International Arbitration Agreements: Which Law Applies?

Publication Date17 November 2020
SubjectCorporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
Law FirmShepherd and Wedderburn LLP
AuthorMr Phillip Sewell

Introduction

In Enka Insaat Ve Sanayi AS ("Enka") v OOO Insurance Co Chubb ("Chubb Russia") (2020) UKSC 38, the UK Supreme Court ("SC") considered the applicable law of an arbitration agreement. The Judgment (9 October 2020) will be of particular relevance to arbitration agreements with an international dimension, where there are questions regarding the system of national law that governs an arbitration agreement distinct from the governing law applicable to the main contract.

The case

Enka was an engineering business contractor completing works at a Russian power plant insured by Chubb Russia. Following a fire at the plant, Chubb Russia brought a claim against Enka in Moscow, seeking damages under the terms of the construction contract ("the contract") governing the works.

In this case, the contract provided for disputes to be arbitrated in England, yet other provisions had to be governed by Russian law. Further, while the arbitration clause referred to England, the parties made no express choice of law to govern the Arbitration Agreement distinct from the contract.

The parties' positions in respect of the governing law that should apply to the Arbitration Agreement was English law (in the case of Enka) and Russian law (Chubb Russia).

The decision

The claim brought by Enka in England to seek a declaration in support of its position was first heard in the Commercial Court, and dismissed as the Judge regarded that another court in Russia was better suited to hear the damages case.

On appeal, the Court of Appeal subsequently determined that the Commercial Court was wrong in its earlier judgment, reasoning that the English Courts controlled the place of the arbitration and that therefore they were the right Court to determine matters. In the eyes of the Court of Appeal, while there was no express choice of law for the Arbitration Agreement, there was a strong presumption that the parties had impliedly chosen English law because of their choice of England as the place of arbitration.

Appeal to the Supreme Court

The question of applicable law in such circumstances subsequently proceeded to the most senior court in England, being the Supreme Court ("SC"), who on a split majority of 3 to 2 judges determined that the Court of Appeal was wrong to find that in choosing the place of arbitration there was a "strong presumption" that the law of that seat was intended by the parties to apply to it.

The SC instead suggested a general proposition: where the parties have...

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