Court orders defaulting party to comply with arbitral tribunal’s peremptory orders

Tecnimonst S.p.A & another -v- LLC Eurochem North-West-2 & another [2025] EWHC 3151 (Comm)

This dispute usefully illustrates the English Court’s powers under s.42 Arbitration Act 1996 to enforce peremptory orders of an arbitral tribunal. It also clarifies what the Court will consider to be valid peremptory orders for these purposes.

The case is another example of Russian litigants bringing court proceedings in Russia in breach of an arbitration agreement or a foreign court jurisdiction clause because they argue that international sanctions against Russia will prejudice them in foreign arbitral proceedings seated in an ‘unfriendly state’.

The background facts

The parties

The claimants are MTR Russia LLC (MTR), a Russian company, and Tecnimont S.p.A (Tecnimont), an Italian company that is the majority owner of MTR.

The first defendant is LLC EuroChem North-West-2 (NW2), a Russian company, whose immediate parent company is MCC EuroChem JSC (MCC). NW2 is owned and controlled by Mr Melnichenko, a wealthy Russian who is a designated person under both UK and EU sanctions against Russia.

The contracts

In June 2020, NW2 engaged the claimants as contractors to build a urea and ammonia fertiliser plant in Russia. The contracts included an offshore engineering and procurement (EP) contract dated 1 June 2020 between the Tecnimont and NW2, an onshore engineering local procurement and construction contract dated 1 June 2020 between MTR and NW2 and a coordination and interface agreement (CIA), dated 1 June 2020, between the claimants and NW2.

All three contracts provide for any disputes between the parties to be referred to ICC arbitration in London. The EP contract and CIA are both governed by English law.

The dispute

In May 2022, following the designation of Mr Melnichenko as a sanctioned individual, the claimants suspended the contracts. They contended that export controls on dual-use goods by EU Council Regulation 328/2022 and EU Council Regulation 269/2014 precluded them from obtaining numerous items that were necessary to perform the contractual services, despite their making applications for export authorisation.

They further argued that several of the claimants' vendors and service providers refused to supply items for use in Russia.

The claimants also maintained that due to sanctions against Mr Melnichenko, they could not perform the contracts in any manner that would involve Tecnimont providing economic resources to NW2, since to do so would be in breach of the EU's economic sanctions regime.

NW2 disputed the validity of the claimants' suspension of performance and, on 4 August 2022, terminated the contracts on account of the claimants' alleged breach of contract.

ICC arbitration -v- Russian Court proceedings

The claimants commenced ICC arbitration in London against NW2 on 15 August 2022. NW2 had, until fairly recently, participated in the arbitration and had filed a counterclaim for over Euros 1 billion. The final hearing in the arbitration is scheduled for January 2026.

NW2 subsequently changed its strategy in relation to the arbitration and in respect of its counterclaim and decided to commence Russian court proceedings, seeking to restrain the claimants from continuing the arbitration and also seeking interim measures in Russia against the claimants’ assets. Specifically:

1. The first Russian action brought by MCC (on behalf of its subsidiary, NW2) on or about 4 August 2025 against the claimants, naming NW2 as a third party. This involved the same claims as in NW2's counterclaim in the arbitration for restitutionary damages and repayment of advance payments made to the claimants in respect of the project.

2. The second Russian action brought by NW2 against MTR (and subsequently also Tecnimont) on or about 5 August 2025, which in effect replicated the balance of NW2's counterclaim in the arbitration for damages for breach of contract and repayment of advance payments made in respect of the project.

3. NW2’s proceedings commenced before the St Petersburg Arbitrazh Court on 2 October 2025, seeking an anti-arbitration injunction against the claimants.

Peremptory orders

The claimants obtained a number of orders from the ICC Tribunal to restrain NW2’s breaches of the arbitration agreements. These were not complied with.

Therefore, by Procedural Order 18 (PO18), the Tribunal concluded that the first and second Russian court actions and the Russian anti-arbitration applications constituted breaches of the arbitration agreements that formed part of the contracts and made peremptory orders that NW2 should withdraw the second Russian action immediately, take all necessary steps to stay the first Russian action as a third party thereto until the arbitration and any post-award proceedings were finally concluded, and withdraw the Russian anti-arbitration applications. NW2 again did not comply.

