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The court can enforce an arbitration award if it is for a negative declaration, the Court of Appeal (CoA) has ruled in the much-anticipated West Tankers case.
The CoA rejected submissions from counsel representing insurers Allianz and Generali Assicurazione Generali.
At the centre of the dispute was the interpretation of Section 66 of the Arbitration Act 1996, which provides that an award made by an arbitration tribunal in accordance with an arbitration agreement can be “enforced” in the same manner as a court judgment. Should leave be given, it continues, judgment may be given in terms of the award.
MFB Solicitors partner Edward Gray instructed 20 Essex Street’s Stephen Males QC for the insurer appellants.
He challenged the High Court interpretation of “enforced”, arguing that a declaratory judgment, particularly negative declaratory, is incapable of being “enforced”. Specifically, the word “enforcement” differs from “recognition”, as the former involves coercion, he said.
Responding, West Tankers, represented by 7KBW’s David Bailey QC instructed by Ince & Co partner Ian Chetwood, said the point of the clause was to support the arbitral process and provide a procedure for ensuring compliance.
The respondent also submitted that the distinction between “recognition” and “enforcement” was immaterial in the context of an English arbitration award, not least because an English arbitration award is automatically binding under section 58 of the act.
Dismissing the insurers’ appeal, the CoA held that a broad interpretation of the phrase in Section 66 that says “enforced in the same manner as a judgment… to the same effect” makes better sense than the narrow meaning contended for by the insurers.
Lord Justice Toulson, who shared a panel with Lord Justices Carnwath and Lloyd, stated: “At common law a party to an arbitration who has obtained a declaratory award in his favour could bring an action on the award and the court, if it thought appropriate, could itself make a declaration in the same terms.
“The purpose of Section 66 is to provide a simpler alternative route to bringing an action on the award, although the latter possibility is expressly preserved by Section 66(4).
“I cannot see why in an appropriate case the court may not give leave for an arbitral award to be enforced in the same manner as might be achieved by an action on the award and so give leave for judgment to be entered in the terms of the award.”
The case came after a vessel owned by West Tankers collided into a pier owned by Erg Petroli (Erg). The resulting arbitration between Erg’s insurers, Allianz and Generali Assicurazione Generali, found that West Tankers was not liable for the resulting losses. Meanwhile, the insurers launched proceedings in the Italian courts against West Tankers, while West Tankers sought to have the arbitration enforced.
For the appellant insurers:
MFB Solicitors partner Edward Gray instructed 20 Essex Street’s Stephen Males QC to lead Sara Masters of the same set.
For respondent West Tankers:
Ince & Co partner Ian Chetwood instructed 7KBW’s David Bailey QC to lead Marcus Mander of the same set.