Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb

Under English common-law conflict rules, the law governing an arbitration agreement is the law chosen by the parties or, absent choice, the law with which the agreement is most closely connected. A governing-law choice for the whole contract generally extends to its arbitration clause. Selection of a different arbitral seat does not alone displace that inference. It may be displaced where the law of the seat points to that result or the chosen law creates a serious risk of significantly undermining the arbitration agreement. If no law was chosen, the agreement is generally governed by the law of the seat. A multi-tier dispute-resolution process does not ordinarily alter that default. The English court at the seat may restrain foreign proceedings brought in breach of the arbitration agreement, irrespective of its governing law.

Enka, a Turkish subcontractor on a Russian power-plant project, was party to a construction contract containing a multi-tier dispute-resolution clause. It required ICC arbitration seated in London. Following a fire, Chubb Russia paid the owner’s insurance claim and commenced subrogated proceedings against Enka and others in Russia.

Enka sought an anti-suit injunction in the English Commercial Court. The claim was dismissed at first instance: [2019] EWHC 3568 (Comm). The Court of Appeal allowed Enka’s appeal and restrained Chubb Russia from continuing the Russian proceedings: [2020] EWCA Civ 574.

The principal question before the Supreme Court was whether English or Russian law governed the validity and scope of the arbitration agreement. The court also considered whether the governing law affected the English court’s power or discretion to restrain foreign proceedings brought in breach of an English-seated arbitration agreement.

1. Disposition. By a majority of three to two, the appeal was dismissed. Lord Hamblen and Lord Leggatt delivered the majority judgment, with which Lord Kerr agreed. The arbitration agreement was governed by English law, and the anti-suit injunction granted by the Court of Appeal was properly made.

2. Applicable conflict rules. The Rome I Regulation excludes arbitration agreements through article 1(2)(e). Their governing law is therefore determined by English common-law conflict rules. The court first identifies any express or implied choice by construing the contract as a whole under English rules of interpretation. If there is no choice, the applicable law is the system with which the arbitration agreement is most closely connected.

3. Party choice and the arbitral seat. A choice of law for the contract generally extends to an arbitration agreement contained within it. Selection of a different seat does not alone negate that inference or constitute an implied choice of the law of the seat. The inference may nevertheless be displaced where the law of the seat itself points to that result, or where applying the main contract law creates at least a serious risk of significantly undermining the arbitration agreement. Separability does not require an arbitration clause to be treated as wholly independent when identifying its governing law.

4. Default rule and application. In the absence of choice, an arbitration agreement is generally most closely connected with the law of its seat. That rule accords with the place of legal performance, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, legislative policy and commercial certainty. The parties had made no choice of Russian law: references to “Applicable Law” imposed compliance obligations rather than selecting a governing law. The main contract was governed by Russian law under article 4(3) of the Rome I Regulation, but the integrated dispute-resolution clause was governed by English law as the law of the London seat.

5. The Arbitration Act 1996. Section 4(5) means that a foreign law applicable to a matter covered by a non-mandatory provision disapplies that provision without any specific agreement excluding it. The Act therefore contemplates an English-seated arbitration whose arbitration agreement is governed by foreign law. Choice of an English seat does not itself imply a choice of English law for the arbitration agreement.

6. Anti-suit relief. In significant obiter reasoning, the majority held that the principles governing an anti-suit injunction in support of an English-seated arbitration do not change when the arbitration agreement is governed by foreign law. Forum conveniens is irrelevant, while comity has little role where relief enforces a contractual promise not to litigate.

7. Dissent. Lord Burrows, with whom Lord Sales agreed, considered that the parties had impliedly chosen Russian law for the main contract and therefore for the arbitration agreement. They would have remitted the injunction question to the Commercial Court for determination under Russian law.

• United Kingdom Supreme Court: The court dismissed Chubb Russia’s appeal by a majority of three to two and affirmed the Court of Appeal’s conclusion, although on different reasoning, that English law governed the arbitration agreement: [2020] UKSC 38 .
• Court of Appeal: The court allowed Enka’s appeal and granted an anti-suit injunction restraining Chubb Russia from continuing the Russian proceedings: [2020] EWCA Civ 574 .
• Commercial Court: Andrew Baker J dismissed Enka’s claim, principally because he regarded the Moscow Arbitrazh Court as the appropriate forum to determine whether the Russian claim fell within the arbitration agreement: [2019] EWHC 3568 (Comm) .