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Clash between Paris and London Courts: The Law of the Arbitration Agreement

Is the law of the arbitration agreement the law of the seat or the law of the underlying contract? Already in 2010 English and French courts have reached fundamentally different decisions to answer this question (Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46). Again, English and French Courts have reached opposite conclusions with regard to the governing law of arbitration agreements.   On January 20, 2020 the English Court of Appeal decided in Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2020] EWCA Civ 6 that it is the law of the underlying contract that applies to the arbitration agreement, i.e. in this case English law. But on June 23, 2020 the French “Cour d’Appel de Paris (Paris, pôle 1 - ch. 1, 23 Juin 2020 (n° 17/22943)” decided exactly the opposite, i.e. that French law applies to the arbitration agreement being the law of the seat and pursuant to a substantive rule of international arbitration law that the arbitration clause is legally independent from the underlying contract in which it is included. As of today, unless on appeal the UK Supreme Court or the French Cour de Cassation reach a different verdict, the award could be enforced in France, but not in England.   The dispute and the diverging decisions would not have arisen, had parties not failed do designate the law that should govern the arbitration clause. To avoid such undesirable (and ultimately costly) diverging decisions it is highly recommendable to include an express governing law provision within an arbitration clause

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