London Steam-Ship Owners' Mutual Insurance Association Ltd v Kingdom of Spain (THE “PRESTIGE”) (NO 3)
| Jurisdiction | England & Wales |
| Judge | Henshaw J |
| Judgment Date | 18 June 2020 |
| Neutral Citation | [2020] EWHC 1582 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
([2020] EWHC 1582 (Comm))
(Henshaw J)
England, High Court, Queen's Bench Division (Commercial Court).
State immunity — Jurisdiction — State Immunity Act 1978 — Arbitration — Spain seeking to set aside order granting English claimant company permission to serve application claim form — Appointment of arbitrator — Whether Spain entitled to State immunity — Whether Spain lacking immunity under Sections 2, 3 or 9 of Act — Whether Spain having submitted to jurisdiction of the Court — Whether arbitration proceedings relating to a commercial transaction entered into by Spain — Whether proceedings relating to a contractual obligation falling to be performed in United Kingdom — Whether Spain having agreed in writing to submit dispute to arbitration
Arbitration — Arbitration Act 1996 — English claimant company seeking to appoint arbitrator in proceedings against Spain — Whether Spain entitled to State immunity under State Immunity Act 1978 — Whether court having jurisdiction to appoint an arbitrator — The law of England
Summary:2The facts:—In 2002 the vessel “M/T Prestige” was part of a major marine pollution incident which caused serious oil pollution to parts of the coastlines of Spain and France. In civil proceedings in Spain, the owners and managers of the vessel as well as the claimant in these proceedings, an insurance firm that provided pollution cover to the owners and managers of the vessel, were held liable for damages.
The contract of insurance between the claimant and the owners and managers of the vessel contained an arbitration clause requiring claims under the contract to be pursued via arbitration in London. In a 2013 award, a
London-based arbitrator declared that Spain, the defendant in these proceedings, was bound by the arbitration clause and that its civil claims must be referred to arbitration in London. The claimant successfully applied to enforce the 2013 Award.3 Meanwhile, Spain continued to seek enforcement of the Spanish civil judgment.The claimant served a fresh notice of arbitration seeking, among other relief: a declaration that the defendant was in breach of its obligation not to pursue the claims made in the Spanish proceedings other than by way of London arbitration; equitable compensation for breach of an equitable obligation to arbitrate those claims; and contractual damages for breach of a contractual obligation to arbitrate those claims.
The claimant sought the appointment of an arbitrator. In an order of 8 April 2019, the claimant was granted permission to serve the arbitration claim form on the defendant out of the jurisdiction. The defendant brought an application to set that order aside, arguing that it was entitled to immunity and that the court lacked jurisdiction to appoint an arbitrator.
Held:—Spain did not have immunity in respect of the arbitration proceedings. The grant of permission to the claimant to serve the arbitration claim form was upheld.
(1) The defendant, by asserting and pursuing a claim based on an insurance contract containing an arbitration clause, assumed the burden represented by the arbitration clause in so far as it related to the claim pursued. The defendant was under an equitable obligation to recognize the claimant's right to arbitration, including regarding both the claimant's right to arbitration of the substantive claim and its right to seek relief through arbitration for breach of the former right. The defendant had “agreed in writing” to submit this dispute to arbitration for the purposes of Section 9(1) of the State Immunity Act 1978 (“the SIA 1978”), and therefore was not immune from suit4 (paras. 42–92).
(2) The proceedings related to a commercial transaction entered into by the defendant. Therefore, pursuant to Section 3(1)(a) of the SIA 1978 the defendant was not immune from suit.5 The defendant's pursuit of a claim under the insurance contract was an activity of a commercial, financial or other similar character. The application to appoint an arbitrator in respect of the claims was a proceeding relating to that activity. Accordingly, on the natural meaning of Section 3(1)(a), no immunity existed (paras. 93–119).
(3) The proceedings related to an obligation of the defendant which by virtue of a contract fell to be performed wholly or partly in the United
Kingdom, therefore under Section 3(1)(b) of the SIA 1978 the defendant did not have immunity.6 Although the negative aspect of the obligation to arbitrate did not fall to be performed in England, the positive aspect of the obligation did. The obligation in equity to pursue claims under the insurance contract only in accordance with the arbitration agreement was an “obligation of the State” within the meaning of Section 3(1)(b). It was not necessary for the defendant to have been an original party to the contract in question (paras. 120–34).(4) The lack of immunity of the defendant could not be grounded on Section 2 of the SIA 1978, because the defendant could not be said to have submitted to the jurisdiction of the courts of the United Kingdom, nor to have taken any step in the proceedings.7 By combining a claim for immunity and a jurisdictional objection in one application, the defendant had not demonstrated an election to abandon its claim to State immunity; nor had it demonstrated such an election via its suggestion that the issue of jurisdiction was logically prior to the immunity issue (paras. 135–49).
