The End for West Tankers?
February 08, 2012
The long-running West Tankers litigation underwent
recently what may be a final twist, with the publication of the
Court of Appeal's judgment. In what was a widely expected outcome,
the court dismissed the Italian appellants' appeal, confirming that
a declaratory award may be enforced under section 66 of the
Arbitration Act 1996 ("Act") as a judgment of the English
court.
This decision confirms that parties wishing to enforce arbitral
awards as judgments in England for enforcement purposes in foreign
countries may do so, even if they only have a negative declaratory
award confirming no liability. In principle, this ought to provide
a means of defeating parallel litigation proceedings in foreign EU
states, by obtaining a judgment which would stand and against which
any later EU court judgments would have to be tested for
inconsistency. For the parties in West Tankers, this may therefore
be the end of the matter.
Background
In a prior judgment relating to the West Tankers
litigation, the European Court of Justice refused to endorse an
anti-suit injunction granted by the English courts against the
defendant, who had started proceedings in Italy in breach of an
arbitration agreement. This left open the possibility that parties
seeking to delay or undermine arbitration proceedings could do so
by commencing litigation elsewhere in the EU without fear of an
anti-suit injunction by another EU court. This is because, under EU
law, courts of member states are entitled to rule on their own
jurisdiction.
The claimant in West Tankers commenced and continued
arbitration proceedings in London, obtaining an award in its
favour. In the Commercial Court, it succeeded in enforcing a
declaration of non-liability in the award as a judgment. The order
was enforced on the basis that the claimant's objective was to show
the primacy of the declaratory award over any later inconsistent
judgment of the Italian courts. The defendants appealed the
decision, leading to proceedings before the Court of Appeal.
Decision of the Court of Appeal
On 24 January 2012, the Court of Appeal, with Toulson LJ giving
the leading judgment, upheld the Commercial Court's decision. The
court held that a party to an arbitration who has obtained a
declaratory award in his favour may bring an action on the award
and the court, if it thought appropriate, would enforce the award
as a judgment pursuant to section 66 of the Act.
However, such enforcement remains subject to the court's
discretion. The process is not automatic and the court will need to
be convinced that the interests of justice favour the order being
made and that it is necessary. In this case, the necessity related
to the claimant's belief that the court's judgment would assist in
resisting later, inconsistent court judgments from, for example,
Italy.
The decision did not directly address the question of whether
this judgment would prevent later "irreconcilable judgments" being
recognised for the purposes of article 34(3) of the Brussels
Regulation, as this point was dropped by the appellants. However,
the case of African Fertilizers and Chemicals Nig Ltd (Nigeria)
v. BD Shipsnavo GmbH & Co Reederei Kg (on which we
reported in October 2011) appears to confirm this. It should be
noted, however, that African Fertilizers is under appeal and will
be heard by the Court of Appeal on 13 June 2012. We will therefore
have to wait until then for the Court of Appeal to address this
point expressly.