Mr Justice Field:
1. This is an application by the Defendants to set aside the order of
Simon J dated 15 November 2010 whereby: (i) leave was granted to the
Claimant pursuant to s. 66 (1) of the Arbitration Act 1996 („the 1996
Act“) to enforce an arbitration award dated 12 November 2008; and (ii)
judgment was entered against the Defendants pursuant to s. 66 (2) of the
1996 Act in the terms of the award.
2. The award was made pursuant to an arbitration agreement contained
in a charterparty on an amended Asbatankvoy form between Erg Petroli
SpA („Erg“) as Charterer and the Claimant as Owner, under which the
vessel „Front Comor“ was chartered to carry a cargo of crude oil to Erg's
refinery in Italy. The Charterparty provided, as did the ISAB/ERG Petroli
Clauses incorporated therein, that all disputes arising out of the charter
were to be referred to arbitration in London with English law to apply.
3. Following a collision between the „Front Comor“ and a pier at Erg's
refinery, claims were asserted by Erg against the Claimant which were
referred to arbitration in accordance with the arbitration agreement.
As the reference was progressing, the Defendants, who are Erg's
subrogated insurers, brought a claim against the Claimant in the
Tribunale di Siracusa, in Italy, in respect of the same incident. On 21
March 2005, Colman J granted an anti-suit injunction restraining the
Defendants from taking any steps to prosecute their claims except
by way of London arbitration. On an appeal direct to the House of
Lords, their Lordships referred to the ECJ the question whether it was
consistent with EC Regulation 44/2001 („the Regulation“) for a court of
a Member State to make an order to restrain a person from commencing
or continuing proceedings in another Member State on the ground that
such proceedings are in breach of an arbitration agreement ([2007] UKHL
4). At the same time, their Lordships made it very clear that they thought
that this question should be answered in the affirmative.
4. In the reference the Claimant denied liability and counterclaimed for a
declaration against Erg and the Defendants that it was under no liability
arising out of the collision with the pier; and on 7 May 2008 Andrew
Smith J ordered and directed that the Defendants were bound by the
arbitration agreement and that the dispute between Erg, the Claimant and
the Defendants was to be determined as a single reference by the arbitral
tribunal that had already been appointed.
5. Although Erg continued to participate fully in the reference, the
Defendants declined to take any part in the London arbitration.
6. On 12 November 2008, the arbitral tribunal (Sir Brian Neill, Mr Michael
Baker-Harber and Mr David Johnson QC) published its third final award
in which, inter alia, it held and declared that the Owners (the Claimant)
were under no liability to the Insurers (the Defendants) in respect of the
collision (Earlier, on 7 October 2008, the arbitral tribunal published its
second final award, declaring that the Claimant was under no liability to
Erg, and that Erg’s claim was dismissed).
7. It is this award that Simon J gave leave to enforce as a judgment.
8. On 10 February 2009, the ECJ answered the question referred to it by
the House of Lords in the negative, holding that an anti-suit injunction
enforcing an arbitration agreement was incompatible with the Regulation
([2009] 1 Lloyd’s Rep 413).
9. Following the subsequent discharge of the anti-suit injunction, the
Defendants have continued to prosecute the proceedings brought in the
Tribunale di Siracusa despite the arbitral tribunal's third final award. In
these proceedings, in which the issues at stake are the same as those in
the reference, the Claimant has denied liability and has denied that the
court has jurisdiction.
10. The Claimant is concerned that the Defendants may obtain a
judgment in their favour from the Tribunale di Siracusa and then seek
to have that judgment recognised and enforced in England pursuant
to Chapter III of the Regulation. The Claimant apprehends that on
the back of such a judgment, the Defendants will seek to enforce in
England a Club Letter of Undertaking subject to English law and to
the exclusive jurisdiction of the English Courts which, by a side letter
agreement, has been made applicable to the Claimant's liabilities (if any)
to the Defendants. It is these concerns that are behind the Claimant's
application to have the award enforced as a judgment, the thinking being
that once the award has been converted into a judgment, any subsequent
Italian judgment in favour of the Defendants would not be recognised in
England pursuant to Article 34 (3) of the Regulation which provides:
A judgment will not be recognised:
3. If it is irreconciliable with a judgment given in a dispute between the
same parties in the Member State in which recognition is sought.
