West Tankers Inc v Allianz SpA & Anor

Arbitration falls outside Council Regulation (EC) 44/2001. An arbitral tribunal is therefore not bound by the Regulation’s principle of effective judicial protection, which protects a party’s right to sue in a national court having jurisdiction under the Regulation. The tribunal retains jurisdiction to award equitable damages or an indemnity for breach of an obligation to arbitrate. The possibility that the arbitral tribunal and the national court may reach inconsistent conclusions does not alter that position. Where the national court’s jurisdiction remains unresolved, a claim for damages should not ordinarily be dismissed on the assumption that it can never succeed; it may be deferred.

The claimant appealed under section 69 of the Arbitration Act 1996 from a majority partial award determining Issues 8 and 9. The tribunal had held that it lacked jurisdiction to award damages for legal costs incurred in Italian proceedings or an indemnity for any adverse Italian judgment, because European law protected the respondents’ right to litigate before the Tribunale di Siracusa under Article 5(3) of Council Regulation (EC) 44/2001.

The issue was whether European law deprived the arbitral tribunal of jurisdiction to award equitable damages for breach of the obligation to arbitrate. The appeal followed earlier anti-suit proceedings and the decision of the European Court of Justice that an anti-suit injunction restraining proceedings in another member state was incompatible with the Regulation.

1. Appeal allowed. The tribunal was not deprived by European law of jurisdiction to award equitable damages for breach of the obligation to arbitrate or an indemnity.

2. The reasoning of the European Court of Justice concerned the relationship between national courts of member states. The principle that the court first seised determines its own jurisdiction, and the related principle of mutual trust, did not prescribe the jurisdiction of an arbitral tribunal, which is outside the Regulation. The Advocate General’s Opinion also recognised that an arbitral tribunal might reach conclusions on jurisdiction or the merits inconsistent with those of the Italian court.

3. The principle of effectiveness or effective judicial protection was not free-standing. It operated to protect a right conferred by European law, here the respondents’ right under Article 5(3) to bring proceedings in the Italian courts. That right was engaged before national courts, not before the arbitral tribunal. The tribunal was bound to apply European law as part of English law, but the principle did not prevent it granting the relief sought.

4. There was no principled distinction between an inconsistent decision on the merits, an indemnity, and equitable damages. If the principle of effectiveness applied, all the relief sought would potentially make the Italian proceedings practically impossible or excessively difficult. The Advocate General and the European Court of Justice had nevertheless contemplated that the arbitral tribunal could decide jurisdiction and merits inconsistently with the national court. That supported the conclusion that the tribunal’s jurisdiction was not circumscribed.

5. The tribunal had also erred by dismissing the damages claim rather than deferring it. If the Italian court later declined jurisdiction and the respondents were obliged to arbitrate in London, there could be a strong claim for losses caused by the unsuccessful Italian proceedings.

6. The decision in National Navigation Co v Endesa (The Wadi Sudr) [2009] EWCA Civ 1397; [2010] 1 Lloyd’s Rep 193 did not establish that the Regulation applied to arbitration. Recognition of a foreign judgment in arbitration followed from the English common-law doctrine of res judicata.

• High Court (Commercial Court): the appeal under section 69 of the Arbitration Act 1996 was allowed and the tribunal’s conclusion on jurisdiction was held to be erroneous.
• Arbitral tribunal: the majority had answered Issues 8 and 9 in the negative in the Final Partial Award dated 14 April 2011.