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Tag: Arbitration

  • Orders against third parties in arbitration

    Orders against third parties in arbitration

    A commentary on s.44 of the Arbitration Act 2025

    Confusing, unsatisfactory, inconsistent. These are some of the words that could be used to describe Section 44 of the Arbitration Act 1996 (“s.44”) just last year. With the Arbitration Act 2025 coming into force in August 2025, reforms have been introduced which aim to enhance efficiency and maintain England and Wales as a leading arbitration destination.

    S.44 Powers Pre-Arbitration Act 2025

    Confusion regarding s.44 stemmed from the fact that s.44(1) did not clarify how far the powers of the court extended. Three major cases relating to s.44 only served to further muddy the waters. The first case, Cruz City v Unitech [2014] EWHC 3704 (Comms), revolved around whether the court could grant an interim injunction against a third party under s.44(2)(e). The High Court concluded that the power did not extend to non-parties and denied the injunction. Similar attempts to apply s.44(2)(b) were equally unsuccessful in DTEK Trading SA v Morozon [2017] EWHC 1704.

    However, in the Court of Appeal case of A and B v C, D and E [2020] EWCA Civ 409, the Court held that s.44(2)(a) – the taking of the evidence of witnesses – was applicable to third parties. The reasoning of Flaux LJ was partially influenced by the fact that it is often rare for a witness to be a party to the arbitration.

    Changes to s.44

    S.44 seeks to clarify any uncertainty with a concise amendment, specifically to s.44(1): “whether in relation to a party or any other person”. The inclusion of ‘any other person’ clarifies that the court now has the power to make orders against uninvolved third parties in support of an arbitral award.

    As regards what orders the court may make, s.44(2) lists them as: 44(2)(a), Taking of the evidence of witnesses

    • 44(2)(b), Preservation of evidence
    • 44(2)(c)(i), Inspection, photographing, preservation, custody or detention of property subject of the proceedings
    • 44(2)(c)(ii), Samples, observation or experiment of property subject of the proceedings
    • 44(2)(d), Sale of any goods subject of the proceedings
    • 44(2)(e), Granting of an interim injunction or appointment of a receiver

    The court’s power to make interim injunction orders against non-parties should serve as a warning to those connected to any arbitral dispute.

    Future Development of s.44

    The Arbitration Act 2025 provides useful clarification on s.44. The conditions in which the court might make orders against third parties are yet to be determined and could likely come down to a case-by-case basis. Third parties’ retention of the full right of appeal under s.44(7) will also likely result in increased litigation as non-parties seek to prevent courts from imposing costly orders upon them. The door has now been opened for direct parties of arbitral proceedings to access orders and evidence previously denied. The dynamic between direct and indirect parties is likely to shift to a more adversarial one as direct parties seek evidence (inter alia) from indirect parties.

    Conclusion

    While the full consequences of s.44 reforms are yet to be seen, this is undoubtedly the beginning of a new era of court involvement in arbitral proceedings. Courts now have the authority to grant a wide variety of orders against third parties. However, the willingness and situations where the courts will grant these orders are yet to be seen and will be an area for case law development.

    Therefore, when arbitral proceedings are being commenced, parties both directly and indirectly involved should be attentive to the rights and obligations that they may have. Swift, decisive action will be vital in protecting their interests and ensuring a favourable outcome.

  • ICC, LCIA and HKIAC – Governing Law, Seat Selection, Efficiency

    ICC, LCIA and HKIAC – Governing Law, Seat Selection, Efficiency

    Choice of Governing law

    The data from the ICC over the past three years confirms the preference for English and Welsh governing law in international arbitration. A steady and consistent use of English law has been reported, with 125 cases governed by it in 2024, maintaining its primary position. In contrast, the use of U.S. law has seen a gradual decrease, from 81 cases in 2023 to 69 in 2024 and Swiss law, which featured prominently in 2023 with 83 cases, fell from the top ranks in 2024 after recording 53 cases in 2022. This comparative trend reflects a global appeal of the English legal system’s respect for party autonomy, especially for parties that seek predictability in decisions. Party autonomy refers to the freedom of contracting parties to determine the terms of their agreement, which is fostered by an objective interpretation of contracts by the English courts. By giving priority to the express terms of the contract and avoiding reliance on extrinsic evidence, the choice of English and Welsh governing law is more attractive to international parties for its legal certainty and protection of agreed terms.

    Seat Choice

    There has also been a slight shift in seat selection within ICC arbitrations in favour of the United Kingdom. In 2024, the UK overtook France as the most selected seat, with 96 cases compared to France’s 91. This is a reversal of the previous year where France led with 99 cases against the UK’s 85. This upward trajectory continues from 2022, when the UK was selected in 74 cases. Since the introduction of the Arbitration Act 1996, the UK has established a reputation for judicial non-interference. English judges generally refrain from intervening in the conduct of arbitral proceedings and are supportive in enforcing final awards, creating a legal environment that reinforces the finality and integrity of arbitration.

