Court grants injunctive relief where Russian proceedings brought in breach of asymmetric jurisdiction clause

In Barclays Bank PLC v PJSC Sovcombank & Anor [2024] EWHC 1338 (Comm) the High Court granted the Applicant bank a final anti-suit injunction (ASI) and anti-enforcement injunction (AEI) aimed at restraining proceedings brought by the Respondents in the Russian courts in breach of the exclusive element of an asymmetric jurisdiction clause. This decision will be of interest to those involved in transactions with foreign counterparties, particularly those in Russia - the recent imposition of sanctions has led to a range of cross-border disputes being brought in the Russian courts in breach of exclusive jurisdiction clauses in favour of other courts. The decision also demonstrates how the English courts are willing to grant injunctive relief to enforce asymmetric jurisdiction clauses (where only one party is limited to the exclusive jurisdiction of the nominated courts) which are commonly used in finance transactions.

Anti-suit and anti-enforcement injunctions in respect of foreign proceedings

An ASI is an order from a court which seeks to restrain a party from commencing or continuing foreign court proceedings. An AEI is an order from a court aimed at restraining a party from enforcing a foreign court order or judgment in its jurisdiction.

In recent months, there have been a number of significant judgments in the English courts regarding the availability of ASIs and AEIs. These decisions are primarily in the context of proceedings brought in the Russian courts by entities designated under the Russia (Sanctions) (EU Exit) Regulations 2019, often in breach of contractual dispute resolution clauses. In response to the imposition of sanctions, Russia introduced legislation conferring wide jurisdiction on the Russian courts. This has led to jurisdiction battles in sanctions-impacted cases, and decisions on the availability of ASIs and AEIs in the English courts are becoming more important.

Background

The dispute in this case arose out of a syndicated loan agreement (the Facility) entered into between the Applicant and the First Respondent, a Russian Bank. The Facility is governed by English law and contains an ‘asymmetric’ jurisdiction clause; exclusive jurisdiction is given to the English courts in respect of proceedings brought by the First Respondent.

As a result of sanctions imposed on the First Respondent, the Applicant was prevented from making payments to the First Respondent under the Facility.

In breach of the jurisdiction clause, the First Respondent brought proceedings against the Applicant in the Russian courts for damages for non-payment of amounts allegedly due under the Facility. The Applicant successfully obtained an interim ASI, and now sought final injunctions and declaratory relief. The Respondents did not engage with the English proceedings and were not present or represented.

Decision

The anti-suit injunction

The Court was satisfied that the claim brought in Russia fell within the scope of the contractual jurisdiction clause and that the pursuit of proceedings in Russia breached the exclusive jurisdiction element of the clause. The Court noted that a long line of English cases make it clear that, “the court will ordinarily grant injunctive relief to enforce the parties' contractual bargain, unless strong reasons for not doing so are shown.”

The Court held there were no strong reasons for refusing relief, adopting the reasoning of HHJ Pelling KC in the interim application judgment. In particular, there had been no significant delay with the application for an ASI brought at an early stage in the Russian proceedings, and the Applicant had ‘clean hands’. The Respondents’ decision not to engage in the English proceedings but to focus on the Russian proceedings was an additional factor in favour of granting relief. The Judge was satisfied that the granting of the ASI was just and equitable, in that it upheld the agreement of the parties in respect of the exclusive jurisdiction of the English courts.

The anti-enforcement injunction

The Court clarified that there was no additional jurisdictional requirement of ‘exceptionality’ for granting an AEI in comparison to an ASI. However, the Judge noted that it is likely to be a rare case in which it will be possible to persuade a court to grant an AEI. There were two key reasons which satisfied the Court that the order was appropriate in this case.

First, the Judge was satisfied on the expert evidence that, even if the Respondents to the anti-suit injunction had sought to discontinue the Russian proceedings, the approval of the Russian court would be required, that the approval might not be granted and that judgment might be entered regardless.

Second, the Applicant applied for the injunction in advance of any judgment from the Russian courts, which the Judge considered to be material because “the comity considerations in acting now are less intrusive than when the foreign court has already given judgment”.

Declaratory relief

The Court noted that the English courts will now grant negative declaratory relief (when previously they were reluctant to do so) provided it would serve a useful purpose. Negative declaratory relief is a declaration by the court that the claimant is not liable.

The Court held that a declaration would serve a useful purpose in this case, particularly when given by the court with exclusive jurisdiction and the issue in dispute was the effect of sanctions imposed in the jurisdiction.

The Court confirmed that the sanctions encompassed payments by the Applicant under the Facility and that payment to the First Respondent would be a criminal offence. There was also a defence available to the Applicant under s.44(1) of the Sanctions and Anti-Money Laundering Act 2018. Therefore the Applicant was not in breach of the Facility in not making payments.

Key takeaways

The decision demonstrates the increasing willingness of the English courts to grant ASIs and AEIs where a party acts in breach of an exclusive jurisdiction clause in favour of the English courts.

The decision also shows that the English courts are willing to grant these remedies even where the jurisdiction clause is asymmetric in nature and the exclusive element only applies to one party. This is particularly helpful for banks and other financial institutions, as these clauses are common in finance documents.

In relation to AEIs, it seems that a court may be persuaded to grant one where an ASI was sought at an early stage of the foreign proceedings and there is a concern that the ASI alone will not be effective. The judgment emphasises the importance of timing in applying for an AEI: earlier applications are viewed more favourably as they interfere with the foreign courts’ proceedings to a lesser extent.

With thanks to Alex Roper for his assistance in preparing this post.