The London Steam Ship Owners Mutual Insurance Association Ltd v The Kingdom of Spain

JurisdictionEngland & Wales
JudgeMr Justice Walker
Judgment Date17 October 2013
Neutral Citation[2013] EWHC 2840 (Comm)
CourtQueen's Bench Division (Commercial Court)
Date17 October 2013
Docket NumberCase No: 2013 Folio 368

[2013] EWHC 2840 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Walker

Case No: 2013 Folio 368

Between:
The London Steam Ship Owners Mutual Insurance Association Ltd
Claimant
and
The Kingdom of Spain
Defendant

Mr Christopher Hancock QC and Miss Charlotte Tan (instructed by Ince & Co) for the Claimant

Miss Sara Cockerill QC and Miss Anna Dilnot (instructed by K & L Gates) for the Defendant

Hearing date: 5 July 2013

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Walker

A. Introduction

1

In this judgment I give reasons for a ruling which I made at a hearing on 5 July 2013. At that hearing I was concerned with various procedural issues which arose between the claimant, a protection and indemnity association (which I shall refer to as "the Club"), and the defendant Kingdom of Spain (which I shall refer to as "the Kingdom").

B. The casualty and the Spanish proceedings

2

In November 2002 massive oil pollution damage was caused when the M/T "PRESTIGE" ("the vessel") broke up off the coast of Spain. Criminal proceedings were begun in Spain later that month. The vessel was entered with, and her owners and managers were members of, the Club. Accordingly the Club, pursuant to a contract of insurance (the "Insurance Contract") on terms set out in its rules ("the Rules") provided protection and indemnity ("P&I") insurance, along with freight, demurrage and defence ("FD&D") insurance, in respect of the vessel.

3

Spanish law permits civil claims to be advanced in the course of criminal proceedings. In July 2010 the Spanish court ordered that such claims should be tried against the Master, Chief Officer, and Chief Engineer, against the owners and managers, and against the Club.

4

The Club maintains that the claims against it ("the Asserted Claims") can broadly be described as:

(1) "The CLC claim": that the Club is liable under the International Convention on Civil Liability for Oil Pollution Damage 1992 ("the CLC"); and

(2) "The Spanish law claim": that the Club is liable under Spanish law, including pursuant to the provisions of Article 76 of a statute of 1980 ("the Spanish Insurance Contract Act 1980") and/or Article 117 of the Spanish Penal Code.

C. The Club's notice of arbitration

5

The Club declined to participate in the Spanish proceedings. On the footing that the Asserted Claims were made by the Kingdom, the Club served on the Kingdom a notice of arbitration dated 16 January 2012.

6

The notice of arbitration began with an introductory section which asserted that:

(1) the Club provided indemnity insurance in respect of the vessel under the Insurance Contract as set out above;

(2) in the case of the vessel, the CLC provided the exclusive basis upon which claims for pollution damage were to be compensated;

(3) the Club had lodged in cash with the Spanish Court on 28 May 2003 (at the then exchange rate) the full amount of the vessel's CLC limitation fund, namely Euros 22,777,986; and

(4) the Rules provided by Rule 1.2 and 43.2 for English law to apply to the Insurance Contract, while Rule 43.2 provided, among other things:

… for any difference or dispute arising out of or in connection with the Rules and/or the Insurance Contract and/or as to the rights or obligations of the Club thereunder or in connection therewith or as to any other matter whatsoever, to be referred to arbitration in London before a tribunal consisting of a sole arbitrator.

7

The second section of the notice of arbitration was headed "Notice of arbitration for the purposes of Arbitration Act 1996 s.14". It said that the Asserted Claims purported to claim for sums in excess of and in addition to the CLC Fund. The position taken by the Club in that regard was then set out:

To the extent that such claims are in excess of and in addition to the CLC Fund, such claims are claims to enforce the Insurance Contract in accordance with its terms including Rule 43.2 which provides for London Arbitration and English law. Accordingly, your claims should be determined in London Arbitration.

The Club denies and disputes that it has any liability at all in respect of the Asserted Claims to you under or in connection with the Insurance Contract. The Claimants seek declaratory relief to that effect.

Given these disputes, the Asserted Claims and the Club's claims for declaratory relief should be referred for determination to arbitration in London before a sole arbitrator.

