Mr Justice Hamblen:
A. Introduction
This is an application by the Claimant (“Sovarex”) for permission to
enforce an arbitration award in the same manner as a judgment and
to enter judgment in the terms of the Award pursuant to s. 66 of the
Arbitration Act 1996 (“the Act”).
The relevant award is FOSFA arbitration award no. 4107 dated 28 January
2010 (“the Award”) under which a FOSFA Tribunal (“the Tribunal”)
awarded Sovarex damages of EUR 1,035.000 against the Respondent
(“Alvarez”) (plus interest and certain costs).
Alvarez's position is that the award is a nullity because no contract was
concluded. It also relies on the fact that the Spanish courts were asked to
decide on the validity of the alleged contract on 3 October 2008 – months
before the commencement by Sovarex of the FOSFA proceedings and
contends that they remain seised of this question. It submits that:
(1) Alternatively the court should decline jurisdiction or stay proceedings
on the basis that (i) any English judgment would be an interference
with the jurisdiction of the Spanish courts and/or (ii) that it is obliged
to recognise the findings by the Spanish courts on 6 July and 6 October
2009, that the validity of the contract would be determined in Spain,
pursuant to Article 33(1) of the Regulation.
(2) Alternatively the court should decline jurisdiction or stay proceedings
on the basis that (i) any English judgment would be an interference
with the jurisdiction of the Spanish courts and/or (ii) that it is obliged
to recognise the findings by the Spanish courts on 6 July and 6 October
2009, that the validity of the contract would be determined in Spain,
pursuant to Article 33(1) of the Regulation.
(3) Alternatively, the court should stay these proceedings in the exercise
of its inherent discretion, on lis pendens and forum non conveniens
grounds.
B. Background
B.1 The Contract
Sovarex's claim was brought under a contract which it contends was
made on 3 June 2008 (“the Contract”), by which Sovarex agreed to sell
to Alvarez 5,000 MT of sunflower seeds CIF Seville for shipment between
15 September and 15 October 2008. The Contract provided for English
law and contained an arbitration agreement providing for London FOSFA
arbitration and making it a breach of contract to start legal proceedings
elsewhere. The Claimant's case was that the Contract was concluded by
telephone and email through the intermediary of a broker, Mr Garrido.
There is a supporting witness statement of Mr Garrido before the court.
Alvarez denies that any contract was concluded. In support of its case it
has provided a witness statement from Mr Manuel Romero Alvarez.
If a contract was concluded Sovarex submits that it is beyond doubt that
it was repudiated by Alvarez when it refused to acknowledge that any
contract had been made when the time for performance arose. Sovarex
accepted that repudiation on 17 September 2008.
B.2 The arbitration
Sovarex initiated arbitration on 16 December 2008, in ignorance of any
other proceedings. FOSFA appointed an arbitrator on behalf of Alvarez on
20 February 2009. On 28 January 2010, the Award in Sovarex's favour
was issued.
B.3 The Spanish proceedings
Alvarez's Spanish action was issued in early October 2008 and formally
admitted by the Spanish Court on 1 December 2008, but not served until
20 April 2009.
On 22 September 2010, the Spanish Court dismissed Alvarez's action
on the basis that Spanish procedural law does not recognise negative
declaratory relief asserting the non-existence of a contract. Alvarez is
appealing that decision.
Alvarez, however, relies upon the facts that, at an earlier stage in the
Spanish proceedings, the Spanish Court had on 6 July 2009 dismissed an
application made by Sovarex for a stay in favour of the FOSFA arbitration
and that it thereafter subsequently re-affirmed its decision on 6 October
2009. Sovarex could appeal those decisions but that depends on the
outcome of Alvarez's own appeal.
B.4 The s. 66 application
This application was brought on 19 October 2010, initially without
notice, after the dismissal of the Spanish proceedings. By order dated 17
December 2010, Teare J ordered service out of the jurisdiction.
C. The Issues
C.1 (1) Whether the s.66 application should be dismissed because the
evidence shows that there is a real ground for doubting the validity of the
award.
The first issue which arises under this head is whether Alvarez has lost
the right to object to the enforcement of the Award under s. 66(3) of the
Act by participation in the arbitration.
S. 66 provides:
„66.– Enforcement of the award.
(1) An award made by the tribunal pursuant to an arbitration agreement
may, by leave of the court, be enforced in the same manner as a
judgment or order of the court to the same effect.
(2) Where leave is so given, judgment may be entered in terms of the
award.
(3) Leave to enforce an award shall not be given where, or to the extent
that, the person against whom it is sought to be enforced shows that the
tribunal lacked substantive jurisdiction to make the award.
