LLC EuroChem North-West-2 v Tecnimont SPA & Anor

An injunction bearing penal consequences is construed strictly, but its clear language retains its natural meaning when read in its known historical context and by reference to its object. The court cannot narrow an order merely because its terms may extend beyond the contractual basis on which relief was granted. Any desired alteration must be sought by variation.

A broadly drafted arbitration agreement may prevent a party from litigating abroad an issue which is central to its contractual dispute, even through intervention in proceedings involving another group company. An intervener commences or pursues proceedings where it actively seeks substantive relief. Proceedings intended indirectly to strengthen a defence to payment may be brought for the purpose of impairing payment within an anti-suit injunction.

EuroChem NW obtained an anti-suit injunction restraining Tecnimont and MT Russia from commencing or pursuing foreign claims or proceedings for the purpose of restraining, delaying or otherwise impairing payment under on-demand bonds. The underlying construction contracts contained London arbitration clauses.

Tecnimont later intervened in Italian administrative proceedings concerning a decree which treated another EuroChem group company as controlled by a designated person. It sought to uphold the decree because the ownership and control issue was also central to English bank proceedings and London arbitration concerning the bonds.

Henshaw J declared that the intervention breached the injunction and refused to vary the order to permit it. Tecnimont appealed against both conclusions. The central questions were whether intervention amounted to commencing or pursuing proceedings for the purpose of impairing payment, whether it breached the arbitration clauses, and whether the injunction should be varied.

1. By a majority, the appeal was dismissed on all grounds. Carr LJ gave the leading judgment, with which Lewison LJ agreed. Nugee LJ dissented on whether the intervention fell within the injunction and the arbitration clauses.

2. The injunction was expressed in clear and deliberately broad terms. Its prohibition was not limited to proceedings which themselves breached the London arbitration clauses. An order is construed strictly because breach carries penal consequences, but its natural wording must be read in its known historical context and by reference to its object. A court cannot give an order a narrower meaning merely because a party considers that it went further than it should have done. The proper course is an application to vary the order prospectively.

3. Tecnimont commenced a claim and, alternatively, pursued proceedings by intervening in Italy. It sought rejection of EuroChem Agro’s challenge to the decree, an award of costs and active participation supported by substantial evidence. The injunction was not confined to original claimants or principal litigants.

4. Tecnimont acted for the purpose of impairing payment under the bonds. Direct restraint was unnecessary. Its object was to obtain evidential and substantive advantages on the ownership and control issue, thereby strengthening its position that payment was unlawful. The fact that the Italian proceedings sought different relief, or might not bind the English court or arbitral tribunal, did not alter Tecnimont’s purpose.

5. The intervention also breached the broadly drafted arbitration clauses. A “Dispute” included a question or difference arising in connection with the contracts. The ownership and control issue was central to the disputes between Tecnimont and EuroChem NW. Tecnimont could not avoid its agreement by seeking a favourable determination of that issue through proceedings involving another group company. Lewison LJ regarded those proceedings as a proxy for the real dispute with EuroChem NW.

6. The refusal to vary the injunction was a permissible exercise of discretion. Tecnimont suffered limited prejudice because the Italian authorities were already opposing EuroChem Agro’s challenge. Its asserted need to answer an allegation of abusive intervention created no procedural unfairness once the intervention was withdrawn.

7. Nugee LJ would have allowed the appeal. In his view, the injunction should have been confined to foreign proceedings concerning the bonds in which relief was directed at inhibiting payment. The Italian public law dispute could not have been arbitrated between Tecnimont and EuroChem NW, despite involving a factual issue common to the arbitration.

1. Court of Appeal (Civil Division): By a majority, dismissed Tecnimont’s appeal against the declaration of breach and the refusal to vary the anti-suit injunction: [2023] EWCA Civ 688.

2. High Court, Commercial Court: Henshaw J declared that Tecnimont’s Italian intervention breached the injunction and refused its application to vary the order. No neutral citation for that decision is stated.

3. High Court, Commercial Court: HHJ Pelling KC continued the anti-suit injunction, rejected an alleged failure of full and frank disclosure and refused permission for proceedings in France or Italy: [2022] EWHC 2444 (Comm).