Enka V Chubb: Finally, A Final Decision On The Law Of Arbitration Agreements

• Published date: 13 October 2020
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Arbitration & Dispute Resolution
• Law Firm: Quadrant Chambers
• Author: Mr Simon Rainey QC and Gaurav Sharma

On 9 October 2020, the Supreme Court handed down judgment in Enka Insaat Ve Sanayi A.S. v OOO Insurance Company Chubb [2020] UKSC 38, unanimously confirming the Court of Appeal's decision to grant injunctive relief restraining proceedings in Russia in apparent breach of the parties' agreement to arbitrate their disputes in London.

However, the members of the court were not unanimous in the route they took to arrive at their decision, notably on the important issue of the position of English law on the governing law of agreements to arbitrate. In giving judgment, the majority also departed from the position of the Court of Appeal on this issue of law - reaching the same outcome, but for different reasons.

In this short article, we touch on the intricacies and nuances of the majority and minority positions, before reflecting on the finality the decision brings in relation to this vexing question of arbitration law, and the implications for contract drafters when it comes to making considered selections of a governing law and place of arbitration.

The Issue

The question of the law applicable to an arbitration agreement which is part of a main contract has come before the English courts on a number of occasions. The analyses and outcomes have not, however, always been consistent. Given the impact that different findings as to the applicable law can have on the invalidity, non-applicability or unenforceability of an arbitration agreement, it was not surprising to hear Popperwell LJ in the Court of Appeal in Enka declare that "the time has come to seek to impose some order and clarity on this area of the law" ([2020] EWCA Civ 574).

Essentially, two possible approaches have emerged when it comes to determining the law applicable to arbitration agreements, absent an express choice of governing law for the contract:

(i) The first involves determining the law that governs the main contract, and presuming that this is also the law that governs the arbitration agreement.
(ii) The second involves the presumption that the parties' choice of a seat of arbitration reflects their choice of governing law for the arbitration agreement more generally.

In his dissenting judgment, Lord Burrows used the shorthand of the "main contract" and "seat" approaches respectively.

The High Court and Court of Appeal Decisions

At first instance, Baker J in the High Court concluded that there was no need to determine the law applicable to the arbitration agreement, refusing to issue the...