WHAT LAW GOVERNS THE AGREEMENT TO ARBITRATE?

With increasing frequency, sophisticated contractual parties agree to resolve their disputes though arbitration. Particularly in contracts with a cross-border element, or where the parties hail from different countries, parties commonly adopt one system of law (for example, New York law) to govern their rights and obligations, but agree that any arbitration will be heard and conducted under the laws of a separate locale or ‘seat’ (for example, London, England).

However parties rarely specify, or even give specific thought to, the law that will govern their agreement to arbitrate, as distinct from the law that governs the rest of the substantive contract.

Recent case law in England reminds parties not to assume that the law chosen for their substantive contract will necessarily extend to the agreement to arbitrate, and that despite an express choice of law provision, the law which governs the agreement to arbitrate may follow the law of the seat instead.

In the recent case of Sulamérica Cia Nacional de Seguros SA and others v Ensea Engenharia SA and others [2012] EWCA Civ 638, the English Court of Appeal provided guidance as to how, in the absence of express choice, it will determine the proper law of the agreement to arbitrate.

In Sulamérica, although the Court considered that the law of the substantive contract was a persuasive factor, other factors led it to find that the law of the arbitration agreement was the same as the law of the seat.

Jan-Mar 2013 issue

Skadden, Arps, Slate, Meagher & Flom (UK) LLP