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Un arrêt contre l’Italie replace la délicate question des mineurs non accompagnés sur le devant de la scène européenne. Si les arrêts de violation de la convention européenne des droits de l’homme en raison du placement d’un mineur dans un centre pour adulte sont connus, celui-ci insiste, en plus, sur l’absence de suivi psychologique d’une mineure en détresse.

Sur la boutique Dalloz Code de l’action sociale et des familles 2023, annoté et commenté Voir la boutique Dalloz

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La limitation du nombre de licences de services de véhicule de tourisme avec chauffeur (VTC) dans l’agglomération de Barcelone est contraire au droit de l’Union européenne, et notamment au principe de la liberté d’établissement. En revanche, exiger l’obtention d’une licence supplémentaire à celle prévue au niveau national peut s’avérer nécessaire pour la bonne gestion du transport, du trafic et de l’espace public ainsi que pour la protection de l’environnement.

Sur la boutique Dalloz Droit des transports 2023/2024 Voir la boutique Dalloz

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Le ralentissement de l’activité de la Cour européenne des droits de l’homme (CEDH), traditionnellement observé pendant les deux mois de plein été, a été compensé en 2023 par l’importance d’arrêts rendus sur des questions graves et complexes tenant à l’assujettissement de la lex sportiva aux exigences de la CEDH, à la lutte contre la constitution de « casiers judiciaires virtuels », aux fouilles corporelles intégrales, au recours à la technique de la reconnaissance faciale, à l’application de la clause couperet de l’article 17 ou aux violences parapolicières exercées contre les membres d’un groupe punk. La satisfaction des besoins élémentaires au cours d’une garde à vue, l’inexécution des décisions de justice favorables aux personnes vulnérables, le placement en isolement total des pensionnaires de maisons de retraite, encore le regroupement familial et pour une fois l’application rétroactive de la loi pénale plus douce, ont également aidé à nourrir l’intérêt de la jurisprudence estivale.

Sur la boutique Dalloz Code de procédure pénale 2024, annoté Voir la boutique Dalloz

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The recently published Volume 428 of the Collected Courses of the Hague Academy of International Law includes a course by Mario J. A. Oyarzábal (Argentine Ambassador to the Netherlands, Member of the United Nations International Law Commission, Professor at the University of La Plata Law School) on The Influence of Public International Law upon Private International Law in History and Theory and in the Formation and Application of the Law.

This course explores the influence of public international law upon private international law, in the history and the theory as well as in the formation and the application of the law. It focuses on the biggest transformations that have taken place on the international plane over the course of the last century and assesses how that has affected the legal landscape, raising questions as to the scope and the potential of private international law and the suitability of the traditional sources of international law to address the role of private actors and the incursion of public law in the private arena. Examples are drawn from the areas of jurisdictional immunities and their impact on the right of access to justice, mutual legal assistance, sovereign debt restructuring, child protection, sports, arts law, cyberspace, and issues related to law of the sea and climate change. This course takes a pragmatic problem-solving approach, which nonetheless is systemic and based on principles, and argues that while public and private international law are and should be kept as separate legal fields, both are needed to address an increasing number of issues.

Further details about this course are available here.

NADA e.a.
Principes du droit communautaire PDON
Lutte contre le dopage et protection des données : l’avocate générale Ćapeta considère qu’une autorité nationale de lutte contre le dopage qui publie sur Internet des données à caractère personnel d’un sportif professionnel dopé ne viole pas le RGPD 

TGSS (Refus du complément de maternité)
Discrimination fondée sur le sexe en Espagne : les pères de deux enfants ou plus contraints d’aller en justice pour bénéficier d’un complément à leur pension d’invalidité ont droit à une indemnisation supplémentaire

Tuk Tuk Travel
Rapprochement des législations PROT
Résiliation de voyages à forfait en cas de circonstances exceptionnelles : une juridiction nationale peut, sous certaines conditions, informer d’office le voyageur de son droit de résiliation sans frais

Volkswagen Group Italia et Volkswagen Aktiengesellschaft
Espace de liberté, sécurité et justice
Le principe ne bis in idem s’applique aux sanctions infligées en matière de pratiques commerciales déloyales qualifiées de sanctions administratives de nature pénale

The latest issue of the IPRax (Praxis des Internationalen Privat- und Verfahrensrechts) has been published. The table of contents is available here. The following abstracts have been kindly provided to us by the editor of the journal.

C. Budzikiewicz/K. Duden/A. Dutta/T. Helms/C. Mayer, The European Commission’s Parenthood Proposal – Comments of the Marburg Group

The Marburg Group – a group of German private international law scholars – reviewed the European Commission’s Proposal for a Council Regulation on jurisdiction, applicable law, recognition of decisions and acceptance of authentic instruments in matters of parenthood and on the creation of a European Certificate of Parenthood. The Group welcomes the initiative of the Commission and embraces the overall structure of the Parenthood Proposal. Nevertheless, it suggests some fundamental changes, apart from technical amendments. The full article-by-article comments of the Group with redrafting suggestions for the Commission Proposal are available at http://www.marburg-group.de. Building on the comments, the present article authored by the members of the Marburg Group focuses on the main points of critique and considers the present state of discussion on the proposed Regulation.

U.P. Gruber, A plea against ex post-adaptation of spousal inheritance rights

Adaptation is recognized as a tool to eliminate the lack of coordination between the provisions of substantive law derived from different legal systems. According to a widespread view, adaption is very often necessary with regard to the spouse’s share in the deceased’s estate, namely if the matrimonial property regime and questions relating to succession are governed by different laws. However, in this article, the author takes the opposite view. Especially in light of the ECJ’s classification of paragraph 1371(1) BGB as a provision dealing with succession, there are new solutions which render ex post adaptations superfluous.

M. Mandl, Apparent and virtual establishments reflected through Art. 7 No. 5 Brussels Ia Regulation and Art. 19 (2) Rome I Regulation

The Federal Court of Justice (Bundesgerichtshof – BGH) has ruled that a dispute has the required connection to the operation of an (existing) establishment pursuant to Article 7 (5) Brussels Ia Regulation if the business owner operates an internet presence that gives the appearance of being controlled by this establishment instead of the company’s central administration and the contract in dispute was concluded via this internet presence. This decision provides an opportunity to examine the prerequisites and legal consequences of apparent establishments and so-called virtual establishments (internet presences) from a general perspective, both in the context of Article 7 (5) Brussels Ia Regulation and in connection with Article 19 (2) Rome I Regulation.

D. Nitschmann, The consequences of Brexit on Civil Judicial Cooperation between Germany and the United Kingdom

The United Kingdom’s withdrawal from the European Union has far-reaching consequences for international civil procedure law. This is exemplified by the decisions of the Higher Regional Court of Cologne for the international service of process. Since the European Regulation on the Service of Documents no longer applies to new cases, the Brexit leads to a reversion to the Hague Service Convention and the German-British Convention regarding Legal Proceedings in Civil and Commercial Matters. Of practical relevance here is, among other things, the question of whether and under what conditions direct postal service remains permissible.

R.A. Schütze, Security for costs of english plaintiffs in Austrian litigation

The judgment of the Austrian Supreme Court (Oberster Gerichtshof – OGH) of 29 March 2022 deals with the obligation of English plaintiffs to provide security for costs according to sect. 57 Austrian Code of Civil Procedure. The principle stated in para. 1 of this section is that plaintiffs of foreign nationality have to provide security for costs. But an exception is made in cases where an Austrian decision for costs can be executed in the country of residence of the plaintiff.
The OGH has found such exception in the Hague Convention 2005 on Choice of Court Agreements. As the United Kingdom has, on 28 September 2020, declared the application of the Hague Convention 2005 for the United Kingdom, the Convention is applicable between Austria and the United Kingdom despite the Brexit. The Hague Convention opens the possibility to recognition and execution of judgments rendered under a choice of court agreement including decisions on costs.

Th. Garber/C. Rudolf, Guardianship court authorisation of a claim before Austrian courts – On international jurisdiction and applicable law for the grant of a guardianship court authorization

The Austrian court has requested court approval for the filing of an action by a minor represented by the parents. The international jurisdiction for the granting of a guardianship court authorisation is determined according to the Brussels II-bis Regulation or, since 1.8.2022, according to the Brussels II-ter Regulation. In principle, the court competent to decide on the action for which authorization by the guardianship court is sought has no corresponding annex competence for the granting of the authorization by the guardianship court: in the present case, the Austrian courts cannot therefore authorize the filing of the action due to the lack of international jurisdiction. If an Austrian court orders the legal representative to obtain the authorization of the guardianship court, the courts of the Member State in which the child has his or her habitual residence at the time of the application have jurisdiction. In the present case, there is no requirement for approval on the basis of the German law applicable under Article 17 of the Hague Convention 1996 (§ 1629 para 1 of the German Civil Code). The Cologne Higher Regional Court nevertheless granted approval on the basis of the escape clause under Article 15 para 2 of the Hague Convention 1996. In conclusion, the Cologne Higher Regional Court must be agreed, since the escape clause can be invoked to protect the best interests of the child even if the law is applied incorrectly in order to solve the problem of adaptation.

