In a recent English case, Shagang South-Asia (Hong Kong) Trading Co. Ltd v Daewoo Logistics Corp. [2015] EWHC 194 (Comm), the High Court of England and Wales considered the situation where the contract provides for the arbitration to take place in one jurisdiction but to apply the laws of another jurisdiction.
The underlying dispute of the case involves two clauses in a fixture note between the owner of vessels (“the Owners”) and the charterers (“the Charterers”). Clause 23 of the note stated that “Arbitration: Arbitration to be held in Hong Kong. English Law to be applied.” Clause 24 stated that “Other terms/conditions and charter party details base on Gencon 1994 Charter Party.”
As the parties did not state which of the alternatives in clause 19 of the Gencon form should apply, English law and London arbitration became automatically applicable under clause 19(a).
The Owners then began arbitration in London and appointed an arbitrator as the sole arbitrator under clause 19(a). The Charterers disputed the appointment but the arbitrator ruled that the English Arbitration Act was applicable and he was properly appointed under clause 19(a).
The award of the arbitration was appealed in the High Court of England and Wales. The issue before the court was whether the arbitration was subject to English law or Hong Kong law.
The court considered the argument that the parties were based in Asia and that London is less convenient for the arbitration but held that it was not a determining factor. The judges gave significant weight to the words “arbitration to be held in Hong Kong” and ruled that the words implied a choice of Hong Kong as the seat of arbitration and Hong Kong law is applicable. “Significant contrary indicia” is necessary to displace the presumption.
The decision clarifies that the choice of an arbitration seat will imply a choice of the procedural law of that seat. Parties should also bear in mind the importance of clear drafting, especially in expressing their intentions on the arbitration venue and governing law clearly in the contractual documents. It is also worth noting that the judges in the case had also made positive comments on the Hong Kong arbitration system, stating that Hong Kong is a “well known and respected arbitration forum”.