UK: West Tankers Revisited: Enforcement of Declaratory Awards

The long-running dispute between West Tankers Inc. and Allianz SpA continued last week with the High Court refusing an application to set aside an order granting leave to enforce an English arbitration award in this jurisdiction where proceedings in relation to the same dispute were ongoing in Italy.  In doing so, the court sought to protect the primacy of the arbitration award over any inconsistent Italian judgment which might otherwise be recognised and enforced in England. 

Background

In West Tankers v Allianz SpA and others, the insurers, Alliance SpA and Generali Assicurazione Generali SpA, applied to set aside an order granting leave to West Tankers to enforce an arbitration award pursuant to section 66(1) of the Arbitration Act 1996 (the "Act").  The award made by the tribunal was a declaration that West Tankers had no liability in respect of the collision of a ship with a jetty in Italian waters. 

The same dispute is the subject of ongoing proceedings in Italy, pursued by the insurers against West Tankers, following the well publicised decision by the European Court of Justice that it is incompatible with EU law for a court of a Member State to make an order restraining a party from commencing or continuing proceedings in the court of another Member State in breach of an arbitration agreement (see our Law-Now for further background information).

Having obtained an arbitration award in its favour, West Tankers was concerned that the insurers might in future obtain an Italian judgment which was inconsistent with that award.  The insurers could then seek to have that judgment recognised and enforced in England, pursuant to Chapter III of EC Regulation 44/2001 (relating to the jurisdiction and recognition and enforcement of judgments in civil and commercial matters between EU member states) (the "Regulation").  Those concerns were behind West Tanker's application to have the award enforced as a judgment, the thinking being that once the award had been converted into a judgment, any subsequent Italian judgment in favour of the insurers would not be recognised in England pursuant to Article 34(3) of the Regulation.  Article 34(3) of the Regulation provides that:

West Tanker's application was successful and, by an order dated 15 November 2010 (the "Order"), it was given leave to enforce the arbitration award pursuant to section 66(1) of the Act and judgment was entered against the insurers pursuant to section 66(2) of the Act in the terms of the award. 

The insurers applied to set aside the Order, arguing that an award in purely declaratory terms cannot be "enforced" as a judgment and so the court had no power to make the Order under sections 66(1) and (2) of the Act.  The key issue was under what circumstances a court would make an award under sections 66(1) and (2) of the Act to enforce an arbitral award.

Judgment

The court held that the purpose of sections 66(1) and (2) is to provide a means by which the victorious party in an arbitration could obtain the material benefit of the award other than by suing on it.  Where the victorious party's objective in obtaining an order under sections 66(1) and (2) was to establish the primacy of a declaratory award over an inconsistent judgment, the court would have jurisdiction to make the Order.  West Tankers' objective was exactly that and it had a real prospect of establishing the primacy of the award over any future Italian judgment.  Accordingly, the court had jurisdiction to make the Order and the insurers' application was dismissed. 

Comment 

This decision is likely to be welcomed by users of arbitration.  Indeed, there is little point in arbitrating if the final award cannot be enforced and used to prevent the recognition of conflicting foreign judgments in this jurisdiction.  The fact that the English courts are prepared to support the primacy of English arbitration awards may go some way to easing the frustration of a party who agrees to arbitrate but is then dragged into prolonged and uncertain litigation in another Member State.

Further reading: 

West Tankers Inc v Allianz SpA and Generali Assicurazione Generali SpA [2011] EWHC 829 (Comm)

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 11/04/2011.