The right to raise such an objection may have been lost (see section 73).
(4) Nothing in this section affects the recognition or enforcement of an
award under any other enactment or rule of law, in particular under Part
II of the Arbitration Act 1950 (enforcement of awards under Geneva
Convention) or the provisions of Part III of this Act relating to the
recognition and enforcement of awards under the New York Convention or
by an action on the award.”
S. 72 provides:
“72.– Saving for rights of person who takes no part in proceedings.
(1) A person alleged to be a party to arbitral proceedings but who takes
no part in the proceedings may question–
(a) whether there is a valid arbitration agreement,
(b) whether the tribunal is properly constituted, or
(c) what matters have been submitted to arbitration in accordance with
the arbitration agreement,
by proceedings in the court for a declaration or injunction or other
appropriate relief.
….“
S. 73 provides:
“73.– Loss of right to object.
(1) If a party to arbitral proceedings takes part, or continues to take part,
in the proceedings without making, either forthwith or within such time as
is allowed by the arbitration agreement or the tribunal or by any provision
of this Part, any objection–
(a) that the tribunal lacks substantive jurisdiction,
(b) that the proceedings have been improperly conducted,
(c) that there has been a failure to comply with the arbitration agreement
or with any provision of this Part, or
(d) that there has been any other irregularity affecting the tribunal or the
proceedings,
he may not raise that objection later, before the tribunal or the court,
unless he shows that, at the time he took part or continued to take part in
the proceedings, he did not know and could not with reasonable diligence
have discovered the grounds for the objection.
(2) Where the arbitral tribunal rules that it has substantive jurisdiction
and a party to arbitral proceedings who could have questioned that
ruling–
(a) by any available arbitral process of appeal or review, or
(b) by challenging the award,
does not do so, or does not do so within the time allowed by the
arbitration agreement or any provision of this Part, he may not object
later to the tribunal's substantive jurisdiction on any ground which was
the subject of that ruling.”
It was common ground between the parties that the question of whether
Alvarez has lost the right to raise its objection to enforcement under s.
66(3) depends on whether or not Alvarez took part in the arbitration
proceedings. If it did not do so, then its rights under s. 72 and s. 66(3)
will have been preserved. If it did so, then its right to rely upon s. 66(3)
will have been lost by reason of s. 73(2).
It was also common ground that this is an issue which must be
determined objectively – see, for example, Gater Assets Ltd v. NAK
Naftogaz Ukrainiy [2007] 2 Lloyd's Rep. 588 at 605, at [79] per Rix LJ.
I was referred to a number of authorities in which this issue has been
considered. Although each case turns on its own facts they provide some
assistance in determining what amounts to taking part in an arbitration.
Alvarez relied in particular upon the decisions of Clarke J in Caparo Group
Ltd v. Fagor Arrasate Sociedad [2000] ADLRJ 254 and of Mann J in Law
Debenture Trust v. Elektrim Finance BV [2005] 2 Lloyd's Rep. 755.
In the Caparo case Clarke J held that if a party was invoking the
jurisdiction of the tribunal to consider whether it had jurisdiction then that
would be taking part in the arbitration. However, merely saying that you
are not party to any arbitral agreement and that the arbitration tribunal
has no jurisdiction would not be.
In the Law Debenture case Mann J commented as follows on the Caparo
decision [at 23]:
“It is noteworthy in that case that Clarke J was able to find that
protestations as to the absence of jurisdiction, which were presumably
intended to persuade, did not amount to participating in the arbitration
even where the body had the additional function of deciding whether
there was a prima facie case on jurisdiction.”
In relation to the facts of the case before him Mann J said that making the
point that you are contesting jurisdiction and saying that the jurisdiction
issue should be considered by a court is not taking part in the arbitration.
This is to be contrasted with “attempting to argue its case against
jurisdiction so that the arbitration can consider it”. He considered that the
party in that case “was asserting non-jurisdiction, not participating in the
exercise of it” (at [28]).
The cases therefore draw a distinction between protesting that the
arbitration tribunal has no jurisdiction and asserting that the issue should
be decided by some other court or tribunal and asking the tribunal to
consider the issue of jurisdiction. In the latter case the party is likely to be
held to have invoked the jurisdiction of the tribunal.
Sovarex sought to rely upon the obiter comment made in Broda Agro
v. Alfred C. Toepfer [2011] 1 Lloyd's Rep 243 at 250, at [50] (Stanley
Burnton LJ), where he said:
“It may be difficult to distinguish between a letter that does no more
than inform the arbitral tribunal, as a matter of courtesy, that the
respondent does not accept its jurisdiction, and a submission that it has
no jurisdiction. This is such a case“.