    Lengths and delays of Proceedings

    The average duration of ICC arbitration proceedings has remained relatively stable over the past three years, typically concluding within 26 to 27 months. In 2024, the average duration was 26 months, consistent with 2022 and slightly improved from 27 months in 2023. However, data on procedural delays indicates some growing inefficiencies. In 2024, 75 cases experienced delays exceeding two months, compared to 49 cases in 2023 and 29 cases in 2022, showing an upward trend in longer delays despite the stable overall duration.

    Despite the rising number of delays there has been reform enacted to streamline the arbitral process. This is exhibited by the ICC’s 2021 Rules, which introduced stricter time limits for arbitrators to render awards, including financial penalties such as reduced fees if deadlines are not adhered to. While these measures aim to encourage efficiency and meet procedural deadlines, they appear to have limited de facto impact.

    A key factor that could be contributing to the worsening of delays, despite the changes in promoting efficiency, is the phenomenon of due process paranoia. This occurs when tribunals adopt an overly cautious approach to avoid challenges to final awards based on procedural unfairness. This has led to arbitrators granting repeated procedural requests from parties, particularly at late stages, which undermines both efficiency and equal treatment. As seen in cases like Jaguar Energy and Anwar Siraj, courts generally support tribunals’ procedural decisions and reject weak due process challenges. However, the inflated perception of risk continues to affect case management, enabling actions that prolong proceedings and increase delay.

    Changes in Asian regional distribution

    The ICC data also reveals subtle changes in the regional distribution of parties involved in arbitrations, including a gradual decline in participation from Central and West Asia. In 2022, parties from this region accounted for 11% of the caseload, rising to 12.7% in 2023 before falling to 10% in 2024. This downward trend may reflect the development and appeal of regional arbitration centres, such as the Dubai International Arbitration Centre (“DIAC”) and the Qatar International Court and Dispute Resolution Centre, which offer geographically closer and often more cost-effective alternatives. Conversely, North and West European parties continued to dominate, rising from 28.8% in 2023 to 30.2% in 2024. These figures suggest a rebalancing of global arbitration activity, with European parties consolidating their presence and some Asian and Middle Eastern parties exploring arbitration locally.

    Future changes

    Looking to the future, English law will continue to dominate arbitration proceedings. As for seat preference, the recent enactment of the Arbitration Act 2025 introduces a series of targeted reforms that modernise and enhance the efficiency of the arbitration process in England. Tribunals have been given new powers to summarily dispose of claims; the Act has provided clarification of court authority over third parties, codification of emergency arbitrator enforcement, and stricter procedures for challenging awards. These reforms, in combination with England’s commercial jurisprudence and pro-arbitration judiciary will likely further increase the appeal of English law and London as the seat of arbitration.

    Comparative Analysis

    HKIAC

    The 2024 statistics reveal that the ICC maintains a broader global presence compared to HKIAC. Parties to ICC arbitrations came from 145 countries, whereas HKIAC involved parties from 34 jurisdictions, primarily from Asia and offshore hubs such as Mainland China, Hong Kong, and the Cayman Islands. While both institutions conduct most arbitrations in English, HKIAC maintains a significant portion in Chinese (15.9%) or bilingually (4.3%), reflecting its regional orientation.

    The choice of governing law further illustrates the difference between the HKIAC’s more local appeal in comparison to the global attractiveness of the ICC. In 2024, ICC arbitrations involved over 100 different legal systems, with English law as the dominant choice. HKIAC cases, while involving 15 governing laws, primarily applied Hong Kong law, followed by English and Chinese law, reinforcing its alignment with the Greater China commercial bubble. Overall, the ICC shows greater international diversity, whereas HKIAC displays its appeal for tackling Asia-based party disputes.

    LCIA

    English and Welsh law continues to dominate as the governing law in both LCIA and ICC arbitrations. However, recent statistical reports suggest that there has been a decline in its choice. At the LCIA, the choice of English law has gradually declined: from 85% of arbitrations in 2022 to 83% in 2023, and down to 78% in 2024. Likewise, English law was chosen in 125 (15%) new cases for ICC proceedings in 2024, this represents a decline from 131 cases in 2023. This drop may indicate that while London remains a preferred seat, parties are increasingly opting for other governing law provisions.

    Conclusion

    The 2024 data confirms that English law and London remain central to international arbitration, despite minor declines in usage. Their continued dominance stems from the legal consistency, party autonomy, and enforcement-friendly environment they offer. The Arbitration Act 2025 is expected to strengthen this position further by modernising English arbitration and improving procedural efficiency.

    While institutions like HKIAC and DIAC are increasing in popularity regionally, the ICC maintains a broader international presence, accommodating a wider range of legal systems and parties. The LCIA’s gradual diversification in governing law choices signals growing openness but still reflects the appeal of English law.

    Overall, the trends indicate that jurisdictions offering legal clarity, efficient procedures, and judicial support will remain at the forefront of global arbitration. England’s proactive legal reforms and arbitration-friendly stance ensure it continues to lead in this evolving landscape.

