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Court of Appeal confirms power of English Courts to grant anti-suit injunctions in support of London-seated arbitrations, regardless of law governing the arbitration agreement

In its recent decision in Enka v Chubb [2020] EWCA Civ 574,1 the Court of Appeal strongly endorsed the English courts' power to grant anti-suit injunctions restraining foreign proceedings brought in breach of an arbitration agreement. The Court confirmed that the jurisdiction to grant anti-suit relief arises from the parties' choice of an English seat of arbitration and exists whether or not the arbitration agreement is governed by English law.

The Court also addressed lingering uncertainty in how the test for determining the governing law of an arbitration agreement is to be applied. In the absence of an express choice of law, there will now be a "strong presumption" that the parties have impliedly chosen the curial law (i.e. the law of the seat) to govern the arbitration agreement.

 

Anti-suit injunctions and the (ir)relevance of the governing law

Subject to inroads made by European Union law, the English Courts have consistently demonstrated their willingness to grant anti-suit injunctions to restrain foreign proceedings brought in breach of an arbitration agreement.2 Following the 2013 decision of the Supreme Court in Ust-Kamenogorsk,3 however, it has remained unclear whether and to what extent the governing law of the arbitration agreement is relevant to the jurisdiction of the English Court to grant such relief.

The decision of the Court of Appeal in Enka v Chubb makes clear that the English courts will exercise their "curial jurisdiction" to grant anti-suit injunctions based on the parties' choice of London as an arbitral seat and regardless of the law governing the arbitration agreement. If necessary, the Court will hear expert evidence on foreign law said to govern the arbitration agreement and apply that law to determine whether the foreign proceedings are in breach of the arbitration agreement.4

The Court of Appeal emphasised that the "anti-suit injunction jurisdiction is concerned to protect and enforce the integrity of the arbitration agreement" and that the role of the curial court is to "interrogate the substantive jurisdiction of the arbitral tribunal… in determining whether the foreign proceedings are a breach of the agreement to arbitrate the dispute in question."5 Accordingly, even if the arbitration agreement is governed by foreign law, considerations of forum conveniens and comity do not arise and should not be taken into account by the English Court in deciding whether or not to grant anti-suit relief.6

 

How to determine the law governing the arbitration agreement?

There is no doubt concerning the general choice of law test to be applied to determine the governing law of an arbitration agreement. The court must consider: (1) is there an express choice of law? (2) if not, is there an implied choice of law? (3) if not, with which system of law does the arbitration agreement have its closest and most real connection?7

There has, however, been considerable uncertainty as to how this test should be applied in practice. In particular, different courts have given differing levels of weight to the parties' choice of: (i) the substantive law governing the contract; and (ii) the arbitral seat, when determining what "implied choice" the parties may have made and/or what system of law has the closest and most real connection with the arbitration agreement.8

The Court of Appeal in Enka sought to "impose some order and clarity" on the existing case law.9

The first stage of the test remains to determine whether the parties have made an express choice of law to govern the arbitration agreement. Exceptionally, there may be an express choice of law within the arbitration agreement itself, but more commonly, this will require the Court to consider whether the parties' express choice of law to govern their substantive obligations amounts to an express choice of the same law to govern the arbitration agreement. In order to determine whether such an express choice has occurred, the English Court must apply "the principles of construction of the main contract law if different from English law."10

If no express choice of law is found (i.e. at stage 2 of the test), there will now be a "strong presumption that the parties have impliedly chosen the curial law as the [law governing the arbitration agreement]."11 Lord Justice Popplewell expressed the view that "the connection between the [arbitration agreement] law and the curial law is very much closer than that between the [arbitration agreement] law and the main contract law."12

In view of the strong presumption at stage 2 of the test, very few cases will require the Court to engage with stage 3. The Court of Appeal made clear that the presumption in favour of the curial law will be displaced only "where there are powerful countervailing factors in the relationship between the parties or the circumstances of the case."13

 

Comment

This is a strong judgment of the Court of Appeal that once again underscores the position of England and Wales as a "pro-arbitration" jurisdiction.

The Court of Appeal has made clear that, where the parties have chosen an English seat for their arbitration, the English courts will readily exercise their "curial jurisdiction" to grant anti-suit relief (provided that the party seeking such relief can demonstrate that the foreign proceedings amount to a breach of the arbitration agreement). In so doing, the English Courts will not shrink from engaging with difficult questions of foreign law if it is necessary to do so.

With regard to the governing law of the arbitration agreement, the judgment provides welcome clarity to a situation where there was arguably inconsistent authority at the Court of Appeal level. It can be expected that future cases will test the boundaries of when an express choice of a governing law for the parties' substantive contractual obligations will also amount to an express choice of law governing the arbitration agreement. The recent Court of Appeal judgment in Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait)14 suggests that this is a relatively low bar, but future cases may show the Kabab-Ji decision to be an outlier in a world where the arbitration agreement is almost invariably governed by the law of the seat.

In order to ensure certainty and reduce the scope for future disputes, the best advice to parties remains to make an express choice of law within the arbitration agreement itself.

 

1 Enka Insaat Ve Sanavi A.S. v OOO "Insurance Company Chubb" and others [2020] EWCA Civ 574.
2 See e.g. Nori Holding Ltd v Public Joint-Stock Company Bank Otkritie Financial Corporation [2018] EWHC 1343 (Comm).
3 Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Plant LLP [2013] UKSC 35.
4 Enka, paras. 63-64
5 Enka, para. 53.
6 Enka, para. 64
7 Sulamerica Cia Nacional de Seguros SA v Enesa Engelharia SA [2013] 1 WLR 102, paras. 9 and 26.
8 See e.g.¸ Sulamerica Cia Nacional de Seguros SA v Enesa Engelharia SA [2013] 1 WLR 102 and Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2020] EWCA Civ 6.
9 Enka, para. 89.
10 Enka, para. 105(2).
11 Enka, para. 105(3).
12 Enka, para. 99.
13 Enka, para. 105(3).
14 [2020] EWCA Civ 6.

 

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