M. Fornasier, The German Certificate of Inheritance and its Legal Effects in Foreign Jurisdictions: Still Many Unsettled Issues

What legal effects does the German certificate of inheritance („Erbschein“) produce in other Member States of the EU? Is it a reliable document to prove succession rights in foreign jurisdictions? More than one decade after the entry into force of the European Succession Regulation (ESR), these questions remain, for the most part, unsettled. In particular, commentators take differing views as to whether the Erbschein, being issued by the probate courts regardless of whether the succession is contentious or non-contentious, constitutes a judicial decision within the meaning of Article 3(1)(g) ESR and may therefore circulate in other Member States in accordance with the rules on recognition under Articles 39 ESR. This article deals with a recent ruling by the Higher Regional Court of Cologne, which marks yet another missed opportunity to clarify whether the Erbschein qualifies as a court decision capable of recognition in foreign jurisdictions. Moreover, the paper addresses two judgments of the CJEU (C-658/17 and C-80/19) relating to national certificates of inheritance which, unlike the German Erbschein, are issued by notaries, and explores which lessons can be learned from that case-law with regard to certificates of inheritance issued by probate courts. In conclusion, it is submitted that, given the persisting uncertainties affecting the use of the Erbschein in foreign jurisdictions, the European Certificate of Succession provided for by the ESR is better suited for the settlement of cross-border successions.

E. Vassilakakis/A. Vezyrtzi, Innovations in International Commercial Arbitration – A New Arbitration Act in Greece

On 4.2.2023 a new Arbitration Act came into effect in Greece. It was approved by means of Law No. 5016/2023 on international commercial arbitration, and was enacted in order to align the regime of international commercial arbitration with the revision of the UNCITRAL Model Law on International Commercial Arbitration adopted in 2006 (hereinafter the revised Model Law). The new law contains 49 arbitration-related provisions and replaces the Law No. 2735/1999 on international commercial arbitration, while domestic arbitration continues to be regulated by Art. 867–903 of the Greek Code of Civil Procedure (hereinafter grCCP). A reshaping of Art. 867 ff. grCCP was beyond the “mission statement” of the drafting Committee.1 Besides, it should also be associated with a more extensive and, in consequence, time-consuming reform of procedural law. Hence, the dualist regime in matters of arbitration was preserved.
Pursuant to Art. 2, the new law incorporates on the one hand the provisions of the revised Model Law and on the other hand the latest trends in international arbitration theory and practice. Therefore, it is not confined to a mere adjustment to the revised Model Law, but also includes several innovative provisions that merit a brief presentation.

C. Rüsing, Dialogue International Family Law, 28th – 29th April, Münster, Germany

The post below was written by Giuditta Cordero-Moss, who is a Professor at the Department for Private Law, University of Oslo. It is the sixth and concluding contribution to the EAPIL online symposium on the English Law Commission’s proposed reform of the law governing arbitration agreements. The previous posts of Alex Mills, Manuel Penades, George Bermann, Sylvain Bollée and Matthias Lehmann can be found here, here, here, here and here.

Readers are encouraged to participate in the discussion by commenting on the posts. 

We are aware that some users are experiencing technical issues while posting comments: while we fix these issues, comments may be sent to Ugljesa Grusic (u.grusic@ucl.ac.uk). 

In this online symposium, we addressed one particular aspect of the Final Report on the Review of the Arbitration Act 1996 rendered by the Law Commission of England and Wales: the choice of the law applicable to the arbitration agreement.  The Law Commission recommends reversing the law as stated in the known UK Supreme Court decisions Enka (Enka v Chubb [2020] UKSC 38), and Kabab-Ji (Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2021] UKSC 48). Among other things, these decisions established that the choice of law made by the parties in their commercial contract applies also to the arbitration agreement.

Arbitration agreements are often contained in an arbitration clause which is part of a larger contract regulating the commercial relationship between the parties (which the Law Commission defines as the “matrix contract”, and I refer to as the “main contract”). Often, the main contract contains, in addition to the arbitration clause, a choice of law clause subjecting the contract to a certain law. The question is whether the choice of law made by the parties for the main contract also covers the arbitration clause. According to the Supreme Court, it does; according to the Law Commission, it does not.

In the Law Commission’s Final Report, the law chosen by the parties for the main contract applies to the arbitration clause only if it was expressly and specifically also made for the arbitration agreement. Failing an express and specific choice, the Report recommends that the arbitration agreement be subject to the law of the place of arbitral seat. This default rule is aligned with the New York Convention provision in article V(1)(a) and with the UNCITRAL Model Law provision in article 34(2)(a)(i), and will not be commented any further here, other than to commend the Law Commission for having recommended a clear rule harmonised with international sources.

The spirit of the reform is clear: party autonomy is respected, but subject to the principle of severability – although Manuel Penades points out in his post that the wording suggested by the Law Commission may give rise to some uncertainties.

The recommendation’s rationale is explained in sections 12.17-20 of the Final Report: the aim is to give a clear rule and to align the law applicable to the arbitration agreement with the law applicable to the arbitral procedure – which, incidentally, permits to apply English law to arbitration agreements that are to be performed in England.

A Restriction to Party Autonomy?

There is a general acceptance that the arbitration agreement may be subject to a law different from that governing the main agreement (see, for France, Cour de cassation, 28 September 2022, n° 20-20.260 (Kabab-Ji); for Sweden, ; for Germany,  BGH 26 November 2020, I-ZR 245/19 (Mace-Flower)). However, opinions diverge on the effects for the arbitration agreement of a choice of law contained in the main contract and that does not specifically refer to the arbitration agreement.

Alex Mills argues in his post that the Law Commission does not persuasively explain why the policies mentioned in the Report should trump the principle of party autonomy. Likewise, George Bermann finds that the law chosen by the parties should be given respect even though it does not specifically mention the arbitration agreement.

The question is, however, whether the Law Commission’s proposal represents a restriction of party autonomy. If the parties to a contract subject to the law of Ruritania decide to submit disputes between them to arbitration in England, are they more likely to expect that their arbitration agreement is subject to the law of Ruritania or to the law of England?

The arbitration agreement is the source of the arbitral tribunal’s powers. Subjecting it to the law applicable to the arbitral proceedings may turn out to be more compatible with the parties’ expectations than a scenario in which the law of Ruritania has a say on the existence and scope of the arbitral tribunal’s powers in an arbitration that, according to the parties’ choice, is to be carried out in England.

Severability and Choice of Law

The arbitration agreement is to be deemed a separate agreement, even where it is a clause within the main contract. This is confirmed, i.a., in article 16(1) of the UNCITRAL Model Law.

Without falling into excessive dogmatism, as correctly warned against in the post by Matthias Lehmann, the principle of severability has important practical consequences.

The purpose of severability is to preserve the integrity of the arbitration agreement; if there were no severability, any issues relating to the existence, validity or termination of the contractual relationship would affect the arbitration agreement. Questioning the validity of the contract would be sufficient to affect the whole basis of the arbitral process in which the contract’s validity is an issue. The question is how far severability reaches: does it cover only the validity of the arbitration agreement, or also its applicable law?

George Bermann correctly assumes, in his post, that parties who choose the arbitration seat only choose the arbitration law of that country. He concludes that rules on the arbitration agreement fall outside of this choice. Arguably, however, the arbitration law covers also questions relating to the arbitration agreement and its effects – both the New York Convention and the UNCIRAL Model Law, to name two examples, have rules precisely on this, and there is no doubt that they can be defined as arbitration law. By choosing the seat for their arbitral proceedings and the arbitration law applicable to them, therefore, parties may well have expected that their choice would cover also questions regarding the arbitration agreement.

The UK Supreme Court argues in Enka that the arbitration clause should be dealt with like any other clause in the agreement. Surprisingly, instead of concluding that the parties’ choice of law consequently directly applies to the arbitration clause, the majority in Enka states that choice of law for the main agreement amounts to an implied choice of law for the arbitration agreement. According to the minority, this choice creates a presumption that the law was chosen also for the arbitration agreement.

The Law Commission correctly points out in sections 12.34-38 that this reasoning lacks internal logic: if the arbitration agreement is a clause like any other clause in the main contract, shouldn’t the parties’ choice of law be deemed to be an expressed choice of law, just like it is for any other cause of the contract? Why is it defined as implied, or presumed? The severability principle prevents drawing a full equivalence of the arbitration agreement with any other clauses of the contract; but an implicit, or presumed, equivalence, is assumed after all.

A comparative view supports the Law Commission’s proposal.

Indirectly, some of the most arbitration-friendly national arbitration laws confirm that the law chosen by the parties for the main contract not necessarily is the law governing the arbitration agreement: Article 178(2) of the Swiss Private International Law Act, as well as Article 9(6) of the Spanish Arbitration Act, are based on the validation principle. According to these provisions, an arbitration agreement is valid if it complies with the requirements contained in (i) the law chosen by the parties to govern the arbitration agreement, (ii) the law applicable to the main contract, or (iii) the lex fori. If a choice of law for the main contract had the effect to select the law applicable to the arbitration agreement, it would not be necessary to list the law chosen by the parties as one of three alternatives.

