Factual and Procedural Background
The Claimant is a Lebanese company that created a branded restaurant concept. On 16 July 2001 the Claimant and a Kuwaiti company (“Company A”) executed a Franchise Development Agreement (“FDA”) and ten related Franchise Outlet Agreements (“FOAs”), all expressly governed by the law of England and Wales. In 2005 Company A was placed under a new holding entity, the Defendant.
After disputes arose, the Claimant commenced International Chamber of Commerce (“ICC”) arbitration seated in Paris against the Defendant alone. The Defendant participated under protest, denying that it was a party to either the FDA/FOAs or the arbitration clauses contained in them. A majority of the tribunal, applying French law to jurisdiction and English law to substance, held that the Defendant had become an additional party to the agreements by “novation by addition” and awarded the Claimant approximately US $6.7 million plus interest and costs. One arbitrator dissented.
The Defendant sought to annul the award before the Paris Court of Appeal while the Claimant applied in England under section 101 of the Arbitration Act 1996 to enforce the award. The Commercial Court tried preliminary issues; the Court of Appeal later refused enforcement and entered summary judgment for the Defendant. The present decision is the Supreme Court’s determination of the Claimant’s appeal.
Legal Issues Presented
- Which system of law governs the validity of the arbitration agreement contained in the FDA/FOAs?
- If English law governs, is there any real prospect that a court could find that the Defendant became a party to that arbitration agreement?
- Was the Court of Appeal procedurally justified in resolving the matter by summary judgment and in refusing an adjournment pending the French annulment proceedings?
Arguments of the Parties
Claimant's Arguments
- The arbitration agreement should be governed by the law of the seat (French law) because clause 14.3 of the FDA directs arbitrators to apply internationally recognised principles (the UNIDROIT Principles), undermining any choice of English law for the arbitration clause.
- Even if English law applies, principles of estoppel, good faith, and reliance on the UNIDROIT Principles displace the FDA’s “No Oral Modification” (“NOM”) clauses, allowing a finding that the Defendant became a party through conduct amounting to novation by addition.
- A full evidential hearing—not summary judgment—was required to satisfy the burden of proof under section 103(2)(b) of the Arbitration Act 1996 and article V(1)(a) of the New York Convention; alternatively, proceedings should have been adjourned under article VI pending the French court’s decision.
Defendant's Arguments
- Clauses 1 and 15 of the FDA expressly select English law for “this Agreement”, which necessarily includes the arbitration clause; clause 14.3 concerns only the merits and cannot override that choice.
- The FDA’s stringent NOM clauses require written, signed consent for any amendment, waiver, or novation. No such document exists; under MWB v Rock Advertising a mere informal variation or estoppel cannot overcome the NOM requirements without unequivocal written representation, which is absent.
- Summary judgment was appropriate because the Claimant had no real prospect of establishing novation or estoppel and could identify no further evidence that might alter the outcome; an adjournment would serve no purpose as the French court applies different conflict rules and its decision would not bind the English court.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38 |
Guidance on determining the law governing an arbitration agreement; general choice-of-law clauses usually extend to arbitration clauses. |
Relied on to hold that the FDA’s choice of English law governs the arbitration agreement despite a different seat. |
| Dardana Ltd v Yukos Oil Co [2002] EWCA Civ 543 |
Sufficiency of documents for enforcement under s 102 Arbitration Act 1996; burden shifts to the party resisting enforcement. |
Confirmed that the Defendant must prove lack of a valid arbitration agreement under s 103(2)(b). |
| Dallah Real Estate & Tourism Holding Co v Ministry of Religious Affairs of Pakistan [2011] 1 AC 763 |
Court must decide validity of arbitration agreement independently; narrow discretion to enforce if a Convention ground is made out. |
Cited to emphasise the court’s duty to decide de novo and to dismiss discretion arguments. |
| MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24 |
No Oral Modification clauses are effective; estoppel requires unequivocal representation beyond the informal promise. |
Used to conclude that the FDA’s NOM clauses barred any alleged novation absent signed written consent. |
| Actionstrength Ltd v International Glass Engineering SpA [2003] 2 AC 541 |
Parameters of estoppel where statutory/formal requirements exist. |
Re-affirmed that mere informal conduct cannot satisfy NOM exceptions. |
| Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 |
Assignments in breach of contractual prohibitions are ineffective. |
Analogised to show that contractual restrictions on transfer in the FDA must be respected. |
| Argo Fund Ltd v Essar Steel Ltd [2005] EWHC 600 (Comm) |
Distinction between assignment and novation; novation needs consent of all parties. |
Supported analysis that novation by addition required compliance with NOM clauses. |
| Yukos Capital Sarl v Rosneft Oil Co (No 2) [2014] QB 458 |
Issue estoppel does not arise where foreign court applies a different governing law. |
Justified refusal to adjourn pending French annulment proceedings. |
| R (Adams) v Secretary of State for Justice [2012] 1 AC 48 |
Statutes implementing treaties should be interpreted consistently with the treaty. |
Underpinned the uniform interpretation of article V of the New York Convention. |
Court's Reasoning and Analysis
1. Governing law of the arbitration agreement. Reading clauses 1 and 15 together, the court found an express choice of English law covering “this Agreement”, including the arbitration clause. Clause 14.3 merely instructs arbitrators on rules for deciding the merits and cannot override that choice. The UNIDROIT Principles referenced in clause 14.3 are non-state rules and, even if applicable, could only supplement, not displace, English law. The validation principle could not be used to infer a different governing law where none was chosen.
2. Whether the Defendant became a party. Under English law, joining a new party would require novation or a contractual amendment. The FDA contains multiple NOM clauses requiring a written, signed agreement for any modification, waiver, or assignment. No such document exists. Applying MWB v Rock Advertising, informal conduct or performance cannot overcome a NOM clause without unequivocal written representation, which was absent. Assertions of estoppel, good faith, or reliance on UNIDROIT Principles failed because: (a) no clear representation by either original party was shown; (b) UNIDROIT Principles cannot contradict the FDA’s strict wording; and (c) the evidential burden remained on the Claimant, which produced nothing beyond conduct already before the arbitral tribunal.
3. Procedural propriety of summary judgment. The Convention and the 1996 Act prescribe the substantive grounds for refusing enforcement but not the procedure. Under the Civil Procedure Rules, summary judgment is appropriate where a party has no real prospect of success. The Defendant met its burden under section 103(2)(b); the Claimant could not identify further evidence warranting a trial. The request for an adjournment under article VI was rejected because the French court applies different substantive rules; its decision could not create an issue estoppel, so waiting served no practical purpose.
Holding and Implications
APPEAL DISMISSED.
The Supreme Court affirmed that English law governs the arbitration agreement and that, under that law, the Defendant never became a party to the FDA/FOAs. Consequently, the award is not enforceable against the Defendant in England. The decision reinforces the effectiveness of No Oral Modification clauses, clarifies that general governing-law clauses ordinarily extend to arbitration clauses even after an award has been rendered, and confirms the availability of summary judgment in New York Convention enforcement proceedings where no real factual dispute exists. No new precedent was created, but existing principles on governing law and enforcement were reaffirmed.