Kabab-Ji Sal v. Kout Food Group

Quick Summary

The franchise contract said: English law governs the agreement; the seat is Paris. But the clause did not name which law governs the arbitration agreement itself. The dispute reached two systems. Paris courts treated French law as governing (law of the seat) and backed the award against KFG. The UK Supreme Court applied English law (law of the main contract) to the arbitration agreement, followed Enka v Chubb, and refused enforcement.

Core Point When no express choice exists, the main contract’s law usually governs the arbitration agreement.

Issues

1. Is there a governing law for the arbitration agreement?
2. Could a court, applying English law, hold that KFG became a party to the arbitration agreement?
3. Was the Court of Appeal right to give summary judgment?

Rules

• Enka v Chubb: If the arbitration agreement has no express law, the governing law of the main contract will generally govern the arbitration agreement.
• Validation Principle: Where wording is unclear, interpret to uphold a valid bargain.

Note: Seat sets procedural law and supervisory court. Governing law sets the contract law for the arbitration agreement.

Arguments

Judgment (Held)

Paris Court of Appeal: Dismissed KFG’s set-aside. Treated French law (law of the seat) as governing the arbitration agreement and found KFG became a party.

UK Supreme Court: Applied Enka v Chubb. With no express choice, the English law of the main contract governs the arbitration agreement. On that basis, the UKSC refused recognition and enforcement of the award against KFG and approved the Court of Appeal’s approach.

Ratio Decidendi

• Absent an express clause, the arbitration agreement’s governing law follows the main contract’s law.
• Seat ≠ governing law: the seat sets procedure and supervision; it does not automatically choose the contract law for the arbitration agreement.
• Courts may give summary judgment where the legal position is clear.

Why It Matters

Cross-border cases can split: a seat court and an enforcement court may reach different answers. Drafting must remove doubt: name the seat and the governing law of the arbitration agreement, and state how a new group company becomes bound.

Key Takeaways

• State the governing law of the arbitration agreement expressly.
• Seat sets the procedural framework; it does not always set governing law.
• For group restructurings, add clear novation/assumption language.
• Enka v Chubb is the touchstone in English law.

Mnemonic + 3-Step Hook

Mnemonic: “MAIN LAW FIRST”

1. MAIN contract’s law fills the gap.
2. LAW of seat runs procedure only.
3. FIRST check Enka before anything else.

3-Step Hook: No express choice → Look to main contract → Apply; then check seat for procedure.

IRAC Outline

Glossary

Seat

Legal home of arbitration; sets procedure and supervisory court.

Governing Law

The contract law applied to interpret and test validity of the agreement or clause.

Validation Principle

Interpret unclear terms to preserve, not destroy, a valid bargain.

FAQs

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