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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> West Tankers Inc v Allianz SpA & Anor [2012] EWHC 854 (Comm) (04 April 2012) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2012/854.html Cite as: [2012] EWHC 854 (Comm) |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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WEST TANKERS INC |
Claimant/ Appellant |
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- and - |
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(1) ALLIANZ SpA (formerly known as Riunione Adriatica Sicurta) (2) GENERALI ASSICURAZIONI GENERALI SpA |
Defendants/ Respondents |
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Stephen Males QC and Sara Masters (instructed by MFB Solicitors) for the Respondents
Hearing dates: 26 March 2012
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Crown Copyright ©
The Honourable Mr Justice Flaux:
Introduction and the issue of law
"Issue 8: Are [the Respondents] liable to [the Appellant] in damages in respect of the legal fees and expenses reasonably incurred in connection with the Italian proceedings?
Issue 9: Are [the Respondents] liable to indemnify [the Appellant] against an award made against Owners in the Italian proceedings which is greater than the liability of [the Appellant] as established in the arbitration?"
"whether the arbitral tribunal is deprived of jurisdiction to award damages for breach of an arbitration agreement by reason of EU law?"
However, Mr David Bailey QC, who appeared for the Appellant accepted at the hearing of the appeal that the issue should be re-formulated as:
"whether the arbitral tribunal is deprived of jurisdiction to award equitable damages for breach of an obligation to arbitrate by reason of EU law?"
The background to the proceedings
"Nothing in this Order affects the declarations contained in paragraph 2 of the Order of [Colman J] … of 21 March 2005 [namely the declarations referred to at paragraph 6 above] which remain binding and in full effect."
The Opinion of the Advocate General and the judgment of the ECJ
"34. Nor is it a prerequisite of infringement of the principle of mutual trust, on which the judgment in Turner was substantially based, that both the application for an anti-suit injunction and the proceedings which would be barred by that injunction should fall within the scope of the regulation. Rather, the principle of mutual trust can also be infringed by a decision of a court of a member state which does not fall within the scope of the regulation obstructing the court of another member state from exercising its competence under the Regulation.
35. The national authorities of a member state may not impair the practical effectiveness of Community law when they exercise a competence which, for its part, is not governed by Community law. That corresponds for instance to a consistent line of cases in which it has been held that national tax legislation must observe the fundamental freedoms, even though direct taxation falls within the competence of the member states.
36. In respect of the Brussels Convention the court has already confirmed, in its judgment in Hagen, that the application of national procedural rules, specifically the conditions governing the admissibility of an action, may not impair the effectiveness of the Convention. In that regard it is irrelevant that the provisions at issue in Hagen were of national origin and from the outset certainly did not fall within the scope of the Brussels Convention, whereas arbitration is merely excluded from the scope of application of the Regulation.
….
57. In its judgment in Gasser the court recognised that a court second seised should not anticipate the examination as to jurisdiction by the court first seised in respect of the same subject matter, even if it is claimed that there is an agreement conferring jurisdiction in favour of the court second seised. As the Commission correctly explains, from that may be deduced the general principle that every court is entitled to examine its own jurisdiction (doctrine of Kompetenz-Kompetenz). The claim that there is a derogating agreement between the parties, in that case an agreement conferring jurisdiction, here an arbitration agreement, cannot remove that entitlement from the court seised.
58. That includes the right to examine the validity and scope of the agreement put forward as a preliminary issue. If the court were barred from ruling on such preliminary issues, a party could avoid proceedings merely by claiming that there was an arbitration agreement. At the same time a claimant who has brought the matter before the court because he considers that the agreement is invalid or inapplicable would be denied access to the national court. That would be contrary to the principle of effective judicial protection which, according to settled case law, is a general principle of Community law and one of the fundamental rights protected in the Community. ...
61. It is also not obvious why such examination [of the scope and effectiveness of the arbitration agreement] should be reserved to the arbitral body alone, as its jurisdiction depends on the effectiveness and scope of the arbitration agreement in just the same way as the jurisdiction of the court in the other member state. The fact that the law of the arbitral seat has been chosen as the law applicable to the contract cannot confer on the arbitral body an exclusive right to examine the arbitration clause. The court in the other member state here the court in Syracuse is in principle in a position to apply foreign law, which is indeed often the case under private international law."