I do not regard that comment as being inconsistent with what was said
in the Caparo and Law Debenture cases. A “submission” that the tribunal
has no jurisdiction is made when you invite the tribunal to consider that
issue and thereby invoke their jurisdiction to decide it.
Turning to consider the facts, Sovarex submitted that Alvarez took part in
the proceedings relating to jurisdiction by reason of the cumulative effect
of the following matters:
(1) Alvarez's message, on 18 February 2009, to FOSFA setting out
reasons as to why FOSFA should refuse to deal with the arbitration
commenced by Sovarex. It stated that:
“….We have received your registered letter date 05.02.09 whereby you
advise us that Sovarex has requested FOSFA to appoint an arbitrator on
our behalf on an arbitration proceeding instigated by Sovarex. Please
note that in respect to the above, we have never concluded any such a
contract as suggested by Sovarex. In fact, proceedings were commenced
in Spain last 3rd of October 2008 by Romero Alvarez SA denouncing this
serious matter before the Court of Seville (proceedings no 1634/2008,
Seville Court no. 10). Please find enclosed Court documents admitting our
claim and agreeing to summoning same to Sovarex. The Spanish Court in
Seville have accepted jurisdiction to deal with our application to declare
that no contract was ever agreed with us as suggested in bad faith by
Sovarex. Accordingly, there was never a contract with Sovarex and there
is a pending litigation case before the Courts of Seville. Therefore, FOSFA
must respect the pending litigation case and refuse to deal with Sovarex's
groundless application.”
(2) Alvarez's further message, on 2 June 2009, following the constitution
of the Tribunal, again submitting that there was no arbitration agreement
between the parties and also that the proceedings in Spain created a litis
pendente. It stated that:
“…. As advised earlier on by Messrs. Romero Alvarez SA our clients did
not enter into any contract of sale with Sovarex during the year 2008.
Accordingly, no arbitration can be claimed by Sovarex before FOSFA. In
such respect, Sovarex has a full copy of our writ of action produced before
the Spanish Courts and we trust Sovarex has passed a copy to FOSFA.
Indeed, Sovarex's lawyers have appeared before the Spanish Court and
have pleaded the proceedings to be set aside. The Court has to deal with
Sovarex's arguments as to the existence of a contract and hence as to the
arbitration. Furthermore, as you know, proceedings were commenced by
Romero Alvarez SA in Spain well in advance to the FOSFA arbitration, thus
there is a litis pendente and we request FOSFA to stop this arbitration
until the Spanish Court makes a decision on the merits of our claim.”
(3) Alvarez's further message, on 2 July 2009, following the Tribunal's
direction that it would deal with jurisdiction and the merits together,
containing submissions based on Articles 27 and 28 of the Brussels
Regulation and citing the line of case law “consolidated in” Allianz SpA v.
West Tankers (The Front Comor). It stated that:
“We draw your attention to the fact that in accordance to Arts. 27 and
28 of the 44/2001 Regulation, there is a lis pendens since proceedings
were initiated first in Spain. Accordingly, we request FOSFA to respect
the proceedings that were started in Spain well before the arbitration.
If this not the case we will ask the award to be declared null in Spain in
breach of 44/2001 and other relevant laws. FOSFA should notice that
Sovarex Spanish lawyers have applied for the Spanish proceedings to
be stopped and the Court is dealing with such request and will shortly
deliver a decision in that respect. You should further consider the line of
case law consolidated in the judgment of the Court (Grand Chamber) 10
February 2009 ECJ. In Case C 185/07, on the reference for a preliminary
ruling under Articles 68 EC and 234 EC from the House of Lords (United
Kingdom), made by the decision of 28 March 2007, received at the
Court on 2 April 2007, in the proceedings Allianz SpA, formerly Riunione
Adritica di Sicurta SpA, General Assicurazioni Generali SpA. Therefore,
we cannot accept to draft any submission before FOSFA as that would be
a recognition that a contract was ever reached with Sovarex containing
arbitration clause, which our clients insist was not the case.”
