The Law of the Seat as the Default Governing Law of Arbitration Agreements: Enka v Chubb [2020] UKSC 38

Introduction

In Enka Insaat Ve Sanayi AS v. OOO Insurance Company Chubb [2020] UKSC 38, the United Kingdom Supreme Court delivered a landmark judgment resolving a long-standing conflict in English (and comparative) law: which system of national law governs an arbitration agreement when the law of the main contract differs from the law of the seat? The Court held that, where the parties have not chosen the law governing the arbitration agreement, the law of the seat of arbitration will generally govern that agreement. At the same time, the Court confirmed that where the parties have expressly or clearly chosen the law for their contract, that choice will typically extend to the arbitration clause, unless displaced by particular features (including the “validation principle” or a statutory rule at the seat).

The dispute arose out of a catastrophic fire at a Russian power plant and subsequent subrogated recovery proceedings brought in Russia by the plant’s insurer, Chubb Russia, against Enka, a Turkish engineering company. The construction contract contained an ICC arbitration clause with a London seat, but it had no express governing law clause. Enka sought an anti-suit injunction from the English courts to restrain the Russian litigation as a breach of the arbitration agreement. The case progressed rapidly through the Commercial Court and Court of Appeal to the Supreme Court, which addressed both the governing-law conundrum and the principles for granting anti-suit injunctions.

The majority judgment (Lords Hamblen and Leggatt, with whom Lord Kerr agreed) affirmed the Court of Appeal’s result—though on different reasoning—establishing a clear framework that brings English common law into harmony with international instruments, especially the New York Convention. There were powerful dissents by Lord Burrows (with whom Lord Sales agreed), favouring a “main contract approach”.

Summary of the Judgment

Governing law of the arbitration agreement—general approach: The Court confirmed a three-stage common law analysis: (1) Identify any express choice of law governing the arbitration agreement; (2) If none, identify any implied choice; (3) Failing either, apply the law with which the arbitration agreement has its closest and most real connection.
Express/Implied choice in the main contract: Where the parties choose a law for the contract, that choice will generally apply to the arbitration clause in that contract, unless strong countervailing factors exist (e.g., risk of invalidity under that law or a seat statute declaring the arbitration agreement’s law).
Default rule clarified: In the absence of any choice of law for the arbitration agreement, the agreement is governed by the law of the seat. This aligns English common law with the New York Convention’s structure, promotes certainty, and recognises the seat as the place of performance of the arbitration agreement.
Application to Enka v Chubb: No express governing law clause appeared in the contract. The main contract was governed by Russian law not by party choice but under Rome I article 4(3) (manifestly closest connection). Accordingly, there was no implied choice for the arbitration clause; the default rule applied, and the law of the seat (England) governed the arbitration agreement.
Anti-suit injunction: With the arbitration agreement governed by English law and the seat in London, the English courts properly granted an anti-suit injunction restraining Chubb Russia from continuing the Russian proceedings. Forum conveniens is irrelevant in this supervisory context, and comity has little role where the injunction enforces a promise to arbitrate.
Dissent: Lords Burrows and Sales preferred a presumption that the arbitration agreement shares the main contract’s law (here, Russian law), both as implied choice and, failing that, as the closest connection. They criticised over-reliance on the seat and emphasised practical coherence in construing complex, integrated dispute resolution clauses.

The Facts and Procedural History (Brief)

Parties: Enka (Turkish engineering contractor); Chubb Russia (insurer subrogated to the plant owner Unipro’s rights).
Contract: No governing law clause; dispute resolution clause (Art 50.1) provided ICC arbitration in London in English.
Russian proceedings: Chubb Russia sued Enka and others in Moscow. Enka argued for reference to London arbitration; the Russian court refused and dismissed the claim on merits; appeals followed.
English proceedings: Enka sought an anti-suit injunction. The Commercial Court refused; the Court of Appeal granted it. The Supreme Court expedited and heard the appeal, ultimately dismissing Chubb Russia’s appeal.

