The London Steam-Ship Owners' Mutual Insurance Association Ltd v The Kingdom of Spain
| Jurisdiction | England & Wales |
| Judge | Mr Justice Butcher |
| Judgment Date | 06 October 2023 |
| Neutral Citation | [2023] EWHC 2473 (Comm) |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2019-000518 |
[2023] EWHC 2473 (Comm)
THE HON Mr Justice Butcher
Case No: CL-2019-000518
CL-2023-000050
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF
ENGLAND AND WALES
COMMERCIAL COURT (KBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Christopher Hancock KC, Thomas De La Mare KC (May 2023) Charlotte Tan (December 2020) and Alexander Thompson (instructed by Wikborg Rein LLP) for the Appellant/Defendant Club
Timothy Young KC and Jamie Hamblen (instructed by Squire Patton Boggs (UK) LLP) for the Respondent/Claimant State
Hearing dates: 2–3, 7–10, 17–18 December 2020 15–18 May 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on Friday 6 October 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives (see eg https://www.bailii.org/ew/cases/EWCA/Civ/2022/1169.html).
THE HONOURABLE Mr Justice Butcher
There are before the court a number of related matters, which form part of the protracted litigation arising from the sinking of the M/T Prestige in 2002. The parties to these proceedings are the London Steam-Ship Owners' Mutual Insurance Association Limited (which I will call ‘the Club’) and the Kingdom of Spain (which I will call ‘Spain’).
Specifically, the following matters fall to be resolved by the Court:
(1) The remaining issues and the outcome of the Club's Appeal in Claim No. CL-2019-000518.
(2) Spain's challenges to the First and Second Partial Awards of Sir Peter Gross dated 6 January 2023 and 27 March 2023 under ss. 67, 68 and 69 Arbitration Act 1996 (‘AA 1996’), in Claim No. CL-2023-000050.
The history leading 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
In November 2002 the M/T Prestige (or ‘the vessel’) suffered damage from a storm surge, and subsequently 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 and other officers of the vessel as well as against a Spanish official who was responsible for handling the immediate aftermath of the casualty. At the conclusion of the investigative stage of those proceedings, in 2010, the Master was charged with the offence of serious negligence against the environment under Articles 325 and 331 of the Spanish Penal Code and with the offence of disobedience to the authorities. Civil claims were also brought by various parties against the Master and crew, the Owners and Managers of the vessel, and against the Club, with which the vessel had been entered for P&I cover at the time of the casualty. The Owners were sued on the ground of vicarious liability for the Master's conduct. The Club was sued directly pursuant to Article 117 of the Spanish Penal Code (or ‘Article 117’) as Owners' liability insurer. In addition the Club was sued pursuant to The International Convention on Civil Liability for Oil Pollution Damage 1992 or Civil Liability Convention (‘the CLC’).
Both Spain and the French State (together, ‘the States’) made claims under Article 117 in those proceedings. In the case of Spain, it was a claimant both on its own behalf and on the basis that it was subrogated to the claims of other claimants whom it had compensated for losses caused by the pollution from the vessel under a compensation scheme established under Spanish law.
The Club's position was that the States' pursuit of Article 117 claims was contrary to an obligation binding on them contained in the Club Rules to pursue their claims by arbitration in London. The Club accordingly commenced separate arbitrations against Spain and the French State. Mr Alistair Schaff KC was appointed by the Commercial Court as the sole arbitrator in each of those arbitrations. The States did not participate in those arbitrations. I will call the arbitration in which Mr Schaff KC was arbitrator and which involved Spain, ‘the Schaff Arbitration’.
In the Schaff Arbitration, by an Award dated 13 February 2013 (‘the Schaff Award’), the arbitrator upheld many of the Club's claims for negative declaratory relief. He made declarations that:
(1) Spain was bound by the arbitration clause contained in the Club's Rules and its claims must be referred to arbitration in London;
(2) Pursuant to the ‘pay to be paid’ clause in the Club's Rules, the Club was not liable to Spain in respect of such claims in the absence of prior payment to Spain by the Owners and/or Managers of the vessel of the full amount of any insured liability.
(3) In any event the Club's liability was subject to the global limit of US$1 billion specified in the contract of insurance.