  • Barclays Bank v VEB.RF: Key Insights on Russian Sanctions and Arbitration Disputes

    Barclays Bank v VEB.RF: Key Insights on Russian Sanctions and Arbitration Disputes

    Barclays Bank plc v VEB.RF [2024] EWHC 2981 (Comm)

    Russian sanctions continue to cause commercial and trade disputes.

    In November 2024, the Commercial Court was asked to make a declaration on an application made under section 32 of the Arbitration Act 1996. These applications are rare, which makes it worth setting out the details of what happened.

    Background of the case

    The Claimant, Barclays Bank entered into a currency swap agreement with the Defendant, VEB.RF, a Russian bank. The Arbitration Agreement stated that any disputes would be referred to the London Court of International Arbitration (LCIA) and, subject to certain provisions, the English Courts would have jurisdiction. In 2022, VEB.RF was made subject to UK, EU, and US sanctions, leading to Barclays ending the contract early. The premature termination meant that Barclays owed VEB.RF US$147.7 million. Barclays said it could not pay the sum due to the sanctions placed on VEB.RF.

    VEB.RF brought proceedings against Barclays in a Russian Court. This was in breach of the Arbitration Agreement. In response, Barclays obtained an anti-suit and anti-injunctive relief through an English Court.

    LCIA Arbitration proceedings were then begun by VEB.RF, who also deferred the Russian proceedings.

    Jurisdiction Dispute

    Barclays gave notice that it wanted the dispute to be heard in an English Court. VEB.RF objected.

    To resolve the jurisdiction dispute, the Arbitrator gave permission for Barclays to apply to the Court under section 32 of the Arbitration Act 1996 for a declaration that the Arbitrator had no jurisdiction to hear the dispute. Section 32 cases are rare as in accordance with the general scheme of the Arbitration Act 1996, a Tribunal should determine its own jurisdiction.

    Section 32 of the Arbitration Act 1996

    Section 32 of the Arbitration Act 1996 allows the Court to make a declaration on the jurisdiction of the Tribunal provided:

    • All parties to the proceedings agree in writing.
    • The Tribunal gives permission.
    • The Court is satisfied that:
      1. the determination of the question is likely to produce substantial savings in costs,
      2. the application was made without delay, and
      3. there is good reason why the matter should be decided by the Court.

    The Court’s Decision

    Looking at the whether a declaration by the Court would save costs, Judge Pelling KC reasoned that if he did not make a declaration regarding jurisdiction, there would almost certainly be a challenge to any award made under section 67 of the Arbitration Act 1996.

    “It follows that the relevant comparison in this case is between the court determining the jurisdiction issue now or leaving it to the tribunal with the court becoming engaged with the jurisdiction issue only after a final award or at any rate an interim award determining jurisdiction. This is likely to generate significant wasted costs, as well as significant delay for the parties.” 

    If the application for a declaration regarding jurisdiction succeeded, Judge Pelling KC reasoned there would be significant savings in relation to costs.

    The Court went on to accept that the second condition, namely that the application had been made as quickly as possible, had been satisfied.

    Condition three was also satisfied, as there was clearly a good reason why the Court should decide on the jurisdiction question. The fact that a section 67 challenge would be almost guaranteed if the Arbitrator determined the question would not only create additional costs but also significant delays and uncertainty.

    Practical Implications

    Practical difficulties could also occur if the Arbitrator determined jurisdiction in favour VEB.RF, leaving Barclays exposed to the risk of enforcement in various jurisdictions while a section 67 challenge was pending. In addition, settling the jurisdiction dispute through the instant application would be consistent with a term in the parties’ Arbitration Agreement that they would resolve their disputes as a matter of exceptional urgency.

    Final words

    One of the takeaways from this case is the importance of a well-drafted Arbitration Agreement. Because the parties had made their intentions clear, for example, that issues will be resolved quickly, the presiding Judge could easily interpret their overall intentions.

    To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.

    Note: The points in this article the law at the time of writing, 14th December 2024. This article does not constitute legal advice. For further information, please contact our London office.

  • Arbitration Solicitors and Agreements

    Arbitration Solicitors and Agreements

    Arbitration is a powerful alternative dispute resolution (ADR) method that is often used to settle international commercial disputes. Given the complexities of arbitration proceedings and enforcement, having an experienced Arbitration Solicitor advise you is imperative.

    Arbitration agreements are final and binding.

    Parties can choose the jurisdiction in which they wish the arbitration to take place, the rules governing the procedure, and the appointment of the Arbitrator/s. One of the reasons arbitration is a preferred method of dispute resolution for commercial entities is that Arbitration Awards can be enforced internationally. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the “New York Arbitration Convention” or the “New York Convention”, is one of the key instruments in international arbitration.

    The New York Convention applies to the recognition and enforcement of foreign arbitral awards and the referral by a court to arbitration.

    Arbitration in England and Wales is governed by the Arbitration Act 1996; therefore, if you plan to enforce an award in this jurisdiction, you must have regard for the Arbitration Act 1996 from the outset.

    Why is it crucial to have a Solicitor draft an Arbitration Agreement?

