Crown Copyright ©
Lord Justice Waller:
Introduction
1.The main point on this appeal is whether a judgment of a fellow
member state of the European Union ruling against a stay of proceedings
on the basis that an arbitration clause was not incorporated in the
contract can be relied on as creating an issue estoppel so as to prevent
the English court deciding the point differently. The broad picture is as
follows. The appellant, Endesa, commenced proceedings in the Mercantile
Court of Almeria in Spain in order to arrest a vessel and claim damages
for late delivery under a bill of lading for discharging a cargo of coal
at a port some way short of the contractual point of discharge. The
respondents, NNC, commenced proceedings in the Commercial Court in
London without reference to any arbitration clause claiming a declaration
of non-liability. NNC however sought a stay from the Almeria court on the
grounds that there was an arbitration clause incorporated by reference
to a charter party in the bill of lading, alternatively on the grounds that
the Commercial Court in London was first seised. The Almeria court
ruled (so Endesa alleges) that no arbitration clause was incorporated
into the contract, refused to decline jurisdiction on that basis, but stayed
proceedings pending the Commercial Court in London establishing its
position as the court first seised.
2.NNC commenced an arbitration and also arbitration proceedings in
London (the Arbitration proceedings). By the Arbitration proceedings they
sought to establish English law as the putative proper law of the bill of
lading and they sought a declaration that the arbitration clause was as
a matter of English law incorporated into the bill of lading and further
sought an anti-suit injunction seeking to prevent Endesa pursuing any
claim other than via arbitration. Endesa's response was to assert that the
judgment of the Almeria court was binding on the English Court under
Article 33 of Council Regulation (EC) 44/2001 (the regulation) so as to
preclude the English court from deciding that question a different way.
3.Gloster J ruled by a judgment handed down on 1st April 2009 that
the judgment of the Almeria court was a judgment within the regulation
but not binding in the Arbitration proceedings, on the basis that those
proceedings were not covered by the regulation being excluded by Article
1(2)(d). Gloster J granted a declaration to the effect that as a matter of
English law, its putative applicable law, the bill of lading did contain an
arbitration clause.
4.Endesa appeal from that judgment accepting that if she was not bound
by the Almeria court judgment, the judge was correct as to putative
proper law and indeed correct as a matter of English law on the issue
whether the arbitration clause was incorporated.
5.Although there is an issue in the Court of Appeal (and it would seem
not before the judge) as to precisely what the Almeria court decided, the
critical issue on the appeal is whether the judgment of the Almeria court
is a judgment to which the regulation applies and whether it gives rise
to an issue estoppel in the Commercial Court in London in the Arbitration
proceedings.
6.The judge's task was made more difficult by the fact that, after
preparing her judgment in draft, the European Court of Justice (the ECJ)
handed down its decision in The Front Comor [2009] 1 Ll Rep 413. It
became common ground that following that decision there could be no
question of the Commercial Court granting an injunction. What remained
in issue was whether a judgment of the Almeria court was a judgment
within the regulation and enforceable as such. The judge accepted that
the ECJ in that case had ruled that a decision taken as to the applicability
of an arbitration clause in the course of proceedings which did fall within
the regulation, was a regulation judgment and that thus the Almeria
judgment was a regulation judgment. But she held it was not binding in
proceedings which were themselves excluded from the regulation, as she
held the Arbitration proceedings were.
7.Endesa, through Mr Richard Lord QC, seek to uphold the judge's view
that the Almeria judgment was a judgment to which the regulation
applied, and argue that there was no basis for holding that such a
judgment was not binding in England, whatever the nature of the
proceedings. NNC by a respondents' notice seek to argue that the
Almeria judgment, at least in so far as it ruled on the incorporation of the
arbitration clause, was excluded from recognition under the regulation,
and otherwise to uphold the judge.
The facts and procedural history in more detail
8.The facts and much of the procedural history are set out fully in the
judge's judgment. It is possible to summarise them as follows: -
i) NNC are the owners of a vessel "Wadi Sudr". Endesa maintain they
have a claim to damages as consignees of a bill of lading for discharge of
a cargo of coal at a port way short of the contractual port of discharge.
On the morning of 23rd January 2008, Endesa made an application to the
Almeria Mercantile Court in Spain (the Almeria Court) for the arrest of the
"Wadi Sudr" in order to secure its claims under the bill of lading.
ii) On the afternoon of 23rd January 2008, NNC commenced an action
(folio 64) in the Commercial Court in London (the Commercial Court
action) by which it sought a declaration of non-liability under the bill of
lading and asserted that by the terms of the bill of lading jurisdiction was
agreed to be London. It made no assertion that there was an arbitration
clause contained in that contract. At this stage NNC had no copy of any
voyage charter referred to in the bill of lading.
iii) On 22nd February 2008, Endesa served its substantive claim in the
Almeria Court.
iv) On 19th March 2008, NNC lodged submissions with the Almeria court
challenging its jurisdiction relying on the fact that the Commercial Court
action had been commenced in London but also "petitioning" the court "on
the grounds the court does not have jurisdiction because the question is
subject to arbitration in London."
v) On 30th April 2008 Endesa responded to NNC's submissions in the
Almeria court asserting (a) that NNC had not disclosed a charter party
incorporated into the bill of lading which incorporated an arbitration
clause;(b) that because NNC and Endesa were not direct parties under
the charter party containing the London arbitration clause under Spanish
law there was no binding arbitration clause; (c) NNC had waived any right
to rely on the arbitration clause by commencing the Commercial Court
action; and (d) the Almeria Court was the court first seised.
vi) On 14th April 2008 Endesa acknowledged service of the Commercial
Court action and gave notice disputing jurisdiction.
vii) On 2nd June 2008 NNC applied to the Almeria court for a stay of its
proceedings on the grounds that the Commercial Court was the court first
seised by virtue of the Commercial Court action.
viii) On 10th June 2008 NNC commenced proceedings in London in order
to obtain copies of the voyage charter. This application was supported by
a witness statement of Mr Askins acting for NNC giving notice that NNC
intended to apply to amend the claim form in the Commercial Court action
to seek declarations that the London arbitration clause contained in the
voyage charter was binding on Endesa. This statement demonstrated
that his knowledge that the charter party contained such a clause was
provided to him by a Mr Alegre prior to Endesa's arrest of the vessel in
January 2008 i.e. prior to the commencement of the Commercial Court
action.
ix) On 3rd July 2008 NNC commenced arbitration in London against
Endesa under the bill of lading provisionally appointing Michael Baker-
Harber as its arbitrator.
