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

JurisdictionEngland & Wales
JudgeLord Justice Males,Lord Justice Popplewell,Lord Justice Phillips
Judgment Date04 November 2021
Neutral Citation[2021] EWCA Civ 1589
Docket NumberCase Nos: A4/2020/1456, A4/2020/1468, A4/2020/1560 & A4/2020/1676
CourtCourt of Appeal (Civil Division)
Between:
The London Steam-Ship Owners' Mutual Insurance Association Limited
Claimant
and
The Kingdom of Spain
Defendant
And Between:
The London Steam-Ship Owners' Mutual Insurance Association Limited
Claimant
and
The French State M/T “Prestige”
Defendant (Nos. 3 and 4)

[2021] EWCA Civ 1589

Before:

Lord Justice Males

Lord Justice Popplewell

and

Lord Justice Phillips

Case Nos: A4/2020/1456, A4/2020/1468, A4/2020/1560 & A4/2020/1676

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTYCOURTS OF ENGLAND AND WALES

COMMERCIAL COURT (QBD)

Mr Justice Henshaw and Mr Justice Butcher

[2020] EWHC 1582 (Comm) and [2020] EWHC 1920 (Comm)

Royal Courts of Justice

Strand, London, WC2A 2LL

Christopher Hancock QC & Alexander Thompson (instructed by Ince Gordon Dadds LLP) for the Claimant

Timothy Young QC & Jamie Hamblen (instructed by Squire Patton Boggs (UK) LLP) for the Kingdom of Spain

Anna Dilnot QC (instructed by K & L Gates LLP) for the French State

Hearing dates: 11, 12, 13, 14 and 15 October 2021

Approved Judgment

Lord Justice Phillips

Lord Justice Males, Lord Justice Popplewell and

(1) Introduction

1

On 19 November 2002 the “Prestige”, a tanker carrying 70,000 mt of fuel oil, broke in two and sank off Cape Finisterre. Its cargo escaped from the vessel and polluted the Atlantic coastline of northern Spain and southern France. This was a catastrophe for the regions affected and for the people who lived there, including those whose livelihoods were dependent on the marine environment. It led to civil and criminal proceedings in Spain which reached the Spanish Supreme Court and to litigation and arbitration in this country which has already involved a previous visit to this court. The present appeals are the latest (but not the last) round in the battle arising out of this casualty between the Kingdom of Spain (“Spain”) and the French State (“France”) (together “the States”) on the one hand and the shipowner's liability insurer, the London Steam-Ship Owners' Mutual Insurance Association Ltd (“the Club”), on the other.

2

It will be necessary to explain in some detail the nature of the claims with which we are presently concerned and the course of proceedings so far, but in the briefest outline the States seek compensation for the losses caused by the pollution of their coastlines and have obtained from the Spanish courts what is now a final judgment against the Club in the sum of €855,493,575.65, broadly speaking the limit of Club cover. Spain has obtained also an order for the registration of that judgment pursuant to the provisions of the Brussels I Regulation ( Council Regulation (EC) No. 44/2001) 1 with a view to its enforcement against the Club's assets here. That order is being challenged by the Club and an appeal is due to be heard by this court later this year.

3

The Club, however, contends that the pursuit by the States of the proceedings in Spain was contrary to an obligation binding on the States to pursue their claims by arbitration in London. It has obtained awards from Mr Alistair Schaff QC, an arbitrator appointed by the Commercial Court (Mr Justice Christopher Clarke), supporting that contention. Mr Schaff has made declaratory awards (“the Awards”) which declare that (1) the States are bound by the arbitration clause contained in the Club's Rules and their claims must be referred to arbitration in London and (2) pursuant to the “pay to be paid” clause in the Club's Rules, the Club is not liable to the States in respect of such claims in the absence of any prior payment. The States challenged those Awards pursuant to sections 67 and 72 of the Arbitration Act 1996 on the ground that Mr Schaff had no jurisdiction to make them, but that challenge was unsuccessful (see The Prestige (No. 2) [2013] EWHC 3188 (Comm), [2014] 1 Lloyd's Rep 309 and [2015] EWCA Civ 333, [2015] 2 Lloyd's Rep 33). At the same time, the Club obtained permission to enforce the Awards pursuant to section 66(1) of the same Act and entered judgment in terms of the Awards pursuant to section 66(2). 2

4

The Club has now issued further proceedings against the States and it is those proceedings which are the subject of the present appeals. They can be grouped under three headings, as follows.