Also under French law, the parties’ choice in the main agreement does not apply to the arbitration agreement – although this is the consequence of a special understanding of arbitration as an autonomous legal order, as Sylvain Bollée explains in his post.

According to Swedish courts, the principle of severability implies that the arbitration agreement is subject to the lex arbitri, irrespective of any choice the parties may have made for the main contract (Svea Court of Appeal, 20 May 2015, T 8043-13).

Indeed, it seems artificial to affirm that the validity of the arbitration agreement is to be examined separately, while the law applicable to the validity is the same as the law applicable to the main agreement. This does not to correspond to the practice of arbitration either.

Parties rarely specify the law governing their arbitration agreement. Usually, model Arbitration clauses recommended by arbitration institutions or, for ad hoc arbitration, by the UNCITRAL, do not contain a choice of law specific for arbitration either. The Model clauses may suggest adding which law governs the contract, but this applies to the merits of the dispute, not to the procedural aspects of the arbitration, as is confirmed by the wording suggested by the LCIA (‘The governing law of the contract shall be the substantive law of []’) and by the SCC (‘This contract shall be governed by the substantive law of […]’). By expressly mentioning the substance of the dispute, these rules arguably exclude that the choice applies to the arbitration agreement itself; and they are generally silent on the law applicable to the clauses themselves. In one instance, (Hong Kong), the model clause specifically suggests that the parties choose the law applicable to the arbitration clause, thus indirectly confirming that severability extends to choice of law.

In my opinion, the above supports extending severability to the applicable law, as the Law Commission recommends. It is compatible with the principle of severability, corresponds to the expectations in international practice, and favours harmonisation of English law with what has been defined as the preferred approach (Gary Born, International Commercial Arbitration 3rd edition, Kluwer Law International 2021, §4.04[A]).

Conclusion

The Law Commission approach is to be saluted. In addition to the practical and policy reasons it mentions, the proposal has the advantage of enhancing harmonization.

In a study carried out at the Hague Academy on the law applicable to various issues in arbitration (D. Fernández Arroyo and G. Cordero-Moss (eds.), Applicable Law Issues in International Arbitration, Brill 2023), one chapter is devoted precisely to the law applicable to arbitration agreements: Giulia Vallar, “Validity of the arbitration agreement”, pp. 325-346. Vallar suggests two main solutions to enhance predictability for the parties. One solution is readily available, but seldom applied: the parties should choose the applicable law in the arbitration agreement. The other, is defined by Vallar as utopistic: a uniform conflict rule.  While I agree with her skepticism about the feasibility of codifying a multilateral rule, I find it an acceptable second best solution that the different legal systems spontaneously adopt a harmonized solution.

The Law Commission recommendation is a step into the right direction.

Venezuela / Conseil
Relations extérieures
Le Tribunal rejette le recours du Venezuela contre les mesures restrictives de l’Union

The post below was written by Matthias Lehmann, who is Chair for Private Law, International Private Law and Comparative Law at the University of Vienna and an editor of the EAPIL blog. It is the fifth contribution to the EAPIL online symposium on the English Law Commission’s proposed reform of the law governing arbitration agreements. The previous posts of Alex Mills, Manuel Penades, George Bermann and Sylvain Bollée can be found here, here, here and here.  

Readers are encouraged to participate in the discussion by commenting on the posts. 

We are aware that some users are experiencing technical issues while posting comments: while we fix these issues, comments may be sent to Ugljesa Grusic (u.grusic@ucl.ac.uk). 

Legislative proposals from the British islands to correct the intricacies of the common law always fill the continental lawyer with joy. Yet interestingly, most of the questions that the Law Commission’s proposal to reform English arbitration law addresses are not dealt with explicitly by legislation but rather by court judgments on the continent. This is at least true for the two legal systems that I will survey in this post, German and Austrian law. Moreover, the case law of these two countries diverges in some very important respects from the Law Commission’s proposal.

The Law Governing the Arbitration Agreement Respect for Party Autonomy

I start with the law governing the arbitration agreement. German and Austrian courts unanimously rule that the law governing the arbitration agreement can be chosen by the parties (see e.g. German Federal Court, 12 May 2011, IX ZR 133/10; Austrian Supreme Court, 23 June 2015, 18 OCg 1/15v). For this, they rely on the conflicts rule contained in Article V(1)(a) New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards (NYC), which they extend per analogiam to the situation before an arbitration award has been rendered. This position is buttressed by Article 6(2) European Convention on International Commercial Arbitration of 1961, which explicitly allows to choose the law applicable to the arbitration agreement.

Choice for Main Contract = Choice for Arbitration Clause?

More difficult is whether a choice in the main contract can be extended to the arbitration agreement, as the UK Supreme Court held, but the Law Commission denies. This issue is moot in German and Austrian literature. The whole debate is impregnated by an unhealthy dose of dogmatism. It basically revolves around the separability of the arbitration agreement from the main contract and its ‘true nature’ – whether it is procedural or substantive.

The Austrian Supreme Court has left this question open (decision of 23 June 2015, 18 OCg 1/15v). The German Supreme Court, however, has cut the Gordian knot and explicitly ruled that a choice in the main contract is to be presumed to also cover the arbitration clause contained therein – at least absent any indications to the contrary (see German Federal Court, 12 May 2011, IX ZR 133/10, discussed here). You can call this an ‘implied choice’, although this expression was not used by the German court; it would probably be more correct to speak of a ‘presumed choice’.

The Impact of the CISG

A notable particularity in comparison to English law is caused by the fact that both Germany and Austria are signatories of the Convention for the International Sale of Goods (CISG). Although this Convention is geared towards sales contracts, the German Federal Court has held that its provisions concerning the formation of the contract (Articles 14–24 CISG) also apply when determining the validity of an arbitration clause contained in the sales contract (German Federal Court, id.). As a result, the question whether standard terms and conditions of one party which contain such a clause have become part of the contract will be governed by the CISG if the contract falls within its scope. Even where the parties have explicitly excluded the CISG, it may be relevant when courts determine whether German law provides a more favourable rule in the sense of Article VII NYC (German Federal Court, id.). To understand this viewpoint, it is necessary to realise that in the eyes of German (and Austrian) courts, the CISG is part of their domestic law, merely providing a special regime for international sales contracts.

The Impact of the Arbitral Seat

In case no law has been chosen – neither for the arbitration agreement nor for the main contract – German and Austrian courts refer to the law of the place of the seat of arbitration to determine the validity of an arbitration agreement (see German Federal Court, id., para 52; Austrian Supreme Court 18 OCg 1/15v). For this, they rely again on Article V(1)(a) NYC per analogiam; with Article 6(2) European Convention on International Commercial Arbitration of 1961 being even more to the point. In this respect, both legal systems converge with the suggestions of the Law Commission.

The Fall-Back Rule

A difficult question is which law governs the arbitration agreement when the applicable law has not been chosen and the seat of the arbitration is yet to be determined. There is no case law in Austria or Germany on this issue yet.

Two solutions are discussed in literature. The first is to always apply the law of the forum of the state court that is facing the task to assess the validity of the arbitration clause, for instance when it is invoked as an exception to its jurisdiction. Yet, this lex forism has the evident downside of favouring diverging results and inviting forum shopping.

Therefore, the second solution is preferrable, which is to apply the law of the state with the closest connection to the arbitration agreement. This connection must be determined on the basis of all circumstances. Most authors understand this to be the law of the state that governs the merits of the case.

From an Austrian and German perspective, there is light and shadow in the Law Commission’s Proposals. The suggestion to lay down in statutory law the parties’ freedom to choose the law governing the arbitration agreement will be met with cheers. Equally, the role of the seat of the arbitral tribunal as a connecting factor in the absence of a choice is down the alley of German and Austrian law. In contrast, the decoupling of the law governing the main contract and that governing the arbitration agreement will raise some eyebrows, at least in Germany.

Verification of the Validity of the Arbitration Agreement by the Courts

But it is the exclusion of the review of the validity of the arbitration agreement by state courts that will be most frowned upon from Schleswig to the Danube. The Law Commission wants to exclude a de novo hearing when this issue has already been discussed and decided before by the arbitral tribunal (see the post by Ugljesa Grusic). The justification for this are efficiency and fairness.

Although German and Austrian courts are no less committed to these values, their position is entirely different. According to them, a party must always have the possibility to invoke a lack of consent to arbitration before a state court, regardless of whether this question was already debated before the arbitral tribunal or not. The famous concept of Kompetenz-Kompetenz developed by the German Federal Court does not imply otherwise. As the German Federal Court has said quite clearly:

“According to the mandatory provision of section 1041 (1) no. 1 ZPO [German Code of Civil Procedure before the reform of 1998, concerning the annulment of arbitral awards], the ordinary court has to examine the validity of the arbitration agreement without being bound by the decision of the arbitral tribunal. Since the arbitral tribunal, according to § 1025(1) ZPO [German Code of Civil Procedure before the reform of 1998, concerning the validity and effects of the arbitral agreement], obtains its jurisdiction solely through the arbitration agreement, it cannot itself make a binding decision on its legal existence. The so-called competence-competence, i.e. the power to make a binding decision on its jurisdiction for the state courts (or other authorities), is therefore not available to it.” (decision of 5 May 1977, III ZR 177/74)

This position, which is shared by Austrian courts (OGH, decision of 19 December 2018, 3 Ob 153/18y), is not merely the product of a particular legal thinking or culture. Instead, it seems to be required by the European Convention of Human Rights (ECHR). To bind a party to a decision of an arbitral tribunal to which it has not agreed would violate the right to a fair trial enshrined in Article 6 ECHR. In no case can efficiency prevail over this fundamental right. If the UK legislator retained the proposal by the Law Commission in this regard, it would create a permanent abyss between English law and that of other European states. This would certainly give rise to heated discussions and a possible recycling of the title of an old article: “What Sort of Kompetenz-Kompetenz has Crossed the Channel?”

