Ruling out in longstanding London P&I Club dispute

Incident took place nearly two decades ago

Ruling out in longstanding London P&I Club dispute


By Terry Gangcuangco

The Court of Justice of the European Union has now provided clarity in the longstanding dispute between the London P&I Club, which insured sunken oil tanker M/T Prestige, and Spain.

The conflict stemmed from the oil spill that was brought about by the vessel’s destruction following a storm in November 2002. Spain was among the victims of the spill damage, and the original civil action brought by the state found the insurer liable.

In response to the Spanish case, the London P&I Club initiated arbitration proceedings in the UK, which at the time was still an EU member state. The move resulted in an arbitral award according to which the claims for damages brought by Spain should have been made in the latter proceedings.

That arbitral award concluded that, in accordance with the ‘pay to be paid’ clause in the insurance contract, the London P&I Club could not be liable to Spain in the absence of the prior payment of the damages by the ship’s owners to Spain.

“As provided for by the Arbitration Act 1996, the London P&I Club applied for and obtained a judgement of the High Court of Justice (England & Wales), Queens Bench Division (Commercial Court) in the terms of the arbitration award,” noted the Court of Justice of the European Union in a release. “That judgement was confirmed in appeal proceedings brought by Spain.

“Spain, on the other hand, applied to the courts in the United Kingdom for the recognition of the Spanish order enforcing the judicial ruling finding the London P&I Club liable to pay compensation for the damage caused. The High Court granted that application in May 2019. The London P&I Club brought an appeal against that recognition, and the High Court decided to refer questions to the Court of Justice [of the European Union] concerning the interpretation of Regulation No 44/2001.”

It continued: “It asked the Court, in essence, whether that recognition could be refused on the basis of the existence, in the United Kingdom, of a judgement entered in the terms of an arbitral award and the effects of which are irreconcilable with those of the abovementioned judicial ruling.”

On Monday, the EU Court delivered its ruling, which says that Regulation No 44/2001 must be interpreted as meaning that a judgement entered by a court of a member state in the terms of an arbitral award cannot prevent, in that member state, the recognition of a judgement given in another member state where a judicial decision resulting in an outcome equivalent to the outcome of that award could not have been adopted by a court of the first member state without infringing the provisions and the fundamental objectives of that regulation.

“The Court ensures, in essence, that those provisions and fundamental objectives cannot be circumvented by means of arbitration proceedings followed by judicial proceedings seeking to have the terms of the arbitral award entered in a judicial decision,” reads the Court’s explanation of the judgement.

Meanwhile it was also noted that the regulation excludes arbitration from its scope.

“A judgement entered in the terms of an arbitral award is therefore caught by that arbitration exclusion and cannot enjoy mutual recognition between the member states,” the Court went on to say in the release. “That being said, such a judgement may be regarded as a judgement within the meaning of Article 34(3) of the regulation alone, capable of preventing the recognition of judgements from other member states if those judgements are irreconcilable.

“However, the position is different where the arbitral award in the terms of which that judgement was entered was, as in the present case, made in circumstances which would not have permitted the adoption, in compliance with the provisions and fundamental objectives of that regulation, of a judicial decision falling within the scope of that regulation.”

In a nutshell, the arbitration proceedings initiated in the UK cannot block the recognition of the Spanish judgement ordering the London P&I Club to pay compensation for the damage caused by the 2002 oil spill. The marine insurer has not published a response as of this writing.

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