Landmark Ruling in Enka v Chubb: Clarifying the Proper Law of Arbitration Agreements

In a pivotal decision, the UK Supreme Court in Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38 addressed a longstanding conflict in international arbitration law: which system of law governs an arbitration agreement when the governing law of the main contract and the arbitral seat differ?

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Background

The dispute stemmed from a construction contract between Enka, a Turkish engineering firm, and Energoproekt (later transferred to Unipro), a Russian company. Following a catastrophic fire at a Russian power plant in 2016, Unipro’s insurer, Chubb Russia, sought compensation from Enka in Russian courts despite the contract’s arbitration clause providing for arbitration in London under the ICC Rules.

Enka sought an anti-suit injunction from English courts to stop the Russian proceedings, arguing the arbitration agreement should be governed by English law as the law of the arbitral seat. Chubb Russia contended Russian law governed, given the main contract’s Russian law clause.

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The Supreme Court’s Key Findings

• Primary Question: What law governs the arbitration agreement if there is no express choice of law?
• Ruling: The law of the arbitral seat applies (here, English law) in the absence of an express or implied choice of law for the arbitration agreement, reinforcing the separability of arbitration clauses from the main contract.
• Reasoning: The Court emphasized that:
  • Arbitration agreements are often separable from the main contract (as under section 7 of the Arbitration Act 1996).
  • Applying the law of the arbitral seat enhances certainty, predictability, and coherence in arbitration, particularly where the seat’s law regulates arbitration procedure and enforcement.
  • This interpretation is supported by international practice and jurisprudence (e.g., Singapore, India).
• Impact on the Field:
  • This decision overruled the Sulamérica precedent that favored the main contract’s law unless displaced by strong factors.
  • It promotes London as a premier arbitration hub by affirming the significance of curial law in arbitration.
  • The ruling guides drafters and legal practitioners in cross-border contracts, highlighting the need for clear, express choices of law for arbitration agreements.
• Effect on Anti-Suit Injunctions: The Supreme Court upheld the anti-suit injunction restraining Chubb Russia’s Russian proceedings, citing breach of the arbitration agreement governed by English law.

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Why This Matters

This ruling addresses a critical ambiguity in international arbitration, balancing party autonomy and legal certainty. It ensures consistent treatment of arbitration agreements and affirms the centrality of the chosen seat’s legal framework in governing disputes.

Timeline of Events

Stage	Date
Supreme Court Judgment	9 October 2020
Construction Contract	27 June 2012
Fire Incident	1 February 2016
Moscow Court Proceedings Initiated	25 May 2019
English Court Anti-Suit Injunction	29 April 2020
Arbitration Notice	10 January 2020

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Key Takeaways for Legal Practitioners

• When drafting contracts with arbitration clauses, specify the governing law of the arbitration agreement to avoid ambiguity.
• Choosing a seat of arbitration implies curial law, but not necessarily the governing law of the arbitration agreement unless clearly expressed.
• Expect increased reliance on English law and London as a trusted arbitration venue.

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