On Friday 9 October 2020, the UK Supreme Court gave judgment in Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb (“Enka v Chubb”). It ended an unedifying episode of real doubt as to the approach under English law to identifying the proper law applicable to arbitration clauses. This issue arises because it is well established that an arbitration clause stands as a separate and independent agreement within the main contract where it is found (the “separability principle”) and each agreement must be governed by a system of law.
Summary of case
The case involves a fire at power plant in Russia. Chubb was the insurer and paid out on the insurance claim, then pursued a subrogated claim against Enka, which was involved in the construction of the plant. The construction contract had no governing law clause but contained an arbitration clause specifying arbitration in London. Chubb said that there was an implied choice of Russian law in the construction contract and that as a result Russian law also applied to the interpretation of the arbitration clause; and since the arbitration clause must be interpreted narrowly under Russian law, the claim that Chubb brought (which involved some elements of tort) fell outside the arbitration clause and could proceed in the Russian Courts. Enka, on the other hand, said that English law applied to the arbitration clause because England was the seat of the arbitration, and since the arbitration clause must be interpreted expansively under English law, Chubb’s claim had to proceed through arbitration and Enka sought an anti-suit injunction from the English Courts to compel Chubb to bring the Russian litigation to an end.
The High Court dismissed Enka’s claim on the primary ground that the appropriate forum to determine to scope of the arbitration agreement was the Russian Court. On appeal, the Court of Appeal overturned the judge’s decision. It held that, unless there has been an express choice of the law that is to govern the arbitration agreement, the general rule should be that the arbitration agreement is governed by the law of the seat, as a matter of implied choice; that there was no express choice of law in this case and that the arbitration agreement was therefore governed by English law; and that it was appropriate to grant an anti-suit injunction to restrain Chubb from pursuing the Russian claim. Chubb appealed to the Supreme Court.
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