(4) Alvarez's further message, on 23 July 2009, with further submissions
about lis pendens and res judicata based on the Spanish proceedings and
on the Regulation. It stated that:
“Romero Alvarez SA insists that FOSFA should stop the proceedings or
the award will be unenforceable for various reasons, inter alia; Romero
Alvarez has not appointed arbitrators, nor produce submissions as
this matter has been in the hands of the Spanish Courts before the
commencement of this arbitration; there is a lis pendens. Furthermore,
we trust that FOSFA has been informed by Messrs. HBJ Gateley Wareing
LLP that Sovarex's application challenging the competence of the Seville
Court number 10 in the proceedings number 1634/2008 has been refused
by the court in its order of 6 July 2009. The Court Magistrate has ruled
that Romero Alvarez's action is to follow before the Spanish Courts and
has rejected the argument of Sovarex that a contract had been fixed
between Sovarex and Romero Alvarez. For good order sake, we repeat
that any award issued under the present circumstances will not be
enforceable in Spain. Moreover, FOSFA should consider the judgment of
the Court (Grand Chamber) 10 February 2009 ECJ. In Case C 185/07, on
the reference for a preliminary ruling under Articles 68 EC and 234 EC
from the House of Lords (United Kingdom), made by decision of 28 March
2007, received at the Court on 2 April 2007, in the proceedings Allianz
SpA, formerly Riunione Adriatica di Sicurta SpA, Generali Assicurazioni
Generali SpA. This judgment makes very clear that 44/2001 applies to
Court and arbitrations cases as the present one. Therefore, we reiterate
that we cannot accept to draft any submission before FOSFA as that would
be a recognition that a contract was ever reached with Sovarex containing
an arbitration clause, which our clients insist was not the case.”
Sovarex further submitted that Alvarez's participation is reflected by the
fact that the Tribunal included a section in its award entitled “Respondents
submissions” and made “findings” in respect of such submissions.
Alvarez submitted that Dr Arizon's letters did not amount to “taking part”
in the FOSFA proceedings. It submitted that these were an objection
to the commencement of arbitration proceedings and a preliminary
protest regarding the jurisdiction of the Tribunal and cannot be read as
a submission by Alvarez to the Tribunal's jurisdiction on kompetenz-
kompetenz grounds.
In my judgment the correspondence did no more than make it clear
that Alvarez was protesting the jurisdiction of the Tribunal and asserting
that they should decline to exercise any jurisdiction they might have
pending determination of the jurisdiction issue by the Spanish court. It
never recognised that the tribunal had jurisdiction, still less did it invite
them to consider or determine the issue of jurisdiction. The letters were
directed at explaining why Alvarez was not going to participate in the
arbitration. They were not inviting any jurisdiction to be exercised. They
were asserting that any jurisdiction the Tribunal might have should not be
exercised at this stage.
Sovarex submitted that inviting the Tribunal to decline jurisdiction was
itself an invocation of their jurisdiction. I do not agree. It was not asking
them to consider any substantive issue as to that jurisdiction. The position
is analogous to that in the Law Debenture case in which the tribunal was
similarly being urged to allow the jurisdiction issue to be decided by the
court. That was regarded as being an assertion of non-jurisdiction rather
than a participation in its exercise.
For all these reasons, I accordingly reject Sovarex's argument that
Alvarez has lost the right to object to the jurisdiction of the arbitration
under s. 66(3).
It therefore becomes necessary to consider whether Alvarez's objections
to the enforcement of the award can be dealt with under the s. 66
procedure.
It was Alvarez's case that s. 66 is a summary procedure that is not
available where “there is a real ground for doubting the validity of the
award”: Middlemiss v. Hartlepool Corporation [1973] 1 All ER 172 at p.
175 per Lord Denning MR.
It submitted that the evidence before the court clearly establishes a real
basis for doubting that any contract was concluded and set out various
detailed points in its skeleton argument in support thereof. Alvarez
submitted that in these circumstances the present s. 66 proceedings
should be dismissed and Sovarex left, if so advised, to bring an action on
the award. In particular it submitted that:
(1) S. 66 of the Act (and its predecessor section 26 of the 1950 Act)
provides a summary procedure for the enforcement of arbitration awards.
(2) It is “mere machinery”. It does not modify the conditions for
enforcement which existed at common law. The right at common law,
being an action on the award, is expressly retained under the Act (see
section 66(4) of the Act): The Amazon Reefer [2010] 1 Lloyd's Rep 222 at
[5 – 7] per Thomas LJ.
(3) As a summary procedure, s. 66 cannot be used as a route to a full
trial.
Whilst supporting the arbitral tribunal's conclusion in relation to the
making of the contract, Sovarex accepted that Alvarez had sufficiently
shown that that is an issue which involves triable issues of fact and that
“there is a real ground for doubting the validity of the award”. However,
it submitted that that is an issue which can and should be dealt with in
the context of the present proceedings and that there is no warrant for
requiring it effectively to start all over again.
It submitted that:
(1) S. 66 is the section of the Act that deals with enforcement of
arbitration awards generally (see Gater, at [44] (Rix LJ). It is intended to
reflect Article 35 of the Model Law.