Key Holdings and Doctrinal Clarifications

The majority distilled nine principles (paraphrased) for determining the law applicable to arbitration agreements:

Arbitration agreements are excluded from Rome I and governed by English common law conflict rules.
The law applicable is the law chosen (expressly or impliedly); absent choice, it is the law with the closest connection.
English law (as lex fori) governs the interpretative exercise to identify any choice of law.
A chosen governing law for the contract will generally also govern the arbitration clause.
The choice of a different seat does not, without more, negate that inference.
But (i) a seat’s statute declaring the arbitration agreement’s law, or (ii) a serious risk of invalidity/ineffectiveness under the main contract’s law, may imply the law of the seat governs the arbitration clause.
If there is no express choice for the contract, the seat does not per se imply the law of the contract or arbitration clause.
Absent any choice for the arbitration agreement, the law of the seat governs it by default, even if different from the law governing the main contract’s substantive obligations.
Embedding arbitration within multi-tier dispute resolution does not generally displace the default rule; the law governing the arbitration agreement should govern the entire dispute resolution mechanism.

Analysis

Precedents and Authorities Cited and Their Influence

Sulamérica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638

The Court of Appeal in Sulamérica articulated the now-familiar three-stage test and treated a contract’s express governing law clause as a strong indicator for the arbitration clause. Importantly, it deployed the validation principle to avoid applying a law that would render an arbitration clause non-binding or ineffective. The Supreme Court in Enka embraced Sulamérica’s structure, refined the role of the validation principle, and endorsed a default rule in favour of the seat’s law when no choice exists, aligning English law with New York Convention policy.

C v D [2007] EWCA Civ 1282

In obiter, the Court of Appeal suggested the law of the seat as the law most closely connected with the arbitration agreement. Enka endorses that proposition as a default rule but rejects any inference that the choice of seat is ordinarily an implied choice of law for the arbitration agreement. The Supreme Court also corrected a misconception derived from C v D about the need to specifically disapply non-mandatory provisions of the Arbitration Act 1996 (see section 4(5) below).

XL Insurance v Owens Corning [2001] 1 All ER (Comm) 530

XL Insurance proposed the “overlap argument” (that the curial law and arbitration agreement law blur and ought to be the same). The Supreme Court in Enka rejected this as a general proposition, principally via section 4(5) of the 1996 Act, demonstrating that choosing an English seat does not necessarily import English substantive law of the arbitration agreement where the parties (expressly or impliedly) make a different choice.

Hamlyn v Talisker [1894] AC 202

A foundational authority for the validation principle: where one candidate law would nullify an arbitration clause and another would uphold it, the latter should prevail. Enka affirms and modernises this principle, applying it as a factor that can displace an inference from the contract’s chosen law when it would significantly undermine the arbitration agreement.

Cie Tunisienne de Navigation [1971] AC 572

Established that the place of arbitration could be a strong indicator of governing law, but not determinative where contrary indications exist. Enka updates the international arbitration landscape rationale: the modern choice of seat is often for neutrality and procedural framework, not because arbitrators will apply their own domestic contract law, reducing the seat’s weight as an implied choice factor.

Amin Rasheed [1984] AC 50; Bonython [1951] AC 201; The Komninos S [1991] 1 Lloyd’s Rep 370

These authorities underpin the common law’s dual inquiry (choice vs closest connection) and the modern formulation of the “closest and most real connection” test. Enka follows this orthodoxy and clarifies how it operates specifically for arbitration agreements.

Lesotho Highlands v Impregilo [2006] 1 AC 221

Enka corrects an over-reading of Lord Steyn’s dictum: Section 4(5) does not require a clause-by-clause contractual disapplication of non-mandatory provisions; the applicability of a foreign law to the arbitration agreement disapplies non-mandatory provisions in respect of matters governed by that foreign law.

Carpatsky v Ukrnafta [2020] EWHC 769 (Comm)

An example where a seat statute (here, Sweden) expressly tied the law governing the arbitration agreement to the law of the seat absent choice; Enka recognises this kind of statutory rule as a factor that can imply the law of the seat for the arbitration agreement.

Fiona Trust v Privalov [2007] UKHL 40

The “one-stop shop” presumption in favour of broad, rational businesslike construction of arbitration agreements is reaffirmed. Enka notes that any putative governing law that unduly narrows scope or effectiveness is less likely to reflect the parties’ reasonable intentions.