The Arbitration Claims

(1) The Club has commenced a new arbitration against each of the States by service of notices of arbitration, in which it claims, in outline, (a) declarations that by continuing to pursue its claims in Spain and seeking to enforce the Spanish judgment, the State is in breach of its obligation not to pursue those claims otherwise than by London arbitration, (b) equitable compensation and/or damages for breach of that obligation in the amount of any liability and costs incurred arising from the pursuit of those claims, (c) contractual damages for breach of a contractual obligation to arbitrate those claims, said to arise from the States' participation in the section 66 proceedings, and (d) an anti-suit injunction to restrain the further pursuit of those claims and enforcement of the Spanish judgment.

The Award Claims

(2) The Club has issued proceedings against each of the States in the Commercial Court, seeking damages or equitable compensation for any liability under the Spanish judgment, including the costs of prior arbitral and court proceedings. The claims are described as being “for breach of the Defendant's obligation to honour an arbitration award” (i.e. Mr Schaff's award) declaring the State bound to pursue its claims in London arbitration.

The Judgment Claims

(3) The Club has also issued further proceedings against each of the States in the Commercial Court, seeking damages or equitable compensation for any liability under the Spanish judgment, including the costs of prior arbitral and court proceedings. The claims are described as being “for breach of the Defendant's obligation to abide by” the judgment of Mr Justice Hamblen, upheld by this court, declaring the State bound to pursue its claims in London arbitration (i.e. the section 66 Judgment entered in the terms of Mr Schaff's award).

5

Thus in each case the monetary relief which the Club seeks is the same, effectively to nullify any liability resulting from the Spanish judgment and to recover its costs of the Spanish proceedings, with an additional claim for an anti-suit injunction made in the arbitrations, although not the court proceedings. However, the obligations on which the claims are founded are different. While the obligation on which the Club relies for its new Arbitration Claims is the original obligation to arbitrate contained in its Rules to which (as held in The Prestige (No. 2) [2015] EWCA Civ 333, [2015] 2 Lloyd's Rep 33) the States have become subject pursuant to a “conditional benefit” analysis (see below), the Award and Judgment Claims are founded on what are said to be new obligations arising from the Awards (“to honour the award”) and section 66 Judgments (“to abide by the judgment”) respectively.

6

Orders were made without notice for service of the claim forms initiating the Award and Judgment Claims, while in the case of the Arbitration Claims orders were made for service of an arbitration claim form seeking the appointment of an arbitrator pursuant to section 18 of the Arbitration Act 1996. There is now no dispute that in each case service has been validly effected.

7

However, the States contend that they are entitled to state immunity in respect of the Award and Judgment Claims and dispute the territorial jurisdiction of the English court over them. They do so, depending on which regime applies, whether the court's jurisdiction falls to be determined by reference to the Brussels Recast Regulation (Council Regulation (EU) No. 2015/2012) or the English domestic rules for service of proceedings out of the jurisdiction. Spain likewise claims state immunity in respect of the Club's application for the appointment of an arbitrator to determine the Arbitration Claim against it (“the section 18 Application”) and disputes the territorial jurisdiction of the English court over it. 3

8

In a judgment handed down on 18 June 2020 Mr Justice Henshaw held that Spain was not entitled to state immunity in respect of the Club's claim for the appointment of an arbitrator and appointed Sir Peter Gross as arbitrator, save in respect of the Club's claim for damages for breach of contract. As to that latter way of putting the Club's case, Mr Justice Henshaw was not persuaded that the parties had entered into any fresh contractual relationship by reason of Spain's opposition to the section 66 proceedings. The Club has not appealed from that decision. 4

9

In a judgment handed down on 24 July 2020 Mr Justice Butcher held that the States were not entitled to immunity in respect of the Award or Judgment Claims. He held that the Award Claims fell within the “arbitration” exception in Article 1.2(d) of the Brussels Recast Regulation, so that the domestic rules for service out of the jurisdiction applied, and that there was a “serious issue to be tried” on the merits. Accordingly he held that the English court had jurisdiction over the Award Claims. He held that the Judgment Claims were not within the “arbitration” exception, so that the applicable regime for determining jurisdiction was the Regulation; that the claims fell within Section 3 of Chapter II of the Regulation (“Jurisdiction in matters relating to insurance”); and that, pursuant to Article 14 of the Regulation, the Club could only bring its proceedings in the courts of the state in which the defendant was domiciled. Accordingly the English court did not have jurisdiction over the Judgment Claims.

10

The States now appeal to this court, contending that the courts below were wrong to reject its claims to state immunity from the Award and Judgment Claims and (in the...

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