x) On 8th July 2008 NNC commenced the Arbitration proceedings in the
Commercial Court in London seeking various forms of relief: (i) disclosure
of the voyage charter;(ii) a declaration that the arbitration clause in the
voyage charter was validly incorporated into the bill of lading; (iii) an
injunction to restrain Endesa proceeding with claims under the bill of
lading other than by way of London arbitration. These claims were made
"in the alternative to the relief claimed in the Commercial Court action".
xi) On 15th July 2008 Flaux J granted permission to serve the Arbitration
proceedings out of the jurisdiction and ultimately on 31st July allowed
that service to be made on Thomas Cooper, solicitors for Endesa, and he
abridged time limits.
xii) On 7th August 2008 the Commercial Court in London listed the
applications in the Commercial Court action for hearing on 29th October
2008. On 8th September 2008 the Almeria court handed down a
judgment. A belated attempt had been made by NNC to seek an anti-
suit injunction before the handing down but the Commercial Court in
London was not prepared to list the matter until 29th October 2008 with
the applications in the Commercial Court action.
xiii) The Almeria court ruled in essence (a) that under Spanish law
the arbitration clause in the voyage charter had not been incorporated
into the bill of lading; and (b) that by commencing the Commercial
Court action NNC had waived reliance on any arbitration clause. It
however granted a stay pursuant to Article 27 of the regulation until the
Commercial Court ruled as to whether it was competent and thus seised
of the action between NNC and Endesa.
xiv) On 30th September 2008 NNC submitted an appeal of the Almeria
court judgment inviting it to review its decision to refuse to reject
jurisdiction because of the existence of an arbitration clause.
xv) By a witness statement dated 16th October 2008 served shortly
before the hearing before Gloster J, NNC gave notice of its intention to
apply to amend in the Arbitration proceedings and more relevantly of its
intention to pursue in the Commercial Court action by process of serving
particulars of claim, a position inconsistent in one material respect with
its position in the Arbitration proceedings and for which it was being
suggested it need no permission to amend. The draft particulars sought
declarations that the London arbitration clause was incorporated into the
bill of lading; damages for breach of that clause; a declaration that the
court had jurisdiction under Article 5 of the regulation [this, as we shall
see, is quite inconsistent with the position taken up in the Arbitration
proceedings]; a declaration that NNC had no liability which Endesa might
bring in breach of the arbitration provision; and an anti-suit injunction.
xvi) The hearing before Gloster J took place between 29th October and
3rd November 2008, following which she reserved her judgment.
xvii) On 3rd December 2008 the Almeria court delivered its judgment on
NNC's appeal. NNC had only supplied the Spanish court with a copy of the
voyage charter on which it relied immediately prior to the handing down
of this judgment. It would seem that the court did not take the terms of
the voyage charter into account before the hand down. But it later ruled
on 29th December 2008 that it made no difference to its judgment and
that the document should be placed on the judicial file and available to
NNC on any appeal.
xviii) The reason why NNC only supplied the voyage charter so late
was because NNC only obtained a copy of the same from Endesa's
supplier Carboex SA, an associated company of Endesa on 2nd October
2008 (following an earlier ruling by Andrew Smith J on 17th July 2008)
and only then on terms that it would only use the same in the English
proceedings. NNC only obtained the same free from such undertaking on
25th November 2008 by virtue of an order made by Gloster J herself on
21st November 2008 after completion of the hearing before her. By that
order she ordered Endesa to disclose the voyage charter, gave permission
of the English court for its use in Spain, but left it to the Spanish court
to rule whether it should receive it. The parties made further written
submissions to Gloster J concerning disclosure after the hearing because
it was only as a result of a question raised by the judge during the
hearing that NNC obtained a translation of the supply agreement which
when obtained contained a reference to the price of "demurrage/dispatch"
being indicated in the "corresponding charter party". NNC submitted
to the judge that this supported the submission NNC had been making
that Endesa were aware of the terms of the voyage charter; and was
something which contradicted the impression NNC said was being given to
the Spanish court that there was no document with an arbitration clause
in it.
xix) The judgment of the Almeria court of 3rd December 2008 would
appear to have ruled (and there is some dispute as to what it ruled) that
NNC had waived arbitration by commencing the Commercial Court action,
that NNC should not be allowed to rely on the arbitration clause at the
same time as seeking a stay under Article 27 on the basis the English
court was first seised; and that the first court was correct in its view as to
whether the arbitration clause was incorporated but adding that English
law had not been adequately asserted on that question. It also said that a
London court might take a different view and would not be bound. A copy
of this judgment was supplied to Gloster J and she did not invite further
submissions on it.
xx) Gloster J circulated a draft of her judgment on 9th February 2009
for handing down on 13th February. By that judgment she would have
dismissed the Commercial Court action, granted the declarations being
sought in the Arbitration action and granted an injunction to prevent
Endesa continuing the proceedings other than by London Arbitration.
xxi) But on 10th February 2009 the ECJ handed down its judgment in The
Front Comor. On any view that decision precluded the granting of any
injunction, and the question was whether it had gone any further than
that. On that issue the judge heard further oral argument and ultimately
handed down the judgment, the subject of this appeal, on 1st April 2009.
The regulation
9.I have appended to this judgment what appear to me to be the relevant
provisions of the regulation, in the context of which all aspects of the
issues before the court have to be resolved.
What have the Spanish courts decided and what points are open to NNC
on the judgments themselves?
10.The judgment of 3rd December 2008 of the Spanish court was handed
down after the hearing before Gloster J and before she had delivered
judgment. Miss Selvaratnam QC sought to address an argument before
us as to whether the 3rd December judgment was a judgment of a
competent court making a final ruling on the question whether the
arbitration clause was incorporated, and whether thus there could be any
question of the ruling being res judicata. She placed particular reliance
on the following passage in the judgment of 3rd December dealing with
the fact that the Spanish Court had originally rejected the arbitration
plea because the proceedings in England were court proceedings not
arbitration.
"The final ruling reached in the aforementioned foreign court [i.e. the
English Court my insertion] will apply, although there are two possibilities
in that regard. One possibility is that the court does not accept the
arbitration clause – and in that case the magistrate judge herein will
refuse jurisdiction in favour of the English court – and the other is that
it does. In the latter scenario this court may indeed proceed, given that
in the event the exception of submission to arbitration is rejected, then
it must consequently act in accordance with the principle of the binding
nature of judicial rulings (Art. 267 Spanish Law of Judicial Proceedings)..."
11.Thus Miss Selvaratnam submitted by its own terms the Spanish
judgment contemplated the possibility that the High Court might conclude
that there was a valid and binding arbitration agreement between the
parties, and she submitted that nothing in the Spanish judgment was
intended to prevent the High Court from reaching such a conclusion.
