High Court grants injunction to prevent enforcement of Russian anti-suit injunction and considers Russian law on exclusive jurisdiction over sanctioned persons

The High Court has ordered the continuation of an anti-anti-suit injunction (AASI) and granted the claimants an anti-enforcement injunction (AEI), in each case pending the determination of the defendant's challenge to the English courts' jurisdiction. The aim of these injunctions is to prevent the defendant enforcing a Russian anti-suit injunction (ASI) which includes very significant penalties if the claimants do not comply: Magomedov v PJSC Transneft [2024] EWHC 1176 (Comm).

In a case where the relevant foreign proceedings are not in breach of an exclusive jurisdiction clause or an arbitration clause, the English court will not generally grant an ASI or AASI unless satisfied that it is the natural forum for the determination of the dispute (and that the pursuit of the foreign proceedings would be vexacious and oppressive, or unconscionable). The present case suggests, however, that an AASI may in some circumstances be granted on an interim basis without necessarily deciding that England is the natural forum.

Each case will turn on its facts, but such an order may be appropriate where there is a pending jurisdictional challenge, at which the question of natural forum will be considered, and the grant of a foreign ASI may hinder the English court's ability to determine that challenge and decide on the natural forum. Further, in cases where the foreign court has already granted an ASI, the English court may grant an AEI on a similar interim basis to prevent enforcement of the ASI pending determination of the jurisdiction challenge.

The decision is also of interest for the judge's comments regarding a Russian federal law introduced in 2020, which grants Russian courts exclusive jurisdiction over disputes involving sanctioned Russian parties and allows such sanctioned parties to apply to Russian courts for an ASI (as discussed in further detail in this blog post). The judge noted that this law was intended to address "a real juridical problem, namely that Russian parties cannot get access to justice because of the impact of sanctions". While the judge accepted that the law may have been applied very broadly in some cases, including where no such juridical problem properly arose, he considered that in the present case it was invoked for its proper purpose, given the difficulties the Russian defendant faced in paying its English lawyers as a result of sanctions. However, that did not prevent the English court protecting its own proceedings by granting the AASI and AEI, at least until the jurisdiction challenge was determined.

The case also gives another reminder of the duty of full and frank disclosure on an application for an ASI or AASI (or any other without notice application). In this case the claimants' failure to disclose the Russian defendant's difficulties arising from sanctions was considered to be a significant breach of that duty, though ultimately it did not prevent their application being granted.

Background

The litigation arises out of claims by a Russian billionaire, Ziyavudin Magomedov and his company, Port-Petrovsk Limited, for USD 13.8 billion. The claimants allege that Transneft (a Russian oil pipeline/transportation company) and other defendants conspired to wrest from the claimants the ownership and control of their Russian assets. Transneft challenged the English court's jurisdiction under CPR Part 11 (the "Transneft Jurisdictional Challenge") and applied in Russia under Article 248.2 of the Russian Arbitrazh Procedure Code for an ASI seeking to prohibit the claimants from continuing the English proceedings. In response, the claimants obtained an interim AASI from the English court prohibiting Transneft from pursuing the ASI proceedings in Russia until the return date hearing at which the court would consider whether the interim AASI, which (in the usual way) had been granted without notice to Transneft, should be continued.

Despite Transneft's application for adjournment of the Russian proceedings, in the light of the English AASI, the Moscow court granted the ASI in Transneft's favour and ordered fines of USD 7.5 billion in case the claimants did not comply with the order. Following that decision, at the return date hearing in England, the claimants requested that the AASI be extended until the determination of the Transneft Jurisdictional Challenge (though that order was somewhat academic by then given that the Russian ASI was already in place), but also requested an interim Anti-Enforcement Injunction ("AEI") barring Transneft from enforcing the Russian ASI. The claimants also requested a permanent order prohibiting Transneft from relying on any actions by the claimants in the English proceedings in Russia (an Anti-Reliance Injunction, or "ARI").

Decision

The High Court (Bright J) ordered the AASI to be continued, and granted the AEI on an interim basis, in each case until the determination of the Transneft Jurisdictional Challenge, but it refused to grant the ARI.

At the outset, Bright J noted that there are relatively few English cases involving AASIs, and even fewer involving AEIs and ARIs. The available cases on AASIs apply the same general principles as those involving ASIs, but the courts are more cautious about granting these injunctions as "they represent a greater interference with the work of foreign courts". The limited case law also suggests that an AEI or ARI will generally be granted only where the court would, in principle, be willing to grant an ASI or AASI. The court therefore considered the requirements for an ASI or AASI when determining the claimants' applications for an AEI and ARI.

Bright J noted that the majority of cases involving ASIs are contractual cases, ie where the ASI is granted to enforce an exclusive jurisdiction clause or an arbitration clause. The present case is of a non-contractual nature, and so the starting point was Airbus Industrie G.I.E. v Patel [1999] 1 AC 119 in which Lord Goff set out a general rule that an ASI will only be granted where the English court is the natural forum (though that is not sufficient – the applicant must also show that further pursuit of the foreign proceedings would be vexatious and oppressive or unconscionable).

