UK: Court Of Appeal Rules On Enforcement Of West Tankers Arbitration Award

Last Updated: 16 February 2012
Article by Anthony Menzies, James Crabtree and Susannah Wakefield

Allianz SpA & Ors v West Tankers [2012]1

Court of Appeal 24 January 2012

This long running dispute concerned claims arising from an allision involving the vessel FRONT CONNOR and a jetty at an oil refinery in Syracuse, Italy, operated by Erg Petroli SpA. Erg's claim against the Owners for the resulting loss and damage arose under a charterparty which provided for London arbitration. Erg was partly indemnified for the loss by its own insurers, Allianz and others (the Insurers), but in the meantime London arbitration proceedings were commenced as between Erg and the Owners to recover the loss suffered in excess of its insurance coverage.

Subsequently, the Insurers launched their own recovery proceedings against the Owners, pursuant to their subrogation rights, in the Italian court. The result was that the same claim was being pursued in two separate venues, in the London arbitration on the one hand, and by way of litigation pursued by the Insurers in the Italian court.

In response, the Owners issued an application in the English court for an injunction to restrain the Italian litigation. Initially, the English court considered itself competent to grant such an injunction, but the House of Lords referred the matter for determination by the European Court of Justice, which went on to hold otherwise. Under the ECJ's ruling, handed down in February 2009, it was held that only the court first seized of the matter (in this case the Italian court) could decide on the proper allocation of jurisdiction under the Regulation. The English court, therefore, could not issue an anti-suit injunction in support of an English arbitration. In the absence of an injunction, both sets of proceedings continued in parallel; the London arbitration on the one hand and the Italian litigation on the other.

In due course, the London arbitration tribunal issued its award, granting the declaration sought by the Owners, namely that they were not liable to Erg and its insurers for the incident. So where did that leave matters? While the Owners had won in the London arbitration, the Italian litigation could yet produce a contrary judgment, which in the ordinary course would be enforceable in another EU member state (i.e. England) under the Regulation. Could the Owners use the arbitration award as a shield against enforcement of an adverse Italian judgment, despite the lack of any anti-suit injunction?

The answer was sought in the Regulation itself, which bars enforcement of a judgment of another member state court which is irreconcilable with an earlier judgment given by the court in which enforcement is sought. The problem in this case was that an English arbitration award is not the same as an English court judgment, and so the award on its own would not have that effect. In the present case, however, the Owners applied to the English court to convert the arbitration award into an English court judgment pursuant to section 66 of the Arbitration Act 1996, which allows judgment to be entered in the terms of an award, for the purposes of enforcement of the award. The English Commercial Court gave its decision, granting the Owners' application, on 6 April 2011. While the court made it clear that it would not grant such relief in all cases, it said it would do so in cases where (as here) there existed an appreciable risk of the losing party obtaining an inconsistent judgment in a member state which it might then seek to enforce in England. Absent of such relief, so the court noted, the winning party would be deprived of the material benefit of the arbitration award.

The Insurers appealed. They contended that the relief granted by the Commercial Court judge should not have been granted in a case where the arbitration award was purely declaratory in nature, and especially where the declaration concerned was a negative award as to liability. In such cases, they argued, there was nothing to be "enforced" for the purposes of section 66 of the Act.

In a judgment handed down on 24 January 2012, the Court of Appeal rejected the Insurers' objection, holding that the "enforcement" of any award meant the enforcement of any rights which the award had established. That could include the rights enshrined in a declaration, including a negative declaration, just as much as the right to a monetary sum.

Result: Judgment for the Claimant owners.

Footnote

1) [2012] EWCA Civ 27

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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