UK: Never A Boring Day - The Long Running West Tankers Dispute Generates Yet Another Significant Decision

Last Updated: 1 November 2012
Article by Marcia Perucca

In West Tankers Inc v Allianz SpA and another [2012] the Commercial Court held that a tribunal was not deprived of jurisdiction by reason of EU law, to award equitable damages for breach of an obligation to arbitrate.

Background

The original dispute arose out of the collision of a West Tankers' vessel, the "FRONT COMOR", with a pier in Sicily belonging to Erg Petroli SpA, the Charterers. Pursuant to the arbitration clause contained in the charterparty, Charterers commenced arbitration in London against Owners. Later, in 2003, Charterers' subrogated Insurers, Allianz SpA and Generali, both commenced proceedings against Owners, in an Italian Court, to recover the sums which they had paid Charterers.

Owners obtained an anti-suit injunction from the English Court, in 2005, restraining the Insurers from pursuing their claim, in Italy, in breach of the arbitration agreement. There was a "leap frog" appeal to the House of Lords which in turn referred to the European Court of Justice ("ECJ"), the question whether such an injunction was consistent with Council Regulation (EC) 44/2001 ("the Regulation") under which the Italian court had jurisdiction.

While the ECJ decision was pending, the tribunal issued partial awards (including a declaration of non-liability), but two issues were stood over until after the ECJ judgment.

In 2009, the ECJ ruled that anti-suit injunctions were incompatible with the Regulation. Thereafter, the tribunal considered the two outstanding issues.

The tribunal's decision

The issues were (1) whether the Insurers were liable to Owners in damages in respect of the legal fees incurred in the Italian proceedings, and (2) whether they were liable to indemnify Owners against any future award made in the Italian proceedings. The majority of the tribunal answered both issues in the negative.

The arbitrators recognised that an arbitral tribunal should not be bound by the constraints of the Regulation (as the EU national courts are) since arbitration is excluded from the Regulation. Nevertheless, in their view, the ECJ decision meant that the Insurers had the right, under Article 5(3) of the Regulation, to commence proceedings in tort in Italy, where the collision occurred. It followed that, if the tribunal were to award damages against the insurers for failing to arbitrate, it would in effect be punishing the Insurers for exercising their right under the Regulation, such right being protected by the EU law principle of effective judicial protection.

The Commercial Court decision

Owners were given permission to appeal under section 69 of the Arbitration Act 1996.

The Court had to consider three main issues:

  1. Was the tribunal circumscribed by the principle of effective judicial protection, which protected the right conferred by Article 5(3) of the Regulation, in circumstances where the Regulation itself did not apply to arbitration?
  2. If the answer to 1) was yes, was the tribunal right to find that an award of damages or an indemnity would interfere with the insurers' rights under EU law?
  3. If the tribunal was right to conclude that it had no jurisdiction to award damages or an indemnity while the Italian proceedings were pending, was it right for the tribunal to dismiss Owners' claim altogether, given that the Italian court had yet to determine its own jurisdiction?

Allowing the appeal, Mr Justice Flaux decided that the tribunal had erred in law. His conclusions for each of the questions posed above were as follows:

1) He placed considerable importance on the Advocate General's earlier view that since the Regulation did not apply to arbitration, the tribunal could reach decisions inconsistent with the decisions of the Italian court without breaching any principle enshrined in the Regulation. The principle of effective judicial protection is not free-standing (as the tribunal itself recognised) and only applies when a specific right is engaged. Since the Regulation did not apply to arbitration, Article 5(3) was not engaged and, as a result, the principle of effective judicial protection did not operate so as to circumscribe the tribunal's jurisdiction

2) Neither the Advocate General nor the ECJ contemplated that the tribunal should decline jurisdiction altogether until the Italian court had ruled. On the contrary, it was recognised that inconsistent decisions could occur

3) On the third issue, Mr Justice Flaux concluded that the tribunal erred in law in not at the very least deferring a decision on the claim. If the Italian court decided in due course that it did not have jurisdiction, and the Insurers were obliged to arbitrate in London, then there would be a strong case for awarding damages for breach of the duty to arbitrate. By dismissing the claim, the tribunal had shut out what might be an arguable claim in the future.

Permission has been granted for Insurers to appeal to the Court of Appeal, so this may well not be the last decision in the West Tankers saga.

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.

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.

Authors
Marcia Perucca
Similar Articles
Relevancy Powered by MondaqAI
CMS Cameron McKenna Nabarro Olswang LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
CMS Cameron McKenna Nabarro Olswang LLP
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions