In Enka Insaat Ve Sanayi AS v OOO “Insurance Company Chubb” & Ors  [2020] UKSC 38 (“Enka”), the UK Supreme Court (“UKSC”) delivered an interesting judgment on the applicable law to the arbitration agreement, departing from the reasoning of the Court of Appeal.

The case involved the construction of a power plant in Russia. Enka was a sub-contractor for the construction of the plant. The operation of the plant went south and the insurers (“Chubb Russia”) commenced proceedings against Enka before Russian courts. Enka moved to the UK courts to ask for an anti-suit injunction.

The contract (“Contract”) between the parties included an ICC arbitration clause with seat in London, but did not specify either the applicable law to the arbitration agreement, or the applicable law to the main contract (though it was implied that the latter was Russian law).
The Court of Appeal stated that in absence of a clear manifestation of the applicable law to the arbitration agreemeent, the law of the seat shall apply and therefore English law should govern the arbitration agreement.

The Supreme Court disagreed and reasoned as follows: where there is an express choice of law governing the main contract, and absent a choice of law governing the arbitration agreement, the law of the main contract shall extend to the interpretation of the arbitration agreement (see paras 43-52). Only when there is no express choice of law governing the main contract, the law of the seat shall be the applicable law to the arbitration agreement because of the closest connection test (see paras 118-146).

Therefore, in Enka, since Russian Law was not explicitly agreed as the law applicable to the main contract, the Supreme Judges agreed on English law as the law applicable to the arbitration agreement (see paras 147-156).

The full text of the decision can be found here.

G. V.