11. The Claimant also intends to resist enforcement of any judgment
against it given by the Tribunale di Siracusa by relying on Art 34 (1)
of the Regulation on the ground that recognition of such a judgment is
manifestly contrary to public policy in England and Wales.
12. Section 66 (1) and (2) of the 1996 Act provide:
(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 given, judgment may be entered in terms of the
award.
13. When making the order giving leave to enforce the award, Simon J
said:
So far as the s. 66 application is concerned, I am satisfied that this is an
appropriate case and the Tribunal had jurisdiction to make the award,
as indeed appears from the order of the House of Lords, to which I have
been referred. I am also satisfied that there is utility in making the order
to protect the integrity of the arbitral process and the award, and there is
no real ground for doubting the validity of the order, at least at this stage.
14. The relevant part of the judgment ordered to be entered by Simon
J was a declaration „that the Claimant is under no liability (whether in
contract or tort or otherwise howsoever) to the Defendants in respect of
the collision between the vessel „Front Comor“ and the pier (and mooring
dolphins) at Erg Petroli's installation at Santa Panagia, Sicily on 8 August
2000.“
15. Mr Males QC for the Defendants argued that leave can only be given
under s. 66 (1) & (2) if a judgment in terms of the award would be
capable of being „enforced“ by use of one or more of the available means
of execution, such as a writ of fi.fa. or a charging order or a third party
debt order. Since a declaratory judgment is no more than a declaration
of the parties' rights, it is not susceptible, argued Mr Males, to being
enforced through the established execution process, except in highly
exceptional circumstances such as obtained in Webster v. Southwark
London Borough Council [1983] QB 698 (see below). No such exceptional
circumstances exist in the instant case. It follows that the court had no
power to make the order it did under s. 66 (1) & (2) of the 1996 Act.
16. Mr Males relied on the decision of the Court of Appeal in Margulies
Brothers, Ltd v. Dafnis Thomaiedes & Co (UK) Ltd [1958] 1 Lloyd's
Rep 205. Here, a dispute concerning cocoa deals had been referred to
an arbitrator and the victorious party had obtained leave to enforce
the resulting award, as amended by the London Cocoa Association
Appeal Board, under s.26 of the Arbitration Act 1950 (Section 26 was
in substantially the same terms as s. 66 (1) & (2) of the 1996 Act).
The award provided that certain identified contracts should be applied
against certain other identified contracts and the resulting differences
plus interest should be paid by the appellants to the respondents. The
Court of Appeal set aside the order made under s. 26. Lord Evershed
MR (with whom Sellers and Parker LJJ agreed) held that an award that
merely says by of declaration (in effect) that certain contracts should be
set against certain other contracts and that one of the parties should pay
the difference was not capable of enforcement within the section.
17. Mr Males also referred me to Tongyuan (USA) International Trading
Group v. Uni-Clan Limited (19 January 2001, unreported), where Moore-
Bick J said in reference to Margulies:
That case is authority for the proposition that an award which is
effectively couched in purely declaratory terms cannot be enforced as a
judgment, and for the wider proposition that, in order to be enforceable
as a judgment under s. 66 of the Arbitration Act 1996 (as it now is), the
award must be framed in terms which make sense if those are translated
straight into the body of a judgment.
18. Mr Males further submitted that any attempt to rely on Art 34 (1) or
Art 34 (3) of the Regulation was in any event doomed to failure in light
of The Wadr Sudr [2010] 1 Lloyd's Rep 193 and Solo Kleinmotoren GmbH
v. Emilio Bloch [1994] ECR 1-2237. In the The Wadr Sadr the Court of
Appeal held that a decision by a court of a Member State that a dispute
was not within an arbitration agreement was a Regulation judgment
and it was not open to argue in an English court that recognition of the
judgment was contrary to public policy within Art 34 (1) of the Regulation.
