HONG KONG COURT APPLIES ENKA V CHUBB IN DETERMINING THE GOVERNING LAW OF DISPUTE RESOLUTION CLAUSE

The Court of First Instance in Hong Kong has adopted the English law principles for determining the governing law of dispute resolution clauses, such as arbitration clauses, in a recent judgment (China Railway v Chung Kin Holdings [2023] HKCFI 132).

The principles for determining the governing law of such clauses as a matter of English Law were recently restated by the U.K. Supreme Court in Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38.

In that case, Enka (which was represented by Shearman & Sterling) successfully argued that where there was no express or implied choice of law for the wider contract, an arbitration clause found within that contract would ordinarily be governed by the law of the seat chosen by the parties.

The Supreme Court also stated that where there was an express or implied choice of law for the wider contract, such choice would typically extend to the arbitration clause absent strong reasons to the contrary (e.g., where such law would render the clause ineffective).

In China Railway v Chung Kin Holdings, the Hong Kong Court followed Enka in applying these same principles as a matter of Hong Kong law, finding that a choice of Hong Kong law in the parties’ debt agreement extended to a dispute resolution clause contained within the same contract. This approach is in line with previous decisions of the Hong Kong Courts such as Klöckner Pentaplast GmbH & Co. KG v Advance Technology (H.K.) Company Limited [2011] HKCFI 458.

It is a welcome development to see Enka being followed in the Hong Kong Courts, thereby achieving some consistency across common law and other important arbitration jurisdictions on this issue.