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ARBITRATION: Enka v OOO Insurance 2020

How is the governing law of an arbitration agreement to be determined when the law applicable to the contract it contains is different from the law of the ‘seat’ of the arbitration (the place chosen for the arbitration in the arbitration agreement)? The Supreme Court of Justice of the United Kingdom has recently considered this issue in the case of Enka Insaat Ve Sanayi AS (Respondent) v OOO Insurance Company Chubb (Appellant) [2020] UKSC 38.


Facts of the Case

A Russian power plant was badly damaged by fire in February 2016. The appellant (“Chubb Russia”) was the insurer of the power plant. It had insured the owner of the power plant against fire damage. Chubb Russia brought proceedings, in Russia, against subcontractors (“Enka”). The proceedings alleged that the subcontractors were liable for causing the fire.

Legal Proceedings

In September 2019, Enka brought an arbitration claim in the English High Court. The main contract had contained an arbitration agreement with a ‘London-seated’ arbitration clause. Enka claimed that the Russian proceedings were a breach of the arbitration agreement. Enka therefore sought an anti-suit injunction from the English High Court. Such an injunction, if granted, would have had the effect of restraining the Russian proceedings. However, the arbitration agreement had not specified which law should apply to the contract or the arbitration agreement.


The case was eventually heard by the Supreme Court of the United Kingdom. Judgment was handed down by the Supreme Court on 9th October 2020. The main issue for the court was, where parties have chosen to arbitrate any dispute, but have not specified the law of the contract, or of the arbitration, what law should apply to the arbitration agreement?

Judgment of the Supreme Court of the UK

The laws relating to international arbitration are complex. It is not surprising, therefore, that the five judges in the Supreme Court could not agree. However, by a majority of 3-2, the Supreme Court essentially held that because London had been chosen as the seat of arbitration, the arbitration agreement was most closely connected with English law. Therefore, the court decided that the arbitration agreement was also governed by English law. They did, however, state that this was the ‘default position’.


Concluding Thoughts

One thing the case clearly highlights – once again – is the need for those drafting any kind of commercial contract to ensure that it is clear on these issues. Failure to do so may lead to costly legal proceedings to resolve them.


[An excellent blog on the judgment can be found at https://gowlingwlg.com/en/insights-resources/articles/2020/which-country-s-laws-govern-arbitration-agreement/ )

Exercise

Find a word or phrase in the text which means the following:

1. Claimed or asserted that someone had done something wrong.

2. To be legally responsible for something

3. The formal name for a court order which prevents someone doing something.

4. A two-part verb which means to give formal judgment in a court case.

5. A word, used in relation to court judgments, which means ‘decided’.

Answers:

1. alleged

2. liable

3. injunction

4. to hand down

5. held (to hold)



(c) Cambridge Legal English Academy 2020

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