Monday, January 19, 2015

Law governing arbitration agreement: SulAmerica, Arsanovia, Habas, Enercon

 

Sulamerica CIA Nacional de Seguros SA and others v Enesa Engenharia SA and others [2012] EWCA Civ 638

The English Court of Appeal has clarified what has been an uncertain area of jurisprudence as to which law should apply to the arbitration agreement where none is expressly stated. It upheld the High Court's decision that the law of the seat (England) should apply in this case, despite the fact that all other factors pointed to the law of Brazil. In so doing, they continued the anti-suit injunction that had been ordered in relation to Brazilian court proceedings. The Court included the three stage test for determining the proper law of the arbitration agreement: (i) whether the parties expressly chose the law of the arbitration agreement; (ii) whether the parties made an implied choice of the arbitration agreement; and (iii) in the absence of express or implied choice, the system of law with which the arbitration agreement has the “closest and most real connection”. In this case, the arbitration agreement had its closest and most real connection with English law and was therefore governed by English law.

Arsanovia Ltd & Ors v Cruz City 1 Mauritius Holdings

Another related decision of the Commercial Court ia Arsanovia Ltd & Ors v Cruz City 1 Mauritius Holdings which concerned the application of the Sulamérica test in circumstances where the parties had expressly chosen Indian law to govern the substantive contract and London as the seat of arbitration. Interestingly, both parties sought to rely upon the decision in Sulamérica in support of their conflicting positions as to the law of the arbitration agreement. The court in Arsanovia was satisfied on the facts of the case that the parties had evinced an intention that Indian law was to apply to the arbitration agreement, the effect of which was that the arbitral tribunal was found not to have had jurisdiction to issue one of the two challenged awards. Although not decisive, the court was satisfied that the choice of law governing the substantive contract was a "strong pointer" toward the law of the arbitration agreement which could not be displaced alone by the choice of a seat in a foreign jurisdiction.

Habas Sinai Ve Tibbi Gazlar Istihsal Andustrisi AS and VSC Steel Company Ltd [2013] EWHC 4071 (Comm)

In subsequent decision of Habas Sinai Ve Tibbi Gazlar Istihsal Andustrisi AS and VSC Steel Company, the English Commercial Court further added that the terms of the arbitration agreement may themselves indicate an implied choice of law of that arbitration agreement. The contract which was ultimately concluded by two companies acting as agents for Habas, provided for no applicable law to the substantive contract or to the arbitration agreement, but provided for arbitration in London. The Court rejected the argument that it should disregard the chosen seat included in the arbitration agreement when considering the law with which the agreement had its closest connection, on the basis that the Claimant’s agents exceeded their actual authority when agreeing to the arbitration agreement. For a number of reasons, the Court found that, even if it was the case that there was no actual authority to agree the London arbitration clause, the applicable law of the arbitration agreement would be English law.

Enercon India Ltd v. Enercon GmbH (Indian Supreme Court)

The Indian Supreme Court had to determine whether the seat of the arbitration was London or India in light of an arbitration clause which provided that the "venue of the arbitration proceedings shall be London" and that "the provisions of Indian Arbitration and Conciliation Act 1996 shall apply". The Supreme Court, having regard to the applicable law of the contract (Indian law) and the fact that the parties did not purport to exclude the application of Part 1 of the Indian Arbitration and Conciliation Act, held that India is the seat of the arbitration. The Court also went on to state that the choice of India as the seat was analogous to an exclusive jurisdiction clause in favour of the Indian courts which had the effect of excluding the respondent's right from seeking interim relief in the English courts. The latter part of the Supreme Court's decision is in stark contrast with that of Blair J. in U&M v. Zambia (Zambian courts were the natural courts for granting effective interim relief in respect of those assets which were present in Zambia, notwithstanding that London was the seat). 



Sources: http://uk.practicallaw.com/5-519-6971

https://www.dlapiper.com/en/uk/insights/publications/2013/03/determining-the-law-of-an-arbitration-agreement-__/

http://hsfnotes.com/arbitration/2014/01/20/commercial-court-reaffirms-the-importance-of-sulamerica-in-determining-the-law-of-the-arbitration-agreement-in-circumstances-where-choice-of-seat-was-agreed-without-actual-authority/

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