"70. It is true that the arbitral body or the national courts at its seat, on the one hand, and the courts in another member state which have jurisdiction under the Regulation in respect of the subject-matter of the proceedings, on the other, may reach divergent decisions regarding the scope of the arbitration clause. If both the arbitral body and the national court declare that they have jurisdiction, conflicting decisions on the merits could result, as pointed out by the House of Lords.
71. Within the scope of application of the Regulation irreconcilable decisions in two member states should be avoided as far as possible. In cases of conflict of jurisdiction between the national courts of two member states, Articles 27 and 28 of Regulation No 44/2001 ensure that there is coordination, as particularly noted by the French Government. However, since arbitration does not come within the scope of the Regulation, at present there is no mechanism to coordinate its jurisdiction with the jurisdiction of the national courts.
72. A unilateral anti-suit injunction is not, however, a suitable measure to rectify that situation. In particular, if other member states were to follow the English example and also introduce anti-suit injunctions, reciprocal injunctions would ensue. Ultimately the jurisdiction which could impose higher penalties for failure to comply with the injunction would prevail.
73. Instead of a solution by way of such coercive measures, a solution by way of law is called for. In that respect only the inclusion of arbitration in the scheme of Regulation No 44/2001 could remedy the situation. Until then, if necessary, divergent decisions must be accepted. However it should once more be pointed out that these cases are exceptions. If an arbitration clause is clearly formulated and not open to any doubt as to its validity, the national courts have no reason not to refer the parties to the arbitral body appointed in accordance with the New York Convention."
"23. Proceedings, such as those in the main proceedings, which lead to the making of an anti-suit injunction, cannot, therefore, come within the scope of Regulation No 44/2001.
24. However, even though proceedings do not come within the scope of Regulation No 44/2001, they may nevertheless have consequences which undermine its effectiveness, namely preventing the attainment of the objectives of unification of the rules of conflict of jurisdiction in civil and commercial matters and the free movement of decisions in those matters. This is so, inter alia, where such proceedings prevent a court of another member state from exercising the jurisdiction conferred on it by Regulation No 44/2001.
….
27. It follows that the objection of lack of jurisdiction raised by West Tankers before the Tribunale di Siracusa on the basis of the existence of an arbitration agreement, including the question of the validity of that agreement, comes within the scope of Regulation No 44/2001 and that it is therefore exclusively for that court to rule on that objection and on its own jurisdiction, pursuant to Articles 1(2)(d) and 5(3) of that regulation.
28. Accordingly, the use of an anti-suit injunction to prevent a court of a member state, which normally has jurisdiction to resolve a dispute under Article 5(3) of Regulation No 44/2001, from ruling, in accordance with Article 1(2)(d) of that regulation, on the very applicability of the regulation to the dispute brought before it necessarily amounts to stripping that court of the power to rule on its own jurisdiction under Regulation No 44/2001.
29. It follows, first, as noted by the Advocate General in point 57 of her Opinion, that an anti-suit injunction, such as that in the main proceedings, is contrary to the general principle which emerges from the case-law of the Court on the Brussels Convention, that every court seised itself determines, under the rules applicable to it, whether it has jurisdiction to resolve the dispute before it (see, to that effect, Gasser, paragraphs 48 and 49). It should be borne in mind in that regard that Regulation No 44/2001, apart from a few limited exceptions which are not relevant to the main proceedings, does not authorise the jurisdiction of a court of a member state to be reviewed by a court in another member state (Case C-351/89 Overseas Union Insurance and Others [1991] ECR I-3317, paragraph 24, and Turner, paragraph 26). That jurisdiction is determined directly by the rules laid down by that regulation, including those relating to its scope of application. Thus in no case is a court of one member state in a better position to determine whether the court of another member state has jurisdiction (Overseas Union Insurance and Others, paragraph 23, and Gasser, paragraph 48).
30. Further, in obstructing the court of another member state in the exercise of the powers conferred on it by Regulation No 44/2001, namely to decide, on the basis of the rules defining the material scope of that regulation, including Article 1(2)(d) thereof, whether that regulation is applicable, such an anti-suit injunction also runs counter to the trust which the member states accord to one another's legal systems and judicial institutions and on which the system of jurisdiction under Regulation No 44/2001 is based (see, to that effect, Turner, paragraph 24).