The Club then sought to enforce the Schaff Award as a judgment, and to enter judgment in terms of the Schaff Award pursuant to s. 66 AA 1996. Spain participated in those proceedings, both by defending the Club's application, and by issuing its own proceedings under ss. 67 and 72 AA 1996, seeking a declaration that Mr Schaff had had no jurisdiction to make the Schaff Award. Spain also claimed state immunity from the Court's processes in relation to the s. 66 AA 1996 application.
In its ss. 67 and 72 AA 1996 applications Spain contended that the direct rights which it was pursuing in its Article 117 claims were independent rights under Spanish law rather than contractually-based rights. It was further argued that they were not arbitrable because they were brought under a criminal statute and were bound up with issues of criminal liability and/or because they involved Spain and the Public Prosecutor fulfilling a constitutional, public policy function, namely the protection of the environment.
These applications came before Hamblen J in October 2013. He handed down judgment on those applications on 22 October 2013 ( The Prestige (No. 2) [2013] EWHC 3188 (Comm), [2014] 1 Lloyd's Rep 309). Hamblen J held that Spain's jurisdiction challenge failed and the Club's application for enforcement of the Schaff Award succeeded.
In approaching the proper characterisation of Spain's Article 117 claims, Hamblen J had regard to the decision of the Court of Appeal in Through Transport Mutual Insurance Association Co Ltd v New India Assurance Co Ltd (The ‘Hari Bhum’) (No. 1) [2004] EWCA Civ 1598, [2005] 1 Lloyd's Rep 67. Hamblen J posed the question as to the substance of Spain's claim: was it, in substance, a claim to enforce the contract of insurance or a claim to enforce an independent right of recovery? He found that that involved a consideration of the right as a matter of Spanish law, followed by an exercise of characterisation applying English conflict of laws principles. He concluded that the direct action right was in substance a right to enforce the contract. He also held that Spain's claim was arbitrable. He rejected the contention that the reference of the dispute was an attempt to delegate to an arbitrator a matter of public interest which could not be determined within a private contractual process, or that such a reference was inarbitrable. Finally, he concluded that Spain had lost the right to state immunity pursuant to s. 9 of the State Immunity Act 1978 (‘SIA’), as it had agreed in writing to submit the relevant dispute to arbitration. He reasoned that a third party making a claim under an insurance policy containing an arbitration clause was, when the claim was disputed, bound to refer the dispute to arbitration in accordance with the arbitration agreement; and that when a State was so bound, it had ‘agreed in writing’ to submit a dispute to arbitration within the meaning of s. 9(1) SIA.
Accordingly, Hamblen J gave the Club permission to enforce the Schaff Award pursuant to s. 66(1) AA 1996 and entered judgment in terms of the Schaff Award pursuant to s. 66(2) AA 1996.
Hamblen J gave Spain permission to appeal on certain issues. The appeal was fully contested. On 1 April 2015 the Court of Appeal upheld the order of Hamblen J and dismissed the appeal ( The Prestige (No. 2) [2015] EWCA Civ 333, [2015] 2 Lloyd's Rep 33). I will call the decisions of Hamblen J and of the Court of Appeal on appeal, together, ‘the English s. 66 Judgments’.
In giving judgment on the appeal, Moore-Bick LJ reasoned, in part:
(1) That the court was concerned with the characterisation of issues not claims, and that the relevant issues were whether the Club's liability could be enforced only in arbitration and whether the ‘pay to be paid’ clause operated to defeat a claim under the policy;
(2) That these were issues relating to an obligation sounding in contract, and that they were to be determined in accordance with English law as the proper law of the obligation;
(3) That, applying English law, if Spain wished to pursue claims against the Club it must do so in accordance with the terms of the contract of insurance and subject to the ‘pay to be paid’ clause;
(4) That Spain had lost its right to State immunity both by reason of an agreement in writing within s. 9(1) SIA, and also because Spain had submitted to the jurisdiction pursuant to s. 2(3)(b) SIA.
Between the judgment of Hamblen J and the decision of the Court of Appeal, on 13 November 2013, the Provincial Court of La Coruña (‘the Provincial Court’) gave judgment in the Spanish proceedings. The Master was acquitted of serious negligence against the environment. He was convicted of the crime of disobeying orders of the Spanish maritime authorities, but this...
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