— Many thanks to Paul Eichmüller for his assistance in researching the Austrian decisions.

La règle de compétence posée à l’article 3, paragraphe 1, sous a), sixième tiret, du règlement Bruxelles II bis, selon laquelle sont compétentes les juridictions de l’État membre de la résidence habituelle du demandeur s’il y a résidé depuis au moins six mois immédiatement avant l’introduction de la demande, exige qu’il bénéficie d’une résidence habituelle au sein de cet État membre depuis au moins six mois avant la saisine.

Sur la boutique Dalloz Code de procédure civile 2024, annoté Voir la boutique Dalloz

en lire plus

The post below was written by Sylvain Bollée, who is Professor at Paris 1 Panthéon-Sorbonne University. It is the fourth contribution to the EAPIL online symposium on the English Law Commission’s proposed reform of the law governing arbitration agreements. The previous posts of Alex Mills, Manuel Penades and George Bermann can be found here, here and here.

Readers are encouraged to participate in the discussion by commenting on the posts.

We are aware that some users are experiencing technical issues while posting comments: while we fix these issues, comments may be sent to Ugljesa Grusic (u.grusic@ucl.ac.uk). 

For a French lawyer, the Law Commission’s proposal concerning the determination of the law governing the arbitration agreement is of particular interest. It comes a little less than a year after the decision rendered by the French Court of Cassation in the Koot Food Group case (Civ. 1st, 22 September 2022, No. 20-20.260), in which the French and English courts were notoriously divided on the contemplated issue.

Without going into the details of the solutions found in English case law, their key points can be summarized (albeit with a degree of approximation) – as follows: 1) the parties are free to choose the law applicable to the arbitration agreement; 2) a choice of law clause stipulated in the matrix contract will generally be held applicable to the arbitration agreement; 3) in the absence of any choice of law, the arbitration agreement will generally be governed by the law of the seat chosen by the parties.

In order to understand the French approach, it is important to bear in mind that it is primarily based on the rejection of any conflict-of-laws reasoning and, supposedly, the application of any national law to the arbitration agreement. French courts directly apply “substantive rules” (règles matérielles) which, to a large extent, seek to give effect to the parties’ common intent to submit their dispute to arbitration. In reality, this “substantive rules method” inevitably amounts to applying rules that are a creation of the French legal system. Thus, in the final analysis, it is not so much the application of legal rules from national sources that is set aside, but rather conflict-of-laws rules and all foreign laws (and also, at least in theory, the application of French law rules applicable to domestic situations). The Dalico judgment (Civ. 1st, 20 December 1993, No. 91-16.828), which is the landmark decision on the subject, does not bring this out so clearly. But that is indeed the methodological approach which, in principle, prevails before French courts. Obviously, the underlying policy is to favour the validation of arbitration clauses and, by implication, the enforcement of arbitral awards.

One question is whether the parties may still choose to submit their arbitration agreement to a foreign law. As a matter of principle, the French Court of Cassation has answered in the affirmative. But the existence of such an electio juris is not easy to establish: according to the terms of its judgment in Koot Food Group, “the parties must have expressly submitted the validity and effects of the arbitration agreement itself to such a law”. This entails that a choice of law clause stipulated in the matrix contract, with no specific indication as to its applicability to the arbitration agreement, will not be regarded as sufficient. As a result, the application of the substantive rules method will likely not be overturned in the vast majority of cases.

The Law Commission’s proposal would significantly narrow the gap between the English and French solutions. Of course, from a methodological point of view, there is still a profound divergence: the English approach does not deviate from conflict-of-laws reasoning in the first place, whereas the French approach only grants it a secondary role. But if one looks at the solutions in terms of their practical results, two points of convergence stand out.

The first is a strict limitation of the cases in which the existence of a choice of law clause applicable to the arbitration agreement will be deemed to be established. An express choice will be required, and it will not be sufficient to refer to the existence of a choice of law clause in the matrix contract.

This immediately gives rise to an objection: why exclude the possibility of an implied choice? If the arbitrator or the judge is convinced that the parties have implicitly agreed on the application of a certain law, is it not unfortunate that he or she is obliged to disregard this implicit choice? Of course, one should not be too quick to dismiss the prima facie advantages of the solution: it is expected to close the door to overly subtle discussions, costly litigation and, in the end, what is perceived as legal uncertainty. But can this objective really be achieved? Only to a limited extent, because the existence of an express choice might also be debated. My colleague Dr Manuel Penades rightly raised this point in his contribution and I will take one of his examples here: what will be decided in the case where the matrix contract contains both a choice of law clause the scope of which (as per its very wording) is “the Agreement”, and a clause that defines “the Agreement” as all the clauses contained in the contractual document (which, by hypothesis, will include the arbitration clause)? Commercial contracts regularly include such provisions and I suspect reasonable people might disagree about the existence of an express choice in the considered scenario.

Besides, it would seem to be in the nature of things that a choice of law clause included in the matrix contract should apply to the arbitration agreement, as long as it does not turn out that the parties intended otherwise. In this respect, it has been convincingly objected to the Law Commission’s proposal that it disregards the normal expectations of the parties (see the Final report, paras 12-32 et seq.). As a matter of fact, international contracts very often contain choice of law clauses, which tend to support the view that the parties are keen to settle the issue of applicable law themselves. At the same time, they generally say nothing specific about the law applicable to the arbitration clause. Why is that? Precisely, I believe, because they naturally assume that the choice of law clause they have inserted in the contract will also apply to the arbitration agreement. It is regrettable that the Law Commission’s proposal does not draw the consequences from this, all the more so as the application of two different laws – one to the matrix contract and the other to the arbitration clause – is not without practical disadvantages: it is likely to result in undesirable complexity, if not inconsistencies. This objection is not new and concerns about such a split in the applicable law were raised during the consultation process (see the second consultation paper, paras 2.66 and 2.67).

The second point of convergence between the Law Commission’s proposal and French law pertains to the case (which, in practice, is likely to be by far the most common) where the parties are deemed not to have expressly chosen the law applicable to the arbitration agreement. If the seat of the arbitration is in England, the English court will do what the French court would do in its place: it will apply its own law. In fact, this appears to be one of the main reasons why the Law Commission found it adequate to rule out the possibility of an implied choice: combined with the default rule in favour of the law of the seat, that solution is likely to ensure the applicability of English law in the contemplated situation and, correlatively, to protect the arbitration clause against the effects of a foreign law which might be less supportive of arbitration (see the Final report, paras 12-18, 12-72 and 12-73). Such a pro-arbitration attitude is also at the root of the French method of substantive rules and, arguably, the reluctance of French courts to acknowledge the existence of a choice of law clause which might submit the arbitration agreement to a foreign law.

This being said, French law goes much further in its policy of favouring the validity of arbitration agreements: its substantive rules method applies independently of any conflict of laws rule, so that the benefit of the pro-arbitration rules of French law is not restricted to arbitrations seated in France. The resonance of this approach is all the greater in the light of another aspect of French law: as shown by the decisions rendered in the well-known Hilmarton (Civ. 1st, 23 March 1994, No. 92-15.137) and Putrabali (Civ. 1st, 29 June 2007, No. 05-18.053) cases, the annulment of the award in the country of the seat does not constitute a ground for non-recognition in France. Thus, if the court of the seat of the arbitration, applying its own law, considered that the arbitral tribunal lacked jurisdiction, this will not prevent the French courts from granting exequatur to the award. The Law Commission’s proposal, as it provides for the application of the law of the seat even when it is located abroad, is a reminder that profoundly different conceptions of international arbitration prevail on either side of the Channel.

I discussed Richard de La Tour AG’s Opinion in C-590/21 Charles Taylor Adjusting Limited v Starlight Shipping Company and Overseas Marine Enterprises Inc here.

The CJEU held last week, [27] qualifying as the AG did, the English orders as a quasi anti-suit injunction in the circumstances of the order (leaving some room for distinguishing).

Rather more so (and correctly so) than its AG, it [35] points to the nature of ordre public as expressed in (now) A45 BIa as being a concept of the national legal order of the Member States, even if [36] the origin of that rule may lie in EU law (such as here the rule [37] that “every court seised itself determines, under the applicable rules, whether it has jurisdiction to resolve the dispute before it”).