In Solo Kleinmotoren, the ECJ held that to be a „judgment“ for the
purposes of the Convention, the decision must emanate from a judicial
body of a Contracting State deciding on its own authority on the issues
between the parties; accordingly, a settlement recorded in an order of a
court was not a judgment of the purposes of the Convention.
19. Mr Males also referred to Arab Business Consortium International
Finance and Investment Co v. Banque Franco-Tunisienne [1996] 1 Lloyd's
Rep 485, at 488-489 and E D & F Man Sugar Ltd v. Lendoudis [2007]
2 Lloyd's Rep 579 at paragraph 34 where the view was expressed at
first instance that the conversion of a foreign arbitration award into a
judgment in the state of origin does not make any subsequent „judgment“
a Regulation judgment.
20. Mr Bailey QC for the Claimant contended that the purpose of s. 66
(1) and (2) is to assist the successful party in obtaining the benefit of
an award and that the word „enforced“ in s. 66 (1) should be construed
accordingly. It follows, he submitted, that where a party's object is to
convert an award into a judgment to utilise Art 34 (3) of the Regulation
to trump a later judgment given in breach of an arbitration agreement,
the court would be enforcing the award if it made an order under s. 66 (1)
and (2).
21. Mr Bailey QC further submitted that any previous rule or convention
that a declaratory judgment could not be enforced in the traditional sense
was displaced by the decision of Forbes J in Webster v. Southwark London
Borough Council [1983] QB 698, where it was held that in an appropriate
case a declaratory judgment could be enforced by the issue of a writ of
sequestration pursuant to an inherent power to ensure that the court's
orders were carried out in the interests of justice.
22. Mr Bailey also relied on the decision of the NSW Court of Appeal in
Tridon Australia Pty Ltd v. ACD Tridon Inc (Incorporated in Ontario) [2004]
NSWCA 146. This was an application for leave to appeal the refusal
by Smart AJ to grant leave under s. 33 of the Commercial Arbitration
Act 1984 (S. 33 (1) provides: An award made under 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, and where leave
is so given, judgment may be entered in terms of the award) to enforce
an award and for judgment to be entered in the terms thereof. The
award in question took the form of a number of declarations made by
an arbitrator who had decided five issues going to the question whether
certain conduct had been in breach of an agreement made between the
parties. Having heard full argument, the NSW Court of Appeal refused
leave to appeal. The purpose of the applicant was to have the award
turned into a judgment that would „speak to the world“. Giles JA held that
that did not constitute enforcement of the award.
11. …...Enforcement is a plain word, and means something quite different
from a restatement of the effect of the award in the form of a judgment.
The summary procedure provided by s. 33 of the Act is a procedure with
a purpose, the purpose of enabling a victorious party in an arbitration to
obtain the material benefit of the award in its favour in an easier manner
than having to sue on the award. There has been nothing put forward
in this case to suggest any occasion for enforcement of the declarations
made in the interim award. They are binding on the parties, and bind
them for the balance of the arbitration and beyond that.
12. I agree with Smart JA's view that there is no utility in making the
order sought, but for the perhaps more fundamental reason that there
is just no question of enforcement yet arising. In the absence of any
question of enforcement arising, it would not be appropriate to grant
leave to enforce the award.
23. On the question whether the Claimant could establish the primacy
of an arbitral award and/or a judgment made under s. 66 (1) and (2) of
the 1996 Act pursuant to Arts 34 (1) and 34 (3) of the Regulation, Mr
Bailey argued that the public policy issue whether a foreign judgment
inconsistent with an arbitral award should be enforced was fundamentally
different from the public policy issue featured in The Wadi Sadr. In the
former case, the public policy engaged was the giving of force and effect
to awards in accordance with the New York Convention, whereas in
the latter case the public policy contended for was the enforcement of
arbitration agreements.
24. Mr Bailey also submitted that Solo Kleinmotoren GmbH v. Emilio
Bloch was distinguishable on the basis that it concerned the status of a
settlement agreement recorded in an order of the court, which is very
different from a judgment given in terms of an arbitration award.
