Sulamerica CIA Nacionel de Seguros SA & Ors v Enesa Engenharia SA & Ors  EWCA civ 638
This case was an appeal against the order of Cooke J continuing an anti-suit injunction restraining the appellants, Enesa from pursuing proceedings against the respondents, Sulamerica, in the Brazilian courts. The insured, Enesa, entered into two all risk insurance policies with the insurer, Sulamerica, in connection with the construction of a hydroelectric generating plant in Brazil. The policies contained a London arbitration clause, an express choice of Brazilian law as the law governing the contract and an exclusive jurisdiction clause in favour of the Brazilian courts.
On 29 November 2011, Sulamerica gave Enesa notice of arbitration. In response Enesa commenced proceedings in Brazil in order to establish that Sulamerica was not entitled to refer the dispute to arbitration and obtained an injunction from the court in Sao Paulo restraining the insurer from resorting to arbitration in order to pursue a claim for a declaration that they were not liable under the policy. Subsequently, Sulamerica made an application to the Commercial Court successfully seeking an injunction restraining Enesa from pursuing the proceedings in Brazil.
The issue before the CA therefore concerned the choice of proper law of the arbitration contract. Following a review of authorities on the subject (which the Court of Appeal commented were not entirely consistent), LJ Moore-Bick established that two propositions provided the starting point for any enquiry into the proper law of an arbitration agreement.
Firstly, even if the agreement formed part of a substantive contract (as was commonly the case), its proper law might not be the same as that of the substantive contract. Secondly, the proper law was to be determined by undertaking a three-stage enquiry into (i) express choice, (ii) implied choice, and (iii) closest and most real connection. As a matter of principle, those three stages ought to be embarked on separately and in that order, since any choice made by the parties ought to be respected, but in practice stage (ii) often merged into stage (iii), because identifi cation of the system of law with which the agreement had its closest and most real connection was likely to be an important factor in deciding whether the parties had made an implied choice of proper law.
Deciding that the implied choice was English law, LJ Moore- Bick took account of the fact that it was Enesa’s case that under Brazilian law, the arbitration agreement would only be enforceable with its consent. If correct, this would signifi cantly undermine the arbitration agreement. Furthermore, there was nothing to indicate that the parties intended to enter into a one-sided arrangement of that kind. The possible existence of a rule of Brazilian law that would undermine the referral to arbitration of disputes suggested that the parties did not intend the arbitration agreement to be governed by that law. The choice of London as the seat assumed acceptance that the arbitration agreement would be conducted under the Arbitration Act 1996. Therefore, the supervisory jurisdiction was held to have a closer connection to the arbitration agreement in this case than the law of the insurance policy whose purpose is unrelated to that of dispute resolution.