The first Russian action was subsequently withdrawn by MCC. However, NW2 sought ex parte interim relief against the claimants in the second Russian action instead of withdrawing the action.

The claimants obtained an order from the Tribunal on 31 October 2022 that NW2 should withdraw this application for interim relief, but it did not comply. Therefore, the Tribunal issued Procedural Order 22 (PO22) finding NW2 to be in breach of its 31 October interim directions and making a peremptory order that NW2 comply with the interim directions by 4pm on 13 November 2025.

When NW2 did not comply within time, the Tribunal issued Procedural Order 23 (PO23), finding NW2 to be in breach of PO18 in failing to withdraw the second Russian action and making a further peremptory order that NW2 withdraw the second Russian action by 4 pm on 14 November 2025. NW2 did not comply.

The Tribunal had given the claimants permission to make an application to the Court under s.42 Arbitration Act 1996 (AA 1996) to secure NW2's compliance with PO18. Faced with NW2’s non-compliance with the POs, the claimants made a s.42 application to the Court.

Statutory provisions

S.41 AA 1996 deals with the tribunal’s powers in case of a party’s default. Pursuant to s.41(5), where a party fails to comply with an order or direction of the tribunal without showing sufficient cause, the tribunal may make a peremptory order to the same effect, requiring the defaulting party to comply by a particular deadline.

Pursuant to s.42, if a defaulting party fails to comply with a peremptory order, the Court may make an order requiring the defaulting party to comply. The Court must first, however, be satisfied that the applicant has exhausted any available arbitral process in respect of the failure to comply with the peremptory order.

The Commercial Court decision

NW2’s main objections to the making of a s.42 order were as follows:

1. POs 18 and 22 and 23 were not valid peremptory orders because the underlying orders in respect of which they were made were not interim or conservatory measures for the purposes of Article 28.1 of the ICC Arbitration Rules 2021 because, so it was said, they were final orders. Therefore, the Tribunal did not have jurisdiction to make them.

2. The power to enforce a peremptory order under s.41(5) of the 1996 Act is limited to orders relating to a party's failure to do something necessary for the proper and expeditious conduct of the arbitration and an anti-suit injunction is not such an order.

As to the first argument, the Court held that the Tribunal did have power to restrain NW2's breaches of the arbitration agreement and that POs 18 and 22 and 23 were interim or conservatory measures for the purposes of Article 28.1 of the ICC Arbitration Rules.

It was apparent that the POs were interim measures because they were made prior to and in the interim pending the full trial. They were also expressly stated to be subject to amendment by the Tribunal, they bound the parties for the duration of the arbitral proceedings, and they were not awards.

It was also apparent from the Tribunal’s explanations that they intended these POs to be made on a provisional basis under Article 28.1 of the ICC Arbitration Rules and also under s.39(1) AA 1996. On the authorities, an order requiring even the termination of other court proceedings might be an interim or conservatory measure within the ICC Rules, including Article 28. Therefore, the fact that the POs would result in the permanent withdrawal of the Russian court proceedings did not change the position.

As to the second argument, there was authority that where any order is made by a tribunal, compliance with it is to be treated as necessary for the proper and expeditious conduct of the arbitration. Furthermore, in the Court’s view, an order restraining NW2 from seeking to litigate its arbitral claims in the Russian courts and preventing NW2 from seeking, in Russia, to injunct the claimants from continuing the arbitration was necessary for the proper and expeditious conduct of the arbitral proceedings.

The Court thought that the words “peremptory order” in s.41(5) extended beyond “unless orders” and could encompass the POs made in this case. It also dismissed the argument that if the directors of MCC or NW2 complied with the orders sought, they might be at risk of civil or criminal sanctions under Russian law. On the expert evidence, the Court thought there was very little risk of prosecution.

The issue was whether the orders sought were required in the interests of justice to assist the proper functioning of the arbitral process. The Court concluded they were. The Court should also seek to uphold the effectiveness of UK and EU sanctions regimes against Russia.

The Court, therefore, granted the order sought under s.42.

Comment

Where appropriate, the English Court will act to restrain foreign court proceedings brought in breach of a freely negotiated agreement to arbitrate. In this case, the anti-suit injunction also furthered the public policy of promoting the effectiveness of the UK and EU sanctions regimes against Russia.