Author: Peter Ashford*
Published: December 2013
Description: The last few years have seen the seemingly modest point of the governing law of agreements to arbitrate, exercise the English courts. In agreements to arbitrate it is rarely stated what the governing law of that, separate, agreement, is. There are, in essence, two rival theories: the “seat” theory that states that the governing law follows the geographical location of the seat of the arbitration provided for, and, secondly, the “host” theory that states that the governing law of the agreement to arbitrate is the same as the governing (or substantive) law of the contract in which, typically, the agreement to arbitrate is a clause. The modern cases, that are seemingly irreconcilable, are C v. D and Sulamérica Cia Nacional de Seguros S.A. v. Enesa Engenharia S.A. (“Sulamérica”). Two of the modern day commercial colossi in the Court of Appeal, Longmore LJ in C v. D and Moore-Bick LJ in Sulamérica, are plainly at odds.
In Arsanovia Ltd & Ors v. Cruz City 1 Mauritius Holdings (“Arsanovia”), Andrew Smith J grappled with the tensions between, and questions left unanswered in, the two Court of Appeal cases. As Andrew Smith J, rather politely observed in Arsanovia, it is “impossible not to detect in the judgment of Moore- Bick LJ … that he was uncomfortable with the reasoning of Longmore LJ….” This article aims to make the analysis a little more comfortable.
The importance of the governing law of the arbitration agreement is that it will determine questions as to formation (including special considerations concerning questions of disputed incorporation), validity (and conversely illegality or invalidity), effect or construction and discharge of that agreement to arbitrate. These will often be significant battlegrounds.
Before embarking on further consideration it is, firstly, worth noting several uncontroversial propositions (at least in English law): …
*International Arbitration Partner, Fox Williams LLP, London; FCIArb.