Judgement Briefs

Alternative Dispute Resolution

Kabab-Ji SAL v. Kout Food Group

[2021] UKSC 48

Citation
[2021] UKSC 48
Court
UK Supreme Court
Date
27 October 2021
Bench
Lord Hodge, Lord Briggs, Lord Sales, Lord Hamblen and Lord Leggatt

Facts

  • Kabab-Ji entered into a Franchise Development Agreement with Al Homaizi Foodstuff Company.
  • The agreement governed development of Kabab-Ji restaurants in Kuwait.
  • It contained:
  • an arbitration clause providing for ICC arbitration seated in Paris;
  • an English governing-law clause; and
  • “no oral modification” provisions requiring contractual changes to be in writing and signed.
  • Following a corporate restructuring, Al Homaizi became a subsidiary of Kout Food Group.
  • Kout Food Group did not sign the Franchise Development Agreement.
  • Kabab-Ji alleged that Kout:
  • participated in performance;
  • became the real counterparty; and
  • was bound by the arbitration clause.
  • Arbitration was commenced against Kout in Paris.
  • The tribunal held that French law governed the arbitration agreement and found Kout bound.
  • It issued an award in Kabab-Ji’s favour.
  • Kabab-Ji sought enforcement in England.
  • Kout resisted, arguing that English law governed the arbitration agreement and that no written novation or consent bound it.

Issue

  • Which law governed the arbitration agreement.
  • Whether Kout became a party through conduct.
  • Whether the French-seated award could be enforced in England.

Rule

  • The law governing the arbitration agreement determines:
  • formation;
  • validity;
  • scope; and
  • identity of the parties.
  • Under the English common-law approach then applicable, an express choice of law governing the main contract will generally govern the arbitration agreement unless the contract indicates otherwise.
  • The choice of a foreign seat does not automatically displace an express governing-law clause.
  • Under English law, contractual provisions requiring signed written modification must ordinarily be respected.
  • Enforcement may be refused where the alleged award debtor never became a party to the arbitration agreement.

Application

  • The UK Supreme Court treated the English governing-law clause as an express choice applicable to the whole agreement.
  • Nothing in the contract excluded the arbitration clause from that choice.
  • The Paris seat concerned:
  • procedural supervision;
  • curial law; and
  • annulment jurisdiction.
  • It did not itself establish that French law governed formation of the arbitration agreement.
  • English law therefore governed whether Kout had become bound.
  • Kabab-Ji relied heavily on Kout’s conduct during performance.
  • However, the agreement contained strict provisions stating that:
  • amendments had to be in writing;
  • waivers had to comply with specified formalities; and
  • changes of party required signed documentation.
  • No signed written novation substituted Kout for Al Homaizi.
  • Conduct inconsistent with the original structure was insufficient under the agreed formal requirements.
  • The Court rejected the argument that enforcement should continue to a full trial.
  • The relevant documents and legal rules were clear enough to decide that Kout had never consented.
  • Since no arbitration agreement existed between Kabab-Ji and Kout under English law, enforcement had to be refused.
  • The case illustrates that:
  • seat law;
  • governing law of the main contract; and
  • law of the arbitration agreement may perform different functions.
  • It also demonstrates that the same award can receive different treatment in different jurisdictions because French courts adopted a different conflicts approach.
  • For English law today, the Arbitration Act 2025 introduces a statutory seat-law default unless the parties expressly choose the law of the arbitration agreement.
  • Kabab-Ji remains important for agreements and proceedings governed by the earlier framework and for its strict consent analysis.

Conclusion

  • The UK Supreme Court held that English law governed the arbitration agreement.
  • Kout Food Group had not become a party because no signed written novation or valid contractual modification occurred.
  • Recognition and enforcement of the award against Kout were refused.
  • Use this case for: the law governing the arbitration agreement determines non-signatory consent, and a foreign seat does not necessarily override an express contractual choice of law.