    Parties that enter into Arbitration Agreements are often involved in contracts worth millions, sometimes billions of pounds (or dollars) involving projects or deals spanning multiple jurisdictions. For this reason alone, it is vital to ensure the Agreement is drafted by experienced Arbitration Solicitors.

    Arbitration Agreements set out essential terms such as:

    • How the Arbitrator will be selected.
    • Where the arbitration will be heard (the seat of arbitration).
    • What law will govern the arbitration.
    • Whether the arbitration tribunal comprises one member or three.

    The former Secretary General of the International Chamber of Commerce (ICC) International Court of Arbitration, Frederic Eisemann, identified the term’ pathological clause’ in relation to Arbitration Agreements in an article written in 1974 (La clause d’arbitrage pathologique, Commercial Arbitration Essays in Memoriam Eugenio Minoli, UTET 1974). Mr Eisemann stated that a ‘pathological clause’ was one that was so badly written that it could be invalidated and therefore futile.

    He went on to state four criteria that must be met to ensure a clause in an Arbitration Agreement is effective.

    A clause should:

    • Produce mandatory consequences for the parties.
    • Exclude the intervention of state courts in the settlement of the dispute.
    • Give powers to the arbitrators to resolve the disputes likely to arise between the parties.
    • Permit a procedure which leads, under the best conditions of efficiency and rapidity, to the rendering of an enforceable award.

    The Arbitration Agreement is core to successful arbitration and extremely complicated to draft. Therefore, it is essential to have it written by an experienced Arbitration Solicitor who understands the arbitration process and how it applies to your market sector and particular organisation.

    What part does a Solicitor play in an Arbitration hearing?

    In addition to drafting the Arbitration Agreement, an Arbitration Solicitor plays a significant role before, during, and after the arbitration itself. They will:

    • Advise and assist with the selection of Arbitrators (in line with the terms of the Arbitration Agreement).
    • Advise on the law governing the arbitration and how this will affect your position.
    • Inform you about arbitration costs.
    • Gather evidence and witness statements.
    • Prepare written submissions that are presented to the Arbitrator.
    • Explain the award to you and advise you on enforcement options, including the provisions of international conventions.

    Who pays for arbitration costs, including the legal fees?

    In England and Wales, parties to an arbitration can agree in advance on how costs are allocated, subject to some exceptions; however, this is rare in practice. The Arbitral Tribunal can award costs.  Section 61(1) of the Arbitration Act  1996 provides that:

    “the tribunal may make an award allocating the costs of the arbitration as between the parties, subject to any agreement of the parties.”

    It is generally accepted that the Tribunal will award costs unless the parties agree otherwise. In most cases, arbitrations are conducted by the parties and Tribunal on the basis that the Tribunal will make an award dealing with the allocation of costs.

    Final words

    Domestic and International commercial disputes are by nature complex and often involve multiple claims and counter-claims. Arbitration provides a straightforward, confidential way of resolving matters. An Arbitration Solicitor will advise you on a strategy before Arbitration proceedings, markedly increasing your chances of a successful outcome and preserving necessary commercial relationships.

    To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.

    Note: The points in this article reflect sanctions in place at the time of writing, 12 April 2024. This article does not constitute legal advice. For further information, please contact our London office.

  • LCIA Arbitration Rules

    LCIA Arbitration Rules

    What are the key rules of LCIA Arbitration?

    If you plan to commence arbitration in the LCIA, you must be aware of the following:

    • The appointment of Arbitrators is by the LCIA Court; however, parties can agree to make a nomination.
    • There is a presumption in favour of a sole Arbitrator.
    • A Tribunal can be quickly put together or an emergency Arbitrator appointed if required.
    • Arbitrations can be consolidated in certain circumstances.
    • Early determination of claims/counterclaims/issues are available.
    • Security for claims and costs is available.
    • Appeal rights are waived unless otherwise agreed.
    • Costs are calculated without regard to disputed amounts.
    • There are staged advance payments for costs.
    • Proceedings and awards are confidential.

    What do Claimants and Defendants need to do before the LCIA Arbitration?

    The following is a step-by-step guide to bringing an arbitration in the LCIA:

    Claimants

    1. Check the arbitration provisions in the contract to see if there is a clause covering LCIA arbitration. Also check any clause amendments which may cover the selection of an Arbitrator, the type of dispute that can be referred to arbitration, and rights of appeal.
    2. Check that the claim is not statutory or contractually time-barred.
    3. Consider whether interim provisions are required to protect your position, for example a freezing injunction.
    4. Begin case preparation, including locating documents and identifying those that are privileged, collecting witness statements, and retaining an expert witness.
    5. If the clause allows parties to nominate an Arbitrator, identify someone you prefer and have funds available for advance payments of their costs.

    Respondent

    1. Check the Arbitration Agreement to ensure the dispute that has led to the claim falls within the Agreement’s scope. If there is a potential jurisdictional issue, you will need to prepare your challenge.
    2. Identify potential counter claims or cross claims.
    3. Examine the claim to see if it is time-barred.
    4. Apply for interim measures such as security for costs.
    5. Prepare your defence case.