Furthermore she pointed out in the context of the Spanish court staying
its proceedings pending the High Court in London ruling on its own
competence in the Commercial Court action, that the Spanish Judgment
was expressly stated to be: -
"...without prejudice to the fact that these points do not bind the London
court which may well decide the opposite – either in the manner set
out by Mr Askins or in any other manner – and in that case this judicial
body will be obligated to act in accordance with Article 27 of Regulation
44/2001".
12.Miss Selvaratnam sought, I believe, to make two points. First she
submitted the Spanish court did not intend to preclude the English High
Court from finding there was a binding arbitration clause and that, she
submitted, was relevant to whether the Spanish court decisions were res
judicata. Second, she submitted, that any decision of the Spanish court
was conditional and that the Spanish court would only ultimately decide
the point on the arbitration clause if the English court held it was not first
seised, and the stay in Spain was lifted. The latter point, if correct, would
mean that at the stage when Gloster J ruled on the matter, there was no
decision of the Almeria court, i.e. a competent court on the incorporation
of the arbitration clause. That would allow Gloster J to rule as she did and
provide a judgment of the English court that could be relied on either as
an answer to any judgment that might be given by the Almeria court or as
a foundation for a claim for damages for breach of the arbitration clause.
13.We raised with Miss Selvaratnam whether these points were taken in
her grounds of appeal and whether indeed she had permission to appeal
on them. Furthermore it seemed clear from Gloster J's judgment that
these points were not taken before her [see for example paragraph 76 of
her judgment].
14.Miss Selvaratnam explained first that there had been little opportunity
to raise the matter before the judge because the 3rd December decision
was handed down while judgment was reserved. She furthermore
suggested that the points were taken in the respondents' skeleton on
which Longmore LJ granted permission to appeal and thus that she had
permission.
15.It seems to me that since the parties went back before the judge to
deal with The Front Comor it is difficult to contend that there was not an
opportunity to address the judge on the points. Furthermore since there is
no sign of this point in the grounds of appeal, technically I do not think it
can be said that NNC have permission to appeal on these points.
16.But it would not be satisfactory to rest a decision solely on
technicalities in a case of this kind. The points were clearly taken in
an addendum to the respondents' skeleton dated 29th October 2009
and I did not understand Mr Lord for Endesa to object with any force to
the points being argued. It is right in my view that we should deal with
them and consider whether they are points with any validity on which
permission to appeal should be given.
17.In my view the points made are unsound. Miss Selvaratnam would
seem to suggest that it is only the judgment of 3rd December which
provides her with the arguments. It is thus worth examining first what
the position was after delivery of the first Spanish judgment which ruled
that the arbitration clause was not incorporated and only stayed the
proceedings on the basis that the English court might by virtue of the
Commercial Court action be the court first seised. Does the fact that the
proceedings were stayed by that judgment render the judgment itself
in any way conditional? We have no evidence as to the view a Spanish
court would take but I cannot see why a judgment delivered is anything
other than just that. If it rules that a stay should be granted it is not
only a valid judgment so ruling but a valid judgment for anything else it
actually decides. In this case that judgment, in my view, decided that as
matter of Spanish law there was no arbitration clause and/or that NNC
were precluded from reliance on it and refused to decline jurisdiction on
that basis, but it ruled that it would grant a stay in compliance with its
obligation to do so under Article 27.
18.The first court would not know what view the English court would take
as to the binding nature of any decision of the Spanish court and made no
comment on that.
19.What then of the 3rd December judgment? That again as it seems
to me was a judgment on which reliance could be placed as from the
moment it was delivered. There was nothing conditional about the
judgment. So far as a stay was concerned it was upholding the first
decision that there should be a stay. It furthermore was upholding the
first judgment on the question whether as a matter of Spanish law the
arbitration clause was incorporated. It made clear why it had not applied
English law. In the first passage of the judgment quoted above, the
Spanish court is not saying if the English court were to decide that the
arbitration clause was incorporated, the Spanish court will abide by that:
it was saying precisely the opposite.
20.The fact that the Spanish court was of the view that an English court
might still feel free to decide the issue as to whether an arbitration clause
was incorporated into the contract seems to me of no consequence. At
the time the Spanish court made that observation i.e. before the decision
of the ECJ in The Front Comor it might have thought that a decision on
the incorporation of an arbitration clause was outside the regulation and
thus one by which the English court would not be bound, in the same way
as the Spanish court thought it would not be bound by an English court
decision on incorporation, but the question whether that is right or not is
the very question which we must decide.
21.In my view Miss Selvaratnam's argument that the Spanish judgments
had not decided that the arbitration clause was not incorporated even if
open to her would fail.
The Commercial Court action and permission to appeal
22.Gloster J dismissed the commercial court action and we dismissed
the application for permission to appeal that ruling at the hearing of the
appeal. It is convenient to give reasons for doing so and to dispose of this
aspect before dealing with points that arise in the Arbitration proceedings.
23.Miss Selvaratnam for NNC was seeking to keep this action alive only
as an alternative to her submissions in the Arbitration proceedings.
The desire to do so flowed as I understood it from assistance that NNC
would seek to gain from the fact that if she can keep this action alive and
properly served, the English court would at least be first seised, and the
Spanish action would remain stayed.
24.I have my doubts as to whether even if NNC could have kept this
action alive on the basis they now wish, that would gain them anything.
In the Arbitration proceedings they argue that the proceedings are
outside the regulation by virtue of the arbitration exclusion, Article
1(2)(d). In the Commercial Court action they now wish to amend their
claim and argue that a claim for breach of an arbitration agreement
falls within the regulation, Article 5(1). The question (as it at present
seems to me) would still arise in that action as it does in the Arbitration
proceedings, whether the judgment of the Spanish court that there
was no arbitration agreement was binding on the judge who had to
consider whether there was an arbitration clause. If it was binding in the
Arbitration proceedings, I am at present unclear why it would not also be
binding in the Commercial Court action. I do not see how the fact that the
English court might be the court first seised assists NNC. But be all that
as it may, there is good reason why Gloster J was right in dismissing this
action and why permission to appeal should be refused.
25.NNC commenced the Commercial Court action and sought to serve
the proceedings without leave of the court on the basis that there was a
clause in the contract giving the English court jurisdiction. That plea was
made at a time when Mr Askins, solicitor acting for NNC, did not have
the relevant voyage charter. But his information was that the voyage
charter contained a London arbitration clause not as was pleaded in the
Commercial Court action that there was a term providing for the English
court to have jurisdiction [see paragraph 8(ii) above]. To allow NNC to
amend in order to make the case that they deliberately did not make and
indeed which is inconsistent with the case that they first made in order
to enable them to preserve a first seised status is to my mind simply
unacceptable. This was the view of Longmore LJ when refusing permission
on paper, and I agree.
