Home > Supreme Court ruling on the law applicable to arbitration agreements: key points of Enka v OOO Insurance

Supreme Court ruling on the law applicable to arbitration agreements: key points of Enka v OOO Insurance

2nd December 2020

Supreme Court ruling on the law applicable to arbitration agreements: key points of Enka v OOO Insurance

In the eagerly awaited judgment in Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38, the Supreme Court finally settled an important issue in the law of arbitration that has long divided the authorities and commentary: in the absence of a choice by the parties, where the law applicable to the main contract differs from that of the arbitral seat, it is the law of the seat that governs the validity and scope of the arbitration agreement.  Although decided by majority of only 3:2, the case represents, for all practical purposes, welcome clarity, authority, and – most importantly – certainty for the business community. 

The key points arising in the Majority Opinion which are as follows:

  • In the absence of an express choice as to the law governing an arbitration agreement, the law chosen by the parties to govern the main contract will generally apply to the arbitration agreement as to any other clause contained within the main contract.
  • The doctrine of separability does not mean that the arbitration agreement is distinct for all purposes: its scope is limited to ensuring that the parties’ agreement to arbitrate remains binding, even if the main contract itself is held void, frustrated, or otherwise becomes invalid.
  • In the present case, the parties had not chosen, either expressly or impliedly, a governing law applicable to the main contract. The third limb of the English common law rules of determining the law applicable to a contract, i.e. the “closest and most real connection” test, therefore applied,
  • Under the English conflicts of law rules, the default rule for determining the law applicable to an arbitration agreement in the absence of choice by the parties is that the law of the arbitral seat applies. Such a default rule accords with international legislation and policy and the domestic English arbitration law through which the New York Convention 1958 is implemented.

Part I of our commentary on the decision examines the reasoning of the Majority in depth; Part II sets out noteworthy points of principle arising from the minority Opinions.

Ryan Hocking
November 2020

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