    To book a meeting with our lawyers, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.

    Our LCIA-experienced arbitrators

    Who do I contact in the LCIA?

    Prior to the Tribunal being formed, all communications should be sent to the Registrar and the other party must be copied in unless the matter is purely administrative.

    An Arbitrator who is participating in the selection of the Presiding Arbitrator can consult with any party to gain insights into the candidate’s suitability.

    Unless the Tribunal decides otherwise, once the Tribunal is formed, all communications must take place between the parties and the Tribunal, with the Registrar copied in.

    How is arbitration commenced?

    To commence an Arbitration, the Claimant must serve a Request for Arbitration along with the prescribed fee. The Respondent serves their Response and the Tribunal is then appointed.

    The Request and Response set out:

    1. The dispute/s to be arbitrated, and
    2. The parties’ respective cases.

    How is the award made?

    Article 15.10 of the LCIA Rules 2020 provides that the Tribunal:

    “shall seek to make its final award as soon as reasonably possible and shall endeavour to do so no later than three months following the last submission from the parties (whether made orally or in writing), in accordance with a timetable notified to the parties and the Registrar as soon as practicable (if necessary, as revised and re-notified from time to time). When the arbitral tribunal (not being a sole arbitrator) establishes a time for what it contemplates should be the last submission from the parties (whether written or oral), it shall set aside adequate time for deliberations (whether in person or otherwise) as soon as possible after that last submission and notify the parties of the time it has set aside.”

    The award will be made in writing and set out the reasons for the Arbitrator/s decision. Separate awards can be made at different times concerning dissimilar matters.

    In summary

    Commencing arbitration in the LCIA requires a thorough knowledge of the rules and guidance, especially when the issues are related to cross-border matters. Instructing an experienced Arbitration Solicitor will ensure the process runs smoothly and your best interests are protected.

    To book a meeting with our Lawyers, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.

    Note: The points in this article reflect sanctions in place at the time of writing, 2nd May 2024. This article does not constitute legal advice. For further information, please contact our London office.

  • Anti-Suit Injunction Against Russian Court Proceedings Upheld In Hong Kong Court

    Anti-Suit Injunction Against Russian Court Proceedings Upheld In Hong Kong Court

    Linde GMBH v. Ruschemalliance LLC [2023] HKCFI 2409

    In this article we will discuss the impact of Russian sanctions on commerce and trade, particularly situations where there is an Arbitration Agreement between the parties.

    Anti-Suit and Anti-Anti-Suit Injunctions in UK Law

    In our previous article, we discussed the decision in Renaissance Securities (Cyprus) Ltd v Chlodwig Enterprises Ltd & Others [2023] EWHC 2816 (Comm), where the English High Court granted an anti-suit injunction (ASI) and an anti-anti-suit injunction (AASI) to a company to prevent the defendants in the case, who were subject to UK and US sanctions, bringing proceedings in Russia under Article 248 of the APC.

    Shortly before the Renaissance Securities decision, the Hong Kong Court of First Instance maintained an anti-suit injunction to prevent legal proceedings initiated in Russia that violated an Arbitration Agreement based in Hong Kong. Notably, the Court dismissed assertions that Russian jurisdiction laws should dissuade this decision, underscoring its commitment to honouring the agreement between the parties.

    EU Sanctions and Contractual Obligations

    Due to EU sanctions, Linde GMBH (‘Linde’), a German contractor, temporarily halted its obligations under an engineering, procurement, and construction contract aimed at building a gas processing complex (the ‘Contract’) with Russian owner Ruschemalliance LLC (‘RCA’). The Contract, governed by English law, included an Arbitration Agreement explicitly subject to Hong Kong law and specifying HKIAC arbitration seated in Hong Kong.

    In response, RCA terminated the Contract, alleging Linde’s independent actions constituted a significant breach. RCA then initiated proceedings in Russia under Article 248.1 of the Russian Arbitration Procedural Code (‘Article 248.1’), which, as was explained our previous article, claims to establish exclusive jurisdiction over disputes involving Russian-sanctioned entities.

    Concurrently, Linde initiated a HKIAC arbitration and subsequently secured an anti-suit injunction (‘ASI’) from the Hong Kong court in support of arbitration, preventing RCA from pursuing the Russian legal action. RCA attempted to lift the ASI by applying to the Hong Kong court.

    The Hong Kong Court’s Decision: Upholding the Arbitration Agreement

    The Hon. Madam Justice Mimmie Chan rejected RCA’s application and upheld the ASI. She confirmed that there was a fundamental principle that unless there were powerful reasons to the contrary, when it comes to proceedings designed to breach an agreement to arbitrate, the Court will use its discretion to restrain such proceedings via granting an injunction.

    RCA relied on Article 248.1 to argue that granting the ASI was not just and convenient because:

    1. Article 248.1 meant the Russian courts had exclusive jurisdiction; and
    2. Under Russian law, the Arbitration Agreement in the Contract was invalid, and any award would therefore be unenforceable.

