Enka Insaat Ve Sanayi A.S. v OOO Insurance Company Chubb

JurisdictionEngland & Wales
CourtSupreme Court
JudgeLord Burrows,Lord Kerr,Lord Sales,Lord Hamblen,Lord Leggatt
Judgment Date09 October 2020
Neutral Citation[2020] UKSC 38

[2020] UKSC 38

Supreme Court

Michaelmas Term

On appeal from: [2020] EWCA Civ 574

before

Lord Kerr

Lord Sales

Lord Hamblen

Lord Leggatt

Lord Burrows

Between:
Enka Insaat Ve Sanayi AS
(Respondent)
and
OOO Insurance Company Chubb
(Appellant)

Appellant

David Bailey QC

Toby Landau QC

Marcus Mander

Clara Benn

(Instructed by Kennedys Law LLP (London))

Respondent

Robin Dicker QC

David Joseph QC

Niranjan Venkatesan

(Instructed by Shearman & Sterling LLP (London))

Heard on 27 and 28 July 2020

Lord Leggatt

Lord Hamblen AND( with whom Lord Kerr agrees)

I. Introduction
1

Where an international commercial contract contains an agreement to resolve disputes by arbitration, at least three systems of national law are engaged when a dispute occurs. They are: the law governing the substance of the dispute; the law governing the agreement to arbitrate; and the law governing the arbitration process. The law governing the substance of the dispute is generally the law applicable to the contract from which the dispute has arisen. The law governing the arbitration process (sometimes referred to as the “curial law”) is generally the law of the “seat” of the arbitration, which is usually the place chosen for the arbitration in the arbitration agreement. These two systems of law may differ from each other. Each may also differ from the law which governs the validity and scope of the arbitration agreement.

2

The central issue on this appeal concerns which system of national law governs the validity and scope of the arbitration agreement when the law applicable to the contract containing it differs from the law of the seat of the arbitration.

3

This is an issue which has long divided courts and commentators, both in this country and internationally. On one side there are those who say that the law that governs a contract should generally also govern an arbitration agreement which, though separable, forms part of that contract. On the other side there are those who say that the law of the chosen seat of the arbitration should also generally govern the arbitration agreement. There have been Court of Appeal decisions falling on either side of this divide: Sulamérica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638; [2013] 1 WLR 102 and C v D [2007] EWCA Civ 1282; [2008] Bus LR 843.

4

In its judgment in the present case [2020] EWCA Civ 574, the Court of Appeal considered that “the time has come to seek to impose some order and clarity on this area of the law” (para 89) and held that, unless there has been an express choice of the law that is to govern the arbitration agreement, the general rule should be that the arbitration agreement is governed by the law of the seat, as a matter of implied choice, subject only to any particular features of the case demonstrating powerful reasons to the contrary (para 91).

5

On this appeal the appellant argues that this conclusion is heterodox and wrong and that the correct approach is that, in the absence of strong indications to the contrary, a choice of law for the contract is a choice of that law to govern the arbitration agreement. The appellant contends that in the present case the parties have chosen Russian law to govern the construction contract between them and that the implication that they intended the arbitration agreement included in that contract to be governed by Russian law is not displaced by their choice of London as the seat of arbitration.

6

If that issue is decided in its favour, the appellant goes on to argue that the Court of Appeal was wrong to grant an injunction to restrain it from pursuing proceedings in Russia in alleged breach of the arbitration agreement. The appellant's case is that, because the arbitration agreement is governed by Russian law, the Russian courts are best placed to decide whether or not the arbitration agreement applies to the claim which the appellant has brought against the respondent in Russia and that, as a matter of comity or discretion, the English courts ought not to interfere with those proceedings by granting an anti-suit injunction.

II. Factual background
(i) The construction contract
7

On 1 February 2016 a power plant situated at Berezovskaya in Russia was severely damaged by fire. The appellant (“Chubb Russia”) is a Russian insurance company which had insured the owner of the power plant, a company now named PJSC Unipro (“Unipro”), against such damage. Chubb Russia is part of the Chubb Group, which is the world's largest publicly traded property and casualty insurer.

