In Enka Insaat Ve Sanayi AS (Respondent) v OOO Insurance Company Chubb (Appellant)
[2020] UKSC 38, the English Supreme Court sought to introduce a measure of certainty in an area of the law which has long been unclear. The central issue in the case was: how the governing law of an arbitration agreement is to be determined when the law applicable to the contract containing it differs from the law of the “seat” of the arbitration, the place chosen for the arbitration in the arbitration agreement.
The main propositions arising from the majority judgment are as follows:
1. Where the law applicable to the arbitration agreement is not specified, a choice of governing law for the contract as a whole will generally apply to an arbitration agreement, which forms part of the contract.
2. The choice of a different country as the seat of the arbitration is not, without more, sufficient to negate an inference that a choice of law to govern the contract was intended to apply to the arbitration agreement.
3. Additional factors which may, however, negate such an inference and may in some cases imply that the arbitration agreement was intended to be governed by the law of the seat are (a) any provision of the law of the seat which indicates that, where an arbitration is subject to that law, the arbitration will also be treated as governed by that country’s law; or (b) the existence of a serious risk that, if governed by the same law as the main contract, the arbitration agreement would be ineffective. Either factor may be reinforced by circumstances indicating that the seat was deliberately chosen as a neutral forum for the arbitration.
4. The law applicable to the arbitration agreement will be (a) the law chosen by the parties to govern it, or (b) in the absence of such a choice, the system of law with which the arbitration agreement is most closely connected.
5. Whether the parties have agreed on a choice of law to govern the arbitration agreement is ascertained by construing the arbitration agreement and the contract containing it, as a whole, applying the rules of contractual interpretation of English law as the law of the forum.
6. Where there is no express choice of law to govern the contract, a clause providing for arbitration in a particular place will not by itself justify an inference that the contract (or the arbitration agreement) is intended to be governed by the law of that place.
7. In the absence of any choice of law to govern the arbitration agreement, the arbitration agreement is governed by the law with which it is most closely connected. Where the parties have chosen a seat of arbitration, this will generally be the law of the seat, even if this differs from the law applicable to the parties’ substantive contractual obligations.
8. The fact that the contract requires the parties to attempt to resolve a dispute through good faith negotiation, mediation or any other procedure before referring it to arbitration will not generally provide a reason to displace the law of the seat of arbitration as the law applicable to the arbitration agreement by default in the absence of a choice of law to govern it.
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