The London Steamship Owners' Mutual Insurance Association Ltd v The Kingdom of Spain and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moore-Bick,Lord Justice Patten,Lord Justice Tomlinson |
| Judgment Date | 01 April 2015 |
| Neutral Citation | [2015] EWCA Civ 333 |
| Docket Number | Case Nos: A3/2013/3463 & 2013/3473 |
| Court | Court of Appeal (Civil Division) |
| Date | 01 April 2015 |
[2015] EWCA Civ 333
Lord Justice Moore-Bick
Vice-President of the Court of Appeal, Civil Division
Lord Justice Patten
and
Lord Justice Tomlinson
Case Nos: A3/2013/3463 & 2013/3473
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
Mr. Justice Hamblen
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Joe Smouha Q.C. and Ms Anna Dilnot (instructed by K & L Gates LLP) for the appellants
Mr. Christopher Hancock Q.C. and Ms Charlotte Tan (instructed by Ince & Co LLP) for the respondent
Hearing dates: 20 th– 22 nd January 2015
A. Background
These proceedings arise indirectly out of the sinking of the vessel 'Prestige' off Cape Finisterre in November 2002. The vessel was carrying 70,000 tonnes of fuel oil, which escaped and polluted the Atlantic coastline of northern Spain and southern France when the vessel broke up. The resulting damage was very extensive and the costs of cleaning up far exceeded the amount of the owners' liability under the International Convention on Civil Liability for Oil Pollution Damage ("CLC"), in respect of which they were compulsorily insured.
The facts giving rise to the proceedings are described fully in the judgment of Hamblen J., from which the following summary is largely drawn. In late 2002 criminal proceedings were instituted in Spain against the master, chief officer and chief engineer and in 2010, at the conclusion of the investigatory stage, claims were brought by several Spanish legal entities, including the State Administration of Spain ("Spain"), against the vessel's owners on the grounds that they were vicariously liable for the acts of the master. At about the same time the French authorities ("France") joined the proceedings making similar claims. All those claims were made under provisions of the Spanish Penal Code which enable a person who has suffered injury as a result of a criminal offence to recover damages in the criminal proceedings in respect of his loss.
In those proceedings Spain and France also made claims against the owners' protection and indemnity insurers, The London Steamship Owners' Mutual Insurance Association Limited ("the Club"), under Article 117 of the Spanish Penal Code which enables an injured party to pursue a direct claim against the defendant's insurer. Those claims were based both on the Club's obligation to indemnify the owners against their CLC liability and on its obligation to indemnify them against their independent liability for the tortious acts of the master, chief officer and chief engineer.
The CLC itself provides for direct action against insurers in respect of their obligations to indemnify owners in respect of their liability under it and accordingly the Club acknowledged its liability to Spain and France in that respect. However, in relation to the other heads of claim it maintained that they were bound by the contract contained in the Club rules, which provided that it was to be governed by English law and that disputes were to be referred to arbitration. The rules also contained a "pay to be paid" clause (see The 'Fanti' and the 'Padre Island' [1991] 2 A.C. 1) and the Club maintained that on the true construction of that clause it was under no liability to the claimants.
The Club played no part in the Spanish proceedings. It did, however, commence arbitration in London seeking declarations that Spain and France were bound by the arbitration clause in its rules and that it was not liable under the contract. The references proceeded separately, but the same arbitrator, Mr. Alistair Schaff Q.C., was appointed in each case. Neither Spain nor France agreed to the appointment of an arbitrator and it was therefore necessary for the Club in each case to obtain an order from the court pursuant to s.18 of the Arbitration Act 1996 in order to constitute the tribunal. In due course the arbitrator published awards granting the declarations which the Club sought.