(2) Consistent with its general application, CPR 62 shows that an
arbitration claim started under s. 66 does not automatically fail simply
because the award debtor can show, on paper, that there is a real ground
for doubting the validity of the Award.
(3) On the contrary, CPR 62.18 contemplates two different paths for an
application under s. 66; namely:
(i) Either an enforcement order may be made without notice pursuant to
CPR 62.18(1);
(ii) Alternatively, the court will specify that the arbitration claim form
must be served under CPR 62.18(2) and the enforcement proceedings
then continue. This contemplates the enforcement proceedings being
assimilated to any CPR claim in circumstances where the court has felt
unable to act summarily (see Gater at [74 – 75] (Rix LJ), see also Colliers
International [2008] 2 Lloyd's Rep 368 at [24] (Beatson J)).
(4) By reason of the order of Teare J, this case has taken the second
path. The court should now make directions to dispose finally of these
enforcement proceedings. The procedure should henceforth be the
equivalent of a jurisdictional rehearing under s. 67 of the Act.
The general procedure which has been adopted by the courts in respect
of the enforcement of awards under the Arbitration Acts is conveniently
summarised by Thomas LJ in The Amazon Reefer [2010] 1 Lloyd's Rep
222 at [7]:
“The procedure for enforcement by action is little used in practice. For
many years it has been the practice of parties who seek to use the
enforcement mechanism of the court in England and Wales to use the
procedure under section 26 of the 1950 Act and section 66 of the 1996
Act to enforce an award. The procedure is straightforward. The parties
make an application to the court on an ex parte...or without notice)
basis and any challenge to the enforcement is heard by the judge. The
procedure under sections 26 and 66 had its origins in earlier legislation
and was a summary form of proceeding intended to dispense with the full
formalities of the action to enforce an award. The summary procedure
was originally intended only to be invoked in reasonably clear cases
– see Boks & Co v. Peters, Rushton & Co Ltd [1919] KB 491 at p. 497
where Scrutton LJ made clear it was only to be invoked in “reasonably
clear cases”. However, procedures were developed so that the court
could decide summarily questions of law which did not involve issues
of fact. By the 1980s courts were prepared to deal with all applications
under the summary procedure provided objections could be disposed
of without a trial: see, for example, Middlemiss and Gould v. Hartley
Corporation [1972] 1 WLR 1643 and Hall & Wodehouse Ltd v. Panorama
Hotel Properties Ltd [1974] 2 Lloyd's Rep 413. The summary procedure
both under section 26 and the 1950 Act and section66 of the 1996 Act
is so convenient that it is by far the most common way of enforcing an
award.”
Historically the enforcement mechanism provided under the Arbitration
Acts was therefore treated as involving a summary procedure. However,
in recognition of the greater convenience of that procedure over an action
on the award the nature of the issues which could be dealt with thereby
grew. As Thomas LJ stated, by the 1980s the courts were prepared
to deal with all applications under the procedure provided objections
could be disposed of without a trial. The question raised by the present
proceedings is whether this means or requires that disputed issues of fact
can never be dealt with under s. 66.
As Alvarez pointed out, in The Amazon Reefer Thomas LJ assimilated the
procedure under s. 26 with that under s. 66 and I was referred to other
cases and textbooks in which this has been done. However, none of those
cases or citations addresses the issue of whether the court has power to
deal with disputed issues of fact under s. 66.
The starting point is s. 66 itself. As Sovarex submitted, there is a
difference between s. 66 and s. 26 due to the inclusion in s. 66 of s.
66(3), which has no equivalent in the earlier legislation.
The proviso in s. 66(3) applies where the person resisting enforcement
“shows” that the tribunal lacked substantive jurisdiction. That indicates
proof of that fact rather than merely showing that it involves a triable
issue. It also indicates that that is a matter which can be determined
within the context of the s. 66 procedure.
By contrast in an action on an award it is incumbent on the claimant to
“plead and prove both the arbitration agreement and the award”, and
to “establish that the dispute was within the terms of the submission,
and that the arbitrator was duly appointed” – see Mustill and Boyd on
Commercial Arbitration (2nd edition) at p. 418, 419. If the party who has
obtained an award cannot rely on s. 66 and is compelled to start an action
on the award the burden of proof will accordingly be the reverse of that
contemplated under s. 66(3) and he will therefore lose that benefit, a
benefit which the Act confers on him.
Further, placing the burden of proof on the party resisting enforcement
is consistent with the approach to recognition and enforcement set out
in the New York Convention, s. 103 of the Act and the Model Law (upon
which s. 66 was based, as stated in the DAC report). Under all of these
it is incumbent on the party resisting recognition or enforcement of the
award to prove the grounds relied upon. In effect the party who has
obtained an award has the benefit of a presumption of validity and it is
for the party resisting recognition or enforcement to prove otherwise.
s. 66 would appear to be intended to confer a similar benefit, but one
which would be lost if an action on the award is the only means by which
disputed issues of validity can be resolved.