The challenge faced by Bright J in this case was that the court was due to consider the question of natural forum much later, at the hearing of Transneft's Jurisdictional Challenge in November 2024. Bright J therefore considered whether a conclusion that England is the natural forum is a necessary precondition to the grant of AASI relief or any associated relief (in which case the claimants' application must fail).

A "natural forum" requirement?

Bright J considered that, in Airbus, Lord Goff was expressing a "general principle" or "general rule" which was based on a broader underlying principle, namely, that the court has jurisdiction to grant an ASI "when the ends of justice require it". In Airbus, the natural forum requirement came in because of the need to respect comity. However, Bright J stated that "just as the ends of justice must be served in a manner that maintains respect for comity, so respect for comity must not be allowed to lead to injustice".

In this case, Bright J considered that the "unusual facts" justified the court exercising its discretion to continue the AASI at least until Transneft's Jurisdictional Challenge. The court noted that the following factors were of particular significance:

1. The court's difficulty in this case was caused by Transneft's unconscionable behaviour: The situation in which the court had to consider the AASI application before it could determine whether it is the natural forum stemmed from Transneft's decision to apply for the Russian ASI as well as filing a Jurisdictional Challenge. This put the claimants in a difficult position where they had to choose between: (i) not resisting the Transneft Jurisdictional Challenge and thus losing the chance to claim in the English court, without any further contest; or (ii) resisting the Transneft Jurisdictional Challenge and facing the risk of having to pay fines of USD 7.5 billion for the breach of the Russian ASI.
2. The terms of the AASI sought would minimise any offense to comity: The AASI was sought only on an interim basis until the Transneft Jurisdictional Challenge was heard, and was intended solely to allow the English court to make an assessment on its own jurisdiction.

Bright J drew parallels with so-called Hemain injunctions developed in the Family Division, which are interim ASIs intended to pause foreign proceedings for a limited duration while the English court deals with a jurisdictional challenge. On a similar basis, the judge held, the court must be able to grant an interim AASI to last until it is able to decide on its own jurisdiction, and thereby give itself the chance to decide the question of natural forum.

Bright J noted that, although any future cases are likely to be highly fact sensitive, an AASI may be appropriate where an ASI is sought in a foreign court which "is intended to stymie the proper determination" of a jurisdictional challenge in England.

Alternative argument based on Art.248

Bright J also considered the claimants' alternative submission that the "natural forum" requirement should not apply in this case, relying on Lord Goff's language in Airbus that there may be "extreme" cases, including "where the conduct of the state is such as to deprive it of the respect normally required by comity."

The claimants suggested that the Russian court's application of Art.248 amounted to such conduct. In particular, the claimants criticised the article on the basis that "it was an exorbitant jurisdiction, which (for example) runs roughshod over important international treaty obligations such as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards".

Bright J did not, however, consider that the Russian court's conduct was such as to bring it outside the realm of comity. He said Art.248 was introduced with the intention of addressing a "real juridical problem", specifically, the inability of Russian parties to access justice due to the impact of sanctions. While it may be that Art.248 has been applied in a way that is contrary to international norms and/or English/UK public policy, that was not the position here.

In Bright J's view, in the present case Art.248 was invoked for its proper purpose of addressing Transneft's potential problems in accessing justice in England as a result of sanctions, including because of its practical difficulties in paying its lawyers. The fact that one legal team had ceased working due to non-payment, and the new team had not been paid four months after they began acting for Transneft, demonstrated to the judge that this was a real problem for Transneft.

The judge was more critical of the Russian court's decision to order fines of USD 7.5 billion for a breach of the Russian ASI, which he considered disproportionate. However, that was separate to the question of whether Art.248 was offensive in principle, and it was more relevant to the AEI than the AASI.

Breach of the duty of full and frank disclosure

The claimants were aware of Transneft's practical difficulties arising from sanctions, in particular its difficulties in paying its lawyers and in meeting an outstanding costs order, but they failed to disclose these difficulties in the application for interim relief. Instead, the claimants emphasised Transneft's failure to comply promptly with the costs order and implied that Transneft did not have any good reasons for failure to pay or for seeking time extensions in relation to the Transneft Jurisdictional Challenge.

The court found this to be a significant breach of the duty of full and frank disclosure. The question of appropriate remedy for the breach was finely balanced, but the court decided to continue the AASI on the basis that, if it were discharged and no AEI were granted, the claimants would be exposed to a penalty in Russia of USD 7.5 billion, merely for proceeding with the case to the extent of resisting the Transneft Jurisdictional Challenge. The court considered such risk to be "utterly disproportionate". The court also took into account that the breach was not deliberate or intentional.

AEI and ARI

As well as continuing the AASI, the court also granted the AEI sought on an interim basis until determination of the Transneft Jurisdictional Challenge. As noted above, refusing the order would expose the claimants to fines of USD 7.5 billion under the Russian ASI if they resisted the Transneft Jurisdictional Challenge. While it was necessary to be cautious in granting an AEI, that caution was somewhat tempered by the Moscow court having awarded these sums as penalties, despite Transneft having asked the court not to proceed.

The court declined to grant the ARI, which was sought on a permanent basis but was no longer pursued by the end of the claimants' submissions.

Note: Permission to appeal was refused on 29 July 2024.