    The Hon. Madam Justice Mimmie Chan rejected argument (a), stating that Article 248.1 only applies if the application of foreign sanctions created access to justice obstacles for a party in the dispute. In this case, RCA had a means of accessing justice through the Arbitration Agreement.

    Furthermore, EU sanctions did not apply in Hong Kong, and RCA had access to excellent lawyers there. Case law had established that provided an Arbitration Agreement is valid and can be applied under the law chosen by the parties and stated in the agreement (in this case Hong Kong), the fact that a foreign court has jurisdiction under its own law did not prevent granting an ASI. In addition, the Contract had been entered into whilst EU sanctions were in force, therefore, terms had been drafted to cater to their potential impact.

    Regarding point (b), the Hong Kong court concluded that the Arbitration Agreement was valid and Article 248.1 did not apply in this case. And even if EU sanctions prevented an Arbitration Award being enforced in the EU, it could be enforced in other jurisdictions.

    Implications of Anti-Suit Injunctions in International Trade and Sanctions

    The Hong Kong court’s ruling and the decision in Renaissance Securities is important for companies aiming to withdraw or vary Russia-related contracts that include arbitration clauses due to the impact of US, EU, and UN sanctions.

    These entities are increasingly confronting Russian legal actions based on Article 248.1. In these cases, obtaining an Anti-Suit Injunction (ASI) from relevant courts is sometimes the best option and one that is becoming increasingly popular.

    To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.

    Note: The points in this article reflect sanctions in place at the time of writing, 27 December 2023. This article does not constitute legal advice. For further information, please contact our London office.

  • Will the New Fixed Costs Regime push parties away from litigation to arbitration?

    Will the New Fixed Costs Regime push parties away from litigation to arbitration?

    What is the Fixed Costs Regime? 

    The fixed recoverable costs (FRC) regime sets the amount of legal costs that the winning party can claim back from the losing party in civil litigation. 

    In proceedings today, it is not uncommon for costs to amount to nearly the same or exceed any sum awarded by a court. The purpose of the regime is to give parties certainty about the maximum amount that the losing party will have to contribute to the winning party’s costs. 

    The New Fixed Costs Regime October 2023

    Previously, under the Civil Procedure Rules (CPR), the FCR regime only applied to road traffic accident cases with up to £10,000 in damages. For all other cases, the amount recoverable depended on what the winner’s lawyers charge and whether the court deemed those charges to be reasonable and proportionate, considering the value and complexity of the case. 

    However, since the implementation of the new regime under CPR 45 and PD 45, which came into effect on 1 October 2023, the regime is now extended to all types of civil proceedings valued at less than £100,000 allocated to the fast and intermediate tracks, that are issued on or after 1 October 2023. 

    There are exceptions to this general rule including: 

    • particularly complex cases allocated to the multi-track;
    • if a party is protected by CPR r.45.1(6);
    • personal injury claims where the cause of action accrues before 1 October 2023; and
    • residential housing claims (although this may change with new legislation in 2025). 

    Effect of the New Fixed Costs Regime

    Under the new regime, the maximum costs the losing party will be liable to pay will be fixed at the rates set in the tables at PD 45 of the CPR. 

    In determining these rates, the court will assign the case to a complexity band, labelled 1 to 4 in ascending order of complexity. The more complex the case, the higher the band it will be assigned to, and the greater the fixed costs applicable to the case. 

    In deciding the band into which the dispute falls, consideration will be had for the nature of the claim, the amount in dispute, the legal complexity, the number of parties, and the expected duration of the hearing. 

    There are also certain cases in which the new FCR regime is applied but costs greater than the FRC can be awarded such as where vulnerable parties or witnesses have resulted in additional work leading to costs 20% above the FRC. 

    How Does The New Fixed Costs Regime Affect Disputes? 

    At first blush, the new regime may appear to be a welcome change to litigants as it provides an additional degree of certainty as regards adverse costs. 

    However, it is important to remember that only the recoverable costs are fixed, not what lawyers charge for representing a party in the proceedings. Any shortfall between the recoverable costs and the amount charged by lawyers remains the winner’s liability. 

    This liability will also be greater as the introduction of complexity bands potentially creates and additional procedural step for which parties will have to determine their applicable band and make representations if their assigned band is disputed. 

    Arbitration Agreements to agree on costs liabilities 

    Since the introduction of the new FCR regime, parties are seeking alternative methods to resolve their dispute which allows them to keep in control of their costs. 

    Unsurprisingly, parties are turning towards arbitration as a method that is more cost-effective and allows the parties to agree terms on costs liabilities. 

    To ensure arbitration is available when a dispute arises, parties need to enter into an Arbitration Agreement. 

    International businesses across the world are including arbitration agreements as boilerplate clauses in all their standard contracts. However, there are still many who don’t and end up incurring significant costs when a dispute ultimately arises. 

    As such, the best approach parties can take to maintain control over their costs is to draft a clear arbitration clause into their contract. 

