An important decision in support of international arbitration has confirmed that a party which has agreed to arbitrate in England can ask the English courts to enforce the arbitrators' award for a declaration of non-liability, despite earlier court proceedings started in another Member State.
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An important decision in support of international arbitration
has confirmed that a party which has agreed to arbitrate in England
can ask the English courts to enforce the arbitrators' award
for a declaration of non-liability, despite earlier court
proceedings started in another Member State.
Following the Commercial Court, the Court of Appeal has recently
confirmed in West Tankers Inc v Allianz SPA & Anr
[2012] EWCA Civ 27, that declaratory awards can be enforced in the
same manner as a judgment. A judgment can, therefore, be entered in
terms of that award pursuant to section 66(1-2) of the Arbitration
Act 1996 (the "Act"). (Read our Law-Now on the commercial
court decision
here).
This decision arises out the West Tankers shipping insurance
dispute which has already given rise to one of the most important
decisions of the European Court of Justice on the interaction of
the Brussels I Regulation and arbitration.
The underlying dispute was between the insurers of charterers of a
vessel (Allianz) and the vessel's owners (West Tankers) about
responsibility for a collision of the vessel against a jetty owned
by charterers in Italy during the voyage charter.
After arbitration had been started in England pursuant to the
arbitration agreement on the charterparty, Allianz started
substantive court proceedings in Italy. West Tankers obtained an
anti-suit injunction from the English courts preventing the
insurers from prosecuting their claim in Italy, but that injunction
was set aside following the ECJ ruling (read our Law-Now
here).
In England the arbitrators rendered a declaratory award stating
that West Tankers were under no liability to the charterers'
insurers in respect of the collision.
In order to prevent the possibility that a contrary Italian
judgment could be enforced in England on the same matter, West
Tankers applied and obtained an order giving leave from the court
for the award to be enforced in the same manner as a judgment
pursuant to section 66 of the Act. Allianz's appealed against
the order and argued that a normal interpretation of section 66
should exclude declaratory awards from its scope.
Finding that the appeal turned upon a pure question of construction
of a domestic statute, Lord Justice Toulson explained that "it
is not a question with a distinctively European flavour".
Further, he rejected the appellant's narrow interpretation of
section 66 of the Act by which "enforced" should normally
apply to awards which were coercive in form, i.e. apply only to
awards which ordered a party to do or not to do something. Toulson
LJ preferred to adopt a broader interpretation which is
"closer to the purpose of the Act and makes better sense in
the context of the way in which arbitration works". He found
that section 66 does not only envisage enforcement by one of the
normal forms of execution of a judgment but may include instead
other means of giving judicial force to the award, on the same
footing as a judgment, like issue estoppel or res
judicata.
This decision confirms the equal footing of arbitral awards with
court decisions: if a declaratory judgment of negative declaration
can have an effect, so can such declaratory awards.
This decision also endorses the approach adopted by the Commercial
Court in African Fertilizers and Chemicals Nig Ltd (Nigeria) v
BD Shipsnavo GmbH & Co Reederei Kg [2011] EWHC 2452 (Comm)
(which is itself subject to appeal) and shows that the courts are
willing to establish the primacy of contractual arbitration over
irreconcilable court proceedings thereby granting to a successful
party the "material benefit" of an award.
In West Tankers the appellants did not pursue the argument
that, should the Italian courts decide in favour of the insurers,
this may result in contrary judgments on the same matter emanating
from courts of two Member States of the European Union. Such a
situation is likely to contradict the objectives of the Brussels
Regulation and will raise the question of whether a judgment
entered in the form of an award falls, or does not fall, within the
scope of the Brussels I Regulation. One can therefore reasonably
expect another episode of the West Tankers saga entertaining the
English courts, and possibly the ECJ, on the question of the
enforcement of the Italian judgment despite the declaratory award
and its implication in the Brussels regime.
Further reading:
West Tankers Inc v Allianz SPA & Anor
[2012] EWCA Civ 27 (24 January 2012)
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 01/02/2012.