The procedure in relation to Arbitration Act claims is also different
under the Act to that which prevailed under the 1950 Act. The relevant
procedure is set out in CPR Particle 62 and Practice Direction 62. Under
that procedure where, as in this case, the s. 66 application has been
served then pursuant to CPR 62.18(3) the enforcement proceedings
continue as if they were an arbitration claim under Part I. This means
that it is subject to the court's case management powers under CPR
Particle 62.7 to give such directions as may be appropriate. It is clear,
and was not disputed, that they may include directions appropriate for
the determination of issues of fact, as often, for example, happens where
there is a s. 67 challenge to jurisdiction. There is no procedural reason
why similar directions should not be given where the same issue arises in
respect of a claim form issued under s. 66.
As Sovarex submitted, the procedure whereby the court may specify that
the arbitration claim form must be served under CPR 62.18(2) and the
enforcement proceedings then continue as if they were an arbitration
claim contemplates the enforcement proceedings being assimilated to
any other arbitration claim, such as a s. 67 claim. As it further submitted,
it would be anomalous if an award debtor was in a more advantageous
position under s. 66(3) than it would have been if it had taken part in the
arbitration (see Gater at [93] (Moses LJ)).
Given that the court has the power under CPR Particle 62 to give
appropriate directions to enable issues of fact to be determined, there
is no obvious reason why the enforcing party should be compelled to
start proceedings all over again by commencing an action on the award,
thereby potentially wasting both time and costs. s. 66 is meant to deal
with enforcement generally and there is nothing in s. 66 itself or in the
CPR which requires an alternative mode of procedure to be adopted in the
event of the application being challenged on the facts. Consistent with
the Overriding Objective the priority must be to progress matters sensibly
and cost effectively rather than to waste time and costs for formalistic
reasons.
Aside from the fact that it has been the approach adopted historically in
respect of s. 26 applications, the only reason suggested by Alvarez for
why a party should be compelled to start an action on the award was
that it is right in principle that where there is a real ground for disputing
the validity of the award the burden of proof should be on the claimant.
However, as noted above, that is contrary to both the terms of s. 66(3)
and the approach taken under the New York Convention, the Act and
the Model law. The party who has an award is entitled to start from the
position of validity. That is a reason for recognising a procedure for trying
issues under s. 66 rather than excluding that procedure.
For all these reasons I consider that the court does have the power to
direct that there be a determination of disputed issues of fact under s.
66 and that there is no necessity for this to be done by way of action on
the award. No doubt there will be cases where it will still be appropriate
for the proceedings to continue as if it was an action, particularly where
the dispute is one of some complexity. However, in a case such as the
present which involves relatively straightforward issues of fact such as are
commonly determined on a s. 67 application, I consider it is appropriate
for the issues to be dealt with under s.66 and for appropriate directions to
be given under CPR Particle 62.7.
Alternatively, if that be wrong, I would have ordered that the proceedings
should continue as if they had been begun by a claim form in an action
on the award and would have given the same directions as I am going to
give in respect of the determination of the s.66 application so that the end
procedural result would be the same.
As stated in Mustill and Boyd on Commercial Arbitration (2nd edition) at
p. 419 in relation to applications under s. 26:
“If the application under section 26 is refused, the plaintiff is left to
enforce the award, if he can, by action. In such a case the Court has
power, in order to save the time and expense of commencing fresh
proceedings, to order that the proceedings should continue as if begun by
writ and to give directions for the further conduct of the action.”
I am satisfied that the court has the same power under CPR and/or its
inherent jurisdiction and indeed this was not disputed.
C.2 (2) Whether the court should decline jurisdiction or stay proceedings
on the basis that (i) any English judgment would be an interference
with the jurisdiction of the Spanish courts and/or (ii) that it is obliged
to recognise the findings by the Spanish courts on 6 July and 8 October
2009, that the validity of the contract would be determined in Spain,
pursuant to Article 33 (1) of the Regulation.
As to point (i), Alvarez submitted that the validity of the alleged contract
has been an issue with which the Spanish courts have been seised since
October 2008 and that it would be undesirable to have an identical
procedure, with identical witnesses before different courts in the EU.
It further submitted that any judgment enforcing the award would be
an interference with the jurisdiction of the Spanish court. It pointed out
that there are no assets or security in England which would respond to
any judgment issued here and so it follows that Sovarex's intention must
be to enforce the judgment in Spain in an effort to gain a jurisdictional
advantage in the proceedings currently underway in that country.