The CJEU’s reference to Meroni and its stating that a Member State “cannot, without undermining the aim of [Brussels Ia], refuse recognition of a judgment emanating from another Member State solely on the ground that it considers that national or EU law was misapplied in that judgment” [29], with reference ia to Liberato), imho mean that it does not push the principle of ‘non-review’ quite so emphatically as the AG did, however one cannot see in what circumstances an order such as this would survive (now) Article 45.

Finally, the CJEU does not discuss the AG’s ‘ ‘unless it gives effect to a decision which would have been prohibited in direct proceedings’, which I flagged in my earlier post.

The judgment is consistent with the (much contested) Turner and West Tankers approach, and it leaves some open questions on the qualification of orders as ‘quasi anti-suit’,  and the individual circumstances in which they might not clash with ordre public.

Geert.

(EU Private International Law, 3rd ed. 2021, ia 2.95 ff.

#CJEU European court confirms 'quasi anti-suit injunctions' (here ia related to cost order) may fall foul of BIa's recognition rules: MSs may use ordre public to refuse to enforce

C‑590/21 Charles Taylor Adjusting v Starlight Shipping re: The Alexandros Thttps://t.co/u5vT91nLjN

— Geert Van Calster (@GAVClaw) September 7, 2023

The post below was written by George A Bermann, who is Walter Gellhorn Professor of Law and Jean Monnet Professor of European Union Law at Columbia Law School. It is the third contribution to the EAPIL online symposium on the English Law Commission’s proposed reform of the law governing arbitration agreements. The previous posts, by Alex Mills and Manuel Penades, can be found here and here. 

Readers are encouraged to participate in the discussion by commenting on the posts. Those wishing to submit longer analyses are invited to do so by e-mailing Ugljesa Grusic (u.grusic@ucl.ac.uk).

The relationship between the law (if any) chosen in the arbitration clause and the law of the seat is unsettled in the US.

It was taken up in the Restatement of the US Law of International Commercial and Investor-State Arbitration. The gist of the Restatement is that, while the law of the seat governs the conduct of the arbitration, it does not govern the interpretation of the arbitration agreement. Interpretation of the arbitration agreement should of course be governed by the law, if any, chosen in the arbitration clause itself. (I note that the court in Enka v. Chubb cited the Restatement in support.)

There was debate over whether, in the absence of a choice of applicable law in the arbitration clause, the arbitration agreement should be governed by the law, if any, chosen in the main contract. The view that ultimately prevailed is that more respect on matters of choice of law should be given to any expression of preference as to choice of law in the contract (even if not in the arbitration clause) over the law of the seat. That was a choice of seat, not a choice of law (other than the law of arbitration of the seat).

Unfortunately, the Restatement drew no distinction between issues of the interpretation and the validity of the arbitration agreement. More on that below.

The Restatement did not go much further, but the thinking behind it can be amplified and extrapolated. I attempt to do so below. I hasten to add that what follows happens also to be what I think the law should be.

It is this framework that I would use in assessing the differences between US law and the law advanced by the Law Commission.

As a general matter, I believe that Report in some cases fails to make an important distinction and in other cases, acknowledges the distinction, but makes the wrong choice.

I set out below what I consider to be these important distinctions:

1. Distinction between the purposes underlying a choice of law in the arbitration clause (absent which in the law of the main contract) and the purposes underlying a choice of law function of the arbitration law of the seat

When parties choose a seat, they are choosing a seat, full stop. We should not suppose they are choosing an applicable law of any kind other than the arbitration law of the seat (lex arbitri).

By contrast, when parties indicate an applicable law in their arbitration agreement they are making a choice of applicable law. But, absent an indication of an applicable law in the arbitration clause, where else did the parties express a choice of law preference? They expressed it in the choice of law clause in the main contract. There too they are making a choice of applicable law, and their choice of an applicable law should be respected.

2. Distinction between the law of the arbitration agreement and the law of the main contract

This result should be unaffected by the principle of separability. The principle of separability exists for one reason: to ensure that the demise of the main contract (as invalid) does not entail the demise of its arbitration clause. That is why we have the separability principle. It should not be extended to functions (such as choice of law) for which it was not intended.

3. Distinction between “arbitration law of the seat” and “law of the seat”

It is vital to distinguish between the arbitration law of a jurisdiction (lex arbitri) and the whole body of law at the seat, and we too often fail to do so by referring sloppily to “the law of the seat”. An arbitration statute should make clear what it is talking about when it refers to “the law of the seat.”

When the parties chose a seat they certainly chose the lex arbitri of the seat. But, notwithstanding, it seems to be assumed that when the law of the seat is referred to, it includes at least some parts of the law of the seat outside the lex arbitri. For example, if the formation or validity of an arbitration agreement is called into question, the law of the seat may include the law of contract of the seat. If contract law at the seat treats coerced contracts as invalid, then that would apply to a claim that the arbitration agreement was coerced.

4. Distinction between the issues of interpretation and issues of validity

As I mentioned, the Restatement fails to distinguish between issues of interpretation and validity, but it should have.

The law chosen in an arbitration agreement most fundamentally determines the interpretation of that agreement (such as its scope). There is absolutely no reason why the law of the seat should have anything to say about the meaning and scope of the arbitration agreement. If there is no choice of law in the arbitration agreement, then interpretation of the arbitration agreement should be governed by the law chosen in the main contract (on the reasoning set out above).

The question of the validity of the arbitration agreement is slightly more subtle.

Suppose the arbitration agreement is invalid under the law, if any, designated in the arbitration agreement, failing which the law governing the main contract, then it is invalid. It should not matter that it happens to be valid under the law of the seat.

On the other hand, conversely, if the arbitration agreement is invalid under the law of the seat, it is invalid, even if it would be valid under the law, if any, designated in the arbitration agreement, failing which the law governing the main contract. Why? Because the seat has a legitimate interest in the validity of the arbitration agreement giving rise to an arbitration on its territory.

More generally, one should not assume that if the law of the arbitration agreement is not the law of the seat, the seat’s policies risk being impaired. But that is not the case. Under no circumstance can the law of the arbitration agreement or the law of the main contract override the mandatory norms of the arbitration law of the seat (or the public policy of the seat).

The approach set out here is of course contrary to the so-called “validation principle,” and deliberately so. The impetus is a belief that the law chosen by the parties (even that in the main contract) deserves a measure of respect, as does the law of the seat. More delineation should be given to the matter than is generally given. I believe it is sometimes assumed that, unless you give as much weight as you possibly can to the law of the seat, you are not pro-arbitration, which is not the case.

5. Distinction between the mandatory and default law provisions of the lex arbitri

Focusing now on the lex arbitri, it contains both mandatory and default rules. Its mandatory law provisions (and principles of public policy at the seat more generally) must be respected. But its default rules can be contracted around by the parties.

How can parties contract around the arbitration law at the seat? Obviously parties can contract around default rules of the seat by a term of their arbitration agreement. But they should also be allowed to contract around the default rules of the seat via the law designated in the arbitration clause.

Whether they can contract around the default rules of the seat via the law governing the main contract will be more controversial, but, for the reasons set out above, they should be able to do so.

Thoughts on Specific Provisions of the Report and Recommendation

1. 12.17: I do not share the view that subjecting an arbitration agreement to the law of the main contract is a threat to the UK as a seat. It is no more a threat than application of a law chosen in the arbitration clause itself; yet the Report allows the latter to apply in lieu of the law of the seat (sec. 12.17).
2. 12.18, 12:47: The Report treats a choice of law clause in the main contract as only an “implied” choice of law for the arbitration agreement. Driving a wedge between the law designated in the arbitration agreement and the law designated in the main contract is an unwarranted extrapolation of the separability principle.
3. 12.19: I see nothing wrong with the law designated in either the arbitration clause or the main contract with displacing the non-mandatory law of the seat.
4. 12.22: the rule in Enka v. Chubb is not “too complex and unpredictable”.
5. 12.25: as may be expected, I, like those commenters referred to here, do not believe the placement of the choice of law clause in a contract should be determinative.
6. 12.35: This is just another assertion of separability where it doesn’t belong.
7. 12.40: This view is correct. When parties choose a seat, they do not think they are choosing anything more than the seat. Maybe they should be bound by the lex arbitri, but why by the law of the seat writ large?
8. 12.53: What is said here makes no sense. To have the law chosen in the main contract govern the arbitration agreement in no way compromises the parties’ decision to arbitrate. The parties will still arbitrate, won’t they?  The arbitration clause is 100% intact. What the Report is in effect doing is to convert the notion of “the decision to arbitrate” into the notion of “the decision to arbitrate under the law of the seat.” In other words, the remark already assumes what the Report wants to establish, namely necessarily subject the arbitration agreement to the law of the seat.  Moreover, if giving effect to a choice of law (other than the law of the seat) in the arbitration clause itself – which the Report clearly allows – does not undermine the decision to arbitrate, then giving effect instead to the applicable law clause in the main contract doesn’t undermine that decision either. Here, the Report is “question-begging.”
9. 12.66: I do not understand the Report’s aversion to using the law designated in the main contract in the rare situation that no seat was yet chosen.
10. 12.73: Here and elsewhere it is said that we can’t allow a choice of law in the main contract to override the parties’ intent to arbitrate. But it doesn’t override. We can easily give effect to the parties’ intent to arbitrate without subjecting the arbitration agreement in all respects to the law of the seat.

