We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
An English court has held an arbitrator's
declaration can be enforced as a judgment.
The English Court of Appeal has held in West Tankers Inc v
Allianz SPA & Generali Assicurazione Generali SPA [2012] EWCA
Civ 27 that a declaration made by an arbitrator can be enforced as
a judgment.
What is a declaration?
A declaration is an order which establishes the legal position
of the parties, usually before a dispute has escalated to trial.
Declarations are frequently sought by a potential respondent to
resolve a preliminary question; the Tribunal's finding may
limit:
the forum in which the dispute is to be referred;
when the dispute is to be referred; and
whether the claimant can in fact prosecute the claim at
all.
Enforcing an arbitral award
Both the Arbitration Act 1996 (UK) and the International
Arbitration Act 1974 (Cth) empower the Court to enter judgment in
terms of an arbitral award enabling the successful party to enforce
the award as a judgment.
What has, however, been uncertain is whether the Court has the
power to enforce an award which is purely in the form of a
declaration. The reason for this uncertainty is that, unlike other
forms of relief such as an award of monetary compensation, an
injunction or specific performance, a declaration is not coercive;
it does not require a party to do or refrain from doing a
particular act.1
In West Tankers, the Court was faced with precisely this
question: was an award in the form of a declaration capable of
being enforced?
The dispute and arbitration in West Tankers
A vessel owned by West Tankers Inc, under charter to Erg Petroli
SpA, collided with a pier at Erg's oil refinery in Italy. The
Claimant referred the dispute to arbitration in London in
accordance with an arbitration clause in the charterparty, seeking
a declaration that it was not liable for damages arising out of the
collision. In its award, the Tribunal found in favour of West
Tankers and granted the declaration sought.
West Tankers subsequently sought leave to enforce the award as a
judgment.
The reason for taking that step can be understood by what
transpired before the tribunal handed down its award. Erg's
subrogated insurer had commenced Court proceedings against West
Tankers in Italy over the same incident. West Tankers had obtained
an anti-suit injunction restraining the insurer from prosecuting
the Italian proceeding, but this was overturned on appeal.
West Tankers contended that if the award was converted into a
judgment, it would then be able to rely on article 34(3) of the
Brussels Convention which prevents enforcement of a foreign
judgment which is irreconcilable with a judgment of an English
court in relation to a dispute between the same parties.
The insurer, however, argued that the award was not capable of
being enforced as a declaration.
What did the court find?
The Court found that a declaratory arbitral award was
enforceable under the English Arbitration Act. In reaching this
conclusion, it was persuaded by the increasing commercial
significance of declaratory relief and the need for the Court to
facilitate (rather than hinder) the arbitral process.
The Court was not satisfied that the word "enforced"
was limited to normal forms of executing a judgment (for example,
by issuing a writ of execution for failure to pay a monetary sum).
The Court, in particular, noted that a declaration could be used to
establish an issue estoppel.
Comment
The decision is a welcome development as it clarifies previous
uncertainty in this area of the law and will of course be
persuasive in Australia. The decision is also consistent with the
pro-arbitration stance generally taken by the English courts, with
the court promoting the primacy of an arbitral award over an
inconsistent foreign judgment.
Footnotes
1 The uncertainty can be traced back to the
case of Margulies, Brothers Ltd v Dafnis Thomaides & Co (UK)
Ltd [1958] 1 Lloyd's Law Report 205 in which Lord Evershed said
"You cannot enforce a document which merely says by way of
declaration (in effect) that certain contracts with three numbers
should be set against certain other contracts with three other
numbers and that [the appellant] ought to pay the differences
between them."
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
Persons listed may not be admitted in all states and
territories.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