31. Lastly, if, by means of an anti-suit injunction, the Tribunale di Siracusa were prevented from examining itself the preliminary issue of the validity or the applicability of the arbitration agreement, a party could avoid the proceedings merely by relying on that agreement and the applicant, which considers that the agreement is void, inoperative or incapable of being performed, would thus be barred from access to the court before which it brought proceedings under Article 5(3) of Regulation No 44/2001 and would therefore be deprived of a form of judicial protection to which it is entitled."
The Award
"63. In support of the argument that insurers' right to effective judicial protection is not derived from the Regulation but is a wider right than that, we were referred to paragraph 58 of the Opinion of the Advocate General and paragraph 31 of the judgment of the European Court.
[The tribunal then quoted the last sentence of paragraph 58 of the Opinion of the Advocate General and paragraph 31 of the judgment of the ECJ, both of which I have set out above, and continued]
65. If one reads these passages together it is apparent that the "fundamental right" to which the Advocate general was referring in paragraph 58 of her Opinion was the right to judicial protection of some other right that has been conferred by Community law. The principle of effectiveness cannot be applied in the abstract or in the absence of some other conferred right. So one turns to identify the right to be protected.
66. We have already discussed the right. In simple terms the right to be protected is the right enshrined in Article 5.3 of Regulation No 44/2001 to sue a tortfeasor in the courts of the place where the harmful event occurred. Moreover, this conclusion accords with paragraph 31 of the judgment of the European Court…"
68. So one comes to consider the nature of the protection and against whom and against what the protective shield can be used. This is a crucial question in the present case.
69. We have already referred to the fact that in her Opinion the Advocate General set out some of the Recitals in the preamble to Regulation No 44/2001. One of these Recitals was Recital 14:
"The autonomy of the parties to a contract, other than an insurance, consumer or employment contract, where only limited autonomy to determine the courts having jurisdiction is allowed, must be respected subject to the exclusive grounds of jurisdiction laid down in this Regulation."
70. It is clear from this Recital, that has to be read together with Recital 15 (set out in paragraph 12 above), that the Regulation is directed to the jurisdiction of national courts and to the allocation of jurisdiction between national courts. One then finds a specific provision in Article 1 of the Regulation stating that the Regulation does not apply to arbitration. Furthermore, as we have already noted, in the anti-suit proceedings before the European Court the existence of the arbitration proceedings and the possibility of conflicting decisions indicate that the parallel jurisdiction of the arbitral tribunal was fully recognised.
71. It can therefore be strongly argued that an arbitral tribunal is free of any of the restraints that would bind a national court and can exercise a jurisdiction to award damages for breach of an arbitration agreement in the same way as it would be able to do if no question of Community law was involved. Moreover, this jurisdiction is reinforced by the unappealed declarations made by the Commercial Court and affirmed by the House of Lords.
72. In the present case, however, we have to take account at every stage of the Opinion of the Advocate General and the judgment of the European Court of Justice.
73. It is clear from the Opinion of the Advocate General, with whom the European Court did not disagree, that it is recognised that the possibility exists of conflicting decisions by an arbitral tribunal on the one hand and a national court on the other. These conflicts can extend to decisions on the merits because the tribunal and the court operate in separate though parallel spheres. But it is the duty of both the national court and the tribunal to apply Community law.
74. It is at this stage that we find that the jurisdiction that we would otherwise have had to award damages is circumscribed. Thus, in applying Community law we have to give full effect to the decision of the European Court and what we believe to be its underlying philosophy.
75. It is true that by a specific provision the Regulation does not apply to arbitration. Indeed it could be argued that the principle of effectiveness and the consequential judicial protection should be applied to this exclusion so as to make it of equal importance to the right to bring proceedings in a national court. It is also true that the Regulation is concerned with allocating jurisdiction between national courts.
76. But the underlying theme of the judgment is the importance, indeed the pre-eminence, of the right to bring proceedings in the appropriate national court. It is this right that, in the eyes of the European Court, is entitled to effective judicial protection.
77. The ruling by the European Court means that insurers have the right under European law to bring proceedings in Syracuse. Accordingly it seems to us that a decision by this tribunal that insurers did not have that right would be impossible to sustain if the matter were tested again before the European Court. A competition between the right upheld by the European court and the right to damages would, in the present state of Community law, result in a victory for the former. And this is so despite the specific provision in Article 1(2)(d).
