Invisible arbitration agreements

In Svenska v Government of Lithuania [2006] EWCA Civ 1529, the Court of Appeal interpreted a joint venture agreement (JVA) to determine whether the Lithuanian government was bound to refer disputes to ICC arbitration. Notwithstanding the deletion of an arbitration clause from an earlier draft, the Court held that there was a common intention that the government should submit disputes to arbitration, and "interpreted" the JVA accordingly. It followed that the ICC tribunal appointed pursuant to the JVA had jurisdiction to make an award against the government, and that the award was enforceable. The case is of interest because the Court of Appeal recognised that it was, effectively, rectifying the agreement under the guise of interpreting it under Lithuanian law. This highlights the differing approach to construction of an arbitration agreement which may apply where there is a foreign proper law. The judgment of the Court also contains analysis of lines of international authority on state parties to arbitration agreements and recognition of foreign awards.