In these circumstances it submitted that the court should stay these
proceedings, and order that any further proceedings in England be stayed
until such time as a final unappealable judgment is issued in Spain on the
question of whether a valid contract was concluded between the parties.
The current position in the Spanish proceedings, however, is that no
determination of the validity of the contract is going to be made. On
that basis there is not going to be a duplication of proceedings. That
the Spanish court decision is being appealed does not alter that present
fact. As Sovarex's Spanish lawyer, Mr Casas says, “pending the appeal
decision, the Spanish High Court's decision is presumed to be valid” and
accordingly the question of the existence or non-existence of the contract
is not “as the matter currently stands, a live issue before the Spanish
Court”.
It is in any event difficult to see why the English court, being the court
of the seat of the arbitration, should stay enforcement proceedings
properly before it on the basis of the possibility of proceedings being
brought elsewhere should the Spanish High Court decision be successfully
appealed.
Further, as Sovarex submitted:
(1) A claimant is entitled to try and enforce the award where it sees fit
and it is generally incumbent on the respondent to resist enforcement
“then and there” (see Dallah Real Estate v. Ministry of Religious Affairs
[2010] 2 Lloyd's Rep 691 at [23] and [29] (Lord Mance).
(2) S. 66 is intended to reflect Article 35 of the Model Law (see the DAC
Report on the Arbitration Bill at paragraph 273, cf. paras. 371 – 376 and
the DAC Supplementary Report at paragraph 32). Accordingly, while
s. 66 does contain a discretion, the Model Law upon which it is based
only contemplates, by Article 36(2), a discretion to refuse enforcement
in deference to competing proceedings in the seat of the arbitration,
mirroring Article VI and V(1)(e) of the New York Convention (and,
therefore, s. 103(5) and 103(2)(f) of the Act). It would be surprising if
the English courts had a significantly different, wider discretion in relation
to an award where England was the seat than the discretion they have in
relation to an award from a foreign seat.
(3) The English court has recently taken the view that enforcement
proceedings under s. 66 should not be derailed by reason of competing
Regulation proceedings in another Member State, in circumstances where
the award creditor has a real prospect of establishing the primacy of
the award, through its conversion into an English judgment, over any
inconsistent foreign judgment (see West Tankers Inc v. Allianz SpA [2011]
EWHC 829 (Comm), 6 April 2011, at [30] (FieldJ)).
(4) An English judgment would be enforceable and have primacy in
England. Whilst Sovarex accepts that a decision of the English court
that there was a valid arbitration agreement would not be entitled to
automatic recognition in Spain under Article 33 of the Regulation, that
does not necessarily mean it is incapable of preclusive effect, in Spain
or elsewhere. Its effect will depend upon whether the Spanish (or other)
courts recognise any principle similar to issue estoppel (see Dallah, ibid,
at [29] (Lord Mance)).
As to the alleged interference, it is not an interference with the Spanish
proceedings for the English court, as the court of the seat, to determine
the validity of the arbitration agreement. As Waller LJ said in The Wadi
Sudr, ibid, at 201, [38(i)], explaining the Opinion of the Advocate General
in Allianz SpA v. West Tankers Inc (The Front Comor) Case C-185-07
[2009] 1 AC 1138):
“… I would suggest that, at least by implication if not expressly, one
can say that it was the Advocate General's opinion: (i) that it was not
an interference with the jurisdiction of a member state for one court at
the seat of the arbitration to grant a declaration as had occurred in that
case…”
This is not a case where some injunction is being sought but simply a
determination of the parties' rights. Further, any “interference” is no more
than arises from the fact that Sovarex has an award in its favour. Armed
with such an award it can seek to enforce in Spain and it is difficult to see
how a judgment in the terms of the award increases the alleged resulting
“interference”.
As to point (ii), Alvarez submitted that:
(1) The two Spanish decisions were Regulation judgments and as such
they give rise to an issue estoppel on the question of which court should
determine the validity of the contract.
(2) This applies to English arbitration proceedings excluded from the
Regulation, just as it would in Regulation proceedings before an English
court: The Wadi Sudr [2010] 1Lloyd's Rep 193 (CA) at [56] per Waller LJ
and [119] per Moore-Bick LJ.
