The Law of the Arbitration Agreement: Enka Insat v OOO Insurance: UK Supreme Court

Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38 (09 October 2020) is an important decision which addresses the critical issue of the choice of law of the arbitration agreement. We had, in this blog, criticised, the pre-Enka English approach of giving priority to the law of the seat than the law of the contract where there is no express choice of the law of the arbitration agreement. 

Generally, we analyse such judgments in two parts, the first part deals with a detailed descriptive summary of the decision and the second part, usually in one or more posts, provides a critique of the decision. We will do so in this post but with a small change. We will not provide a detailed descriptive comment like we always do but refer readers to the (informal) press summary (pdf) provided by the UK Supreme Court, which is helpful in identifying the central aspects of the decision. In case readers wish to watch the summary rather than read it, please access this link. However, a brief idea about the judgment is provided in this post. 

The decision covers a situation where the law of the contract is different from that of the seat of arbitration. In this case, the English Court of Appeal had held that where there was no express choice of law of the arbitration agreement, the law of the arbitration agreement should be governed by the law of the seat as a matter of implied choice, subject only to any particular features of the case demonstrating power reasons to the contrary.

Readers who have read our post noted above will be familiar with the critique that preference to the law of the seat over the law of the contract is not the correct approach in the choice of the law of the arbitration agreement. Further, a look at the decision of the court of appeal noted in the above paragraph would reveal a test that is subjective and amorphous. 

In the Supreme Court, Lord Kerr, Lord Sales, Lord Hamblen, Lord Leggatt and Lord Burrows heard the matter.  There are three opinions: 

• the first opinion was of Lord Hamblen and Lord Leggatt with which Lord Kerr agreed, 
• the second one by Lord Sales (with whom Lord Sales agreed), and 
• also a separate opinion by Lord Sales. 

Between the opinions, the  judges agreed in principle that if the parties had agreed on the law of the contract, such law would also govern the law of the arbitration agreement. The judges also agreed that what is material in granting an anti-suit injunction under English law whether the pursuit of foreign proceedings was in violation of the arbitration agreement, and not on the law of the arbitration agreement [See, the Summary]. There is considerable significance in these propositions. 

However, the following issues were contentious between them:

• Where there is no express or implied choice of the law of the contract, whether the law with which the main contract is most closely connected should govern the arbitration agreement?
• Whether, on facts, parties chose Russian law to govern their construction contract?

In terms of relief, the majority dismissed the appeal while the dissenting judges remitted the question as to whether there was breach of the law of the arbitration agreement to the Commercial Court for determination.

More on the decision in another post.