Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2021] UKSC 48

A Lebanese franchisor sought to enforce an ICC arbitration award against a Kuwaiti company (KFG), claiming KFG became party to franchise agreements through conduct. The Supreme Court held English law governed the arbitration agreement and that KFG never became a party due to 'No Oral Modification' clauses requiring written consent.

Facts

Kabab-Ji SAL, a Lebanese company, granted a franchise licence to Al Homaizi Foodstuff Company under a Franchise Development Agreement (FDA) in 2001. Following corporate restructuring in 2005, Kout Food Group (KFG) became Al Homaizi’s holding company. A dispute arose, and Kabab-Ji commenced ICC arbitration in Paris against KFG alone, claiming KFG had become party to the franchise agreements through conduct (‘novation by addition’). The arbitral tribunal majority found for Kabab-Ji, applying French law to the arbitration agreement and English law to substantive obligations.

Issues

Issue 1: Choice of Law

What law governs the validity of the arbitration agreement under Article V(1)(a) of the New York Convention and section 103(2)(b) of the Arbitration Act 1996?

Issue 2: Party Status

Under English law, did KFG become a party to the arbitration agreement?

Issue 3: Procedural Propriety

Was summary judgment appropriate to refuse enforcement?

Judgment

On the Governing Law

The Supreme Court unanimously held that English law governed the arbitration agreement. Article 15 of the FDA expressly provided that ‘This Agreement shall be governed by and construed in accordance with the laws of England.’ Article 1 defined ‘this Agreement’ to include all terms set forth therein, including the arbitration clause in Article 14. The Court rejected arguments based on UNIDROIT Principles and the validation principle.

The ‘law to which the parties subjected’ the arbitration agreement in clause 14 is therefore English law.

On Party Status

The Court held KFG never became party to the FDA or arbitration agreement. The FDA contained strict ‘No Oral Modification’ clauses requiring written consent signed by both parties for any amendment, modification or termination. Following MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018], such clauses are legally effective. No written document existed whereby the necessary consent was provided.

the No Oral Modification clauses are an insuperable obstacle to the claimant’s case of novation by addition

On Summary Judgment

The Court confirmed summary judgment was appropriate. There was no real prospect of the claimant establishing KFG became a party, given the extensive evidence already examined in the arbitration.

Implications

This case reinforces the principles from Enka v Chubb regarding choice of law for arbitration agreements, confirming they apply equally in enforcement proceedings under the New York Convention. It demonstrates the effectiveness of ‘No Oral Modification’ clauses following Rock Advertising, even in international arbitration contexts. The judgment also clarifies that English courts will independently determine jurisdiction issues under section 103, applying their own procedural rules including summary judgment where appropriate.

Verdict: Appeal dismissed. The Court of Appeal’s summary judgment refusing recognition and enforcement of the arbitration award against KFG was upheld. English law governed the arbitration agreement, and under English law, KFG never became a party to the FDA or the arbitration agreement due to the failure to comply with No Oral Modification clauses requiring written consent.

Source: Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2021] UKSC 48