An insurer in Russia.

A contractor in Turkey.

An arbitrator in England.  

No, this is not a rather stale spoiler for No Time to Die, rather an insight into the subject matter recently considered by the Supreme Court in London on the question of jurisdiction where a contract was otherwise silent. 

Background

In 2016, a power plant in Russia was severely damaged by fire. Chubb Russia paid out US$400m. They then sought to recover from the Turkish company, Enka, who built the power plant under a 2012 contract. That contract contained a disputes resolution clause. The clause specified the seat of arbitration as London, England. The contract was, however, otherwise silent on its specific jurisdiction. 

In 2019, Enka brought an arbitration claim in London seeking injunctive relief restraining Chubb’s proceedings in Russia. 

 That case made its way to the UK Supreme Court.  

Judgment 

At common law, the applicable law for arbitration is that expressly or impliedly chosen by the parties. Where, as in the instant case, no such choice is articulated, it is that “most closely connected” to the arbitration agreement.    

The Supreme Court, by a 3:2 majority, concluded that where the arbitration agreement is governed by the law of the chosen seat of arbitration, then that is the law with which the dispute resolution clause is most closely connected.

The English court, as the court of the place of the seat of the arbitration chosen by the parties, has a particular responsibility to ensure that the arbitration agreement is upheld and applied in accordance with its terms. On the basis of expert evidence of foreign law adduced in the usual way, the English court could determine the meaning of [the arbitration clause] according to Russian law. If [it], so construed, imposes an obligation on Chubb Russia to proceed by way of arbitration rather than by litigation, the English court could and should enforce that obligation by way of an anti-suit injunction.

It doesn’t matter whether the arbitration agreement is governed by English, Russian or Turkish law as the question remains the same: has there been a breach of that agreement?

Comment

It occurs that this costly exercise might have been avoided with a more precise approach at the drafting stage of the 2012 agreement.   

As a contractor, do you know what your contracts specify in this regard?

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By Paul Sullivan FRSA

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