The post below was written by Manuel Penades, who is a Reader in International Commercial Law at King’s College London. It is the second contribution to the EAPIL online symposium on the English Law Commission’s proposed reform of the law governing arbitration agreements. The previous post, by Alex Mills, can be found here. 

Readers are encouraged to participate in the discussion by commenting on the posts. Those wishing to submit longer analyses are invited to do so by e-mailing Ugljesa Grusic (u.grusic@ucl.ac.uk).

This post examines the changes proposed by the Law Commission of England and Wales to the choice of law rules for arbitration agreements. Previous contributions to this Symposium have transcribed the text of the draft legislation, which can be found here. The Law Commission introduces three significant amendments that impact the three steps of the common law doctrine of the proper law of the contract. First, the proposal limits the types of choice of law clauses that can demonstrate an express selection of the law applicable to arbitration agreements. Second, it eliminates the possibility to choose the governing law impliedly. Third, it replaces the closest and most real connection test with a hard-and-fast rule in favour of the law of the seat.

Each of these changes requires analysis, followed by a reflection on the New York Convention.

Express Choice of Law

The new rule continues to respect the parties’ freedom to choose the law governing their arbitration agreement. Party autonomy, however, is tempered by proposed section 6A(2) of the Arbitration Act, which provides that an ‘agreement between the parties that a particular law applies to the contract to which the arbitration agreement forms part does not, of itself, constitute an express agreement that that law also applies to the arbitration agreement’. The rule is apparently simple and excludes the possibility to rely on a generic choice of law clause applicable to the contract that includes the arbitration agreement. Section 6A(2) AA, however, does not capture other scenarios, which might become a source of controversy.

The first refers to cases in which the only choice of law in the whole contract is found in the arbitration agreement itself (e.g., ‘the arbitrators shall decide the dispute in accordance with the law of X’). While these cases do not refer to the arbitration agreement specifically, they are express references to the governing law of the whole contract and are contained in the arbitration agreement itself. It is unclear whether these choices will be express enough to satisfy section 6A(2) AA.

The second scenario refers to cases in which the matrix contract not only includes an express choice of law clause applicable to the whole ‘Agreement’, but also a clause in the contract that defines ‘Agreement’ as encompassing all the clauses incorporated in the contractual document, including the arbitration agreement. The UKSC ruled in Kabab-Ji v Kout Food [2021] UKSC 48 that ‘the effect of these clauses is absolutely clear’ [39] and amounts to an express choice also for the arbitration agreement. The Law Commission’s proposal does not mention whether section 6A(2) AA intends to overrule Kabab-Ji. In these scenarios it is not the generic choice of law clause ‘of itself’ that supports the finding of an express choice of law but the combined reading of that clause alongside the definition of the term ‘Agreement’ expressly agreed by the parties in another clause of the contract.

Neither of these uncertainties would exist in the current regime under Enka v Chubb [2020] UKSC 38, as the same law would apply under express or implied choice of law.

The Elimination of Implied Choice of Law

Enka clarified that the designation of a seat does not amount to an implied choice of the law governing the arbitration agreement. This reduced, yet did not eliminate, the uncertainty surrounding implied choice. The proposal of the Law Commission goes much further; it eliminates implied choice altogether from the choice of law rules applicable to arbitration agreements. This is quite revolutionary and might come as a surprise.

Notwithstanding the complexities caused by its application, the courts of England have never questioned the acceptance of implied choice and the UKSC confirmed in Enka that ‘an implied choice is still a choice which is just as effective as a choice made expressly’ [35]. An implied choice is a manifestation of party autonomy, a principle which is at the root of English contract and private international laws.

The proposed new rule also runs contrary to the acceptance of implied choice of law in the vast majority of instruments governing international business transactions (see article 3.1 Rome I, article 14.1 Rome II or article 4 Hague Principles on Choice of Law).

Against this background, disregarding an implied choice of law might seem a step backwards in the common law tradition and global trends. The truth, however, is that decades of arbitration-related litigation in England demonstrate that the inquiry around implied choice is a source of significant uncertainty, expense and tactical litigation. The Law Commission is willing to adopt a regime that disregards cases of real (yet implied) choice of law in exchange for the certainty and savings produced by the elimination of implied choice of law. This less litigious regime makes for better arbitration regulation and strengthens the position of England as efficient arbitration destination.

The proposed solution does not necessarily curtail party autonomy. In fact, the rule after Enka that an implied choice of law for the matrix contract automatically amounts to an implied choice of law for the arbitration agreement, while apparently straightforward, might not always be reflective of the real intent of the parties. The proposed rule eliminates such risk of artificiality.

Further, case law shows that in most disputes where the issue of implied choice arises, English law offers the most arbitration-friendly outcome among the various alternative laws. Under the proposed reform, those cases will be resolved frequently in favour of English law pursuant to the default rule. This will generally protect the parties’ agreement to arbitrate more than under the current regime.

From a normative point of view, the Law Commission’s proposal also eliminates the somewhat artificial cases of double implication, where an implied choice of law for the matrix contract is used as evidence to find an implied choice of the law governing the arbitration agreement (see the conclusion of the minority in Enka [207, 228]).

Finally, the proposal eliminates the confusion sometimes perceived in English judgments between the test applicable to imply a choice of law and the (stricter) requirements to imply an ordinary contractual term [Enka [35] or Kabab-Ji [53]].

The Law of the Seat and Role of the Validation Principle

Under the proposed regime, the absence of an express choice results in the application of the law of the seat. Hard-and-fast rules are alien to the common law doctrine, where the reference to the closest and most real connection permits certain room for manoeuvre in the determination of the applicable law. Other choice of law regimes that provide hard-and-fast rules incorporate escape clauses that allow for the exceptional disapplication of the identified law (e.g., article 4.3 Rome I). In contrast, the proposed rule lacks any reference to the possibility to escape from the law of the seat.

One could wonder whether this could be a residual role for the validation principle. This principle was used in Enka to support the application of the law of the seat when an implied choice in favour of the law of the matrix contract led to a serious risk that the arbitration agreement would be invalid or ineffective. The expulsion of implied choice from the proposed regime would eliminate the raison d’etre of the validation principle. Still, the Law Commission does not exclude the principle in absolute terms, and rather states that ‘we do not need the validation principle for that purpose’ [Para. 12.56]. The question then arises whether other purposes exist.

One option would be to retain the application of the validation principle to correct express choices of law that render the arbitration agreement invalid or ineffective. The answer should be negative. The role of courts is not to improve the contract (Arnold v Britton [2015] UKSC 35, [20]). The validation principle allows the court to resort to the more favourable interpretation when the contract allows for various possible interpretations. When the choice is express, however, there is only one undisputable choice, even if it renders the arbitration agreement invalid or ineffective. In those cases, party autonomy (and the pathologies derived from it) must prevail. Any deviation from the principle of party autonomy would have required an express rule in the Law Commission’s proposal.

The other possible application of the validation principle would be in the context of the default rule, when the law of the seat renders the arbitration agreement invalid or ineffective. Indeed, the majority of the UKSC in Enka suggested (but did not confirm) that the closest connection test might itself be subject to the validation principle [146]. As noted by the Law Commission [para. 12.58], my response to the Second Consultation said that it would be odd to apply the validation principle to escape from an invalidity provided by English law itself under the default rule. However, the proposed default rule is not just in favour of English law, but in favour of the law of any seat. This approach could open the door to the application of the validation principle when, unlike the law of the seat, English law rendered the arbitration agreement valid and effective. While the Final Report of the Law Commission does not explore this option, such extended reach of the validation principle would deviate from the finality and simplicity with which the Law Commission views the default rule. Also, it might not be an appropriate and efficient policy to use English law to enforce a foreign arbitration agreement when the parties have not selected the governing law and the law of the seat would render it invalid or ineffective.

The Conflict with the NYC

Article V(1)(a) NYC provides that arbitration agreements shall be governed by the law to which the parties subjected it or, failing any indication thereon, by the law of the country where the award was made. The default rule in the Law Commission’ proposal aligns English law with the NYC, which is a welcome result.

Section 103(2)(b) AA incorporates article V(1)(a) NYC and therefore allows ‘any indication’ of choice of law made by the parties. The UKSC concluded unanimously in Kabab-Ji that ‘the word “indication” signifies that something less than an express and specific agreement will suffice’ [33]. It is unclear whether the Law Commission intends the new choice of law rule to apply in the context of section 103 AA. The UKSC said in Kabab-Ji that the common law rules on choice of law for arbitration agreements were not ‘directly applicable’ in the context of NYC enforcement actions [35]. Also, awards caught by section 103 AA have a foreign seat by definition and are not English arbitrations. Still, the proposal makes it clear that ‘the new rule would apply whether the arbitration was seated in England and Wales, or elsewhere’ [12.75]. An option would be to interpret this statement as referring to every scenario in which English courts examine an arbitration agreement (whether seated in England and Wales or elsewhere) with the exception of cases caught by section 103 AA. That is, two different choice of law treatments would co-exist within the Act. This internal dealignment would be undesirable and could lead to serious inconsistencies. The same arbitration agreement in favour of an arbitration seated abroad could be subject to different laws in pre-award disputes (e.g., section 9 AA) and post-award litigation (e.g., section 103). The UKSC said in Enka [136] and in Kabab Ji [35] that this divide would be ‘ilogical’.

