Enka v Chubb: U.K. Supreme Court Rules On Law Governing Arbitration Agreements

Published date15 October 2020
Law FirmWilmerHale
AuthorMr Charlie Caher, Jonathan Lim and Joe Rich

On 9 October 2020, the U.K. Supreme Court in Enka Insaat Ve Sanayi AS v. OOO Insurance Company Chubb [2020] UKSC 38 ruled on the English law approach to determining the law governing an arbitration agreement. The Supreme Court's decision (available here) settles a vexed question of law that has given rise to conflicting English Court of Appeal authority.

In summary, the majority held that:

  • Applying English common law rules the arbitration agreement will be governed by (i) the law expressly or impliedly chosen by the parties; or (ii) in the absence of such choice, the law with which the contract is most closely connected.
  • Where the parties have not specified the law applicable to the arbitration agreement but have chosen the law to govern the contract containing the arbitration agreement parties will be presumed to have intended that such law would apply to the arbitration agreement, and the choice of a different seat does not, of itself, displace such a presumption.
  • Any presumption that the parties chose the law of the contract to govern the arbitration agreement could be overcome where there is a "serious risk that, if governed by the same law as the main contract, the arbitration agreement would be ineffective" or by provisions of the law of the seat stating specifically to the contrary.
  • Where the parties have not chosen a law to apply to the arbitration agreement (either expressly or impliedly), the law of the seat will generally be most closely connected to the arbitration agreement and will therefore apply.

The Supreme Court's thorough judgment, which looked extensively to international commentators and authorities, including Gary Born's and Professor Albert Jan van den Berg's treatises, provides welcome certainty as to how English courts will determine the law governing the arbitration agreement in future cases. The decision is also noteworthy for its express endorsement of the validation principle as applied to the law governing the arbitration agreement (citing the second edition of Gary Born's International Commercial Arbitration (2014)). The background to the decision and the key points emerging from the Supreme Court's ruling are expanded upon below.

Background

The underlying dispute arose out of allegations that faulty works by Enka, a subcontractor involved in the construction of the Berezovskaya power plant in Russia, were partially responsible for a massive fire that damaged the plant in 2016. The contract between Enka and the head-contractor included an arbitration agreement providing for London-seated arbitration. The contract did not expressly provide for a governing law, either of the contract or the arbitration agreement.

Chubb Russia, insurers of the assignee head-contractor, filed a claim in the Moscow Arbitrazh Court in the summer of 2019 alleging that Enka and ten other defendants were jointly liable for the fire. In response, Enka filed a motion to dismiss in the Russian courts and brought suit in the English High Court on 16 September 2019, seeking: (i) a declaration that Chubb Russia was bound by the arbitration agreement in the contract and that it applied to the Russian claim; and (ii) an anti-suit injunction pursuant to s.37 of the Senior Courts Act 1981 restraining Chubb Russia from continuing the Russian proceedings.

In the English High Court, the dispute centered, among other things, on the question of the law that governed the arbitration agreement. Enka contended that it was governed by English law; Chubb contended that it was governed by Russian law. Although Baker J did not resolve the question of the proper law governing the arbitration agreement, he rejected Enka's argument that the parties' choice of seat was a choice of law for the arbitration agreement.1 Baker J ultimately dismissed Enka's claim on the...

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