(3) The finding in these judgments that the Spanish court had jurisdiction
to determine the validity of the alleged contract, was not affected by the
subsequent judgment of the Spanish court that declaratory relief in the
form requested by Alvarez was not available
61. As Sovarex pointed out, Alvarez's argument begs the question of
whether any estoppel has been created by those judgments on an issue
that arises for decision in these proceedings. I agree with Sovarex that no
relevant issue has been decided. In particular:
(1) The Spanish judgments have not decided the key issue of whether or
not an arbitration agreement has been concluded (cf. Through Transport
Mutual v. New India Assurance Co. Ltd [2005] 1 Lloyd's Rep 67 at [13 –
14] [50] (Clarke LJ) as qualified in The Wadi Sudr [2010] 1 Lloyd's Rep
193 at [51] (Waller LJ) and at [121] (Moore-Bick LJ)).
(2) The judgments of the Spanish court should be taken as a whole and
the overall outcome is that the Spanish court has declined jurisdiction
because of its ruling on 22 September 2010 that Spanish law does not
recognise the possibility of negative declaratory relief in relation to the
existence of a contract.
(3) Even taking the judgments of 6 July and 8 October 2009 in isolation,
they are not a preclusive ruling that only the Spanish Court has
jurisdiction so that the English court does not have jurisdiction in relation
to enforcement proceedings seeking an English judgment on an Award
given in an arbitration with the seat in England.
C.3 (3) Whether the court should stay these proceedings in the exercise
of its inherent discretion, on lis pendens and forum non conveniens
grounds.
Alvarez submitted that the court should do so for the following reasons:
(1) The submissions made regarding (i) interference, and (ii) recognition.
These have been addressed above. Neither provides good grounds for a
stay.
(2) The undesirability of parallel proceedings, involving the same
witnesses, being conducted before the courts of two EU Member States
simultaneously.
As matters stand, however, there will not be parallel proceedings.
(3) The fact that the two principal witnesses, Mr Garrido and Mr Romero
are (i) domiciled in Spain, and (ii) native Spanish speakers. A Spanish
court is therefore inherently better placed than an English court to assess
their credibility. (Mr Romero is also 78 years old.).
Again, this assumes that the Spanish court decision will be reversed and
that there will be Spanish proceedings on the issue. In any event the
English court is well able to conduct such a trial and most of the relevant
documents are in English.
(4) The fact that but for Article 1(2)(d) there would be no question that
this court would be compelled to decline jurisdiction in favour of Spain, in
circumstances where the Spanish courts have accepted jurisdiction.
This is irrelevant given the existence and application of Article 1(2)(d).
(5) The weakness of the evidence in support of Sovarex's claim that a
valid contract was concluded.
Whilst I accept that Sovarex has an arguable case on the evidence on
the material before the court it is not possible or appropriate to form any
view as to the relative strength and weaknesses of the parties' respective
cases.
(6) The fact that the Spanish court, being first seised in Regulation
proceedings, is highly unlikely to recognise any judgment given by the
English court which is inconsistent with its ability to determine the validity
or otherwise of the contract.
This again assumes that there is a successful appeal since there is
currently no inconsistency. In any event there is no evidence as to
this and, if this be correct, it is a further reason why there can be no
“interference”. Further, it is up to Sovarex where it wishes to seek
enforcement and there is no necessary reason for assuming that it can
only be in Spain.
(8) The possibility that the English court may have to recognise the
final judgment of the Spanish courts pursuant to Article 33(1) of the
Regulation. Field J's decision in West Tankers v. Allianz is under appeal.
This assumes two successful appeals. The court cannot proceed on such a
hypothetical basis.
In any event, the real question is not where a trial on the merits should
be heard, but rather where it is appropriate to decide whether an award
from an arbitration with its seat in London should be converted into an
English judgment. Even accepting that this involves considering whether
a FOSFA tribunal had jurisdiction under an English law agreement with
London as the seat of arbitration, the natural forum for such a dispute is
England.
Further, I accept the further reasons given by Sovarex as to why the
existence of the Spanish proceedings does not justify staying the English
proceedings. In particular:
(1) The arbitration in England was started at about the same time as the
Spanish proceedings.
(2) The English proceedings are significantly advanced: there is already
a detailed arbitration award in existence, which the English courts can
examine (see Dallah at [31] (LordMance)), and both sides have adduced
considerable witness and documentary evidence.
(3) The Spanish courts have, as things stand, dismissed Alvarez's action
in Spain.
(4) Any further hearing in England could take place later this year,
whereas (even if the Alvarez's appeal against its dismissal was successful)
a first instance hearing in Spain would not be likely until June 2012.
For all these reasons I accordingly reject Alvarez's application for a
discretionary stay.
D. Conclusion
For the reasons set out above I reject Alvarez's case that the s. 66
application should be dismissed or stayed. However, I accept that Alvarez
has not lost the right to challenge jurisdiction and that directions for
determination of its challenge therefore need to be given.