International arbitration update: Kabab-ji S.A.L. (Lebanon) v Kout Food Group (Kuwait)

Culminating in the Supreme Court this week is the hearing of Kabab-ji S.A.L. (Lebanon) v Kout Food Group (Kuwait). This final appeal, which concerns the recognition and enforcement by the English courts of an arbitral award handed down by an ICC tribunal seated in Paris, is listed for Wednesday, 30 June to Thursday, 1 July. The hearing will be broadcast live and the public feed will be available shortly before commencement on the Court’s website:

The case will provide important clarification as to how – as a matter of English law – to determine the governing law of an arbitration agreement where the arbitration agreement itself makes no express governing law provision. 

As a brief reminder, Kabab-ji (a company specialising in Middle Eastern cuisines) entered into a Franchise Development Agreement (the “FDA”) with Al Homaizi Foodstuff Company (“AHFC”) in 2001. This related to Kabab-ji’s expansion under licence in Kuwait. Following a corporate reorganisation in 2005, AHFC became a subsidiary of Kout Food Group (“KFG”). When a dispute arose under the FDA, Kabab-ji commenced an arbitration against KFG (and not AHFC). The Tribunal unanimously held that the question of whether KFG was bound by the arbitration agreement was a matter of French law, but the issue of whether a transfer of substantive rights and obligations under the FDA took place was governed by English law. Two of the three arbitrators then concluded that KFG had become an additional party to the FDA (including the arbitration agreement). The majority arbitrators also found that, on the merits, KFG was in breach of the contract.

Following the issue of the Award in 2017, KFG commenced proceedings in the French courts seeking an order for annulment, including on the basis that the tribunal had lacked jurisdiction over KFG. Subsequently, Kabab-ji issued proceedings in the English High Court for enforcement of the Award. The High Court held that English law governed the arbitration agreement and that KFG was not a party to it. However, it declined to make a final determination refusing enforcement pending determination of the proceedings before the Paris court in case further evidence were to emerge. In Paris, the Cour d’Appel last year refused KFG’s application to have the award annulled.

Nonetheless, the English Court of Appeal agreed with the High Court that the governing law of the arbitration agreement was English law, and that KFG was not a party to it. Moreover, it held that the High Court should have made a final determination refusing enforcement and recognition of the Award and the Court of Appeal did so. Kabab-ji now appeals against that judgment. The question of whether French or English law applies is relevant, inter alia, because of the potentially different treatment of no oral modification clauses.

The hearing follows another recent Supreme Court case dealing with related issues, Enka v Chubb [2020] UKSC 38, [2020] 1 WLR 4117. Three of the five Justices from Enka form part of the current panel. The hearing will also contain important discussions on the validation principle, conflict of laws, and the comity doctrine.

Partners Seamus Andrew and Christopher Lillywhite, and associates Jason Rose and Liam Spender, of Velitor Law are excited to be acting for the appellant in this important case, along with the Beirut headquartered firm Alem & Associates, and Counsel Nicholas Tse of Crown Office Chambers (London) and Alem.