High Court declares arbitral tribunal lacks jurisdiction following bank's invocation of asymmetric option clause

The High Court has held that an arbitral tribunal did not have jurisdiction over a dispute on the basis that Barclays Bank plc (Barclays) had invoked an option to litigate, under an asymmetric dispute resolution clause which provided for LCIA arbitration but with an option for Barclays to give notice requiring any dispute to be heard by the English court. The court also amended the terms of an anti-suit injunction (ASI) against the counterparty to the dispute, VEB.RF (VEB), to confirm that VEB was permitted to raise its claim in that court: Barclays Bank Plc v VEB.RF [2024] EWHC 3088 (Comm).

The decision will be of interest to financial institutions as it shows that the English courts will strive to give effect to the parties' chosen dispute resolution clause, including a clause that provides one party with the option to require disputes to be referred to a different forum. It also acts as a reminder that the courts will construe an ASI in the context in which it was made, which in this case included the terms of the dispute resolution agreement read as a whole.

In the present case, Barclays had obtained the ASI after VEB commenced legal proceedings in the Russian courts in breach of the dispute resolution clause (as discussed here). The ASI prohibited VEB from (i) taking any further steps to pursue the Russian proceedings and (i) commencing or pursuing "any other claim or proceedings arising out of, or in connection with, the Agreement …..in Russia or otherwise other than by means of LCIA Arbitration in accordance with Part 5(k)(i) of the Agreement".

In response, VEB applied to suspend the Russian proceedings and commenced an LCIA arbitration. Barclays then exercised the option to litigate, serving notice which required VEB to withdraw the arbitration proceedings and pursue any claims through the English courts. VEB disputed the validity of the notice on the basis that: (i) the terms of the injunction made it impossible for VEB to commence court proceedings; and/or (ii) Barclays had waived its right and/or was estopped from serving the notice. The court dismissed both arguments, including because:

1. It was not impossible for VEB to comply with the notice: it simply had to withdraw the arbitration proceedings and, if it considered that the ASI prevented it commencing court proceedings, it could and should have approached Barclays for a variation or, if necessary, applied to the court. In any event, it was fanciful that the court would have construed the ASI as precluding VEB from commencing English court proceedings.
2. The agreement between Barclays and VEB provided that no waiver would be effective unless it was agreed in writing. That excluded informal waiver, and so there would have to be words or conduct constituting an unequivocal representation that the waiver was valid despite the lack of a formal written waiver. Neither the statements made by Barclays in support of the ASI application nor the terms of the ASI itself amounted to an unequivocal election by Barclays to waive its right to commence court proceedings.

For more information see this post on our Arbitration Notes blog.