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The Kabab-Ji ruling: cementing a cross-Channel clash

By Signature Litigation
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Signature Litigation

French arbitration law affirms its rules on the governing law of arbitration agreements by putting the Kabab-Ji / KFG saga to a close in a decision of 28 September 2022 (Cour de cassation). In this cross-channel saga, the arbitral tribunal had asserted jurisdiction toward KFG, a non-signatory of the arbitration agreement, on the grounds that this company had been involved in the performance of the litigious contract.

Both the English and French courts were seized of the issue of the applicable law to the arbitration agreement at the enforcement or annulment stage. The issue was of importance as French and English arbitration laws do not handle the question of non-signatories in the same fashion.

The Paris Court of Appeal held that the arbitration agreement was governed by the substantive rules (“règles matérielles”) of the seat of arbitration, in this case Paris.

In the UK, the Supreme Court took the opposite view in 2021 and ruled that the law governing the arbitration agreement was found to be the law applicable to the underlying contract, i.e., English law ([2021] UKSC 48), with the Court stating that “it seems difficult to resist the conclusion that a general choice of law clause in a written contract containing an arbitration clause will normally be a sufficient “indication” of the law to which the parties subjected the arbitration agreement”.

Unsurprisingly, the Cour de cassation held fast to the French position, confirming that the parties’ choice of English law as the governing law of the underlying contract is not sufficient to establish the parties’ will to have English law govern the arbitration agreement as well. Absent such clear and unequivocal expression of will, the substantive rules of the seat of arbitration, namely the French substantive rules apply.

Partner Flore Poloni commented in Global Arbitration Review on the clash between the two jurisdictions.

A link to the GAR article can be found here.

 

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