The London Steam-Ship Mutual Insurance Association Ltd v The Kingdom of Spain M/T ‘Prestige’
| Jurisdiction | England & Wales |
| Judge | Mr Justice Butcher |
| Judgment Date | 12 May 2021 |
| Neutral Citation | [2021] EWHC 1247 (Comm) |
| Docket Number | Case No: CL-2019-000518 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 12 May 2021 |
[2021] EWHC 1247 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
The Honourable Mr Justice Butcher
Case No: CL-2019-000518
Christopher Hancock QC, Charlotte Tan, Tatyana Eatwell and Alexander Thompson (instructed by Ince Gordon Dadds LLP) for the Appellant
Timothy Young QC, Naina Patel and Jamie Hamblen (instructed by Squire Patton Boggs) for the Respondent
Hearing dates: 2–3, 7–10, 17–18 December 2020
Further submissions: 22 January, 12 February 2021
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.
THE HONOURABLE Mr Justice Butcher
Introduction
This judgment relates to an appeal by the London Steam-Ship Owners' Mutual Insurance Association Ltd (‘the Club’), against the ex parte registration order of Master Cook dated 28 May 2019 (‘the Registration Order’), made pursuant to Article 43 of Regulation (EC) No. 44/2001 (‘the Regulation’). The Regulation, rather than Regulation (EU) 1215/2012, is applicable because the proceedings out of which the judgment registered arose were commenced prior to 10 January 2015.
The Registration Order relates to an order of the Provincial Court of La Coruña (‘the Provincial Court’) dated 1 March 2019 (‘the Spanish Judgment’). The Spanish Judgment was made following criminal and civil proceedings in which the Spanish courts found the Club liable, up to a USD 1 billion global policy limit, for damages arising out of pollution following the total loss of the M/T ‘Prestige’ (‘the Vessel’) off the coast of Spain in November 2002.
The Club is a mutual insurance association providing Protection and Indemnity (‘P&I’) and Freight, Demurrage and Defence (‘FD&D’) insurance to its members. At the material time, namely the year commencing on 20 February 2002, the Club provided such P&I and FD&D cover to Mare Shipping Inc. (‘Owners’) and Universe Maritime Limited (‘Managers’), who respectively owned and managed the Vessel.
The Kingdom of Spain, which I will call ‘the Spanish State’ or ‘Spain’, is a sovereign state. It was a claimant in the Spanish proceedings to which I have referred.
The Factual Background
The contract of insurance in respect of the P&I cover for the Vessel was evidenced by a Certificate of Entry whereby the Club agreed to provide P&I cover for the Owners and Managers of the Vessel in respect, inter alia, of pollution liabilities up to a maximum aggregate amount of USD 1 billion any one occurrence. This contract of insurance was subject to the Club's Rules of Class 5 – Protecting and Indemnity (the ‘Rules’), which contained a ‘pay to be paid’ clause in the following terms (Rule 3.1):
‘3.1 If any Member shall incur liabilities, costs or expenses for which he is insured, he shall be entitled to recovery from the Association out of the funds of this Class, PROVIDED that:
3.1.1 actual payment (out of monies belonging to him absolutely and not by way of loan or otherwise) by the Member of the full amount of such liabilities, costs and expenses shall be a condition precedent to his right of recovery …’
The Rules also contained an English law and London arbitration clause as follows: ‘43.2 … if any difference or dispute shall arise between a Member and the Association out of or in connection with these Rules, or out of any contract between the Member and the Association, or as to the rights or obligations of the Association or the Member thereunder, or in connection therewith, or as to any other matter whatsoever, such difference or dispute shall be referred to Arbitration in London before a sole legal Arbitrator and the submission to Arbitration and all the proceedings thereunder shall be subject to the provisions of the Arbitration Acts 1950, 1979 and 1996 and any Statutory modification or re-enactment thereof, and to English law. …’
In addition, the Club acted as the Owners' insurer in respect of the Owners' liabilities under the International Convention on Civil Liability for Oil Pollution Damage 1969 (as amended by the 1992 Protocol) (the ‘CLC’).
In November 2002, the Vessel was on a voyage from St Petersburg to the Far East carrying 70,000 mt of fuel oil. She suffered damage from a storm surge and began to list significantly. A distress call was sent to the Spanish authorities, but salvage attempts over the following days were unsuccessful. On 19 November 2002, the Vessel broke in two and sank. The resulting oil spillage caused significant pollution damage to the Spanish and French coastlines.
In late 2002, criminal proceedings were commenced in Spain against the Master of the Vessel, Apostolos Mangouras, as well as against its Chief Officer and Chief Engineer, and against Mr Lopez Sors, the Spanish official who was responsible for handling the immediate aftermath of the casualty and who ultimately ordered the Vessel to sail away from the coast, which was alleged to have resulted in more widespread damage to coastal areas than would otherwise have been the case.
