International arbitration in 2024

Clarity or confusion? The implications of domestic court rulings for arbitration

By: Christophe Seraglini, Katherine Khan, Guy MacInnes-Manby, Ketevan Betaneli

In particular, decisions on anti-suit injunctions, challenges to awards, corruption and sovereign immunity around enforcement against State assets have important implications that will shape dispute resolution strategies of our clients in these areas in the year ahead and beyond.

Anti-suit injunctions in support of foreign arbitrations 

In a series of decisions, the English courts have issued anti-suit injunctions in support of arbitrations without an English seat provided there is a connection to England.

In three cases, including two in the English Court of Appeal (the most recent being UniCredit Bank v RusChemAlliance), the courts found that, although the seat of the arbitrations was Paris, the governing law of the arbitration agreements was English law, which provided a sufficient connection to England. Those decisions relied upon evidence that, although a French court does not have the ability to grant an anti-suit injunction, it may recognize one issued by a foreign court.

As a result, parties arbitrating outside of England may be more inclined to seek assistance from the English courts. However, in all three decisions, the jurisdictional gateway to the English courts was on the basis that the choice of English law as the governing law of the arbitration agreement could be inferred from the choice of English law as the governing law of the contract (following the Supreme Court’s decision in Enka v Chubb). That gateway is unlikely to remain intact when the revised Arbitration Act comes into force at which point the presumption will be that the law of the seat is the governing law of the arbitration agreement absent the parties’ express agreement otherwise.

Award Challenges: high thresholds 

In France, several arbitration-related court decisions reaffirmed a pro-arbitration stance and underlined the existence of a high threshold for setting aside or refusing to enforce an award.

The French Court of Cassation overturned the decision of the Court of Appeal to set aside the award in Oschadbank v Russia, which had determined that the tribunal lacked jurisdiction ratione temporis as the investment had been made before the time limit provided for in the Ukraine-Russia BIT. The Court of Cassation held that the time limit was a substantive rule rather than a jurisdictional condition (contrasting the position adopted by the Swiss Federal Tribunal in decisions 4A_396/2017 and 4A_398/2017, analyzing the same provision). The characterization of the legal issue under review is of crucial importance in annulment proceedings because the French courts generally have limited powers to review a tribunal’s findings, except for when the review concerns a tribunal’s jurisdiction, which they can review de novo. By concluding that the time limit in the applicable BIT was a rule of substance, the Court of Cassation restricted the court’s power on this point.

In another case, the Paris Court of Appeal set aside the award in Agarwal v Uruguay, finding that the tribunal had wrongly declined jurisdiction. The claimants, three British nationals, were the discretionary beneficiaries of a Cayman trust through which the iron ore mining investment had been made. The claimants remained discretionary beneficiaries until a few months before the commencement of the arbitration but after the dispute already arose, at which point the discretionary trust was converted into a fixed trust. According to the tribunal, the discretionary beneficiary interests were not a protected investment under the BIT because the claimants’ interests were subject to the decisions of third parties and they did not possess any direct right over the trust’s assets. The tribunal consequently declined jurisdiction because there was no qualifying investment at the time the dispute arose. The Paris Court of Appeal determined that by requiring the investment to predate the dispute, the tribunal had imposed a temporal restriction which could not be found in the treaty (the only temporal limitation contained in the BIT was that the dispute had to arise after its entry into force); on the other hand, all conditions to the tribunal’s jurisdiction had been met. The court thus set aside the award.

Scrutiny of awards where corruption is alleged

While the English and French courts are generally deferential to arbitral awards, the trend does not apply to cases involving allegations of corruption, where the awards are scrutinized more carefully.

In England, the high-profile case of Nigeria v P&ID is a clear example. An $11bn award was set aside in October 2023 because the award had been procured through fraud and in a manner contrary to public policy, which the judge described as the “most severe abuses of the arbitral process”. In criticizing the tribunal for overlooking red flags during the arbitration, Knowles J highlighted the risks of confidentiality in arbitrations involving States and queried whether tribunals should be more interventionist in circumstances where relevant internal and external representatives of the State are failing to adequately represent it in the arbitration.

In 2017, the Paris Court of Appeal clarified that an award can be set aside or refused enforcement where there are “serious, precise and consistent” indications – or, in other words, red flags – of corruption (the French court’s unlimited powers to scrutinize an award when suspicions of corruption or illegality exist was further affirmed by the Court of Cassation in 2022). This principle has since been used by other courts, notably by a court in Versailles in the context of enforcing an ICC award against Alstom in March 2023 (although in the circumstances the court concluded that there was insufficient evidence for the alleged bribery).

Sovereign immunity and enforcement against State assets

Decisions in the Netherlands, Sweden and the US in 2023 have further shaped the question of what constitutes State assets subject to enforcement. This will be relevant for investors looking to enforce arbitral awards against States and guide enforcement strategies.

The claimants in Stati et al v Kazakhstan sought enforcement of their award through assets owned by Kazakhstan’s sovereign wealth fund in the Netherlands and Sweden. In November 2021, the Swedish Supreme Court upheld the Appeal Court’s ruling that the sovereign wealth fund assets were not protected by sovereign immunity (and in June 2023 it let the decision to allow enforcement stand), while in September 2023 the Dutch Supreme Court held the opposite. In both jurisdictions, the burden to establish that a seized property is not subject to sovereign immunity from execution lies with a claimant. The analysis in both jurisdictions concerns whether assets were intended for a public purpose or used in the exercise of governmental functions, a standard derived from the UN Convention on Jurisdictional Immunities of States and their Property. Sweden found no such public purpose while the Dutch courts did.

In the US, the Court of Appeals for the Third Circuit recently upheld the Delaware District Court’s ruling that assets held by Venezuela’s national oil company, Petróleos de Venezuela, were not protected by sovereign immunity.

The support of national courts continues to be important to the success and viability of arbitration. We expect many more arbitration-related court decisions in 2024, and there is no indication the courts' role in arbitration will diminish in importance in the years to come.