In an important case for English arbitration, the Supreme Court has today handed down its judgment in Enka Insaat Ve Sanayi A.S. ("Enka") v OOO Insurance Company Chubb ("Chubb").
In a 3-2 majority, the Supreme Court upheld a Court of Appeal decision in respect of the correct approach under English law to determine the governing law of an arbitration agreement and the proper role of the court of the seat of the arbitration to determine whether foreign proceedings give rise to a breach of the arbitration agreement.
The Court considered three important questions:
- What is the correct approach to determining the proper law of an arbitration agreement?
- What is the relevance of the parties' choice of law for the main contract under Rome 1?
- What is the role of the court of the seat of an arbitration and in what circumstances is it appropriate or permissible for the English court to permit a foreign court to decide whether proceedings before that foreign court are a breach of the arbitration agreement?
In resolving these questions, the Court found that the correct approach for an English court should be to apply English common law rules rather than Rome 1. The law applicable under common law rules will be (i) the law expressly or impliedly chosen by the parties; or (ii) in the absence of such choice, the system of law "most closely connected" to the arbitration agreement.
Applying those rules, the Court concluded that the contract as a whole contained no choice of law (either express or implied) and that the validity and scope of the arbitration agreement was therefore governed by the law of the seat of arbitration – as the law with which the clause is most closely connected and that therefore English law was the applicable law. By agreeing to arbitrate in London, the parties agreed to submit to the supervision and jurisdiction of the English courts, including its jurisdiction to grant an anti-suit injunction.
This decision is now a leading authority on how the English Court should determine the law governing arbitration agreements and has clarified the role of the seat of the arbitration in relation to the enforcement of the arbitration agreement.
Full analysis to follow.