Nori Holdings Ltd & Ors v Public Joint-Stock Company 'Bank Otkritie Financial Corporation'

Factual and Procedural Background

This opinion concerns an application for a final anti-suit injunction brought by the claimants to restrain the defendant bank from pursuing court proceedings in Russia and Cyprus. The claimants are companies incorporated in Cyprus and the British Virgin Islands, part of a corporate group referred to as the O1 Group. The defendant is a licensed bank incorporated under Russian law.

Originally, the bank had advanced secured loans to entities within the O1 Group, governed by Russian law and subject to arbitration clauses providing for London arbitration under LCIA rules. In August 2017, the parties restructured their arrangements, replacing secured loans with long-term unsecured bonds and terminating the pledges securing those loans. The claimants assert this restructuring was a commercial transaction, while the bank alleges it was a fraudulent scheme replacing valuable secured loans with worthless bonds.

Shortly after the restructuring, the Central Bank of Russia appointed a temporary administrator to manage the bank, who commenced proceedings in the Moscow Arbitrazh Court seeking to set aside the August transactions on grounds including transactions at an undervalue under Russian insolvency law and abuse of rights under Russian civil law. Parallel proceedings were also initiated by the bank in Cyprus alleging fraudulent conspiracy and seeking similar relief.

The claimants commenced multiple arbitrations under the LCIA rules, seeking declarations that the termination agreements were valid and the original pledges terminated, and also seeking an anti-suit injunction against the bank's court proceedings. The bank contests the jurisdiction of the arbitrators and the validity of the arbitrations.

The claimants now apply to the English court for a final anti-suit injunction restraining the bank from continuing the Russian and Cypriot proceedings against them, contending those proceedings breach the arbitration agreements.

Legal Issues Presented

1. How should the court proceed when an application for anti-suit relief can also be made to arbitrators?
2. Can or should an anti-suit injunction restrain proceedings brought under foreign insolvency law to set aside transactions at an undervalue?
3. Does the decision of the Court of Justice of the European Union (CJEU) in West Tankers Inc v Allianz SpA (Case C-185/07) remain good law, specifically regarding the grant of anti-suit injunctions restraining proceedings in EU member states?

Arguments of the Parties

Defendant's Arguments

• Any application for anti-suit relief should be made to the arbitral tribunal now constituted; thus, the court should not intervene.
• The Russian proceedings do not breach the arbitration agreements because claims under Russian insolvency law to set aside transactions at an undervalue fall outside the scope of the arbitration clauses and/or are not arbitrable.
• No injunction can be granted to restrain proceedings in Cyprus, an EU member state, due to the CJEU decision in West Tankers Inc v Allianz SpA.
• There are strong reasons to refuse an injunction as the Russian and Cypriot proceedings will continue regardless and constitute the natural forums for the dispute.
• The claimants delayed in making their application, which should bar relief.

Claimants' Arguments

• The bank cannot advance the argument that the court should defer to the arbitrators while simultaneously challenging the arbitrations’ validity and jurisdiction.
• The arbitration clauses in the original pledge agreements are broad and untainted by allegations of fraud, covering disputes arising in connection with those agreements, including the bank’s court proceedings.
• The dispute is arbitrable and the arbitrators have jurisdiction to determine whether the August transactions were fraudulent and to grant appropriate remedies.
• The presumption in Singapore law that insolvency avoidance claims are not arbitrable does not apply in English law.
• The West Tankers decision remains binding and prevents injunctions restraining proceedings in EU member states, but anti-suit relief is appropriate for the Russian proceedings.
• There has been no undue delay in seeking relief.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first addressed whether the application for anti-suit relief should be made to the arbitrators rather than the court. It held that although arbitrators can grant anti-suit relief, the court retains jurisdiction under section 37 of the Senior Courts Act 1981 to grant such injunctions, particularly where the defendant denies arbitration tribunal jurisdiction and has not applied for a stay under section 9 of the Arbitration Act 1996. The availability of relief from arbitrators is not a reason to refuse a court injunction.

Next, the court considered whether the Russian proceedings breached the arbitration agreements. It rejected the argument that insolvency-related claims to set aside transactions at an undervalue fall outside the arbitration clause or are non-arbitrable. The court found the arbitration clauses to be broadly worded, covering disputes arising under or in connection with the agreements, with no express exclusion for insolvency claims. It rejected the Singapore Court of Appeal’s presumption excluding insolvency avoidance claims from arbitration as not part of English law. The substance of the dispute—whether the August transactions were fraudulent—is arbitrable. The court relied on English authorities, including the Fulham case, to support this conclusion.

Regarding the Cypriot proceedings, the court held that the CJEU decision in West Tankers remains binding EU law. This decision prohibits courts in one member state from granting anti-suit injunctions restraining proceedings in another member state. The court thoroughly analyzed the reasoning in West Tankers and subsequent cases, including Gazprom, and rejected arguments that the Recast Brussels Regulation or later developments had undermined this principle. Consequently, the court dismissed the claimants’ application for an injunction against the Cypriot proceedings but noted that relief might be available from arbitrators or through the Cypriot court’s own powers to stay proceedings.

The court then considered whether there were strong reasons to refuse an injunction restraining the Russian proceedings. It acknowledged that the Russian and Cypriot proceedings and the arbitrations would all likely continue, meaning that full submission of the dispute to a single forum was not achievable. Nevertheless, the court held that the parties’ agreement to arbitrate was decisive and that the bank had not demonstrated strong reasons to refuse the injunction. The court distinguished the facts from the Donohue v Armco case, where the interests of justice favored a single forum.

Finally, the court addressed delay, concluding there was no significant delay in seeking relief that would bar the injunction.

Holding and Implications

The court’s final decision was as follows:

• The bank must discontinue the Russian proceedings as against the claimants.
• The bank is prohibited from commencing proceedings against the claimants in any non-EU and non-Lugano Convention state seeking the same or equivalent relief.
• The claimants’ application for an injunction restraining the Cypriot proceedings is dismissed.
• The claimants’ alternative application for indemnity or damages related to the Cypriot proceedings is deferred.

The decision enforces the parties’ arbitration agreement by restraining foreign proceedings outside the EU and Lugano Convention states, reinforcing the principle that English courts will protect arbitration agreements against breach by foreign court proceedings. However, it recognizes the binding effect of EU law, specifically the West Tankers decision, which prohibits anti-suit injunctions restraining proceedings within EU member states. No new precedent was set beyond applying established principles to the facts.