Commercial dispute resolution specialists Gwendoline Davies, Lynsey Oakdene and Nick McQueen consider two recent Supreme Court judgments of significance to the international arbitration community. The first clarifies the approach to determining the governing law of an arbitration agreement and to granting anti-suit injunctions; the second clarifies the law on arbitrator bias and the duties of impartiality and disclosure.

WM Comment

Arbitration can be an attractive alternative to court litigation as a formal method of resolving commercial disputes and is the method of choice for resolving cross-border disputes. It is also unaffected by Brexit.

These Supreme Court judgments provide much-needed certainty and consistency of approach in complex areas of the law. They reinforce the arbitration-friendly approach of the English courts which play an important supervisory role in support of the arbitration process. As Halliburton’s counsel pointed out in Halliburton v Chubb [1], the main reasons why parties in international arbitration choose to arbitrate in England are the reputation of London and that the English legal system guarantees neutrality and impartiality [2]. It is therefore important that English law upholds rules which support the integrity of international arbitration.

It is important to give careful thought to dispute resolution clauses from the outset. All too often, contracting parties are keen to push forward with their commercial arrangements and they fail to plan effectively for how disputes will be managed if things go wrong. If the parties choose arbitration, careful drafting of the contract and arbitration agreement (including specifying the governing law and the seat (place) of arbitration) can lead to significant time and costs savings and make disputes easier to resolve in the long run.

How can we help?

Walker Morris has a large team of specialists experienced in all aspects of commercial dispute resolution across all sectors, including national and international arbitration, litigation, mediation, expert determination and other forms of alternative dispute resolution. Two of our partners are Fellows of the Chartered Institute of Arbitrators.

If you trade internationally and/or are considering arbitration, and need any assistance or advice on drafting, dispute resolution options or strategy, please contact Gwendoline, Lynsey, Nick or any member of the commercial dispute resolution team.

Determining the governing law

An ‘arbitration agreement’ is typically a clause in the parties’ contract where they agree to resolve any disputes through arbitration. It is effectively a separate agreement from the underlying contract and the two will not necessarily be governed by the same law.

In Enka v Chubb [3] the Supreme Court set out the following principles for determining the governing law of an arbitration agreement:

• The law applicable to the arbitration agreement will be (a) the law chosen by the parties to govern it or (b) in the absence of such a choice, the system of law with which the arbitration agreement is most closely connected.

• Where the law applicable to the arbitration agreement is not specified, a choice of governing law for the contract will generally apply to an arbitration agreement which forms part of the contract.

• The choice of a different country as the seat of the arbitration is not sufficient by itself to negate an inference that a choice of law to govern the contract was intended to apply to the arbitration agreement.

• There are additional factors which may, however, negate such an inference and may in some cases imply that the arbitration agreement was intended to be governed by the law of the seat.

• Where there is no express choice of law to govern the contract, a clause providing for arbitration in a particular place will not by itself justify an inference that the contract (or the arbitration agreement) is intended to be governed by the law of that place.

• In the absence of any choice of law to govern the arbitration agreement, the arbitration agreement is governed by the law with which it is most closely connected. Where the parties have chosen a seat of arbitration, this will generally be the law of the seat, even if this differs from the law applicable to the parties’ substantive contractual obligations.

• The fact that the contract requires the parties to attempt to resolve a dispute through good faith negotiation, mediation or any other procedure before referring it to arbitration will not generally provide a reason to displace the law of the seat of arbitration as the law applicable to the arbitration agreement by default in the absence of a choice of law to govern it.

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