The Club then applied under section 66 of the Arbitration Act 1996 for permission to enforce the awards as judgments of the High Court. Spain and France opposed those applications on the grounds that as states they were immune from proceedings by reason of the State Immunity Act 1978. However, in the course of those proceedings they themselves issued application notices seeking declarations under sections 67 and 72 of the Arbitration Act that the awards had been made without jurisdiction. The grounds on which they sought that relief were that the rights they sought to enforce against the Club arose under Spanish law independently of the contract of insurance. They also contended that the claims were by their nature not susceptible to arbitration.
The Club's purposes in taking proceedings in this country were twofold: first, it wished to establish by what it considered to be the proper process that any liability it might have to Spain or France was subject to the terms of the contract as contained in the rules, i.e., that it was subject to the "pay to be paid" clause and could be enforced only by arbitration; secondly, it wished to obtain a judgment in this country before judgment was delivered in the Spanish proceedings so that, if any attempt were made to enforce a Spanish judgment against it in this country, it could rely on article 34(3) of the Judgments Regulation. In the event, the Spanish proceedings did not result in the conviction of any member of the vessel's crew of an offence which gave rise to a liability enforceable against the Club. However, an appeal is pending, the outcome of which might be different.
B. The decision below
The proceedings before Hamblen J. occupied seven days, in the course of which the judge heard evidence from expert witnesses on Spanish law. He held:
(i) that the claims being made by Spain and France against the Club were to be characterised in English law as claims to enforce English law obligations rather than independent Spanish statutory rights, and that those obligations could be enforced only in accordance with their terms – i.e. in arbitration and subject to the "pay to be paid" clause;
(ii) that Spain and France had become parties to the arbitration agreement in the Club rules and were therefore not entitled to state immunity by virtue of section 9(1) of the State Immunity Act 1978;
(iii) that the claims were arbitrable; and
(iv) that it was appropriate in the exercise of his discretion to give permission to enforce the awards as judgments, because there was a real possibility that the resulting judgments would fall within article 34(3) of the Judgments Regulation and would prevent enforcement of any Spanish judgment in this country or elsewhere in Europe.
He therefore dismissed the applications of Spain and France for declarations that the awards had been made without jurisdiction and gave permission to the Club to enforce them as judgments.
This is the appeal of Spain and France against the judge's orders. The judge gave permission to appeal in respect of his decisions on characterisation, state immunity and enforcement. He refused permission to appeal in respect of his decision on arbitrability, in respect of which the appellants sought permission from this court. In the event, the appellants abandoned their challenge to the exercise of the judge's discretion, with the result that only three of the four issues just mentioned arise for consideration on this appeal.
C. Characterisation
As became apparent in the course of argument, the question of characterisation is closely linked to that of state immunity. Mr. Smouha Q.C. for the appellants preferred to address state immunity first, but I find it more convenient to begin with characterisation.
Characterisation forms part of the English conflict of laws rules and is the means whereby the court identifies the system of law by reference to which a particular issue between the parties is to be determined. For this purpose it is important to distinguish between claims and issues, since a single claim may give rise to several issues, not all of which are to be determined by reference to the same system of law. This point was emphasised by Auld L.J. in Macmillan Ltd v Bishopsgate Investment Trust Plc (No. 3) [1996] 1 WLR 387, when he said at page 407B-C:
"Subject to what I shall say in a moment, characterisation or classification is governed by the lex fori. But characterisation or classification of what? It follows from what I have said that the proper approach is to look beyond the formulation of the claim and to identify according to the lex fori the true issue or issues thrown up by the claim and defence."
In a similar vein Aldous L.J. said at page 418A-B:
"I agree with the judge when he said [1995] 1 W.L.R. 978, 988: "In order to ascertain the applicable law under English conflict of laws, it is not sufficient to characterise the nature of the claim: it is necessary to identify the question at issue." Any claim, whether it be a claim that can be characterised as restitutionary or otherwise, may involve a number of issues which may have to be decided according to different systems of law. Thus it is necessary for the court to look at each issue and to decide the appropriate law to apply to the resolution of that dispute."
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