Case of the week: Arbitration

The court had power under the Arbitration Act 1996 s.66 to order judgment to be entered in the terms of an arbitral award in a case where the award was in the form of a negative declaration.

Appeal dismissed

The appellant insurers Allianz SpA and Generali Assicurazione Generali appealed against a decision that the court had power under the Arbitration Act 1996 s.66 to order judgment to be entered in the terms of an arbitral award which took the form of a negative declaration.

The case came after a vessel owned by West Tankers collided into a pier owned by Erg Petroli SpA (Erg). Generali were Erg’s insurers and were subrogated to their claims against West Tankers.

The arbitrators appointed under the charterparty made an award declaring that West Tankers were under no liability to Erg and its insurer in respect of the collision. While the arbitration was pending the insurers launched proceedings against West Tankers in the Italian court in respect of the same incident.

West Tankers obtained permission to enforce the award under s.66(1) and to enter judgment in terms of the award on the basis that once it had been entered as a judgment any subsequent Italian judgment obtained by Generali would not be recognised in England.

The insurers argued that the judge did not have jurisdiction under s.66 to direct that judgment be entered in the terms of the award because a declaratory judgment, especially a negative declaratory judgment, which did not require anybody to do anything, was incapable of being “enforced”.

Appeal dismissed

The phrase “enforced in the same manner as a judgment to the same effect” in s.66 was not confined to enforcement by one of the normal forms of execution of a judgment but could include other means of giving judicial force to the award on the same footing as a judgment.

A broader interpretation was closer to the purpose of the act and made better sense in the context of the way in which arbitration worked. Ultimately the efficacy of any award by an arbitral body depended on the assistance of the judicial system, Associated Electric & Gas Insurance Services Ltd v European Reinsurance Co of Zurich (2003) UKPC 11, (2003) 1 W.L.R. 1041 considered.

Judges could give force to an arbitral award by a number of means, including by applying the doctrine of issue estoppel. The argument that in such cases the court was not enforcing an award but only the rights determined by an award was an over-subtle and unconvincing distinction and sat on a shaky foundation. The enforcement of any judgment or award was the enforcement of the rights which the judgment or award had established.

In the case of a monetary judgment or award its enforcement was the enforcement of the right to payment which the award had established. In the instant case, as in Associated Electric, West Tankers wanted to enforce the award through res judicata, and for that purpose it sought to have the award entered as a judgment.

At common law a party to an arbitration who had 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 s.66 was to provide a simpler alternative route to bringing an action on the award, although the latter possibility was expressly preserved by the section.

In an appropriate case the court could give leave for an arbitral award in declaratory form 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.

Commentary

Matthew Weiniger

In the facts that gave rise to the West Tankers litigation a ship collided with a jetty outside an Italian port. Since then there has been a legal collision between the English courts and the European Court of Justice (ECJ), with the latter setting its face against the common law remedy of an anti-suit injunction. 

The ECJ’s ruling meant that noone could prevent the question of the validity of the arbitration agreement being laid before the Italian courts, despite the parties’ agreement to arbitrate in London. This latest judgment arose because the ship owners insisted on arbitrating in England in any event.

They prevailed and obtained an award declaring they had no liability to the owners of the jetty. Having succeeded before the arbitrators they applied to the English court to have judgment entered in the terms of the award. 

The stage is now set for the next round. The English courts have declared the arbitration award to be valid.

However, they have not yet confirmed that it will be able to defeat a contradictory judgment if one is ultimately made by the Italian courts – the answer to that will depend upon whether the English judgment falls within the Brussels Regulation regime, or whether it falls outside it because it relates to an arbitration.  

So much doubt now surrounds these questions that only a reform of the Brussels Regulation can provide a clear answer to all the possible eventualities.

Matthew Weiniger, international arbitration partner, Herbert Smith

For Allianz SpA and Generali Assicurazoni Generali

Stephen Males QC and Sara Masters, 20 Essex Street

Edward Gray, MFB Solicitors

For West Tankers

David Bailey QC and Marcus Mander, 7KBW

Ian Chetwood, Ince & Co