The importance of this situation was recently highlighted in Enka v. Chubb, which has been reviewed by the Supreme Court of the United Kingdom. Our global arbitration team looked at how the case would be handled before English judges in this case in other jurisdictions. The boundary between each of the three stages of the investigation is good, and the relative importance that should be attached to the choice of the law of the underlying contract, on the one hand, and the choice of jurisdiction, on the other, is something that has been blurred in English case law. Once the parties to an international transaction have agreed to arbitrate, the legal framework for dispute settlement can lead to the application of a number of different laws. These laws include: (1) the law governing the substantive rights and obligations of the parties – generally expressly chosen and set forth in a clause on applicable law; and (2) the law governing the conduct of the arbitration (also known as curial law) – determined by the choice of a seat or venue for the arbitration. This is a difficult issue that depends on the circumstances of the case and the approach of the arbitral tribunal or national court seized of the case. This lack of clarity may lead to costly satellite procedures that would be unnecessary if the law applicable to the arbitration agreement were set out in the arbitration agreement. What the parties may not understand is that in this scenario, failure to specify the applicable law of the arbitration clause may result in a dispute over the law (English law or French law) that applies to issues related to the validity, scope or interpretation of the arbitration clause. The parties are free to agree on the applicable substantive law (see Article 28(1) of the Qatari Arbitration Law).
In the absence of an agreement, the court applies the law provided for in the conflict-of-laws rules (see Article 28(2) of the Qatari Arbitration Law). Apart from this, there are several conflict-of-laws rules in Qatari law that prescribe which substantive law must be applied if the parties do not make an express choice of law, and therefore the nature of the agreement must be taken into account (see Articles 12, paragraph 2, Articles 27, 29 and 55 of Law No. 12). 22 of 2004 (Qatari Civil Code). International arbitration consistently relies on choice of law rules to determine which law should apply to which aspect of the dispute. There is usually more than one national legal system that affects arbitration, and sometimes courts invest too much time in deciding which one to apply to a particular issue. This can lead to costly litigation that would have been unnecessary if the parties had indicated an applicable law in the arbitration clause. This will not only delay the resolution of the factual issues at issue, but could also result in an involuntary (and possibly undesirable) choice of applicable law by the courts. It also introduces an important element of uncertainty into the dispute settlement procedures that the parties negotiated and agreed upon at the beginning of the transaction. The first solution that comes to mind is to extend the law applicable to the underlying contract where the arbitration clause is dormant.7 This is an interpretation of the choice of the parties, provided that they have implicitly chosen the law governing their arbitration agreement. This approach can be seen in Sulamerica.8 Here, the main agreement – an insurance policy – applied exclusively to Brazilian law.
London was chosen as the seat of arbitration. The insurers commenced arbitration without complying with a multi-level dispute resolution clause and, as a result, the insured companies filed a lawsuit in Brazil. The insurer then obtained an injunction from the English High Court to stay the proceedings in Brazil. The insured companies appealed the injunction, arguing that under Brazilian law, the arbitration clause could not be invoked against them without their consent. Whether the arbitration clause may be invoked must be determined by the law governing the arbitration agreement. The English High Court first understood that in the absence of an express choice of law applicable to the arbitration agreement, the parties intended that their entire relationship would be subject to the same legal system, i.e. the choice of law applicable to the underlying agreement. However, since the tribunal concluded that Brazilian law – which governed the main agreement – would invalidate the arbitration agreement, it concluded that the parties could not have implicitly chosen Brazilian law since they had effectively accepted the arbitration.
Thus, the court applied the law with the closest connection with the arbitration agreement, which was the law of the registered office. In other words, the English High Court has held that there is a rebuttable presumption that, in the absence of an express choice of law, the choice made for the underlying agreement will apply to the arbitration agreement. As Doha-based Jonathan Collier and Joseph Lee explain, arbitrations held in Qatar are subject to Qatari Law No. 2 of 2017 – Qatari Arbitration Law. An exception is the HKIAC Standard Arbitration Clause, which includes optional choice of law provisions that remind parties to indicate the applicable law of the arbitration agreement, as well as the seat and number of arbitrators. There is also a note specifically reminding the parties of the importance of establishing a law applicable to the arbitration agreement when the law of the underlying contract and the law of the registered office are different. Perhaps surprisingly, no. Very few standard arbitration clauses contain a valid legal provision. Internationally applied concepts and principles of law are also an influential approach. A good example is the interpretation of Article II, paragraph 3, of the Convention by the THIRD U.S. Senate in Rhône v.
Lauro.13 Two Italian parties signed an agreement containing an arbitration clause providing for arbitration in Naples, Italy. Rhone asserted that the award was null and void because Italian law required the tribunal to be composed of an odd number of arbitrators. The Third Circuit concluded that the most consistent meaning of Article II(3) is that an arbitration agreement is “null and void”: (1) if it is the subject of an internationally recognized defense such as coercion, error, fraud or waiver; or (2) if it violates the basic guidelines of the Forum State. Therefore, the expression “null and void” must be interpreted restrictively in view of the presumption of enforceability of arbitration agreements. The conclusion was reasonable because it recognized the true international character of the Convention and encouraged jurisdictions to get rid of their narrow-minded practice. On the other hand, the recent views of commentators tell a different story from the point of view of conflicts of laws. Graeme Johnston and Paul Harris SC, authors of “The Conflict of Laws in Hong Kong”, suggest that, on the basis of the legitimate principles of expectation/commercial purpose and severability, “if the contract contains a clause on the applicable law and determines a place of arbitration, the Hong Kong court should conclude that: that the arbitration agreement is governed by the law of the place of arbitration”. Courts in some jurisdictions have held that in the absence of an agreement to the contrary, the law of the seat of arbitration will also be deemed to be the law applicable to the arbitration clause (the “Sit Approach”). Courts in other jurisdictions have held that the applicable law of the arbitration clause should be consistent with the applicable law of the underlying contract (the “main contract approach”). However, this position does not affect the effects that a particular law may have on arbitration agreements in certain circumstances, such as.
B Spanish insolvency law, which expressly provides for the possibility of suspending the validity of an arbitration agreement if certain conditions are met. It was also suggested that the applicable law of the main contract should be replaced only if its choice as the law applicable to the arbitration agreement effectively annulled the arbitration agreement, even if the parties had clearly expressed the intention to arbitrate. Simple wording such as “the applicable law of this Arbitration Agreement is the law of [England]” shall prevail. This is a problem that does not arise when the parties choose a legal system that specifically regulates the arbitration clause. But, and this is a big but, the parties rarely, if ever, make an explicit choice separate from the law that governs an arbitration clause. This can lead to costly litigation that may delay the resolution of the substantive issues at issue or give rise to a challenge to an arbitral award. The second most common option is the application of arbitration law. However, it can be argued that the implicit choice of this proposal may not work properly. Given that the seat is often chosen, among other things, on the basis of its arbitration laws – procedural laws – it is difficult to argue that the parties implicitly define when choosing the seat that the substantive law of the seat would govern matters related to their arbitration agreement, such as validity, constitution, etc. .