UniCredit fails to overturn Gazprom’s Russian injunctions

A Russian court has upheld injunctions obtained by a Gazprom affiliate in a long-running dispute with UniCredit over unpaid bonds that has led to conflicting decisions between the Russian and UK courts.

Last week, a three-judge bench in the St Petersburg Commercial Court confirmed anti-suit (ASI), anti-arbitration and anti-enforcement injunctions that RusChemAlliance (RCA) obtained against UniCredit last year.

It means UniCredit continues to face the threat of a €250 million Russian fine if it seeks to refer its dispute with RCA to any forum outside of the Russian courts.

RCA is pursuing Russian litigation against UniCredit, Deutsche Bank and Commerzbank over unpaid performance and advance bonds for a suspended gas plant construction project. The banks claim they are unable to pay out on the bonds because of EU sanctions imposed on Russia in the wake of its full-scale invasion of Ukraine.

The banks have all sought relief from courts in England to uphold Paris-seated ICC arbitration clauses contained in bond documents with RCA. The Gazprom joint venture argues those clauses are inoperable under Russian law, but a first instance court in St Petersburg stayed its suits against UniCredit and Deutsche Bank pending the English proceedings.

Last year, UniCredit obtained an anti-suit injunction from the Court of Appeal in London, the first time an English court had granted such relief to enforce an arbitration agreement with a foreign seat. The decision was later upheld by the UK Supreme Court.

Despite that ruling, the first instance St Petersburg court lifted the stay on the Russian lawsuits and allowed RCA to seize €463 million in assets held by UniCredit, €239 million held by Deutsche Bank and €94 million belonging to Commerzbank. The three banks were also banned from disposing of their Russian businesses.

In December, the same court issued an ASI against UniCredit and ordered the bank to cancel its English ASI or to pay a €250 million fine. The court also restrained the bank from pursuing any proceedings outside of the Russian court’s “exclusive jurisdiction” over commercial disputes involving sanctioned Russian parties, which the Russian government introduced through legislation in 2020.

UniCredit then applied to lift its English ASI, telling the Court of Appeal in London that it risked increasing its liability to RCA to an “eye-watering” €710 million. The bank said its Russian assets were at risk whereas, in contrast, RCA has no presence outside of Russia. The English court agreed to lift the ASI in February.

However, UniCredit still appealed the Russian ASI to the St Petersburg Commercial Court, arguingthat cancelling a decision that had been confirmed by the UK Supreme Court was “unprecedented and impossible.”

But the St Petersburg cassation court agreed with the first instance court that RCA’s “unilateral expression of will expressed in procedural form” was enough to transfer the dispute to the jurisdiction of the Russian courts. It said UniCredit was wrong that the Russian courts should consider its jurisdiction on a case-by-case basis, and that the bank had in any event waived any jurisdictional exemption by appealing RCA’s ASI.

The cassation court also agreed that foreign proceedings would jeapordise RCA's access to justice, including because of the difficulty of sanctioned entities to pay arbitration fees. It said “reasonable doubts” also arose as to the impartiality of a Paris-seated tribunal hearing a case over EU sanctions.

UniCredit’s argument that it did not intend to initiate foreign proceedings against RCA was dismissed by the cassation court “as having no legal significance.” Moreover, the court said the injunctions would not violate UniCredit’s rights if it does not intend to initiate foreign proceedings.

The court was also unconvinced that the Russian ASI was issued in breach of Russian procedural law. It likewise rejected UniCredit’s argument that RCA’s request for the ASI was inadmissible as it was contrary to their arbitration agreement. The court pointed to the “different legal nature and consequences of a violation of a public-law injunction of the court and a private-law injunction resulting from the parties' agreement.”

Counsel in the cassation court is unclear. In the first instance Russian court, UniCredit used KIAP while Commerzbank used Kulkov Kolotilov & Partners.

In the English court proceedings, Latham & Watkins and barristers at Essex Court Chambers and Serle Court acted for UniCredit, while RCA used One Essex Court, Russian firm ELWI and (until last year) disputes boutique Enyo Law.

The London Court of Appeal said in February that Deutsche Bank and Commerzbank also appear to have “concluded that they have no option but to comply” with similar threats of fines by the St Petersburg court. The English High Court discharged an interim ASI that Deutsche Bank had obtained against RCA in 2023, while Commerzbank’s request to undo a final ASI was adjourned pending the UniCredit ruling.

Two other German banks – Bayerische Landesbank and Landesbank Baden-Wurttemberg (LBBW) – have also sought to refer disputes with RCA over bonds for the same gas plant to Paris-seated ICC arbitration. In January, the St Petersburg court ordered Bayerische Landesbank and LBBW to withdraw their claims and seek to cancel English ASIs they have obtained against RCA – or else pay over €270 million and €52 million, respectively.

Meanwhile, RCA is also pursuing Russian litigation against German multinational Linde, the contractor which suspended work on the construction project.

The St Petersburg Commercial court has restrained Linde from pursuing the dispute in HKIAC arbitration, and issued billion-euro judgments and asset freezing orders against the German company. Earlier this year, the court threatened to issue a €1 billion fine against a Dutch Linde subsidiary if it failed to withdraw pending claims over the dispute in the Rotterdam courts.

Last month, a Russian bank filed a complaint with Russia’s Constitutional Court over the “exclusive jurisdiction” law.