreement was valid and binding on Chubb Russia but the Defendants denied that the Russian proceedings were within the scope of the agreement. At the same time, Enka applied to the Moscow Court to stay the Russian proceedings pursuant to the New York Convention.

The Chubb Defendants argued that both the Construction Contract and the arbitration agreement contained within it were governed by Russian law, with the result that the English High Court was not the appropriate forum to determine whether there had been a breach of the arbitration agreement – at least in circumstances where there was a good arguable case that the Russian proceedings did not fall within the scope of the arbitration agreement as a matter of Russian law, and those proceedings were being pursued in good faith. By contrast, Enka argued that the arbitration agreement was governed by English law and that the Russian proceedings were a breach of the agreement under English law, so that an injunction should be granted on Angelic Grace principles.

Andrew Baker J agreed with the Chubb Defendants that the English High Court was not the appropriate forum to determine whether there had been a breach of the London arbitration agreement. If Enka was not content with pursuing its application before the Moscow Court to stay the claim against it to arbitration, then Enka should have commenced arbitral proceedings and sought relief from the arbitrators. The Judge commented that, in normal circumstances, an anti-suit injunction defendant who challenges the appropriateness of the English Courts for the resolution of the issues raised against him should make a forum non conveniens application to stay or set aside the claim pursuant to CPR Part 11, or else he will be left to fight his corner at trial on the questions of breach and ‘strong reasons’. The unusual procedural history of this particular case took it outside the norm, however, such that Enka’s failure to refer the matter to arbitration remained a relevant consideration weighing in the Defendants’ favour.

The decision will be of considerable interest to all those with an international practice. Andrew Baker J conducted a careful re-examination of the Angelic Grace principles and related caselaw, including the concept of ‘strong reasons’, and concluded that even if the English Courts had been the appropriate forum for deciding the question of breach he would have refused to grant an injunction against Chubb Russia on the grounds of delay. As to the other Chubb Defendants, the Judge had no hesitation in dismissing Enka’s claims since they were founded on “something not far short of a purely speculative conspiracy theory”.

Although Andrew Baker J did not actually decide the choice of law issues, his judgment also contains a timely analysis of the caselaw on the proper law of arbitration agreements, including the leading decision in Sulamérica SA v Enesa Engenharia SA [2013] EWCA Civ 638, [2013] 1 WLR 102. The Judge observed that “there are choices of seat and choices of seat”: in other words, not all choices are equal, and a choice of seat is not always sufficient to convey a choice of law for the arbitration agreement that is different from the choice of law for the contract as a whole. In the case at hand, the choice of London as the place of the arbitration under the Rules of Arbitration of the International Chamber of Commerce was “not of any real moment” given the essentially delocalised nature of ICC arbitration.

David Bailey QC, Marcus Mander and Clara Benn were instructed by Kennedys Law, on behalf of the Defendants.

A copy of the judgment can be found here.