(5) The Court did not lack jurisdiction to appoint an arbitrator due to lack of jurisdiction to grant an injunction against the defendant, damages in lieu of an injunction, or equitable compensation. Section 13(2) of the SIA 1978, which provided inter alia that injunctive relief should not be given against a State, applied only to the Court, not to arbitration.8 Section 13 of the SIA 1978 governed the exercise but not the existence of the Court's power to grant an injunction, while Section 48 of the Arbitration Act 1996 permitted an arbitrator to grant an injunction against a State.9 As arbitration was founded on consent, an injunction by an arbitrator did not impinge on the par in parem principle (paras. 150–213).
The following is the text of the judgment of the Court:
| Page | |
| (A) Introduction | 534 |
| (B) Background | 535 |
| (1) The proceedings in Spain | 535 |
| (2) The First Arbitration Proceedings | 537 |
| (3) Other proceedings pending in England | 538 |
| (4) The present proceedings: the Club's fresh arbitration claims | 539 |
| (C) Issues | 541 |
| (D) State immunity: overview and approach | 542 |
| (E) State immunity: section 9 (agreement in writing) | 544 |
| (1) Section 9(1) | 544 |
| (2) The parties' cases in outline | 545 |
| (3) Construction of section 9 | 546 |
| (4) Authorities on the “conditional benefit” principle | 547 |
| (5) Application to the present case | 562 |
| (F) State immunity: section 3(1)(a) (commercial transaction) | 568 |
| (G) State immunity: section 3(1)(b) (obligation to be performed in UK) | 579 |
| (H) State immunity: section 2 (submission) | 583 |
| (I) Arbitration Act section 18 | 590 |
| (1) Introduction | 590 |
| (2) How the court should approach these issues | 591 |
| (3) Jurisdiction | 595 |
| (4) Merger | 596 |
| (5) Arbitrator's power to grant an injunction against a State | 600 |
| (6) Equitable damages in lieu of an injunction | 604 |
| (7) Other equitable compensation | 608 |
| (8) Conclusion in relation to AA 1996 section 18 | 610 |
| (J) Choice of arbitrator | 610 |
| (K) Conclusions | 611 |
1. This judgment follows a hearing over four days of an application by the Kingdom of Spain (“Spain”) under CPR Part 11 to set aside the order of Robin Knowles J dated 8 April 2019 granting the Claimant/ Respondent (“the Club”) permission to serve an arbitration claim form out of the jurisdiction. The arbitration claim form seeks the appointment of an arbitrator pursuant to section 18 of the Arbitration Act 1996 (“AA 1996”).
2. Spain invites the court to set aside the grant of permission because:
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(i) Spain is immune from all suits brought by the Club pursuant to section 1 of the State Immunity Act 1978 (“SIA 1978”);
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(ii) alternatively, the court has no jurisdiction to hear the claims set out in the arbitration claim form and the section 18 application (“the Arbitration Claims”).
The scope of the hearing has extended more broadly to other issues relevant to whether or not the court should exercise its power (if any) to appoint an arbitrator under AA 1996 section 18.
3. This matter was originally due to be heard on 6 February 2020. Unfortunately Spain's then leading counsel became ill, and the hearing was adjourned to 20 February 2020. Shortly before the hearing on that date, replacement counsel expressed the view that the time estimate appeared too short, and correspondence ensued about the issues the court would need to address and how long they would take. Teare J as Judge in Charge of the Commercial Court directed that the issues of service (at live issue at that stage) and of whether a seriously arguable issue existed under section 18 be heard on 20 February, with State immunity deferred to a later date. That, however, gave rise to further correspondence arising from case law indicating that any immunity issue should be dealt with first. An assurance provided by the Club on 13 February satisfied the Judge in Charge but not, it appeared, Spain.
4. Ultimately, when the matter first came before me on 20 February, I concluded that that day and the further hearing (by then fixed for late April) should be treated as a single hearing and deal with both the State immunity and section 18 issues. Between 20 February and 28 April, helpfully, the parties agreed (and Teare J approved) a consent order providing that certain other issues previously due to be heard at the late April fixture should instead be...
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