78. Accordingly, we are driven to the conclusion that Community law would not allow an arbitral tribunal, although exercising a parallel jurisdiction, to cross the divide and in effect "punish" a party for pursuing a course that the European Court itself had approved."
The Appellant's submissions
(1) The tribunal correctly concluded that the principle of EU law of effectiveness and effective judicial protection were not free-standing (as the Respondents had argued) but existed to protect rights under EU law, in this case the right of the Respondents under Article 5(3) of the Regulation to commence court proceedings against an alleged tortfeasor in the courts of the place where the harmful event occurred. However, the tribunal was wrong to conclude that its jurisdiction was circumscribed by that right in circumstances where by virtue of Article 1(2)(d) the Regulation has no application to arbitration.
(2) Even if the majority of the tribunal was right to conclude that its jurisdiction was capable of being circumscribed by the Regulation, it was wrong to find that an award of damages or an indemnity would interfere with the Respondents' rights under EU law. The tribunal wrongly transposed the reasoning of the ECJ in relation to anti-suit injunctions to an award of equitable damages for breach of the obligation to arbitrate.
(3) Even if the majority of the tribunal was correct to find that it had no jurisdiction to award damages or an indemnity while the Italian proceedings were pending, it should not have dismissed the Appellant's claim for damages, given that the Italian court has yet to determine its own jurisdiction. If the Italian court determines it has no jurisdiction, there can be no question of an award of damages interfering with the Respondent's right of access to the Italian court.
"Mr Dicker also relies on the decision of the European Court of Justice in Turner v Grovit [2005] 1 AC 101 as indicating that this court should not purport to tell a court in another member state directly or indirectly how to exercise its own jurisdiction. To award damages against a party for having improperly invoked the process of a foreign court is an indirect interference with that foreign court. I accept his submission, which provides another reason why the Italian court should decide questions arising under Article 96."
The Respondents' submissions
"As the court has confirmed in its judgment of 6 October 1981 Broekmeulen , (case 246/80 [1981] ECR 2311 ), Community law must be observed in its entirety throughout the territory of all the member states; parties to a contract are not , therefore , free to create exceptions to it. In that context attention must be drawn to the fact that if questions of Community law are raised in an arbitration resorted to by agreement the ordinary courts may be called upon to examine them either in the context of their collaboration with arbitration tribunals , in particular in order to assist them in certain procedural matters or to interpret the law applicable, or in the course of a review of an arbitration award - which may be more or less extensive depending on the circumstances - and which they may be required to effect in case of an appeal or objection, in proceedings for leave to issue execution or by any other method of recourse available under the relevant national legislation."
"In that regard, the detailed procedural rules governing actions for safeguarding an individual's rights under Community law must be no less favourable than those governing similar domestic actions (principle of equivalence) and must not render practically impossible or excessively difficult the exercise of rights conferred by Community law (principle of effectiveness) ... "
"The Court has also held that any provision of a national legal system and any legislative administrative or judicial practice which might impair the effectiveness of Community law by withholding from the national court having jurisdiction to apply such law the power to do everything necessary at the moment of its application to set aside national legislative provisions which might prevent, even temporarily, Community rules from having full force and effect are incompatible with those requirements, which are the very essence of Community law."
Analysis and conclusions
"It is quite true that the Regulation itself does not apply to arbitral tribunals and that arbitrators are not therefore bound by the Regulations themselves to recognise judgments of the courts of member states of the EU, but it does not follow that foreign judgments, whether of the courts of member states or other countries, can be disregarded in arbitration proceedings. A judgment of a foreign court which is regarded under English of conflicts of laws rules as having jurisdiction and which is final and conclusive on the merits is entitled to recognition at common law: see Dicey and Morris and Collins, The Conflict of Laws, 14th ed. paragraphs 14-027 - 14-029. It follows, therefore, that arbitrators applying English law are bound to give effect to that rule. There is nothing new in this; it has long been recognised that a judgment of a foreign court can give rise to estoppel by res judicata – see, for example, The Sennar (No. 2) [1985] 1 W.L.R. 490 – and the principle is routinely applied in arbitration proceedings."
Conclusion