26.Miss Selvaratnam sought to persuade us that even if we took that view
and were inclined to dismiss the application for permission to appeal on
that basis, we should hear the argument based on the draft particulars of
claim. She submitted that if NNC were to lose the appeal in the Arbitration
proceedings (because we decided that the judgment of the Spanish court
was an enforceable regulation judgment), an important point might
arise for the future as to whether a claim for breach of an arbitration
agreement might not also be proceedings within the regulation capable of
being made under Article 5(1).
27.I would think that Gloster J's view as to the merits of that argument
are likely to be right, but in agreement with Longmore LJ, it would not
in my view be right to give permission to appeal so as to explore those
arguments in a case where the point had not been properly taken at the
outset.
Position at this stage
28.It is convenient to take stock. It follows that the position before
Gloster J handed down her judgment was that (i) there was no decision of
the English court relating to the incorporation of an arbitration clause into
the contract; (ii) there were two judgments of the Almeria court in which,
after argument from both sides, one judgment had decided, and the
other confirmed the decision, that the arbitration clause relied on by NNC
had not been incorporated into the contract; (iii) as a matter of English
common law the issue whether there was an arbitration clause in the
contract would have been res judicata as between NNC and Endesa and
thus a judgment to which the English court would be bound to give effect
(subject possibly to an argument on public policy which I will leave on one
side at this stage); (iv) NNC's only escape from that position could be by
virtue of section 32(1) and (3) of the Civil Jurisdiction and Judgments Act
1982, but that escape would not be available if section 33(4) applied, and
the judgment was one to which Article 33 of the regulation applied.
29.It is convenient to set out section 32 at this stage: -
"32 Overseas judgments given in proceedings brought in breach of
agreement for settlement of disputes
(1) Subject to the following provisions of this section, a judgment
given by a court of an overseas country in any proceedings shall not be
recognised or enforced in the United Kingdom if—
(a) the bringing of those proceedings in that court was contrary to
an agreement under which the dispute in question was to be settled
otherwise than by proceedings in the courts of that country; and
(b) those proceedings were not brought in that court by, or with the
agreement of, the person against whom the judgment was given; and
(c) that person did not counterclaim in the proceedings or otherwise
submit to the jurisdiction of that court.
(2) Subsection (1) does not apply where the agreement referred to in
paragraph (a) of that subsection was illegal, void or unenforceable or was
incapable of being performed for reasons not attributable to the fault of
the party bringing the proceedings in which the judgment was given.
(3) In determining whether a judgment given by a court of an overseas
country should be recognised or enforced in the United Kingdom, a court
in the United Kingdom shall not be bound by any decision of the overseas
court relating to any of the matters mentioned in subsection (1) or (2).
(4) Nothing in subsection (1) shall affect the recognition or enforcement
in the United Kingdom of—
(a) a judgment which is required to be recognised or enforced there under
the 1968 Convention [or the Lugano Convention][or the Regulation];
(b) a judgment to which Part I of the Foreign Judgments (Reciprocal
Enforcement) Act 1933 applies by virtue of section 4 of the Carriage of
Goods by Road Act 1965, section 17(4) of the Nuclear Installations Act
1965,... [section 6 of the International Transport Conventions Act 1983],
section 5 of the Carriage of Passengers by Road Act 1974 or [section
177(4) of the Merchant Shipping Act 1995]"
30.It was common ground, as found by the judge at paragraph 87 of
her judgment, that, if the Spanish judgments were not required to be
recognised under the regulation, Endesa could not in the light of section
32(3) rely on the ordinary principles of res judicata.
31.The judge's conclusion was that the judgments did fall within the
regulation on the basis of the decision in The Front Comor but she held
(a) that an English court was not required to recognise them by virtue
of Article 33(1) in the Arbitration proceedings, since those proceedings
were outside the scope of the regulation by virtue of Article 1(2)(d); (b)
that to grant a declaration was not an interference with the jurisdiction of
the court of another member state; and (c) that, even if that conclusion
were wrong, the judgments were not enforceable on the grounds of public
policy.
Were the judgments of the Almeria court within the regulation?
32.NNC by their respondents' notice seek to challenge the judge's view
that the Spanish Judgments were regulation judgments, and that is
obviously the first question to deal with. NNC accept that the proceedings
brought in the Almeria court claiming damages for breach of the bill
of lading would come within the regulation. The question is whether a
judgment which is not on the merits but which is ruling that an arbitration
clause has not been incorporated and that proceedings should not be
declined for that reason is a judgment which must be recognised and
enforced under Chapter III of the regulation.
33.The difficulty for Miss Selvaratnam is the decision of the ECJ in The
Front Comor. In that case the English court had ruled on the validity of an
arbitration clause and it had granted a declaration of the clause's validity.
It had also consistent with English authorities at that time granted an
anti-suit injunction to restrain proceedings in a court in Syracuse. The
House of Lords referred one question to the ECJ, i.e. whether it was
consistent with 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 grounds that such proceedings are in
breach of an arbitration clause. The question whether the granting of a
declaration already granted by the English court was consistent or not
with that regulation was not referred. The Advocate General handed down
an opinion on 4th September 2008. I will not set out many passages from
that opinion since it is the court's decision which is of most relevance but
the essence of the Advocate General's opinion was as follows.
34.The proceedings in Syracuse were proceedings to which the regulation
applied. It is the subject matter of the proceedings which dictates whether
the proceedings are within or without the regulation. A preliminary issue
in such proceedings does not change the nature of the proceedings and
the Advocate General relied on the decision of the ECJ in Marc Rich &
Co AG v Societa Italiana Impianti pA Case C-190/89 [1991] ECR I-3855
(Marc Rich). The summary of the Advocate General's view in the Front
Comor is in paragraph 54 where she says: -
"The existence and applicability of the arbitration clause merely constitute
a preliminary issue which the court seised must address when examining
whether it has jurisdiction. Even if the view were taken that that issue
fell within the ambit of arbitration, as a preliminary issue it could not
change the classification of the proceedings, the subject matter of which
falls within the scope of the Regulation. It can be left undecided here how
proceedings which concern similar findings in the main case should be
evaluated."
35.It seems to me that the Advocate General in that paragraph is
advising that a judgment on a preliminary issue in proceedings within
the regulation will be a judgment within the regulation, even if, when
looked at in isolation, the subject of the preliminary issue fell within the
ambit of arbitration. That is consistent with the decision in Marc Rich on
which the Advocate General was relying. In Marc Richthe argument was
that a preliminary issue as to the existence of an arbitration clause came
within the regulation, although the subject matter of the proceedings
was arbitration. In other words the argument was the mirror image of
the argument being addressed in The Front Comor. That argument was
rejected by Advocate General Darmon and by the ECJ. It was the scope
and main subject of the proceedings which dictated whether they were
within or without the regulation – in Marc Rich that resulted in them being
without, and in The Front Comor the result was that they were within.
