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The Applicability of CISG to Arbitration Agreements: Insights from Enka v. Chubb and the 1996 EAA Reform
The Applicability of CISG to Arbitration Agreements: Insights from Enka v. Chubb and the 1996 EAA Reform
Introduction:
The United Nations Convention on Contracts for the International Sale of Goods (CISG) plays a significant role in the realm of international sales contracts. However, its applicability to arbitration agreements has been a contentious issue. This article explores this topic through the lens of the Enka v. Chubb case and the impending reform of the 1996 English Arbitration Act (1996 EAA).
CISG in the UK Context:
Although the UK has not adopted the CISG, it can still play a role in UK legal proceedings. Article 1(1)(b) of the CISG provides that it governs sales contracts if the rules of private international law point to the law of a CISG Contracting State. Consequently, an English court might apply the CISG if the applicable law is from a CISG Contracting State, such as Germany. Additionally, English law respects party autonomy, allowing parties to choose the governing law of their international sales contracts. This choice can include the CISG, even if neither party is from a CISG Contracting State. In arbitration, particularly under the London Court of International Arbitration (LCIA), parties can select the CISG as the governing body of rules for their transaction.
Applicability of the CISG to Arbitration Agreements:
The CISG primarily addresses the formation of sales contracts and the rights and obligations of the parties. The question arises whether the CISG can also govern arbitration agreements, often embedded as clauses within sales contracts.
Divergent Approaches in Literature:
Stefan Kröll identifies three approaches in the literature regarding the CISG's applicability to arbitration agreements:
Exclusionary Approach: This view holds that arbitration clauses fall outside the CISG’s scope due to the doctrine of separability, which treats arbitration agreements as distinct from their container contracts.
Inclusive Approach: Advocates of this view believe that the CISG applies to arbitration agreements, including Article 11, which removes the writing requirement.
Selective Approach: This more cautious stance supports the application of only the CISG’s contract formation rules to arbitration agreements. Article 19 of the CISG, which addresses dispute resolution terms, supports this view by treating changes to such terms as material alterations.
Enka v. Chubb: Implications for CISG
In Enka v. Chubb, the UK Supreme Court clarified the approach to determining the law applicable to arbitration agreements. The Court decided that in the absence of an explicit choice, the law governing the container contract should apply to the arbitration agreement unless countervailing factors exist. This reasoning suggests that if the CISG governs the main contract, it could extend to the arbitration agreement, aligning with the inclusive or selective approaches.
Reform of the 1996 EAA:
The 1996 EAA reform introduces significant changes. The draft Arbitration Bill stipulates that the law of the seat of arbitration governs the arbitration agreement unless another law is expressly chosen. This provision would make the Enka v. Chubb ruling obsolete, pointing to English law as the governing law of the arbitration agreement, regardless of the CISG’s application to the container contract.
Conclusion:
The debate over the CISG’s applicability to arbitration agreements remains unresolved. The arguments from Enka v. Chubb support the view that a choice of the CISG for the main contract could imply its application to the arbitration agreement. However, the forthcoming reform of the 1996 EAA suggests a shift towards the law of the seat governing arbitration agreements, potentially excluding the CISG. As these legal frameworks evolve, the interplay between the CISG and arbitration agreements will continue to be a crucial area of exploration for practitioners and scholars alike.
- In arbitration, particularly under the London Court of International Arbitration (LCIA), parties can select the CISG as the governing body of rules for their transaction.
- The Court decided that in the absence of an explicit choice, the law governing the container contract should apply to the arbitration agreement unless countervailing factors exist.
- The draft Arbitration Bill stipulates that the law of the seat of arbitration governs the arbitration agreement unless another law is expressly chosen.