International instruments: New York Convention, UNCITRAL Model Law, European Convention

The Court emphasised coherence with international norms, particularly Article V(1)(a) of the New York Convention (default to seat’s law failing indication of choice), and section 103(2)(b) of the 1996 Act, which enacts that default at the enforcement stage. Enka aligns pre- and post-award analyses to promote uniformity and legal certainty across jurisdictions.

Legal Reasoning in Depth

1) The three legal systems and the governing-law problem

International arbitration engages: (a) the law governing the substance of the dispute (usually the main contract law); (b) the law governing the arbitration agreement (validity, scope, interpretation); and (c) the curial law (law of the seat, i.e., the arbitral process and court supervision). The “separability” doctrine means the arbitration clause is treated as distinct for validity purposes, but not divorced for all purposes; it does not mandate a different governing law from the rest of the contract.

2) Choice analysis—express and implied

Where the main contract contains an express governing law clause, that choice will typically apply to the arbitration agreement.
The mere choice of a different seat will not, without more, displace that implication.
However, two factors can displace or reverse the inference:
- A seat statute indicating the arbitration agreement is governed by the seat’s law (e.g., Swedish or Scottish statute); or
- The validation principle: if applying the main contract’s law would seriously risk invalidity or significant ineffectiveness of the arbitration agreement, it is unlikely the parties intended that law to govern the arbitration clause.

3) Default: closest connection points to the seat

If there is no (express or implied) choice, the Court reasons that the arbitration agreement is most closely connected with the seat:

Place of performance: The legal, not necessarily physical, place of performance of the arbitration agreement is the seat.
International harmony: Mirrors Article V(1)(a) of the New York Convention; encourages uniformity pre- and post-award and across jurisdictions.
Commercial purpose: Parties often choose neutral, arbitration-friendly seats; defaulting to the seat’s law meets reasonable expectations and maximises enforceability.
Legal certainty: A clear default rule simplifies drafting and reduces disputes about governing law.

4) Rejection of the “overlap argument”

The Court declined the proposition that curial law and the arbitration agreement’s substantive law must coincide because the 1996 Act contains interconnected procedural and substantive provisions. Section 4(5) of the Arbitration Act 1996 decisively shows that where a foreign law governs the arbitration agreement, non-mandatory provisions of Part I dealing with matters “in respect of” the arbitration agreement are disapplied without needing targeted clauses to that effect. Only limited mandatory provisions (e.g., sections 66–68 on award challenges/enforcement) remain, and they are procedural/supervisory; they do not dictate the arbitration agreement’s governing law.

5) Multi-tier dispute resolution clauses

Where an arbitration clause is embedded within a staged dispute resolution clause (negotiation → senior management meeting → arbitration), the Court recognised the entire clause should be governed coherently. On the facts, the Court treated the whole of article 50.1 as an arbitration agreement for Rome I purposes and applied the same governing law (English, as law of the seat under the default rule).

6) Anti-suit injunctions

The supervisory court at the seat can enforce the parties’ bargain to arbitrate by restraining foreign proceedings brought in breach. Forum conveniens is irrelevant in this context; considerations of comity carry “little if any role” where the injunction enforces a contractual promise not to litigate. This builds on The Angelic Grace and West Tankers and is consistent with the New York Convention’s pro-arbitration ethos.

The Dissent: The “Main Contract” Approach (Lords Burrows and Sales)

The dissenters preferred a clear presumption that the arbitration agreement shares the main contract’s law:

Implied choice: Where the main contract’s law is chosen (expressly or impliedly), that choice should ordinarily carry over to the arbitration clause; the seat should not trump that implication.
Closest connection: Even at the default stage, the arbitration agreement should usually be governed by the main contract’s law to preserve interpretative coherence and avoid “splitting” rules that complicate multi-tier clauses and cross-references within the contract.
Curial vs substantive law: The dissent emphasised the distinction and argued that the curial law should not be allowed to inform the arbitration agreement’s governing law absent clear reasons.
Validation principle as the exception: They accepted that if the main contract’s law endangers validity/effectiveness, the presumption can be rebutted in favour of the seat’s law.

Applying their approach, they would have held Russian law governs the arbitration agreement and would have remitted the anti-suit issue to the Commercial Court to determine scope under Russian law.