    An effective Arbitration Agreement should be in writing and include the following non-exhaustive provisions: 

    • The seat of the arbitration 
    • The governing law 
    • The nature of the dispute under the agreement 
    • The inarbitrability of specific agreements under the chosen law and elected by the parties 
    • Whether the arbitration is to be ad hoc or institutional
    • The number of arbitrators in the tribunal 
    • The language of the proceedings
    • Specifying any opt-out provisions. 

    The decisions a business makes on each of these points will have consequences on future arbitrations, so it is essential that expert advice is sought. A poorly drafted, unclear Arbitration Agreement will only result in additional delay and costs. 

    At Eldwick Law, our expert lawyers can assist in drafting an Arbitration Agreement that suits your business needs and will draw upon their experience in arbitration proceedings to mitigate potential issues arising in the future. 

    For more information on how Eldwick Law can assist you, or to arrange a consultation, please contact our London office.

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  • Court Grants Anti-Suit Injunction To Stop Sanctioned Entities Bringing Russian Proceedings

    Court Grants Anti-Suit Injunction To Stop Sanctioned Entities Bringing Russian Proceedings

    In 2020, the Russian legislative body made amendments to the Russian Arbitrazh (Commercial) Procedural Code (APC) to establish the exclusive jurisdiction of Russian Arbitrazh Courts in cases involving individuals and entities subject to sanctions. According to the newly introduced Article 248.1 of the APC, Russian courts would exercise exclusive jurisdiction over disputes involving sanctioned individuals and entities; unless there exists an agreement between the parties stating otherwise. The exclusive jurisdiction of Russian courts under Article 248.1(4) is triggered if:

    • The dispute resolution clause states that a dispute must be resolved in an overseas court or through arbitration.
    • The clause becomes inoperative due to sanctions against a party, creating obstacles to access to justice for that party.

    If proceedings are either pending or about to commence in a foreign court or arbitration, the sanctioned individual has the option to petition the Russian court to issue an anti-suit injunction against the opposing party, as outlined in Article 248.2 of the APC.

    In the recent case of Renaissance Securities (Cyprus) Ltd v Chlodwig Enterprises Ltd & Others [2023] EWHC 2816 (Comm), the English High Court granted an anti-suit injunction (ASI) and an anti-anti-suit injunction (AASI) to a company for the purposes of preventing the defendants in the case, who were subject to UK and US sanctions, from bringing proceedings in Russia under Article 248 of the APC.

    Background to the decision

    Renaissance Securities (Cyprus) Limited (RenSec), an investment services company, executed Investment Services Agreements (ISAs) with the defendants, who included companies under the control of a Russian person designated as a sanctioned person by OFSI in the UK as well as a person subject to US OFAC sanctions. These companies were designated as holding assets for trusts benefiting sanctioned persons. In the case of a dispute, the ISAs, subject to English law, stipulated for LCIA arbitration with a seat in London.

    RenSec managed substantial sums and securities for each defendant. When the defendants requested the transfer of assets held by RenSec, blocked due to sanctions, to Russian bank accounts, RenSec declined, citing potential breaches of US, EU, and/or UK sanctions. In response, the defendants threatened legal action in the ‘appropriate forum.’

    Shortly thereafter, RenSec discovered that the defendants had initiated proceedings in the Russian courts, seeking damages equivalent to its blocked assets in Russia. Subsequently, RenSec applied for an ASI and an AASI in the English Court.

    The application was conducted without notifying the defendants and in private, as there was a genuine concern that the defendants might seek their own ASI and/or AASI if informed. Such actions, along with potential publicity, would undermine the purpose of the application.

    What are the legal principles (England and Wales) regarding anti-suit injunctions?

    By issuing proceedings in a foreign court in situations where an Arbitration Agreement provides for arbitration to be conducted in England and Wales, the defendants were in breach of contract, and English courts can therefore grant an ASI preventing a party from bringing a claim in another jurisdiction. In The Angelic Grace [1995] 1 Lloyd’s Rep 87, Lord Millet robustly stated (at page 96):

    “There is no good reason for diffidence in granting an injunction to restrain foreign proceedings on the clear and simple ground that the defendant has promised not to bring them.”

    An AASI is designed to guarantee that actions taken by an applicant to safeguard and uphold its contractual rights, including the implementation of an ASI, are not made ineffective or futile by pre-emptive measures or counteractions taken by the respondent. The principles governing the issuance of an AASI closely mirror those applied to an ASI. In cases where foreign proceedings have been brought despite a clear Arbitration Agreement, the courts in England and Wales have granted an AASI to force the respondent to bring any commenced proceedings to a halt.

    What did the High Court decide in Renaissance Securities?

    After examining the evidence, Mrs Justice Dias ruled that the Russian proceedings were brought in “flagrant” breach of the Arbitration Agreement. Furthermore, this was a deliberate choice on the part of the defendants as they were under no legal obligation to bring proceedings under Article 248 of the APC. It was therefore just and convenient for the Court to grant the ASI because if the application in Russia was allowed to carry on, a ruling in the defendants favour could allow them to bypass the sanctions regime by obtaining judgment in Russia and then enforcing it against RenSec’s assets which were currently frozen in that jurisdiction.

