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

The Service Regulation provides a mandatory regime for serving civil or commercial proceedings on an EU Member State, unless the proceedings manifestly concern sovereign acts. National rules cannot restrict service to diplomatic channels.

For state immunity, proceedings may relate both to an arbitration and to a commercial activity. The continued pursuit of civil claims under an insurance policy was an activity of a commercial character and brought the claims within section 3 of the State Immunity Act 1978. Claims based on an obligation to honour arbitral awards related to the arbitration, but claims based on independent obligations to comply with court judgments did not.

Judgment-based claims fell outside the arbitration exception to the Recast Regulation, but were matters relating to insurance. The States were injured parties entitled to the protection of section 3. The Award Claims could proceed; the Judgment Claims could not be brought in England.

The Club brought four related actions against Spain and France. Two sought relief for alleged failures to honour arbitral awards made after the States pursued direct civil claims in Spain. Two sought relief for alleged failures to comply with English judgments which had enforced those awards.

The States challenged service, state immunity and the jurisdiction of the English court. The court first considered whether service on France could be effected under the EU Service Regulation rather than exclusively under section 12 of the State Immunity Act 1978. It then considered the statutory exceptions to state immunity, the common-law jurisdictional rules applicable to the Award Claims, and the application of the Recast Regulation to the Judgment Claims.

The central issues were whether the claims related to arbitration, whether they concerned insurance, whether the States could invoke the insurance jurisdiction provisions, and whether the Award Claims raised a serious issue to be tried.

1. Service. Service on France under the Service Regulation was valid. The Regulation applied to civil or commercial proceedings against a Member State unless the proceedings manifestly concerned acta iure imperii. Where it applied, it established a mandatory regime and did not permit national law to restrict service to diplomatic channels. Article 12 did not create an exclusive diplomatic method.
2. State immunity. The Award Claims related to the arbitrations for the purposes of section 9(1) of the State Immunity Act 1978, because they depended on an alleged obligation to honour the awards. The Judgment Claims did not relate to those arbitrations because they were based on separate alleged obligations to comply with English judgments.
3. All four claims also related to a commercial transaction under section 3(1)(a) and section 3(3)(c). The States’ continued pursuit of civil claims under the insurance policy was an activity of a commercial or similar character undertaken otherwise than in the exercise of sovereign authority. The claims directly concerned that activity. The court therefore did not need to determine the alternative arguments under section 3(1)(b) or section 2.
4. Award Claims. The claims raised serious issues to be tried. The proposed causes of action for failure to honour declaratory awards, the effect of enforcement judgments, merger, causation and alleged abuse of process were all realistically arguable. The court declined to finally determine those complex issues on a jurisdiction challenge, particularly where factual issues and questions of Spanish law required trial. England was a clearly or distinctly appropriate forum and the jurisdictional gateways were satisfied.
5. Judgment Claims. These claims fell outside the arbitration exception in Article 1(2)(d) of the Recast Regulation. They were too remote from the arbitrations and did not seek to regulate, support, supervise or enforce the awards. They were nevertheless matters relating to insurance. Applying substance and reality, their essential purpose was to enforce obligations derived from the insurance policy, including the pay-to-be-paid clause.
6. The States were injured parties for the purposes of section 3 of the Recast Regulation and were entitled to its jurisdictional protections without proof that they were economically weaker. Spain’s subrogated claims did not require a different jurisdictional result because Spain had also suffered losses in its own right and the subrogated claims were, in any event, a minority of its claims.
7. Article 14(2) did not permit the Spain Judgment Claim to be brought as a counterclaim in English enforcement proceedings. That provision concerned counterclaims in proceedings pending under section 3, whereas recognition and enforcement proceedings were governed by Chapter III. The court therefore had no jurisdiction, or should decline jurisdiction, over the Judgment Claims.

The States were not immune from any of the four actions. The court had jurisdiction over the Award Claims but not over the Judgment Claims. The court found no abuse in the Club claiming the earlier costs in the four actions, provided that recovery was not duplicated.