Impact and Practical Implications

Predictability: The Supreme Court’s framework crystallises a simple default: law of the seat governs the arbitration agreement absent choice. This aids pre-dispute planning, tribunal constitution, and enforcement strategy.
Drafting discipline:
- Include an express governing law clause for the arbitration agreement, particularly if seat and main contract law diverge.
- When using “Applicable Law” definitions (common in construction contracts), recognise they do not automatically constitute a Rome I article 3 choice; if an overall governing law is intended, say so expressly.
- For multi-tier clauses, expect the law of the seat (if default applies) to govern the entire dispute resolution mechanism unless an express choice states otherwise.
Alignment with international norms: The decision brings English law into closer harmony with the New York Convention’s structure and global arbitral practice, promoting uniformity in pre- and post-award stages.
London’s attractiveness as a seat: Reinforces the English courts’ supportive, supervisory stance (e.g., anti-suit relief) and provides clarity on how English law will treat hybrid arrangements (foreign substantive law; English seat).
Anti-suit strategy: Parties litigating elsewhere but bound to arbitrate at an English seat should anticipate prompt injunctive relief from the English courts, regardless of the arbitration agreement’s foreign governing law.

Complex Concepts Simplified

Seat of arbitration: The legal “home” of the arbitration. It determines the curial law (procedural framework) and the supervisory court. It is not simply the physical venue for hearings.
Curial law: The law governing the arbitration process (e.g., tribunal powers, court supervision). Typically the law of the seat. Distinct from the law governing the arbitration clause’s validity and scope.
Separability: The arbitration clause is treated as a distinct agreement for the purpose of validity (so defects in the main contract do not automatically invalidate the arbitration clause). It does not compel a different governing law for the clause.
Validation principle: If one candidate law would make the arbitration clause invalid or significantly ineffective, courts prefer a construction or choice that upholds its validity and commercial utility.
Closest and most real connection: The fallback test when there is no choice of law. Enka confirms that for arbitration agreements, the closest connection is generally with the law of the seat.
Rome I Regulation: EU instrument (still applied by English courts for conflict rules regarding contract law) which excludes arbitration agreements. It still determines the main contract’s governing law, which can influence the choice analysis for the arbitration clause.
New York Convention, Article V(1)(a): At the enforcement stage, failing any indication of choice for the arbitration agreement, its validity is tested under the law of the country where the award was made (the seat). Enka harmonises the pre-award approach with this structure.
Anti-suit injunction: An order restraining litigation in breach of an agreement to arbitrate. Granted by the supervisory court at the seat to uphold the parties’ contractual bargain; comity concerns carry little weight here.
Section 4(5), Arbitration Act 1996: If a foreign law governs the arbitration agreement, the Act’s non-mandatory provisions are treated as displaced for matters “in respect of” the arbitration agreement, without needing express disapplications in the contract.

Conclusion

Enka v Chubb is a defining decision in English arbitration law. It reconciles decades of divergent case law by:

Confirming that a contract’s chosen governing law generally extends to the arbitration clause;
Rejecting the notion that choosing a seat is ordinarily an implied choice of substantive law for the arbitration agreement;
Setting out a clear default rule: the law of the seat governs the arbitration agreement in the absence of any choice;
Reinforcing the supervisory court’s willingness to grant anti-suit relief to enforce the promise to arbitrate.

The majority’s approach promotes certainty, coherence with the New York Convention, and commercial common sense, while preserving flexibility through the validation principle and recognition of seat statutes. The dissent cogently underscores the virtues of keeping the arbitration clause under the umbrella of the main contract’s law to avoid “splitting” and practical complexity. Together, these opinions provide a rich and structured framework for future cases and drafting practice. The immediate result—English law governing the arbitration agreement and the grant of an anti-suit injunction—confirms London’s status as a robust, predictable seat of international arbitration.

Practical Checklist for Drafting

State expressly the law governing the arbitration agreement (e.g., “The arbitration agreement in Clause X is governed by [Law].”).
Align seat and governing law decisions consciously; if you want the main contract law to govern the clause, say so expressly.
In multi-tier clauses, specify that the same law governs all stages (negotiation, mediation, arbitration), unless intended otherwise.
Be cautious with “Applicable Law” definitions; if they are intended as a Rome I article 3 choice, make that explicit.
Consider whether a seat statute (e.g., Scotland, Sweden) will automatically govern the arbitration agreement absent choice.