    In addition, Mrs Justice Dias observed that:

    “…evidence is that the Russian courts are unlikely to consider foreign sanctions a legitimate excuse for RenSec’s failure to comply with the Defendants’ instructions. Indeed, this is entirely plausible given that the rationale for the introduction of Article 248 in the first place seems to have been to permit Russian entities to bypass the effects of sanctions. Accordingly, RenSec is unlikely to be able to rely on the imposition of sanctions as a defence to the Defendants’ claims in Russia, whereas this is a matter which an LCIA tribunal would no doubt at least take into account in considering whether RenSec was in breach of contract or not.”

    Given that the evidence showed it was likely that the defendants would try and obtain ASIs in the Russian courts in breach of the English court’s exclusive jurisdiction over any arbitration proceedings, Mrs Justice Dias granted an AASI to prevent the defendants from taking any such action.

    Concluding comments

    Due to the ASI and AASI being granted, the defendants will have no choice but to terminate any Russian proceedings under Article 248 of the APC. Failing to do so means that they risk contempt of court in England and Wales. This case illustrates that where an Arbitration Agreement is in place, an ASI and AASI provides a tactical tool for ensuring the terms of the agreement are upheld and can prevent sanctioned entities from circumventing the agreement via Article 248. In addition, Mrs Justice Dias’s decisions shows that the English High Court will grant an ASI and AASI to protect the interests of a non-sanctioned party who has assets in Russia which are vulnerable to enforcement of a Russian judgment granted in favour of a sanctioned entity.

    To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.

    Note: The points in this article reflect sanctions in place at the time of writing, 30 November 2023. This article does not constitute legal advice. For further information, please contact our London office.

  • The Use of Injunctions in Support of Arbitration Proceedings

    The Use of Injunctions in Support of Arbitration Proceedings

    In these situations, our commercial arbitration team can advise on and facilitate the application for such relief, ensuring that the parties’ interests are protected throughout the arbitration process.

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    The Source of the Court’s Powers

    Section 44 of the Arbitration Act 1996 gives the Court wide powers to make orders for the preservation of assets and evidence in an arbitration, including the useful and important power to grant interim injunctions.  However, the Court will only exercise its powers to the extent that the arbitral tribunal or institution has no such power or is unable for the time being, to act effectively. 

    The Court will therefore adopt a cautious approach, bearing in mind the purpose of section 44 which the Court of Appeal in Cetelem S.A. v Robust Holdings Limited held was to “assist the arbitral process in cases of urgency before there is an arbitration on foot” with Court’s having to “take great care not to usurp the arbitral process…”. 

    Arbitrations with a Foreign Seat

    With parties to arbitrations often having a presence in multiple jurisdictions, the question which often arises is whether a Court in England and Wales can grant an injunction in arbitrations abroad? Helpfully, section 44 applies even if the seat of the arbitration is outside England, Wales or Northern Ireland, or even if no seat has been determined.  

    However, the Court may refuse to act in these circumstances when it considers it inappropriate to do so.  For example, if there are significant differences between the provisions of the curial law and English law; or if there is an insufficient link between the defendant and this jurisdiction, such as residency or assets within England and Wales. 

    What are the requirements for an injunction in support of arbitration proceedings?

    In order to get over the first hurdle of jurisdiction, you must demonstrate that the arbitral tribunal, or any arbitral institution, has no power or is unable for the time being to act effectively. The two main ways in which this threshold is met, is either:

    • By establishing that the tribunal will have no power to grant the order you are applying for. This is particularly the case in applications for freezing injunctions, where the applicant is looking to freeze a respondent’s assets in this jurisdiction backed by a penal notice – a useful deterrent in proceedings with elements of fraud or dishonesty; and/or
    • By establishing that a tribunal is not yet constituted and is therefore unable to act. However, in circumstances where you have yet to commence an arbitration, you will have to be able to demonstrate a clear intention to do so, which will often require the provision of a Court undertaking. 

    Once you have established that the Court has jurisdiction, the usual common law principles apply. The touchstone for injunctive relief is whether there is a serious issue to be tried and that the balance of convenience favours the relief sought (i.e., whether the inconvenience of any damage which could be suffered by the applicant outweighs that of the respondent).  The main injunction sought in arbitration proceedings are freezing injunctions, where the Court will consider urgency and whether there is a real risk that the respondent may dissipate its assets before the enforcement of any arbitral award. 

    Key Considerations

    If you are thinking of using section 44 to support your arbitration proceedings, the balance the Court will draw between its power to grant injunction relief and the risk of displacing the arbitration tribunal should always be borne in mind. 

    Although the Court may approach section 44 applications with caution, injunction applications are a useful tool for interim protection particularly in arbitrations where you have discovered that a respondent is dissipating its assets in this jurisdiction making any enforcement of an award futile. 

    Eldwick Law has recently successfully obtained a freezing injunction in arbitration proceedings before the German Arbitration Institute (DIS). If you would like to discuss any of the points raised in this article, please contact our litigation team below.