The London Steam Ship Owners Mutual Insurance Association Ltd v The Kingdom of Spain

A person who disputes the existence or validity of an arbitration agreement is ordinarily entitled to take no part in the arbitration and to resist enforcement when the award is presented. That principle should not be narrowed by treating inaction during the arbitration as ordinary procedural default.

Where an objector seeks to use the rights available under sections 67 and 68 of the Arbitration Act 1996, the statutory 28-day period applies, but the court may extend time under section 80(5) and the Civil Procedure Rules. The discretion must respect party autonomy, speedy finality and the fundamental protection against enforcement of an award made without consent. In the circumstances, the Kingdom was granted any extension necessary to deploy its jurisdictional objections.

The claimant, a protection and indemnity association, obtained an arbitral award declaring that claims brought against it in Spanish criminal proceedings were subject to London arbitration and that it had no liability absent prior payment by the insured owners or managers.

The claimant sought enforcement under section 66 of the Arbitration Act 1996. The Kingdom had taken no part in the arbitration but sought directions and extensions of time to challenge the award and resist enforcement on jurisdictional and immunity grounds. The central issues were the effect of the Kingdom’s non-participation, the interaction between sections 66, 67, 72 and 73, and the court’s discretion to extend the statutory time limit.

1. The court granted any extension of time required by the Kingdom to deploy its objections to enforcement and to the award, and gave directions for a later substantive hearing. The decision was made even on the assumption that the claimant’s construction of the statutory scheme was correct.

2. The principle stated in Dallah Real Estate & Tourism Holding Co v Pakistan [2010] UKSC 46 is fundamental. A person who denies being party to an arbitration agreement is not obliged to participate in an arbitration which that person regards as invalid. The arbitral tribunal’s assertion of jurisdiction cannot itself create authority or make the award binding.

3. That principle weighs against treating the Kingdom’s failure to challenge the award before enforcement as an ordinary default. The relevant regulation and protocol also provided a satisfactory explanation for delay after notice of the enforcement application. The proposed jurisdictional objections were not obviously unsound, and the circumstances did not justify criticism under the principles derived from AOOT Kalmneft v Glencore International AG [2002] 1 Lloyd's Rep. 128 and Terna Bahrain Holding Co WLL v Al Shamsi [2012] EWHC 3283 (Comm).

4. The court’s considered view was that section 72(1) should be construed generously in favour of a person who disputes jurisdiction and takes no part. It is not confined to the period before an award. Its discretionary remedies include declarations and injunctions.

5. By contrast, the 28-day limit in section 70(3) applies to an application under section 72(2) using the rights conferred by sections 67 and 68. An objector may ordinarily resist enforcement under section 66(3), but must seek an extension if wishing to pursue the procedural route available to a participating party.

This was a first-instance procedural ruling in the enforcement proceedings. The judgment records that the claimant had previously obtained an order appointing the arbitrator under section 18 of the Arbitration Act 1996, and that Mr Justice Andrew Smith later permitted service out of the jurisdiction but declined to make a without-notice enforcement order.