The Supreme Court has ruled that a Russian insurance company cannot pursue litigation in Moscow as it would breach an arbitration agreement governed by English law.
In a judgment handed down this morning, the Supreme Court examined which system of national law governs an arbitration agreement when the law applicable to the contract containing it differs from the chosen seat.
The issue has ‘long divided courts and commentators, both in this country and internationally,’ Lord Hamblen and Lord Leggatt wrote.
The dispute in question arose after a power plant in Russia was damaged by fire in 2016. The appellant company, Chubb Russia, had insured the owner of the power plant against such damage, and in 2019 brought a claim against Enka, a sub-contractor in the construction project, in Moscow.
In response, Enka brought an arbitration claim in the High Court in London arguing that, by proceeding in the Russian court, Chubb Russia was in breach of the arbitration agreement. It sought an anti-suit injunction to restrain the insurer from pursuing the Russian claim, which was subsequently granted by the Court of Appeal.
Chubb Russia challenged the decision in the Supreme Court in earlier this year.
By a 3:2 majority, the Supreme Court dismissed the insurance company’s appeal. It ruled that the contract in the case contains no choice of the law that is intended to govern the contract or the arbitration agreement within it.
In these circumstances the validity and scope of the arbitration agreement is governed by the law of the chosen seat of arbitration – London – as the law with which the dispute resolution clause is most closely connected, it said.
Chubb Russia did not dispute that, if the arbitration agreement is governed by English law, it was legitimate for the Court of Appeal to grant an anti-suit injunction.
Michael Stocks, managing associate at Surrey-based Stevens & Bolton, said the judgment will be ‘warmly welcomed’ by the arbitration community.
‘The decision highlights the powers the English Court is prepared to deploy in determining anti-suit injunctions, and thus the attractiveness of choosing England as a seat for international arbitrations.
‘The Supreme Court was clear in its message that where there is no law chosen to govern the body of the contract nor arbitration agreement, to ensure consistency and legal certainty, and to uphold the reasonable expectations of the contracting parties, the law governing the arbitration agreement would be the law of the seat. In this case: English law.’
The Supreme Court also praised the efficiency of the English court system in this case. ‘It is a striking feature of the English proceedings that the trial, the appeal to the Court of Appeal and the appeal to the Supreme Court have all been heard in just over seven months. This is a vivid demonstration of the speed with which the English courts can act when the urgency of a matter requires it,’ it said.