Therefore, if the law of the underlying contract and that of the registered office differ, the parties should always explicitly state the law governed by the arbitration agreement. Most major institutions already provide for this in their standard arbitration clauses. Or there could be an explicit reference to the arbitration agreement in the provisions of the applicable law. Nevertheless, Singapore courts must always take into account the particular situation in which there was no choice of law of the main contract. The Supreme Court`s decision in Enka v. Chubb will be persuasive in the Singapore courts if the problem arises. This is a problem that does not arise when the parties choose a legal system that specifically governs the arbitration clause. But, and this is a big but, the parties rarely, if ever, make an express choice distinct from the law that governs an arbitration clause. This can lead to costly litigation that can delay the resolution of the dispute or result in a challenge to an arbitral award. However, the situation may differ in cases where the applicable substantive law prescribed by the conflict-of-laws provisions of Qatari law differs from the law of the registered office under the arbitration agreement. Although these circumstances may be limited in practice, it is not yet clear how the law governed by the arbitration agreement will be determined in these circumstances. In accordance with Article II of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (`the Convention`), courts may reject a request for referral of the parties to arbitration if the arbitration agreement is “null and void, invalid or unenforceable”.
However, the provision does not specify which law determines this, nor any choice of law rules to follow. Under South African law, the parties to international arbitration are free to agree on the law applicable to the arbitration. If the parties to an international treaty have not agreed on the applicable law, the general rule of South African private international law is to distinguish between procedural and substantive law rules. The procedural law of arbitration is generally governed by the law of the place of arbitration, the International Arbitration Act 2017 in South Africa, and substantive law rules are governed by the law most closely related to the performance of the underlying contract, such as the law of the place where the contract was concluded or was to be performed. In a recent case before the English Commercial Court, Habas Sinai, a representative (contrary to the client`s instructions), entered into a contract without applicable law and an arbitration clause providing for ICC arbitration in London. In the absence of an express provision of the applicable law in the substantive contract, the law of the arbitration agreement would normally be governed by the law of the registered office, i.e. English law. h.
Applicable. It was argued that, in that case, the seat should be ignored because it had been agreed without actual authorization. The applicable law would then be the law most closely related to the material contract, which would be Turkish law (which was the customer`s intention). The second concerns the scope of the principle of validation. The minority limited the application of the principle of validation to cases where the application of the main law of contracts invalidated the arbitration clause. The majority opinion extends the principle to cases where the application of the main law of contracts would “seriously impair” the arbitration clause – for example, in cases where the application of the law of the main contract would limit the interpretation of the arbitration clause. The lex contractus or the applicable law of the contract is the substantive law that applies to the substance of the dispute between the parties. The lex contractus governs the existence, validity and interpretation of the main contract. It also regulates all non-contractual claims (e.g.
tortious actions) which, depending on the scope of the arbitration agreement, may be invoked before an arbitral tribunal. So, is this the end of the “main treaty” versus “seat” debate? Do we now have a clear and definitive statement from English common law as to the correct law of an arbitration agreement that is principled, simple, clear and easy to apply? 84 States and a total of 117 jurisdictions based their lex arbitri on the 1985 UNCITRAL Model Law on International Commercial Arbitration and its 2006 revised version (see the statute of the UNCITRAL Model Law here). This has resulted in a welcome degree of uniformity between the different national lex arbitri, which has increased legal certainty and encouraged the use of international arbitration by commercial parties to settle their disputes. For example, in Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) ([2020] EWCA Civ 6), the English court (which applied English law as the law governing the arbitration agreement) found that a party had not become an additional party to an arbitration agreement and refused to recognise and enforce an arbitral award, while in Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) (CA Paris, 23 June 2020, No. 17/22943) refused to set aside the award after applying French law to the arbitration agreement. In the absence of an enforceable legal clause, arbitrators (and courts) are asked to determine the most applicable law, which is normally the law with which the dispute is most closely connected (see also the discussion of the relevance of the Rome I and Rome II Rules in determining the law applicable to the issue of international arbitration). The guidelines included a Brazilian clause and a London-based arbitration clause. An express choice of law applicable to the substantive contract is a strong indication of the intention of the parties with respect to the arbitration agreement, unless other circumstances suggest a different conclusion. This may include the terms of the arbitration agreement itself or the consequences for its effectiveness in choosing the correct law of the substantive contract. Although there were important factors in favour of an implied choice of Brazilian law as the applicable law of the arbitration agreement, two important factors pointed in the other direction.
As Florian Quintard points out in Enka v. Chubb, the parties were negligent in drafting their contract and arbitration clause: the contract contained no applicable law and the arbitration clause did not specify the law governed by the arbitration agreement. The law governed by the arbitration agreement shall decide on matters of formal and substantive validity, formation, termination, interpretation, assignment and waiver of the arbitration agreement. If it is not specified, a choice of law rule is applied to find it. However, the English legal situation is far from clear, as an appeal to the UK Supreme Court is pending. The judgment of the Supreme Court, if it comes, will become the principal English court for the applicable law of an arbitration agreement. Although there are doubts about the previous case law and the English judgment in Enka v. Chubb, who might be of some conviction, we believe that the application of Hong Kong`s conflict-of-laws rules would properly answer the question, so that even if a contract contained a clause on applicable law, the law applicable to the arbitration agreement would be the law of the seat of the arbitration.
Another widely used and very convincing approach is the application of the law of place, which is closely related to arbitration. This happens on a case-by-case basis and can be seen in judgments without being explicitly taken into account, as in the Firstlink case. International legal concepts and principles are also an influential approach. A good example is the interpretation of Article II(3) of the Convention by the Third Judicial District of the United States in Rhône v. Lauro.13 Two Italian parties signed an agreement containing an arbitration clause providing for arbitration in Naples, Italy.