8

The company responsible for the design and construction of the power plant under a contract made with Unipro in May 2011 was a Russian company called CJSC Energoproekt. The respondent (“Enka”) was engaged by Energoproekt as one of many sub-contractors involved in the construction project. Enka is a global engineering and construction company incorporated and based in Turkey with a substantial presence and history of operations in Russia, amongst other countries.

9

The contract between Energoproekt and Enka dated 27 June 2012 (“the construction contract”) is a substantial document running to 97 pages, with around 400 pages of attachments. It was executed in parallel Russian and English versions (though it provides that the Russian language version has precedence).

10

The construction contract contains, in article 50, a dispute resolution clause in these terms:

Resolution of disputes

50.1. The Parties undertake to make in good faith every reasonable effort to resolve any dispute or disagreement arising from or in connection with this Agreement (including disputes regarding validity of this agreement and the fact of its conclusion (hereinafter — ‘Dispute’) by means of negotiations between themselves. In the event of the failure to resolve any Dispute pursuant to this article within 10 (ten) days from the date that either Party sends a Notification to the opposite Party containing an indication of the given Dispute (the given period may be extended by mutual consent of the Parties) any Party may, by giving written notice, cause the matter to be referred to a meeting between the senior managements of the Contractor and Customer (in the case of the Contractor senior management shall be understood as a member of the executive board or above, in the case of Customer, senior management shall be understood as general directors of their respective companies). The parties may invite the End Customer to such Senior Management Meeting. Such meeting shall be held within fourteen (14) calendar days following the giving of a notice. If the matter is not resolved within twenty (20) calendar days after the date of the notice referring the matter to appropriate higher management or such later date as may be unanimously agreed upon, the Dispute shall be referred to international arbitration as follows:

• the Dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce,

• the Dispute shall be settled by three arbitrators appointed in accordance with these Rules,

• the arbitration shall be conducted in the English language, and

• the place of arbitration shall be London, England.

50.2. Unless otherwise explicitly stipulated in this Agreement, the existence of any Dispute shall not give the Contractor the right to suspend Work.

50.3. Not used.

50.4. Not used.

50.5. All other documentation such as financial documentation and cover documents for it must be presented in Russian.”

11

On 21 May 2014 Energoproekt transferred its rights and obligations under the construction contract to Unipro pursuant to an assignment agreement made between Energoproekt, Unipro and Enka. By clause 7.5 of that agreement, the parties agreed that disputes between Unipro and Enka were to be finally and exclusively resolved by arbitration in accordance with the provisions of article 50.1 of the construction contract.

12

After the fire in February 2016 Chubb Russia paid 26.1 billion roubles (approximately US$400m) to Unipro under its property insurance policy and thereby became subrogated to any rights of Unipro to claim compensation from third parties for the damage caused by the fire.

(ii) The Russian proceedings
13

On 25 May 2019 Chubb Russia filed a claim in the Moscow Arbitrazh (ie commercial) Court against Enka and ten other defendants whom it claimed were jointly liable for the damage caused by the fire. Chubb Russia was required by the Moscow court to provide further details of its claims, following which the claims were accepted by the court on 3 September 2019.

14

On 17 September 2019 Enka filed a motion in the Russian proceedings to have Chubb Russia's claim against it dismissed (or “left without consideration”) pursuant to article 148(5) of the Arbitrazh Procedure Code, which is intended to give effect to Russia's obligations under article II(3) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (“the New York Convention”) to refer to arbitration parties who have agreed to submit to arbitration a dispute of which a court of a contracting state is seized. Enka argued that the claim against it fell within the scope of the arbitration agreement contained in article 50.1 of the construction contract and ought therefore to be resolved, not by the Russian courts, but by an arbitration conducted in accordance with that provision in London. The Moscow court decided to deal with Enka's motion at the same time as the merits of Chubb Russia's claims at a hearing fixed for 22 January 2020.

15

Following that hearing, which continued on two later dates, on 18 March 2020 the judge in the Russian proceedings announced her decisions (a) not to grant Enka's motion to refer the claim against it to arbitration and (b) to dismiss Chubb Russia's claims against all the defendants on the merits. The reasons for those decisions...

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17 firm's commentaries
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