The better interpretation is that the Law Commission’s proposal also extends to section 103 AA cases. Nothing in the proposal expressly excludes this reading. In fact, the Report argues that the NYC allows, but does not require, the recognition of implied choices [12.47] and concludes that the proposal is compatible with the NYC [12.52]. Ultimately, the new rule replaces the common law doctrine with a statutory provision, which becomes part of the of the regulatory fabric of English arbitration law and should not be limited, unless otherwise provided, to areas originally governed by the common law. Section 100(2) AA shows that critical parts of the notion of arbitration agreement in Part III (where section 103 AA belongs) ‘have the same meaning as in Part I’ (where the new section 6A AA would be placed). Such internal coherence of English arbitration law supports the application of the proposed rule across the board. Still, should Parliament adopt of the Law Commission’s proposal, they would need to be aware of two undesirable (yet tolerable) dealignments.

The first is that English law would move away from the prevailing interpretation of article V(1)(a) NYC as regards the acceptance of implied choice. The UKSC in Kabab-Ji objected to this departure and held that ‘it is desirable that the rules set out in article V(1)(a) for determining whether there is a valid arbitration agreement should not only be given a uniform meaning but should be applied by the courts of the contracting states in a uniform way’ [32]. Still, England would not be alone in this travel. For instance, France has also departed from the choice of law rule in the NYC. Moreover, the generally pro-arbitration results usually achieved by the proposed rule could well place the reform within the favourable gateway of article VII NYC.

The second consequence is that the same arbitration agreement (and award) might be treated differently between English and foreign courts if an existing implied choice of law disregarded in England is effective in other jurisdictions. It should be noted, however, that retaining the possibility of implied choice does not guarantee the uniformity of outcome. For instance, the same dealignment of outcome could occur between two legal systems that accepted the possibility of implied choice of law if one favoured the law of the matrix contract whereas the other veered toward the law of the seat.

Conclusion

The reasons above support the view that the potential disregard of real (yet implied) choice in some exceptional cases and the risk of some disfunctions derived from the described dealignments would be compensated by the significant simplification and savings produced by the Law Commission’s proposal. The draft Bill is therefore well-founded, courageous and beneficial to reinforce English law’s position at the forefront of international arbitration globally.

The post below was written by Alex Mills, who is Professor of Public and Private International Law at University College London. It is the first contribution to the EAPIL online symposium on the English Law Commission’s proposed reform of the law governing arbitration agreements.

Readers are encouraged to participate in the discussion by commenting on the posts. Those wishing to submit longer analyses are invited to do so by e-mailing Ugljesa Grusic (u.grusic@ucl.ac.uk).

The Law Commission of England and Wales has produced a deeply thoughtful and well-researched Report, which proposes a number of very welcome reforms to the Arbitration Act 1996. Regretfully, however, I have significant reservations about the proposal which is the subject of this Symposium – the adoption of a new choice of law rule for arbitration agreements. This proposal is based on the Second Consultation Paper produced by the Law Commission in March 2023, and this comment draws on my Submission which responded to that Consultation Paper.

The rules for identifying the law applicable to an arbitration agreement have long been the subject of debate. The issue was prominently addressed by the UK Supreme Court in Enka v Chubb [2020] UKSC 38, which acknowledged (at [3]) that it had “long divided courts and commentators, both in this country and internationally”. The decision in Enka v Chubb has, however, strikingly failed to end the division among commentators. I understand why the Law Commission considered it desirable to address this question, because of the importance of the issue and the policy considerations it presents, and because it has been suggested that there is a lack of clarity in the Supreme Court’s judgment in Enka v Chubb. This issue is complex and reasonable arguments can certainly be made on both sides, as indeed acknowledged in the impressive Report and Second Consultation Paper. I am, however, not convinced of the proposal set out in the Report, which is that “the Arbitration Act 1996 be amended to provide that the arbitration agreement is governed by the law of the seat, unless the parties expressly agree otherwise” [Report, 12.77]. In this post I set out what I understand to be the relevant principles, and explain how these broadly support the rule adopted by the Supreme Court in Enka v Chubb, which has also been followed in other common law jurisdictions (such as Singapore and Hong Kong).

A first and well-known key principle is that the law governing the arbitration agreement need not be the same as that governing the remainder of the contract, sometimes referred to as the ‘matrix contract’. This is because of the principle of separability, which allows for a distinct analysis of the arbitration clause’s applicable law.

A second key principle is party autonomy, which is the starting point for analysis of any contractual choice of law issue, and particularly important in arbitration because of its contractual foundations. An agreement as to the law which governs a contract or a clause of a contract must generally be given effect, absent considerations of public policy. Traditionally, a choice of law may be express or implied – if the latter, the search is for factors which demonstrate a real (but undocumented) choice, not a choice which is imputed to the parties as one which they ought to have made.

In the absence of a real choice, it is necessary to consider not the intentions of the parties but the objective factors linking the contract to a particular system of law. Arbitration clauses remain subject to the common law choice of law rule, under which the objective test is sometimes described as a search for the system of law with ‘the closest and most real connection’ to the contract or contractual clause. An arbitration clause will generally be most closely connected to the place where it is to be performed, which is the seat of the arbitration (see further Enka v Chubb, at [120] et seq).

In the law of arbitration, another principle is that of efficiency, but this principle is secondary to that of party autonomy. While the fact that efficiency is generally a goal for parties and for arbitration can assist in interpreting arbitration clauses (see eg Fiona Trust v Privalov [2007] UKHL 40), parties may choose to have their agreements resolved according to inefficient arbitral procedures should they so wish. The law should not interfere with their choices merely because they are thought unwise or undesirable.

Choice of Law Rule in Enka v Chubb

On the basis of these clear principles, the law applicable to an arbitration agreement should be governed by the following rule, comprised of three parts in hierarchical order. This is, in essence although not form, the rule set out by the Supreme Court in Enka v Chubb.

Subject to considerations of public policy, an arbitration agreement is governed by:

(i)         The law expressly chosen to govern it;

(ii)        The law implicitly chosen to govern it;

(iii)       The law with which it has its closest and most real connection, which will ordinarily be the law of the seat of the arbitration.

This rule is simple in appearance, although its application may be complex in particular circumstances, as explained further below. The analysis below does not consider the application of public policy, but it remains an important limitation.

Choice of Law Rule in the Report

The Report proposes to amend the Arbitration Act 1996, to insert the following choice of law rule:

(1) The law applicable to an arbitration agreement is—

(a) the law that the parties expressly agree applies to the arbitration agreement, or

(b) where no such agreement is made, the law of the seat of the arbitration in question.

(2) For the purposes of subsection (1), agreement between the parties that a particular law applies to an agreement of which the arbitration agreement forms a part does not, of itself, constitute express agreement that that law also applies to the arbitration agreement.

This rule differs from the previous rule in three respects. First, for an express choice to be made, it is necessary that the parties expressly agree that it applies to the arbitration agreement. Second, there is no possibility for an implied choice. Third, in default of a choice, the law of the seat is automatically applied, rather than being the ordinary outcome of the rule.

Analysis

Under existing law a choice of law for an arbitration agreement may arise in one of three ways.

First, the contract may contain a specific express choice of law agreement for the arbitration clause. In this case, the application of this law to the arbitration clause is self-evidently based on the principles of party autonomy and separability, and is not controversial. This position is maintained in the Law Commission’s proposal.

Second, there may be an implied choice of law for the arbitration agreement. This could arise, for example, where the parties have indicated an understanding that certain statutory provisions which are specific to a governing law will apply to the validity of the arbitration agreement. In this case, the application of the chosen law to the arbitration agreement once again follows straightforwardly as a matter of party autonomy and the principle of separability. One important question in this context is whether a choice of arbitral seat should give rise to an implied choice of law for the arbitration clause. This would certainly be a factor indicating a possible choice of the law of the seat, but it is not generally considered to be a decisive one on its own, as the inquiry is concerned with identifying a real choice made (but not documented) by the parties, and must be attentive to the terms of the contract and other relevant circumstances. This rule would thus in many cases lead to the same outcome as the proposed rule 1(b) in the Report, but would do so not because of a fixed rule of law but because of an implied agreement of the parties. This possibility is rejected in the Law Commission’s proposal.