36.Miss Selvaratnam sought to argue that the last sentence of paragraph
54 left open the question as to how the judgment on any preliminary
issue was to be treated. That sentence is difficult to understand and
we wondered in the course of the hearing whether we had an accurate
translation of the Advocate General's words. Other translations (the
French and the German produced during the hearing before us) seemed
to support the view that what the Advocate General was saying in the
last sentence was that it was unnecessary to say more about preliminary
issues in proceedings, where arbitration was the main subject matter
of the proceedings. That would be more consistent with the first two
sentences, and would accord with my view of what she was intending to
say.
37.The Advocate General was also of the view that one reason why an
anti-suit injunction should not be granted was because a person who
took the view that he was not bound by an arbitration clause could not be
barred from access to the courts having jurisdiction under the regulation.
That seems to be a separate point but in its context the Advocate General
recognised that the result might be that there could be two sets of
proceedings which might reach divergent decisions [see paragraph 70].
In that case that recognition flowed from the fact that the English court
had already granted a declaration but that would be in proceedings where
the main object of the proceedings were arbitration and where thus the
judgment of the English court fell outside the regulation. The Syracuse
court would thus not be bound under the regulation by the judgment of
the English court and would be free to decide the issue of whether there
was an arbitration clause for itself.
38.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; (ii) that since that would not be binding on another court where
proceedings within the regulation had been commenced, there could
be inconsistent decisions; but (iii) a judgment in a member state in
proceedings within the regulation on the incorporation of an arbitration
clause would be a regulation judgment.
39.The essence of the court's judgment was contained in paragraphs 24
to 26: -
"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.
25. It is therefore appropriate to consider whether the proceedings
brought by Allianz and Generali against West Tankers before the Tribunale
di Siracusa themselves come within the scope of Regulation No 44/2001
and then to ascertain the effects of the anti-suit injunction on those
proceedings.
26. In that regard, the Court finds, as noted by the Advocate General
in points 53 and 54 of her Opinion, that, if, because of the subject-
matter of the dispute, that is, the nature of the rights to be protected
in proceedings, such as a claim for damages, those proceedings come
within the scope of Regulation No 44/2001, a preliminary issue concerning
the applicability of an arbitration agreement, including in particular
its validity, also comes within its scope of application. This finding is
supported by paragraph 35 of the Report on the accession of the Hellenic
Republic to the Convention of 27 September 1968 on Jurisdiction and the
Enforcement of Judgments in Civil and Commercial Matters (OJ 1978 L
304, p. 36) ('the Brussels Convention'), presented by Messrs Evrigenis
and Kerameus (OJ 1986 C 298, p. 1). That paragraph states that the
verification, as an incidental question, of the validity of an arbitration
agreement which is cited by a litigant in order to contest the jurisdiction
of the court before which he is being sued pursuant to the Brussels
Convention, must be considered as falling within its scope."
40.I have no doubt that the court was agreeing with the Advocate General
in saying that a preliminary ruling as to the applicability of an arbitration
clause in proceedings in which the main subject of the proceedings
was within the regulations was itself to be categorised as within the
regulations.
41.It may be thought to be unsatisfactory that what appears to be
contemplated is the possibility of inconsistent judgments as between
member states. Perhaps even more unsatisfactory would appear to be the
result which leaves the court in member state A where the proceedings on
the merits have been commenced free to ignore a judgment in arbitration
proceedings in state B the seat of the arbitration, but if a preliminary
ruling can be obtained early enough in state A, the courts in state B are
bound by the result of the preliminary ruling in state A.
42.Miss Selvaratnam, supported by her junior Mr Thomas Whitehead,
sought to argue that it was unnecessary to reach that unsatisfactory
result. They argued that the question as to the effect of a judgment on
a preliminary ruling was not before the ECJ, and if it had been the ECJ
would at least have recognised the lack of reciprocity and would not have
reached the unsatisfactory conclusion postulated. The question the ECJ
was asked she submitted related simply to anti-suit injunctions. So far
as enforcement of judgments was concerned she argued that Article 48
supplied the answer. That Article provides as follows: -
"Where a foreign judgment has been given in respect of several matters
and the declaration of enforceability cannot be given for all of them, the
court or competent authority shall give it for one or more of them."
43.She argued that judgments can be severable and if a judgment dealt
with more than one point and in part was dealing with a point outside the
regulation Article 48 left it open to the courts of another member state
not to recognise the aspect falling outside. She referred us to Van den
Boogaard v Laumen [1997] QB 759.
44.Mr Whitehead, when he followed, put the point in this way. He said
that when one looked at the regulation it was dealing with various aspects
– Scope Chapter 1 was of general application; Chapter II was dealing with
jurisdiction and proceedings in that context; and Chapter III was dealing
with judgments and the enforcement thereof. His argument was that in
considering the extent to which judgments were enforceable one should
not look to see whether the proceedings were within the regulation, that
being relevant to jurisdiction. At the time when the court had to consider
the enforcement of a judgment, the court should look at what was being
enforced under the judgment. If that fell outside the regulation then the
court would not enforce it.
45.Applying the above arguments to this case Miss Selvaratnam and Mr
Whitehead submitted what was being enforced by Endesa was a ruling
on the incorporation of an arbitration clause. That was "arbitration" and
outside the regulation.
46.The arguments are seductive because they would at least eliminate
the lack of reciprocity, but the difficulty is that they seem to me to be
contrary to the ruling of the ECJ and they do not marry with section 32
of the Civil Jurisdiction and Judgments Act. The ruling of the ECJ seems
to me to be that a judgment on a preliminary ruling is a judgment within
the regulation if it takes place in proceedings the main scope of which
brings them within the regulation. Furthermore a decision on whether an
arbitration clause is incorporated into a contract will, in most instances, be
very closely tied up with the merits of a contractual dispute where a court
must first ascertain what the terms of a contract are. It is the judgment
on incorporation and the terms of the contract which is a regulation
judgment and to which Article 33 applies. It is to that judgment which
section 32(4) applies in its entirety. This was the judge's view and I agree
with it.
47.The next question is whether the judge was right in holding that,
because the Arbitration proceedings fell outside the regulation, a
regulation judgment would not be binding in those proceedings. This was
a point that the judge took for herself. She placed reliance on the Court
of Appeal decision in Through Transport Mutual Insurance Association
(Eurasia) Ltd v New India Assurance Co Ltd (The Hari Bhum) [2005] 1
Lloyd's Rep 67 (Through Transport) which she thought supported the view
that a decision of a court of a member state, taken in proceedings where
the main scope brought them within the regulation, on the applicability
of an arbitration provision, was not binding even if the judgment was a
regulation judgment.
