## Facts

- A Tunisian shipping company (COTUNAV) and a shipowning company (CAM) entered a tonnage contract in Paris (Feb. 27, 1967) using an English-language tanker voyage charterparty form for carriage of petroleum products between two Tunisian ports.
- The contract stated it would be “governed by the laws of the Flag of the Vessel carrying the goods.”
- The contract contained a clause requiring disputes to be arbitrated in London before party-appointed arbitrators.
- After performance difficulties, COTUNAV commenced arbitration in London (July 13, 1967).
- The arbitrators first decided the proper law and concluded the “law of the flag” clause pointed to French law on the facts.
- CAM challenged that determination in English courts; the High Court upheld the arbitrators, but the Court of Appeal reversed, treating London arbitration as creating a strong presumption for English governing law.
- COTUNAV appealed to the House of Lords.

## Issues

1. How should the proper law of an international carriage contract be determined where the contract refers to the “law of the flag” but also provides for London arbitration?
2. Does a London arbitration clause create a near-conclusive presumption that English law governs the substantive contract?

## Decision

- The House of Lords allowed the appeal, reversed the Court of Appeal, and restored the High Court’s judgment.
- The proper law of the tonnage contract was French law.
- The London arbitration clause did not by itself determine the proper law; it was only one connecting factor.
- The matter was remitted for further proceedings consistent with the proper-law determination.

## Legal Principles

- Where the governing law is not clearly and unambiguously expressed, the proper law is the system with the “closest and most real connection” to the contract, assessed by multiple factual connecting factors.
- A clause selecting London arbitration does not, without more, fix English law as the proper law of the substantive contract.
- The substantive governing law may differ from the law of the arbitral seat; English arbitrators in London may apply foreign substantive law.
- Courts should, where workable, give effect to contractual indications of governing law (such as a “law of the flag” clause) rather than treat them as ineffective due to potential uncertainty.

## Conclusion

The House of Lords held that French law governed the parties’ tonnage contract because the contract’s connections and the “law of the flag” clause outweighed the single English element of London arbitration, confirming that the arbitral seat is not decisive in determining a contract’s proper law.


Compagnie d’Armement Maritime S.A. v. Compagnie Tunisienne de Navigation S.A., [1971] A.C. 572 (H.L. 1971)