8

The second section concluded:

Accordingly, the Club hereby gives you notice of commencement of London arbitral proceedings in respect of all differences or disputes arising out of or in connection with the Insurance Contract or the Rules in respect of the loss of the M/T PRESTIGE and any resulting loss or damage (save for claims under the CLC) and calls upon and requires you to agree to the appointment of a sole arbitrator.

9

The third section was headed "Appointment of sole arbitrator". It requested the Kingdom, pursuant to section 16(3) of the Arbitration Act 1996, to join in the appointment of Mr Alistair Schaff QC as sole arbitrator. A warning was then given that the Club would apply to the court if an arbitrator had not been appointed within 28 days of service of the notice.

D. The arbitration proceedings

10

The Kingdom responded to the notice of arbitration by denying any obligation to arbitrate and refusing to appoint an arbitrator. This led to an application to the court by the Club under section 18 of the Arbitration Act 1996, served on the Kingdom on 10 May 2012. The response of the Kingdom on 1 June 2012 was that it did not intend to participate. At a hearing on 27 July 2012 the court appointed Mr Schaff QC as the sole arbitrator.

11

The Club's claim submissions in the arbitration were served on the Kingdom on 3 August 2012. An order by the arbitrator for defence submissions to be filed by 21 September met with a response in which the Kingdom reiterated its intention not to participate. It was given a further time extension on the basis that any participation would be without prejudice to threshold questions, but this did not lead the Kingdom to change its position.

12

Later in 2012 the Kingdom was served with documents including the Club's disclosure list, expert evidence, hearing bundles and opening submissions, all of them with Spanish translations. The hearing took place over two days in January 2013. A transcript of the hearing, with a Spanish translation, was sent to the Kingdom, with an invitation to make submissions. The Kingdom did not take up the invitation.

13

The arbitrator's award ("the Award") was published on 13 February 20In the Award the arbitrator made three declarations as regards all claims arising out of the loss of the vessel and the resulting loss and damage "which are currently brought in Spain by the Respondent [i.e. the Kingdom] against the Claimant [i.e. the Club] by way of alleged direct public liability under the Spanish Penal Code":

1) the Respondent is bound by the arbitration clause contained in Rule 43.2 of the Club Rules and such claims must be referred to arbitration in London;

2) (i) actual payment to the Respondent of the full amount of any insured liability by the Owners and/or Managers (out of monies belonging to them absolutely and not by way of loan or otherwise) is a condition precedent to any direct liability of the Claimant to the Respondent in consequence of the 'pay as may be paid clause' contained in Rule 3.1; and accordingly

(ii) pursuant to the 'pay as may be paid clause,' and in the absence of any such prior payment, the Claimant is not liable to the Respondent in respect of such claims.

3) the Claimant's liability to the Respondent in respect of such claims shall, in any event, not exceed the amount of US$1,000,000,000 (US Dollars One Billion).

E. The Club's enforcement application

14

On 14 March 2013 the Club issued an arbitration claim form against the Kingdom. In the claim form, which was given the number 2013 folio 368, it was said that the claim was made without notice. The remedy claimed was that the court should make four orders. They were described in this way:

1. Pursuant to section 66(1) of the Arbitration Act 1996, the Claimants shall have leave to enforce an arbitration award dated 13 February 2013 made by an Arbitration Tribunal consisting of Mr Alistair Schaff QC pursuant to an arbitration agreement, in the same manner as a judgment or order of the court to the same effect.

2. Pursuant to section 66(2) of the Arbitration Act 1996, judgment shall be entered in terms of the Award.

3. That the Defendants shall pay the costs of this application, including the costs of any judgment which may be entered hereunder.

4. The Claimants have liberty to apply for enforcement of any costs award which the arbitral tribunal may make in the near future.

15

Also issued by the Club against the Kingdom on 14 March 2013 was an application notice in 2013 Folio 368. The application notice sought that the application be dealt with on paper. Two orders were sought in the application. First, the Club asked for an order permitting service of the arbitration claim form and other relevant documents out of the jurisdiction in Spain. Second, the Club asked for an order permitting service of those documents by an alternative means, using email and courier rather than diplomatic channels.

16

Both the arbitration claim form and the application notice were supported by a witness statement of Eva Nickel, a solicitor of the firm Ince & Co LLP, who act as solicitors for the Club. Her witness statement gave an account of the history of events culminating in the making of...

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