48.The position in Through Transport was that there was a decision of a
court of a member state [Finland] in proceedings within the regulation on
the question whether there should be a stay for arbitration. It is important
to identify what, if any, issue the Finnish court decided. Simplifying the
position as far as possible, Through Transport was a mutual insurance
association whose club rules contained an arbitration provision in very
wide terms. New India were the assignees of a claim against a club
member who had become bankrupt. New India commenced proceedings
in the Finnish court pursuant to a statutory right under Finnish law
which entitled a claimant to sue an insurance company direct where the
alleged wrongdoer had gone bankrupt. Through Transport challenged
the jurisdiction of the Finnish court. That court held it had jurisdiction
under the regulation because claims against insurers could be brought in
the country where the harmful event occurred and held that New India
was not a party to the contract of insurance and that New India's claim
was not derived from the club member (on the basis presumably that
it derived from the statutory right under the Finnish statute), and thus
New India was not bound by the arbitration clause. [See paragraph 14 of
Clarke LJ's judgment].
49.The issues which the Court of Appeal resolved were (i) whether the
English court should decline jurisdiction leaving the question whether "the
arbitration exception applies" to the court first seised. They ruled that
a court second seised was entitled to consider that question in reliance
on the reasoning of the Advocate General and the ECJ in Marc Rich [see
paragraph 37] and (ii) that because the English proceedings were ones
to which the regulation did not apply the English court had jurisdiction to
decide whether the arbitration clause applied [see paragraph 49]. It is in
the above context there followed the paragraphs of the judgment relied
on by the judge which state as follows: -
"50. A number of other questions which might arise under the Regulation
were touched on in argument. In particular, there was some debate
on the question whether the judgment of the District court of Kotka is
entitled to recognition under Article 33. However, we do not think that this
question arises for decision at present. As we understand it, the judgment
obtained to date is simply to the effect that that court has jurisdiction to
entertain a claim by new India under the Finnish Act. That was essentially
a matter for that court in proceedings which seem to us to be within the
Regulation. Whether that judgment is entitled to recognition or not does
not seem to us to be relevant to the question whether the judge was
correct to grant the declarations or injunction which he did.
51. The fact that arbitration is excluded from the Convention means that
from time to time there are likely to be conflicting judgments in different
member states and it is therefore possible that questions of recognition
and enforcement of conflicting judgments may arise in the future in a
case like this. In our opinion such questions are best left for decision
when and if they arise."
50.What the Finnish court had decided was that the Finnish statute
provided the basis for the claim in Finland and thus the arbitration clause
had no application. So far as the English court was concerned, the issue
was whether that was a correct characterisation of New India's claim.
The Court of Appeal (in agreement with Moore-Bick J (as he then was))
confirmed that, under English conflict of laws, issues of characterisation
are to be resolved by applying principles of English law [see paragraph
55] and that Moore-Bick J had been correct in his characterisation and in
holding New India bound by the arbitration clause but only in the sense
of the club being entitled to raise the same as a defence. The court found
that New India was not a party to the contract containing the arbitration
clause and was thus not in breach of contract in commencing proceedings
in Finland [see paragraph 65]. It thus held that since New India were
pursuing a claim which, under Finnish statute, it was entitled to do, it was
not a case where an injunction should be granted [see paragraph 96].
51.On the issue whether New India were parties to a contract containing
an arbitration clause the English court and the Finnish court were
not in disagreement. Thus, this was not a case where an issue as to
incorporation had been decided under a regulation judgment and where
any consideration had to be given as to whether an issue estoppel had
arisen on that issue. The question whether the ruling of the Finnish court
was res judicata on any issue for decision by the English court simply did
not arise in that case and, if it had, the court could not simply have said
the question of its binding nature did not arise for decision at that stage.
52.It is also interesting to test the judge's view against the reasoning
of Staughton J (as he then was) in Tracomin SA v Sudan Oil Seeds Ltd
[1983] 1 Ll Rep 560. [His reasoning was undisturbed by the Court of
Appeal [1983] 1W.L.R. 1026.] In that case the Swiss court held that an
arbitration clause had not been incorporated, although by its applicable
law, English law, the English court would have held otherwise. The judge
held that the sellers had voluntarily appeared and argued the point and
indeed appealed in Switzerland and the Swiss court had a jurisdiction that
would be recognised by the English court. He held it was clear beyond
doubt that the Swiss Court had held that the arbitration clause was not
incorporated and the decision on that issue qualified for issue estoppel.
He held the judgment on that issue was final and conclusive on the
merits. He held that the fact that the decision was based on Swiss law
(as opposed to the applicable law English law) was no obstacle. [The
similarity with the facts of the instant appeal is striking.] The judge
would have held the sellers estopped from challenging the question of
incorporation but for the coming into force of the Civil Jurisdiction and
Judgments Act 1982 and the application of section 32(1) and (3) and
section 33. He did not of course have to consider section 32(4) as it has
been necessary to do in this case.
53.If Gloster J is right in her conclusion that a registered judgment
simply does not have to be recognised in proceedings excluded from
the regulation, somehow all the findings in relation to issue estoppel,
which would apply in a case where a court of a non-member country
had decided the point of incorporation but for section 32, do not apply
by virtue of section 32(4) applying, whereas one would have thought
the object of section 32(4) was actually to make them apply in the case
where a judgment of a member state was registerable.
54.Miss Selvaratnam sought to support the judge's view by reference
to CMA CGM SA v Hyundai Mipe Dockyard Co Ltd [2008] EWHC 2791, a
decision of Burton J and his view as to whether arbitrators were bound to
recognise a judgment within the regulation from the court of a member
state. Burton J said this: -
"41. Resolution of this point in HMD's favour means that CMA's appeal
fails in any event. The issue of the Judgments Regulation was argued
before me. On further consideration, as this appeal is now resolved
in favour of HMD, I shall do no more than indicate that I am not
persuaded that the Arbitrators were wrong in relation to the issue of the
inapplicability of the Judgments Regulation.
42. They rested their conclusion upon Article 1, which in material part
reads as follow:
"1(1) This Regulation shall apply in civil and commercial matters whatever
the nature of the court or tribunal. It shall not extend, in particular, to
revenue, customs or administrative matters.
2. The Regulation shall not apply to: …
(d) arbitration."