Third, the matrix contract may contain an express or implied choice of law which should, unless the contrary is agreed, be interpreted to extend to the arbitration clause. This is understood to follow from party autonomy, in combination with the common sense presumption that if parties have made a choice of law for their entire contract, and have not specified a different applicable law for any particular clause of the contract, their choice extends to all of the terms of their contract – including any arbitration agreement (see eg Enka v Chubb, at [43]). This presumption is, however, rebuttable, if there are indications that the parties would not have wanted their choice to cover the arbitration agreement. It is important, however, to understand that this question is about the correct interpretation of the scope of a choice which has been made by the parties. (Here I depart slightly from the reasoning in Enka v Chubb, as I take the view that an express choice of law in the matrix contract which also applies to the arbitration clause is an express, not implied, choice of law for the arbitration clause – see also Report, at [12.34] et seq.) The issue is whether there is evidence which might rebut the common sense presumption. The rule proposed in the Report abolishes the presumption and indeed the possibility of a choice of law in the matrix contract extending to the arbitration agreement, unless it does so specifically and expressly.

There are two main justifications offered for the changes in the Report. The first is that they align with the principle of separability (Report, [12.72]). The analysis of the law applicable to the arbitration agreement is treated as an issue which is entirely unrelated to the contract of which it forms part. It is submitted, however, that this takes separability too far (see eg Enka v Chubb, at [41] and [232] et seq). Separability as a principle rightly ensures that the validity of an arbitration clause is analysed separately from the matrix contract, so that challenges to the validity of the matrix contract do not necessarily undermine the validity of the arbitration clause. This does not, however, require that the arbitration clause be treated as an entirely free-floating agreement, ignoring the context in which it was formed. Indeed, if a choice of law clause in the matrix contract is (as proposed in the Report) deemed to be irrelevant to the arbitration clause, this raises the question whether other clauses in the matrix contract are similarly irrelevant. What if the matrix contract contains an ‘entire agreement’ clause, or a ‘no oral modification’ clause? Are they also irrelevant to the arbitration clause? If not, why is the choice of law singled out, particularly as it may also have interpretive effect?

The second is that the rule proposed in the Report would be more desirable for various policy reasons. The rule would, for example, undoubtedly be clearer and easier to apply than the current position (Report, [12.74]). Applying the rule would also strongly favour the selection of English law to determine the validity of an arbitration agreement with the seat of arbitration in England, which the Report considers to be desirable on various grounds, such as the alignment of the law governing the arbitration agreement and the law governing the arbitration process, and the favourable approach of English law toward arbitration agreements (see Report, [12.16] et seq). It is submitted, however, that these justifications are also not persuasive, as they elevate efficiency and other similar policy considerations above party autonomy. In the absence of an express choice of law specific to the arbitration clause, the fixed rule in the Report in favour of the law of the seat no longer requires but rather excludes an inquiry into what the parties have actually agreed. Contrary to the analysis in the Report (eg, at [12.53], [12.73]), this is a significant constraint on party autonomy. Where parties have chosen a seat for their arbitration, but have (expressly or impliedly) chosen a different governing law for their arbitration clause, the fact that they have thereby chosen different laws for the law governing the arbitration process and the law governing the arbitration agreement may be considered undesirable, and it may be inefficient, but it is submitted that this is not a sufficient reason for the law to disrespect their choice, which is the very foundation of arbitration. The proposed rule also has the undesirable effect that the arbitration agreement and the matrix contract are more likely to be governed by different laws, which raises difficult questions concerning their consistent interpretation and validity (see, eg, Enka v Chubb, at [53] and [235] et seq). There is also a concern that arbitrators will be faced with a difficult choice between applying a law chosen by the parties (for example, through a matrix choice of law agreement, or through an implied choice), which they may consider themselves to be required to do as a matter of their contractual mandate, and applying the law that will be applied by the English courts if their award is challenged.

The Law Commission’s Report is overall an excellent example of law reform, offering carefully crafted and well-reasoned proposals for improvement. On this issue, it makes its case well, and there would undoubtedly be some benefits to the reforms which it proposes. Ultimately, however, I am not persuaded that they are consistent with the core principles that should be guiding the law. A simple and clear rule is often desirable, but in this case it is my view that the complexities of the existing rule simply reflect the complexities of arbitration, which cannot and should not be legislated away.

La Cour d’appel de Paris a consacré il y a quelques mois un principe d’effet utile de la convention d’arbitrage. Pourtant, en parallèle, elle adopte une lecture toujours plus stricte de la volonté des parties, privilégiant la volonté exprimée sur la volonté implicite, allant jusqu’à priver la clause de tout effet. Voilà une tendance qui interroge.

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On 7 September 2023, the Court of Justice of the European Union ruled in Case C-590/21, Charles Taylor Adjusting that judgements ordering a party to pay certain sums of money for violating a choice of court agreement are ‘quasi anti suit injunctions’ which violate mutual trust. The courts of Member States are therefore free to consider that such judgements violate public policy and to deny them enforcement under the Brussels I Regulation.

Background

On 3 May 2006, the vessel Alexandros T sank and was lost, along with its cargo, off the bay of Port Elizabeth (South Africa). The companies Starlight Shipping Company and Overseas Marine Enterprises Inc. (‘OME’),  the owner and operator of that vessel, respectively  requested that the insurers of that vessel pay an indemnity on the basis of their contractual liability arising from the occurrence of the insured incident.

After the insurers refused, Starlight initiated proceedings before English courts and before an arbitral tribunal. The parties settled all these actions in several Settlement Agreements, which contained a jurisdiction clause designating English courts. The Settlement Agreements were ratified by several English judgments in 2007 and 2008.

A few years later, Starlight and OME initiated tort actions in Greek courts related to the actions settled in England. One of the defendants in the Greek proceedings was Charles Taylor Adjusting Limited, a legal and technical consultancy which had defended the insurers of the vessel Alexandros T against the claims made by Starlight before the English court, and against the director of that consultancy.

While those actions were pending, the insurers of the vessel and their representatives, including, in particular, Charles Taylor and its director, the defendants in the Greek proceedings, brought actions against Starlight and ΟΜΕ before the English courts seeking a declaration that the actions brought in Greece constituted infringements of the settlement agreements and applying for declarative relief and compensation.

In 2014, the English High Court awarded the applicants compensation in respect of the proceedings instituted in Greece as well as payment of their costs incurred in England on the basis of the content of the settlement agreements and of the jurisdiction clause that they contained.

Charles Taylor and its director then sought recognition and partial enforcement of the 2014 English judgement in Greece.

The Piraeus Court of Appeal found that the 2014 English judgement amounted to a quasi anti suit injunction and should thus be denied recognition and enforcement. The Greek Court of Cassation referred the matter to the CJEU.

Judgment

The starting point of the reasoning was obviously Turner and the other judgments of the CJEU which have confirmed that anti-suit injunctions are unacceptable under the EU law of jurisdiction: ‘Any injunction prohibiting a claimant from bringing such an action must be seen as constituting interference with the jurisdiction of the foreign court which, as such, is incompatible with that regulation’.

The key issue was to determine whether other forms of assessment of the jurisdiction of courts of other Member States and sanctions of parties wrongly litigating before the courts of Member States could equally interfere with the jurisdiction of those courts.

The CJEU found that, although it did not order any party to discontinue the foreign proceedings, the English judgment still held:

26. … That judgment and those orders nonetheless contain grounds relating to, first, the breach, by Starlight and OME together with the natural persons representing them, of those settlement agreements; second, the penalties for which they will be liable if they fail to comply with that judgment and those orders; and, third, the jurisdiction of the Greek courts in the light of those settlement agreements. Moreover, that judgment and those orders also contain grounds relating to the financial penalties for which Starlight and OME, together with the natural persons representing them, will be liable, in particular a decision on the provisional award of damages, the amount of which is not final and is predicated on the continuation of the proceedings before the Greek courts.

The CJEU ruled that the 2014 English judgment thus interfered with the jurisdiction of Greek courts, and could thus be classified as a quasi anti suit injunction:

27. … While the purpose of that judgment and those orders is not to prohibit a party from bringing or continuing legal action before a foreign court, they may be regarded as having, at the very least, the effect of deterring Starlight and OME, together with their representatives, from bringing proceedings before the Greek courts or continuing before those courts an action the purpose of which is the same as those actions brought before the courts of the United Kingdom, which matter is, in any event, for the referring court to determine.

The CJEU then discussed whether the prohibition to review foreign judgments under the Brussels Regulation prevented the Greek court from denying enforcement to the 2014 English judgment. The CJEU concludes that the Greek Court could rely on the public policy exception to sanction the infringement to the principle that every court is to rule on its own jurisdiction, that other courts should trust the result, and the principle of access to justice.

Assessment

The rationale for the judgment seems to be twofold. First, the courts of the Member States should not deter litigants from bringing  proceedings before the courts of any other Member State. Second, the courts of the Member States should always refrain from assessing whether the court of other Member States have jurisdiction.

The first reason seems to exclude any interference in proceedings pending before other Member States which could be perceived as exercising pressure on one party to terminate them. It would leave open the possibility to sue after the termination of the proceedings to seek any form of remedy for initiating the foreign proceedings in violation of a choice of court agreement. The second reason, however, would seem to apply even after the foreign proceedings resulted in a judgment.

The broader question is whether it is possible to seek a remedy for abuse of process for seizing wrongly the court of a Member State. For instance, for initiating proceedings in violation of lis pendens. The answer seems to be that such remedy can only be sought in the Member State of the court wrongfully seized, and nowhere else.