CIArb AWARD WRITING TECHNIQUES: SUBSTANTIVE LAW

​CIArb AWARD WRITING TECHNIQUES: SUBSTANTIVE LAW

Party autonomy is the pillar of arbitration. However, the party fails to choose the choice of law apply to the substantive law of the arbitration, this may open up challenge to the substantive law:
 
Substantive Law
 

1. In the Hearing dated [DATE], the Claimant, stated that the law governing the contract should be […], based on the reason that the law governing the contract is the place where the product is made.
2. The Respondent alleged that the substantive law should be […] instead as this is the location of the dispute.
3. As both parties having disagreed, both said it would be up to the arbitrator to decide and I advised the parties that I would do so and include it as part of my final award in which case, I now do so as the followings:
   1. The arbitration agreement did not provide for the substantive law governing the contract;
   2. Traditionally, the test[i] for determining the ‘governing law’ is where the court must consider, is there an express ‘choice of law’ COL; an implied COL; which law does the arbitration agreement have its closest and most real connection with?
   3. In recent case[ii], court held, a COL govern the substantive obligations will apply to arbitration agreement, even if the COL chosen to govern the contract differs from that of the seat;
   4. Under the first caveat, the arbitration agreement must be valid under its applicable law[iii];
   5. Second caveat, if party argues that an arbitration clause is void under the substantive governing law, the inference is that ‘such a meaning could not rationally have been intended’;
   6. Choice of seat is not enough to displace the preference for the ‘substantive law governing the contract’ to apply to the arbitration agreement [iv];
   7. In the absent of law governing the contract, the seat will not be applied to the contract or to the arbitration agreement[v]; and
   8. In absence of an express agreement, the law ‘applicable to the arbitration agreement’ will be the ‘law of the seat’ which is most closely connected to that issue, i.e. being a neutral forum, selected by the parties. 
   9. As it stand, courts are not required to conduct detailed textual analysis to determine a particular choice of law clause meets.[vi]
      1. Having considered the analysis of COL, in accordance to the common law positions[vii], the ‘closest and the most real connection’ with the arbitration agreement shall be the seat of the arbitration.[viii]
      2. In this case, parties had agreed to the use of the […] law as the seat governing the arbitration, as it is neutral to the parties and on the same reason, the same can be construed that the law governing the contract has the ‘closest and the most real connection’ with the seat shall be […].[ix]
4. On such reason and on balance, I FIND AND HOLD THAT, the law governing the contract is […].

 
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[i] Sulamerica v Enesa[2013]1WLR102
[ii] Enka v Chubb[2020]UKSC38
[iii] Lancashire CC v Municipal Mutual[1997]QB897:verba ita sunt intelligenda ut res magis valeat quam pereat, contract should be interpreted so that it is valid rather than ineffective.
[iv] Arbitration agreement is a contract; naturally should be governed by the substantive law governing the contract; but by applying the ‘doctrine of severability’, it rarely contradict the substantive law.
[v] The ambit of this exception is unclear. S.6 of the Arbitration (Scotland) Act 2010 create a default rule in favour of the seat being the law governing the arbitration agreement, when the choice of law governing the arbitration agreement is absent.
[vi] Kabab-Ji v Kout Food[2020]EWCACiv6
[vii] Sulamérica v Enesa Engenharia [2012] EWCA Civ 638
[viii] Kabab-Ji v Kout Food Group [2020] EWCA Civ 6   
[ix] Enka v Chubb[2020]UKSC38