43. The Arbitrators referred to a number of authorities, and in particular
The Atlantic Emperor [1992] 1 Lloyd's Rep 342 and The Front Comor
[2007] 1 Lloyd's Rep 391, to emphasise that this provision means not
only that UK courts are not required to recognise arbitration awards
(there being of course other international conventions for that specific
purpose) but also proceedings ancillary to arbitration: and the conclusion
by the Arbitrators was that this was, on a true and proper construction
of the Regulation, intended to be reciprocal, i.e. not only were UK courts
not required to recognise foreign arbitral awards, but UK arbitrators were
not required to recognise foreign judgments, the Convention thus not
"apply(ing) to arbitration" at all.
44. In support of that proposition, the Arbitrators, and in his submission
Mr Butcher, referred also to Articles 32 and 33 of the Regulation, which
are both at the outset of Chapter III, the specific chapter relating to
Recognition and Enforcement:
"32. For the purposes of this Regulation, "judgment" means any judgment
given by a court or tribunal of a Member State, whatever the judgment
may be called, including a degree, order, decision or writ of execution, as
well as the determination of costs or expenses by an officer of the court.
33. A judgment given in a Member State shall be recognised in the other
Member States without any special procedure being required."
45. The argument runs as follows. It is plain that in Article 32 the
reference to a tribunal is to a "tribunal of a Member State", not a tribunal
in a Member State, i.e. not an arbitration tribunal: this construction is
confirmed by the view of the authors of Layton and Mercer European Civil
Practice (2nd Ed) at Vol I para 25.006. Thus, it is submitted, if tribunal
in Article 32 does not include an arbitration tribunal for the purpose
of recognition by a UK court, so the word tribunal in Article 1.1 is also
not a reference to an arbitration tribunal, such that for that reason also
the Regulation does not apply to arbitration tribunals, who are thus not
obliged to recognise foreign judgments.
46. It is plainly right that, if the Judgments Regulation does not apply
to an arbitration tribunal, then arbitration tribunals are not obliged to
recognise foreign judgments, even if UK courts are so obliged, and to that
extent the Arbitrators were right not to be persuaded by the beguiling
argument that arbitrators are applying English law, and if English law
requires recognition of a foreign judgment then the arbitrators must
recognise the foreign judgment. This argument does not differentiate
between substantive and procedural law. Of course arbitrators will
apply English law, but they would not then be bound by the procedural
requirement, if it be imposed only on a court, to recognise a foreign
judgment, estopping it from considering the facts underlying that
judgment."
55.Miss Selvaratnam submitted that since Gloster J was exercising
a jurisdiction by virtue of the arbitrators giving NNC permission to
seek a ruling under section 32 of the Arbitration Act 1996, the above
reasoning of Burton J should apply to the court standing in the place of
the arbitrators so as to decide jurisdiction.
56.I confess to having some difficulty with the reasoning of Burton J,
since it would seem to me that arbitrators bound to apply English law
would have to consider under ordinary principles of English law whether
a judgment gave rise to an issue estoppel. But whether that is right or
not, Burton J recognised that an English court was certainly bound by a
regulation judgment and in my view it cannot make any difference that
the court is acting under section 32 of the Arbitration Act.
57.Finally on this aspect, it seems to me that the judge's conclusion is
contrary to the judgment of the ECJ in The Front Comor. It is true that
prior to that judgment the question whether the ruling of the court of a
member state in proceedings within the regulation as to the applicability
of an arbitration clause was not clear. It was dealt with by Advocate
General Darmon in Marc Rich but slightly inconclusively. He said this: -
"43. In the Commissioner's view, the key to the difficulty is provided by
the following passage from the Evrigenis and Kerameus Report:
'However, the verification, as an incidental question, of validity of an
arbitration agreement which is cited by a litigant in order to contest the
jurisdiction of the Court before which he is being sued pursuant to the
Convention, must be considered as falling within its scope'.
44. Let me say at the outset that I would have very serious doubts as
to the correctness of that statement if it meant that it is the Convention
which confers on a court seised of a main action within the scope of the
Convention jurisdiction to deal with an incidental issue falling outside
the Convention. That is a matter for the lex fori of the court seised and
not a matter to be determined by the Convention. As Messrs Gothot and
Holleaux state:
'In fact, the Convention does not operate in that respect: it is a matter for
the general law of the court seised concerning jurisdiction and procedure
to decide whether an incidental issue of that kind must be treated merely
as a preliminary or pre-trial issue'.
45. It therefore seems to me preferable to take the view that the authors
of the report in fact intended to refer to the application of the Convention
to recognition and enforcement of a judgment which disposes of a dispute
within the scope of the Convention after giving a decision on the validity
of an arbitration agreement. As we have seen, that question was raised
during the negotiations prior to the accession of the United Kingdom. In
my view, the question remains open and in any event is not pertinent to
the dispute before the national court."
58.It is however the view of Evrigenis and Kerameus referred to above
that the ECJ in The Front Comor approved in paragraph 26 above.
59.In my view accordingly the judge sought to gain more from the
two paragraphs in Through Transport, quoted by her, than she was
entitled to do. Those paragraphs were dealing with a ruling of the
Finnish court which could not give rise to a relevant issue estoppel. A
regulation judgment can however give rise to an issue estoppel as much
in Arbitration proceedings excluded from the regulation as in any other
proceedings in an English court.
Public Policy
60.What the judge said on this aspect was unnecessary for her decision
and the view expressed was expressed with "some degree of hesitation".
It was founded on certain obiter observations of mine inPhilip Alexander
and Securities and Futures Limited v Bamberger and others [1997] IL
Pr 17 ("Bamberger"). She was of the view that if she were wrong in the
views expressed as to whether the Almeria judgments, although they
were regulation judgments, need not be recognised in the Arbitration
proceedings, then she would hold that she was entitled not to recognise
the same on the grounds they "were manifestly contrary to public policy".
61.Bamberger was decided in a very different context and in a pre-
Front Comor era. In making the observations I did I was dealing with
circumstances in which it was clear there was an arbitration clause and
a position in which the English court would have granted an injunction to
prevent continuation of proceedings abroad. In the instant case Endesa
were contesting the incorporation of the arbitration clause and it is no
longer permissible for the English court to grant an injunction.
62.It seems to me that if, following The Front Comor, Endesa were
entitled to challenge the incorporation of the arbitration clause into the bill
of lading in the Almeria Mercantile Court and, if the English court is bound
to recognise the decision of the Almeria court, there is simply no room
for any argument that in some way public policy is being infringed. The
English court in such circumstances is not entitled to examine for itself
whether the clause is incorporated and that is the end of the matter.
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 then that would provide an answer on its own [see Article
34(3)].
