The London Steam-Ship Owners’ Mutual Insurance Association Limited v The Kingdom of Spain (M/T ‘Prestige’)

A judgment entered under section 66 of the Arbitration Act 1996 may be a relevant domestic judgment for Article 34(3) purposes, even though the underlying arbitration falls outside the material scope of Regulation (EC) No. 44/2001. Foreign and domestic judgments are irreconcilable where their legal consequences are mutually exclusive. A prior final arbitral award may also support refusal on public-policy grounds based on res judicata where Article 34(3) does not apply. A preliminary ruling of the CJEU is not binding insofar as it answers questions not referred or applies EU law to facts falling within the national court’s exclusive province. Equitable compensation may be available for breach of an equitable obligation equivalent to a contractual obligation to arbitrate. Section 13(2) of the State Immunity Act 1978 prevents an arbitrator relying on section 48(5) of the Arbitration Act 1996 to grant an injunction against a State without consent.

The proceedings concerned the enforcement in England of a Spanish judgment arising from the sinking of the M/T ‘Prestige’, and challenges by Spain to partial awards made by Sir Peter Gross.

The Spanish judgment imposed direct liability on the Club. Earlier English proceedings had enforced the Schaff Award under section 66 of the Arbitration Act 1996, including declarations based on the arbitration agreement and the pay-to-be-paid clause. The Court of Appeal had also determined that Spain was bound to arbitrate related disputes.

The Club appealed the registration of the Spanish judgment under Articles 34(1) and 34(3) of Regulation (EC) No. 44/2001. Spain challenged the Gross First Award under sections 67, 68 and 69 of the Arbitration Act 1996. The central issues were irreconcilability, res judicata, the effect of the CJEU judgment, equitable compensation, and the arbitrator’s power to grant injunctive relief against Spain.

1. Club’s appeal. The Club’s appeal succeeded. The Spanish judgment was irreconcilable with the English section 66 judgments under Article 34(3) of Regulation (EC) No. 44/2001. The English judgments declared that, absent prior payment by the Owners, the Club was not liable; the Spanish judgment held the Club liable. Those legal consequences were mutually exclusive.

2. A section 66 judgment is a relevant domestic judgment for Article 34(3) purposes. The court exercises a judicial, non-administrative function in deciding whether to permit enforcement or enter judgment. The arbitration exception does not prevent such a judgment from being relevant. The Solo point and material-scope argument therefore failed.

3. The English section 66 judgments did not breach mutual trust. They did not prevent the Spanish courts determining their own jurisdiction or bar Spain from access to those courts. They assessed the binding effect of the arbitration agreement as the court of the seat.

4. The earlier English decisions created an issue estoppel that the Regulation’s jurisdiction-allocation provisions were no reason not to enter judgment under section 66, because the Regulation did not apply to arbitration. The CJEU reasoning in paragraphs [54]-[73] was inconsistent with that final domestic determination. It also answered questions not referred and applied EU law to facts and procedural matters reserved to the national court. It was therefore not binding on this Court and, if non-binding, would not be followed.

5. Res judicata is a matter of English public policy and an essential aspect of legal certainty. Article 34(1) could not be used to revisit incompatibility with a domestic court judgment where Article 34(3) governed the issue. However, a prior arbitral award creating res judicata could support Article 34(1), since arbitral awards fell outside Article 34(3). Recognition of the Spanish judgment would therefore also offend public policy by reason of the Schaff Award.

6. Spain’s section 67 challenge to the arbitrator’s jurisdiction failed. The Court of Appeal had already finally determined that the arbitrator had jurisdiction. Permission to appeal under section 69 was granted on the CJEU and equitable-compensation issues, but the appeal was dismissed.

7. Equitable compensation was available for breach of an equitable obligation equivalent to the contractual obligation to arbitrate. Its availability was not dependent on the availability of an injunction. The conclusion represented a permissible incremental development of the law and was consistent with The Frio Dolphin.

8. Section 13(2) of the State Immunity Act 1978 deprived the court of jurisdiction or power to grant an injunction against Spain without its written consent. Section 48(5) of the Arbitration Act 1996 conferred no wider power on the arbitrator. Damages in lieu under section 50 of the Senior Courts Act 1981 were likewise unavailable. The decision on the related human-rights argument was deferred pending the appeal in The Resolute.

• High Court, Commercial Court: Hamblen J enforced the Schaff Award under section 66 of the Arbitration Act 1996: [2013] EWHC 3188 (Comm).
• Court of Appeal: The appeal was dismissed and the English section 66 judgments upheld: [2015] EWCA Civ 333.
• High Court, Commercial Court: Henshaw J dismissed Spain’s jurisdiction and immunity application: [2020] EWHC 2082 (Comm).
• Court of Appeal: Spain’s appeal concerning the later arbitration proceedings was dismissed: [2021] EWCA Civ 1589.
• Present judgment: The Club’s appeal against registration of the Spanish judgment was allowed. Spain’s challenges to the Gross First Award were dismissed or adjourned as stated.