25. Mr Bailey relied on certain dicta of Waller LJ contained in
paragraph 63 of the judgment in The Wadi Sadr.
63. Might it make any difference if the English court had already granted
a declaration that an arbitration clause was incorporated before the
court of a member state considers whether to grant a stay? If in such
circumstances a stay were refused by the court of a member state then
the question might arise as to whether the English court should recognise
the judgment but I doubt whether public policy would need to be invoked
or indeed could be invoked. In such a case the claimant in England
could proceed with the arbitration in England so as to obtain a judgment
in England; if that were inconsistent with the judgment obtained in
the member state than that would provide an answer on its own [see
article 34(3)].[Emphasis supplied]
26. My attention was also drawn to paragraph 7.22 in Briggs, Civil
Jurisdiction and Judgments (5th ed. 2009), where the authors, having
expressed the view that it cannot be right either that a foreign judgment
may be enforced notwithstanding that it contradicts the local law of
arbitration, or that the issue is outside the domain of the Regulation on
the ground that it involves arbitration, submit:
[T]hat the least bad solution is to hold that it is contrary to English
public policy to recognise a foreign judgment which is irreconcilable with
an arbitral award which the court has given leave to enforce, despite
the case law and legislative difficulties which stand in the path of the
argument. Alternatively, it could be held that the word „judgment“ in
Article 34 (3) is used in two distinct senses, and that the „judgment
given in a dispute between the same parties in the Member State
in which recognition is sought“ includes local judgments which give
leave to enforce the award of an arbitral tribunal. This would not be
inconsistent with the view that foreign judicial orders which give leave
to enforce awards are not required to be recognised under the Brussels I
Convention, while accepting that once an English court has given leave to
enforce an arbitral award, it would be gravely damaging to legal certainty
for it to be required to recognise and enforce a foreign judgment which
undermined or contradicted that arbitral award.
27. Presciently, the learned editors observe in a footnote at the end of
this passage that the issue may well arise at a later stage in the dispute
between Allianz SpA and West Tankers Inc.
28. In my opinion, s. 66 (1) stands to be construed in the same manner
as that adopted by the NSW Court of Appeal in Tridon in respect to s. 33
of the Commercial Arbitration Act 1984. The purpose of s. 66 (1) and (2)
is to provide a means by which the victorious party in an arbitration can
obtain the material benefit of the award in his favour other than by suing
on it. Where the award is in the nature of a declaration and there is no
appreciable risk of the losing party obtaining an inconsistent judgment
in a member state which he might try to enforce within the jurisdiction,
leave will not generally stand to be granted because the victorious party
will not thereby obtain any benefit which he does not already have by
virtue of the award per se. In short, in such a case, the grant of leave will
not facilitate the realisation of the benefit of the award. Where, however,
as here, the victorious party's objective in obtaining an order under s.
66 (1) and (2) is to establish the primacy of a declaratory award over
an inconsistent judgment, the court will have jurisdiction to make a s.
66 order because to do so will be to make a positive contribution to the
securing of the material benefit of the award.
29. In my view, this approach is not inconsistent with Margulies Brothers,
Ltd v. Dafnis Thomaiedes & Co (UK) Ltd. There, a judgment in terms of
the award would not have assisted in giving the successful party the fruits
of his victory because a judicial declaration would have merely repeated
the declaration contained in the award and because the award did not
order on its face the payment of a specified sum.
30. On an application under s. 66 or to set aside a s. 66 order, it is
enough, in my view, in a case such as this, for the party seeking to
enforce the award to show that he has a real prospect of establishing the
primacy of the award over an inconsistent judgment. It is not necessary,
nor is it appropriate, for the court finally to decide this hypothetical
question – hypothetical because the unsuccessful party to the arbitration
will not have obtained an inconsistent judgment in a member state at the
time the court is dealing with the s. 66 application.
31. In my judgment, the Claimant comfortably satisfies this threshold
requirement.
32. Accordingly, for the reasons I have given, I conclude that Simon J
had jurisdiction to make the s. 66 order he made. It follows that this
application is dismissed.