Anti-suit injunctions and determining the law of the arbitration agreement - the Court of Appeal In Enka v Chubb

Anti-suit injunctions and determining the law of the arbitration agreement - the Court of Appeal In Enka v Chubb

Changes in the Rules on Witness Evidence - Watch This Space

The Court of Appeal in Enka Insaat Ve Sanayi AS v OOO “Insurance Company Chubb” & Ors [2020] EWCA Civ 574 has confirmed that the English courts can grant anti-suit injunctions where the seat of the arbitration is in England and Wales, and has given important guidance on how to determine the law of the arbitration agreement.

 

There are potentially three different types of law relevant in arbitrations:

  • the law of the arbitration agreement;
  • the law of the contract containing the arbitration agreement; and
  • the ‘curial law’ (or ‘lex fori’) – these decide the powers to supervise and support the arbitration (and identify whether the award is governed by the New York Convention) – when parties agree a ‘seat’ or ‘place’ of the arbitration they are choosing which country’s curial law applies, not the geographical location of the hearing venue, which could be held elsewhere.  

In this case, Enka had been one of the sub-contractors building a power plant in Russia. The build contract provided for disputes to be resolved by ICC arbitration with London as the place of the arbitration. There was a massive fire, Chubb paid out insurance monies and brought court proceedings in Moscow against Enka (and others) alleging that faulty performance of the building works caused the fire. Enka applied to the English courts for an anti-suit injunction to restrain the Moscow proceedings.

The parties agreed that the curial law was English, which meant that the English courts had the power to grant anti-suit injunctions in relation to foreign proceedings brought in breach of arbitration agreements. Chubb however argued that the law of the arbitration agreement was Russian, and under Russian law the arbitration agreement would not cover the claims in the Moscow proceedings which they had brought as tort claims. It was common ground that if the law of the arbitration agreement was English, then the claims in the Moscow proceedings would be covered by the arbitration agreement.

The first instance judge, however, refused to determine the law of the arbitration agreement, and instead dismissed the anti-suit injunction application on forum non conveniens grounds, namely that the scope of the arbitration agreement and its applicability to the Russian claims were more appropriately to be determined by the Russian courts.

The Court of Appeal overturned this decision, pointing out that by choosing an English seat, the parties had agreed that the English court was an appropriate court to exercise its curial powers which included the power to grant an anti-suit injunction, and so the question of forum non conveniens simply did not arise.

The Court of Appeal then had to determine what was the law of the arbitration agreement so it could decide whether the foreign proceedings were a breach of the arbitration agreement. The Court of Appeal commented on the rather unsatisfactory state of the law in this area, and in an attempt to impose some order and clarity, they summarised the principles applicable to determining the proper law of an arbitration agreement, when found in an agreement governed by a different system of law, as follows:

  1. The arbitration agreement law is to be determined by applying the three stage test required by English common law conflict of laws rules, namely (i) is there an express choice of law? (ii) if not, is there an implied choice of law? (iii) if not, with what system of law does the arbitration agreement have its closest and most real connection?

 

  1. If there is an express choice of law in the main contract, this may amount to an express choice of the arbitration agreement law. Whether it does so will be a matter of construction of the whole contract, including the arbitration agreement, applying the principles of construction of the main contract law if different from English law.

 

  1. In all other cases there is a strong presumption that the parties have impliedly chosen the curial law as the arbitration agreement law. This is the general rule, but it may yield to another system of law governing the arbitration agreement where there are powerful countervailing factors in the relationship between the parties or the circumstances of the case.

In this case, the proper law of the arbitration agreement was English law:

  • The governing law of the main contract was Russian law but that was not by express choice. There was no clear choice of law clause in the build contract. An attachment to the contract did define Applicable Law as Russian law, but this was drafted in wide terms so as to have a particular focus on regulatory requirements, and it only specifically applied to certain obligations in the contract.
  • The presumption therefore applied that the parties had impliedly chosen that the proper law of the arbitration agreement should coincide with the curial law and be English law. There were no, let alone powerful, countervailing factors suggesting it should be otherwise.

This meant the Moscow Claim was brought and pursued by Chubb Russia in breach of the agreement to arbitrate in the contract. However, injunctions are a discretionary remedy – should the court exercise its discretion to grant the anti-suit injunction? The first instance judge had said that he would not have done so in any event, because Enka had failed to commence arbitration, it had participated in the Russian proceedings, and it had delayed seeking the injunction. The Court of Appeal, however, confirmed that there is no need to have started or intended to start arbitration proceedings in order to obtain an anti-suit injunction; that Enka’s involvement in the Russian proceedings had only been to contest jurisdiction there; and that there was no culpable delay.

Contact our experts for further advice

View profile for Laura BeagrieLaura Beagrie

Search our site