The first stage of Spanish criminal proceedings is the fase de instrucción [investigation stage], which in this case took place before the Corcubión Investigation Court No. 1. During the investigation stage, the Spanish State undertook various underwater investigations of the wreck of the Vessel, which are the subject of dispute between the parties and to which I will return.
In 2010, at the conclusion of the investigation stage, the case proceeded to the oral proceedings phase before the Provincial Court. The Master was charged, inter alia, with the offence of serious negligence against the environment under Arts. 325 and 331 of the Spanish Penal Code 1995 (the ‘CP’) and the offence of disobedience to the authorities. Civil claims were also brought by various parties, including the Spanish State, against the Master and crew, the Owners, the Managers and the Club. The civil and criminal actions were tried together.
By the end of the trial, the quantum of the claims brought by the State Lawyer and the Public Prosecutor on behalf of the Spanish State against the Club was in excess of EUR 4 billion. There were two types of claim brought against the Club. First, there were claims pursuant to the terms of the CLC. The CLC claims were not the subject of the Award or the English Judgments to which I will refer and are not of direct relevance for present purposes. Secondly, claims were made pursuant to Art. 117 CP, which gives a third-party victim certain rights of direct action against the liability insurer of the wrongdoing insured (the ‘non-CLC claims’). It is these non-CLC claims which were the subject of the Award and English Judgments.
The Club's position was (and is) that the non-CLC direct action claims against the Club in the Spanish Proceedings are in substance claims to enforce the terms of the contract of insurance between the Club as insurer and the Owners/Managers as the insureds. Accordingly, so the Club contends, insofar as the Spanish State is entitled to recover from the Club, it is bound by the terms of the contract of insurance. Specifically, the Club's position was (and is) that pursuant to the London arbitration and English law clause the parties were bound to submit the non-CLC claims to London arbitration governed by English law, and that the parties were bound by any contractual defences available to the Club, including any defence based on the ‘pay to be paid’ clause. The Club has always contended that upon the proper application of the ‘pay to be paid’ clause, it has no liability to the Spanish State. The Club has also always maintained, and this has been generally accepted, that the parties are bound by the financial limit contained within the policy, ie USD 1 billion, and that insofar as there is any liability it is so limited.
Consistently with this, in January 2012, the Club commenced London arbitration proceedings seeking declarations that the Spanish State was bound by the arbitration clause and that, in accordance with the contract of insurance, the Club was not liable. Mr Alistair Schaff QC was appointed sole arbitrator in the reference. The Spanish State was invited to participate, but did not take part.
By an Award dated 13 February 2013, with Reasons, (the ‘Award’), Mr Schaff QC upheld many of the Club's claims for negative declaratory relief in respect of non-CLC liability, granting relief in the following terms:
‘A) I AWARD AND DECLARE that, as regards all claims arising out of the loss of the M/T PRESTIGE and the resulting loss and damage which are currently brought in Spain by the Respondent [Spain] against the Claimant [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 shall, in any event, not exceed the amount of US$1,000,000,000 (US Dollars One Billion).
B) … the Respondent...
To continue reading
Request your trial
-
The London Steam-Ship Owners' Mutual Insurance Association Ltd v The Kingdom of Spain
...up to these matters coming before the Court is now a lengthy one. I have already summarised much of this history in my judgment at [2021] EWHC 1247 (Comm). What follows should be read with that. Background 4 In November 2002 the M/T Prestige (or ‘the vessel’) suffered damage from a storm s......
-
The London Steam-Ship Owners' Mutual Insurance Association Ltd v The Kingdom of Spain
...from his decision is due to be heard later this year. He has dismissed the Club's public policy arguments ( The Prestige (No. 6) [2021] EWHC 1247 (Comm)) alleging violation of fundamental rights and has given permission to appeal from that decision, but has extended the time for doing so u......
-
Henry Alexander Brompton Gwyn – Jones v Richard William McDonald
...‘ manifestly’ contrary to public policy ( The London Steamship Mutual Insurance Association Ltd. v. The Kingdom of Spain M/T ‘Prestige’ [2021] EWHC 1247 at para. 49 per Butcher The ICC arbitration issue 75 . The first ICC arbitration — initiated in December 2014 — arose from the provisions ......
-
Cousins Material House Ltd v The Swatch Group AG
...cases were helpfully summarised by Butcher J in London Steam-Ship Mutual Insurance Association Ltd v The Kingdom of Spain (M/T PRESTIGE) [2022] 1 WLR 99 (“ London Steam-Ship”) at [124]. Butcher J held that a party could not use the public policy exception to argue that the foreign court's ......