In Evison Holdings Ltd v International Co Finvision Holdings, Orient Express Bank Public Joint Stock Company [2019] EWHC 3057 (Comm) the English Court dismissed an application for the continuance of an anti-suit injunction against a non-party to an arbitration agreement, which was issued in support of LCIA arbitration proceedings. The anti-suit injunction was ordered based on the non-party initiating and pursuing proceedings in Russia relating to the same or overlapping issues as in the LCIA arbitration proceedings. The application was dismissed on the basis that Russia was a proper and natural forum for the non-party to the arbitration to bring its claims.

Background

Evison Holdings Ltd (“Evison“) and International Co Finvision Holdings (“Finvision“) entered into agreements (the “Agreements“), which related to a merger of Finvision’s banking subsidiary, Uniastrum, into Evison’s banking subsidiary, Orient Express Bank Public Joint Stock Company (“OEB“). The Agreements contained LCIA arbitration clauses with a seat in London.

The disputes arose under the Agreements following Finvision’s attempt to exercise a call option to acquire a tranche of Evison shares in OEB which would give Finvision control over OEB (the “Call Option“).

Procedural history

LCIA arbitrations

Evison initiated four LCIA arbitrations with the same arbitrators appointed in each of the arbitrations (the “Tribunal“) in relation to the disputes, and Finvision responded with cross-claims against Evison seeking damages (which it incurred in its capacity as shareholder of OEB) for wrongdoings allegedly carried out while Evison was in control of OEB (the “Cross-claims“).

Russian courts – Finvision

Finvision commenced proceedings in the Russian courts requiring Evison to transfer OEB shares subject to the Call Option (the “Finvision Russian Proceedings“). Evison obtained urgent anti-suit relief from the Tribunal and orders from the English courts restraining Finvision from pursuing the Finvision Russian Proceedings (the “Finvision Orders“). However, in breach of the Finvision Orders, Finvision proceeded with the Finvision Russian Proceedings, eventually obtaining control over OEB. Finvision then appointed new management in OEB (the “New Management“).

Russian courts – OEB

The New Management caused OEB to commence a claim against Evison in the Russian courts (the “OEB Russian Proceedings“) claiming for the wrongdoings referred to in the Cross-claims (the “OEB Claims“). Finvision was added as a defendant to the OEB Russian Proceedings.

English Court

Upon Evison’s application against Finvision and OEB, the English Court granted an interim anti-suit injunction against OEB (the “Interim Anti-suit Injunction“). The OEB Order restrained OEB from pursuing the OEB Russian Proceedings insofar as the OEB Russian Proceedings sought the same relief or involved claims in respect of the Agreements, and was expressed to be until further hearing. In the Interim Anti-suit Injunction hearing, Finvision gave undertakings (the “Finvision Undertakings“) without admission of liability (i) not to induce others to pursue or itself take further steps in the OEB Russian Proceedings and (ii) not to commence any further proceedings in respect of the Agreements other than by LCIA arbitration.

Arguments made by the parties in the English Court

Evison argued that:

  • Finvision had colluded with OEB to bring the OEB Russian Proceedings, which were vexatious and unconscionable, so as to impede the LCIA arbitrations;
  • Finvision wrongfully gained control over OEB in breach of the Finvision Orders, and exercised that control to bring parallel claims against Evison in a non-contractual forum; and
  • the OEB Russian Proceedings (i) could give rise to issue estoppels binding the LCIA arbitrations and (ii) could potentially result in Evison losing its remaining shares in OEB.

OEB resisted the Interim Anti-suit Injunction arguing that it was entitled to pursue its own claims against Evison in Russia, the natural and only forum where they can be pursued.

In turn, Finvision contended that it did not engage in collusion, referring to a letter from Finvision to OEB requesting that OEB discontinue the OEB Russian Proceedings. It also offered to give undertakings in similar terms to the Finvision Undertakings, and offered to undertake not to rely upon any issue estoppel arising from the OEB Russian Proceedings (the “New Undertakings“).

The Court’s decision

The Court noted that it will not hesitate to exercise its jurisdiction under section 37 of the Senior Courts Act 1981 to prevent a party to an arbitration agreement from breaching that agreement by commencing proceedings in a non-contractual forum. In support of this legal principle, the Court referred to the well-known case decided in 2013 by the Supreme Court, Ust-Kamenogorsk Hydropower Plant JSC (Appellant) v AES Ust-Kamenogorsk Hydropower Plant LLP (Respondent) [2013] UKSC 35, discussed in detail here.

The Court then considered whether this power extended to restraining a non-party to the arbitration agreement for pursuing proceedings which raise the same or overlapping issues to those which are or might be subject to arbitration. The judge referred to two authorities relied upon by Evison, BNP Paribas v Open Joint Stock Company Russian Machines as [2011] EWHC 308 (Comm) and Mace (Russia) Ltd v Retansel Enterprises Ltd [2016] EWHC 1209 (Comm). In these cases, parties who were in common control with the respective parties to the arbitration agreements initiated proceedings in the Russian courts. The English courts in both cases granted anti-suit injunctions concluding that there was a serious issue to be tried as to whether there was collusion between the parties in common control. The Court noted that in those two cases the Russian proceedings were direct attempts to invalidate the underlying agreements and to frustrate the arbitration proceedings, therefore the anti-suit injunctions were necessary and justifiable.

The Court confirmed that – as in Mace v Retansel – there was a presumption that OEB colluded with Finvision (due to the control which Finvision exercised over OEB), which was not rebutted by the evidence. However, the judge distinguished the above two cases, noting that:

  • the OEB Claims were its own corporate claims, which only it could bring, and only in Russia; they were not impeding the LCIA arbitrations, but were brought in their proper and natural forum;
  • the New Management, however their appointment came about, were likely to be acting in good faith and in the interests of OEB, and to seek to restrain them now might put them in an impossible position of conflict; and
  • Finvision’s Cross-Claims in the LCIA arbitrations appeared to be for losses purely reflective of those claimed by OEB in the OEB Russian Proceedings, and therefore questionable.

The judge noted that, in these circumstances, it would be a remarkable step for the Court to restrain a foreign public company from pursuing its own legitimate claims. He concluded that it would be inappropriate to injunct OEB from pursuing its claims, and therefore ordered that the Interim Anti-suit Injunction should be discharged.

The Court accepted the New Undertakings offered by Finvision. It also noted that while the method by which Finvision gained control over OEB may be regarded as unconscionable, Evison must seek other remedies in respect of Finvision’s conduct.

Comment

The English court will not generally hesitate to prevent a party to an arbitration agreement from commencing proceedings in a non-contractual forum in breach of that arbitration agreement. However, whether the court will grant an anti-suit injunction against a non-party to an arbitration agreement will always depend on the evidence before it. The party pursuing the injunction should not merely rely on common control between the other party to the arbitration agreement and the party that commenced proceedings in a non-contractual forum as evidence of collusion. It must stand ready to present evidence demonstrating that the foreign court proceedings were initiated to impede the arbitration. This case helpfully reminds us that not all proceedings initiated by non-parties to an arbitration agreement raising connected or overlapping issues will necessarily be found by an English court to be vexatious or unconscionable. If the non-party commenced proceedings in a forum which is a proper and natural forum to advance its claims, there may be no cause for intervention by the English court.