English Commercial Court finds that arbitration agreements do not extend to claims against third parties

On 6 November 2024, the English Commercial Court rejected an application by Renaissance Securities (Cyprus) Limited (Renaissance) to clarify the effect of, or amend, an anti-suit injunction (ASI) restraining Russian court proceedings brought by two Defendants against Renaissance's (affiliate) Russian entities (RREs) in breach of an arbitration agreement. Mr Justice Pelling held that the arbitration agreement did not extend to claims against non-contracting parties; consequently, the ASI did not prevent the court claims from proceeding. This decision confirms that the availability of an ASI in the context of third parties will depend on the construction of the arbitration agreement.

Background

Renaissance was party to a series of investment service agreements with each of the six Defendants, by which Renaissance held certain of the Defendants' assets. Each investment service agreement contained an arbitration clause.

In breach of the arbitration clauses, in October 2023, the Defendants commenced Russian court proceedings against Renaissance to demand the return of their assets. Shortly after, in November 2023, Renaissance applied to the English courts, obtaining an ASI from Dias J which prevented the Defendants from continuing their court claim or instituting any new proceedings that ought to be referred to arbitration.

In or around April 2024:

• the Sixth Defendant sought to join the RREs (Russian-incorporated companies that were part of Renaissance's corporate group but not party to the investment service agreements) as co-defendants to its Russian court claims; and
• the Second Defendant instituted new proceedings against the RREs.

In response, Renaissance applied to the English courts, obtaining an ASI which required the Defendants to discontinue the new court claims and the joinder of claims (given that claims against the RREs could be brought separately).  In the light of this, Renaissance applied to the English Commercial Court seeking to clarify the effect of, or amend, Henshaw J's ASI, and ultimately to require the Sixth Defendant and Second Defendant to withdraw and discontinue the joinder of claims and the new proceedings against the RREs, respectively. Renaissance asserted that the court claims against the RREs:

1. were a matter for arbitration, not the courts, pursuant to the arbitration agreements under the investment service agreements; and/or
2. were brought vexatiously or oppressively to circumvent the arbitration agreements.

In turn, the Sixth and Second Defendants argued inter alia that the RREs were jointly and severally responsible for Renaissance's losses given that, while autonomous legal entities, they had a single decision-making centre, brand, and corporate structure.

Construction of an Arbitration Agreement

The court considered that it was a matter of construction whether an arbitration clause covered claims against third parties. Renaissance had to prove this "to a high degree of probability".

In doing so, the court considered the different approaches in three cases (Cavendish Square v Ghoussoub (2017), Clearlake Shipping v Ziang Da (2019) (Clearlake) and Donahue v Armco (2001)). He concluded that Clearlake, which concerned an exclusive jurisdiction clause, provided the correct approach and applied to arbitration agreements. In Clearlake, the judge provided that:

• the relevant question was what the clause, viewed in the light of the whole contract, would mean to a reasonable person having all the relevant background knowledge recently available to the parties at the time the contract was made, excluding the previous negotiations to the parties and their declarations of subjective intent;
• if a clause covers claims against third parties, then any ASI would also apply to proceedings against third parties; and
• unless an exception to privity of contract rules applies, only the contracting party can enforce the arbitration clause against the suing party.

Decision

The court held that the arbitration agreements were not intended to, and did not apply to, claims against third parties. In doing so, the court considered that, while the wording of the clause ("...any dispute…in relation to…") could be read, in isolation, to apply to claims against third parties, the following factors indicated that it did not:

1. the clause required negotiation "between the parties" pre-arbitration and did not expressly address that a party negotiating on behalf of a third party would need authorisation;
2. the clause expressly referred to an arbitral award being binding between the parties, without addressing the finality and enforcement of the award on a third party;
3. third party rights under Contracts (Rights of Third Parties) Act were excluded in the main contract, indicating that third-party involvement had been addressed where relevant;
4. part of the clause specified the immunities available to the Defendants only, and not to any affiliates; and
5. part of the clause used the word "your" which referred exclusively to the Defendants.

The court added that the fact that the RREs had provided letters consenting to arbitration was irrelevant to the proper construction of the arbitration agreements.

Separately, the court considered the vexatiousness ground, finding that this could not succeed because the RREs were not bound by the arbitration clauses.

Accordingly, the court rejected Renaissance's application and rejected permission to appeal.

Comment

This decision confirms that the availability of an ASI to restrain proceedings against a non-contracting party to an arbitration agreement will depend on the construction of that arbitration agreement. Accordingly, it serves as an important reminder that parties entering into an arbitration agreement should make their intentions explicit. Doing so will help prevent unintended forum fragmentation on what may be substantially the same issues in dispute.

Interestingly, the court suggested that Article 22.1(x) of the LCIA Arbitration Rules 2020, which allows for the joinder of third parties, could affect the analysis of whether an ASI is available by reference to an LCIA arbitration agreement. Given that this point was not argued before the judge, he offered no further comment.