The London Steam-Ship Owners' Mutual Insurance Association Ltd v The Kingdom of Spain & Anor

A statutory direct action against an insurer is contractual in substance where its essential content depends primarily on the insurance contract, despite arising under foreign law and being subject to statutory exceptions. A claimant invoking such a right must accept the contract’s arbitration requirement.

Civil monetary claims remain arbitrable despite arising in criminal proceedings or involving environmental protection, unless arbitration is prohibited by statute or public policy. A state bound by a written arbitration agreement through such a claim loses immunity under section 9(1) of the State Immunity Act 1978. Declaratory awards may be enforced under section 66 of the Arbitration Act 1996 where judgment has practical utility.

Following the loss of the tanker Prestige and extensive oil pollution, Spain and France pursued civil compensation from the owners’ P&I insurer in Spanish criminal proceedings. The insurer accepted liability under the applicable civil liability convention up to the constituted fund, but denied further liability under its English-law insurance contract.

London arbitrations, in which Spain and France did not participate, produced awards declaring that their non-convention claims were subject to the insurance contract’s arbitration clause and contractual defences, including the “pay to be paid” condition. The insurer applied under section 66 of the Arbitration Act 1996 to enforce the awards as judgments. Spain and France challenged the tribunal’s jurisdiction under sections 67 and 72, alleging independent statutory rights, non-arbitrability, waiver and state immunity.

The court had to determine the claims’ proper characterisation, their arbitrability, waiver, state immunity and whether enforcement should be granted as a matter of discretion.

1. Applications under sections 67 and 72 refused; section 66 applications granted. The claims were contractual in substance, arbitrable and subject to no waiver. State immunity had been lost, and the awards should be enforced as judgments.
2. The characterisation question was governed by English conflict-of-laws principles, informed by the nature of the right under Spanish law. The source of a direct action right was less important than its substance and content. Under Articles 73 and 76 of the Insurance Contract Act 1980 and Article 117 of the Spanish Penal Code 1995, the direct action arose by law but depended principally on the existence, coverage and limits of the insurance contract. Statutory exceptions concerning personal defences and wilful misconduct did not alter its essentially contractual character. The reasoning in Through Transport was applied.
3. The claims were arbitrable. They sought civil monetary relief under an insurance contract. Their pursuit within criminal proceedings, their dependence on facts also relevant to criminal liability, and the states’ environmental functions did not transform them into criminal or uniquely sovereign matters. No English statute or rule of public policy prohibited arbitration.
4. France had not waived arbitration. Its Bordeaux proceedings asserted only convention liability against the insurer. Even if a non-convention claim had been advanced, the material did not disclose the clear choice between inconsistent rights required for waiver by election under English law.
5. Spain and France lost immunity under section 9(1) of the State Immunity Act 1978. A third party claiming a contractual right through an insured becomes, under section 82(2) of the Arbitration Act 1996, a person claiming under or through a party and is bound by the written arbitration agreement. Section 9(1) imposes no additional requirement of personally manifested or express written consent by the state. The states had not separately submitted under section 2 merely through omissions or procedural conduct, because their conduct consistently maintained their jurisdictional objections.
6. Section 66 conferred a broad discretion exercisable in the interests of justice. Enforcing the declaratory awards had practical utility because there was a real prospect that the resulting judgments would establish primacy over an inconsistent Spanish judgment. The arbitration exclusion from the European judgments regime did not justify withholding the awards’ benefit. Third-party rights remained unaffected.

The judgment determined first-instance applications concerning two arbitral awards. The judgment describes no prior court decision in the same litigation requiring appellate treatment.