64.In any event in Krombach v Bamberski Case C-116/02[2000] ECR
1-01935 para 20 the ECJ held: -
"[The ECJ is] required to review the limits within which the courts of a
Contracting State may have recourse to [the concept of public policy]
for the purpose of refusing recognition of a judgment emanating from
another Contracting State...
Recourse to the public-policy clause in [Article 34(1)]... can be envisaged
only where recognition or enforcement of the judgment delivered in
another Contracting State would be at variance to an unacceptable degree
with the legal order of the state in which enforcement is sought inasmuch
as it infringes a fundamental principle. In order for the prohibition of any
review of the foreign judgment as to its substance to be observed, the
infringement would have to constitute a manifest breach of a rule of law
regarded as essential in the legal order of the State in which enforcement
is sought or of a right recognised as being fundamental within that legal
order."
65.I doubt whether the English court would now say, even in
circumstances where a declaration had been obtained from the English
court, that a litigant seeking to obtain a different result in the courts of a
member state was infringing "some fundamental principle"
66.So far as this appeal is concerned, (as I have said) once one reaches
the position that the English court is bound by the decision that no
arbitration clause was incorporated into the bill of lading, that precludes
any re-examination of that question and precludes any argument on the
grounds of public policy.
67.I would accordingly allow the appeal, and dismiss the Arbitration
proceedings.
68.Since I completed this judgment in draft I have had drawn to my
attention certain paragraphs in the new 5th Edition of Briggs and Rees'
Civil Jurisdiction and Judgments. In considering the very issues raised
by this appeal, considerable reliance is placed by them on the decision
of the ECJ in Hoffmann v Krieg 145/86, [1988] ECR 654 an authority
relied on by Miss Selvaratnam during her submissions. That case was not
concerned with any question as to whether a decision of one court was
res judicata in proceedings in another court. It was concerned with how
a judgment of the German court ordering maintenance on the basis that
a couple were still married, was to be reconciled in the courts of Holland
with a judgment of a court in Holland that granted the couple a divorce. I
cannot for my part see any analogy with the question with which this case
is concerned, i.e. whether a decision that there is no arbitration clause
which would, but for section 32 (3) of the 1982 Act, beres judicata, and
whether it loses the protection of section 32(3) by virtue of section 32(4).
69.The other points which Briggs and Rees take in paragraph 7.08 are
essentially points argued by Miss Selvaratnam. Dealing with them briefly;
(1) I do not think it is possible particularly in the light of The Front
Comor to categorise the application to stay made in proceedings the
main subject matter of which is within the regulation in Spain as distinct
proceedings outside the regulation; (2) The United Kingdom's obligation
under the New York convention to give effect to arbitration agreements
does not as it seems to me require the English court not to be bound by a
decision of a court of a fellow member state and co-signatory of the New
York Convention that there was no arbitration clause; (3) For the reasons
I have given, I do not think a preliminary decision in proceedings within
the regulation that there was no arbitration clause is severable; (4) It is
true that the Advocate General in The Front Comor foresaw the possibility
of inconsistent judgments but that was in a case where the English court
had already ruled in Arbitration proceedings (outside the regulation) that
there was a valid arbitration clause, a decision by which the Sicilian Court
would not be bound; it does not follow that the ECJ would encourage
inconsistent decisions and where the court dealing with the case on the
merits has ruled 'no arbitration clause' before an English court is asked to
consider that question, the ECJ would be likely to encourage the notion
that another member state should be bound by that decision. Section
32(4) simply leads to that result.
Lord Justice Carnwath:
70.I agree that the appeal should be allowed for the reasons given
in both judgments (between which, subject to some differences of
emphasis, I detect no material disagreement on the issues necessary to
the determination of this case).
Lord Justice Moore-Bick:
Background
71.The circumstances giving rise to this appeal have been described in
some detail by Waller L.J., whose account I gratefully adopt. I do not
propose to cover the same ground in this judgment, but I think that it is
worth drawing attention to what I consider to be the essential facts that
have given rise to the dispute.
72.In January 2008 the vessel 'Wadi Sudr' discharged a cargo of coal at
Carboneras some way short of the contractual port of discharge stated in
the bill of lading under which it was being carried. A dispute quickly arose
between the appellant, Endesa Generacion SA ("Endesa"), the holder of
the bill of lading and the respondent, National Navigation Co ("NNC"), the
owners of the vessel. On 23rdJanuary Endesa applied for a warrant to
arrest the vessel, an obvious course for it to take since the vessel was still
in Spanish waters and amenable to the jurisdiction of the Spanish courts.
73.On 23rd January 2008 NNC started proceedings in the Commercial
Court (Folio 64) seeking a declaration that it was under no liability to
Endesa arising out of its failure to discharge the cargo at the contractual
destination. The claim form was indorsed with a certificate that the
requirements for service out of the jurisdiction without the permission of
the court were satisfied. It follows that NNC did not at that stage seek to
have the dispute determined in arbitration.
74.On 25th January 2008 the court at Almería made an order for the
arrest of the vessel which was executed later the same day. The court
thereby became seised of the substantive claim by Endesa against NNC.
On 19th March 2008 NNC began proceedings challenging the jurisdiction
of the Spanish court on the grounds that the dispute was subject to an
agreement providing for arbitration in London.
75.On 14th April 2008 Endesa acknowledged service of the claim form
in the Commercial Court action and when doing so gave notice that it
intended to dispute the court's jurisdiction. Accordingly, on 2nd June 2008
NNC applied to the Spanish court for a stay of the proceedings on the
grounds that the Commercial Court was first seised of the substantive
dispute between the parties. The proceedings in Spain led in due
course to a decision by the Spanish court that there was no arbitration
agreement between the parties but that the proceedings should be
stayed in accordance with Article 27 of Council Regulation (EC) No.
44/2001("the Regulation") pending a decision by the Commercial Court as
to its jurisdiction. On 3rd December 2008 the Spanish court affirmed its
decision following a review at the request of NNC.
76.In the meantime there had been two further developments. First, on
3rd July NNC had commenced arbitration in London seeking a declaration
of non-liability. Second, on 8th July 2008 NNC had also commenced
a second action in the Commercial Court (Folio 667) seeking (among
other things) a declaration that its dispute with Endesa was subject
to an arbitration agreement and an injunction to restrain Endesa from
proceeding with its claim otherwise than by way of arbitration.
Commercial Court action Folio 667
77.The central issue in these proceedings is whether the judgment of the
Spanish court declaring that there was no binding arbitration agreement
between NNC and Endesa covering the dispute in relation to the cargo
carried on The 'Wadi Sudr' is to be recognised and given effect in England.
I agree with Waller L.J. that the starting point for the discussion must
therefore be the decision of the Spanish court.
78.The original decision of 31st July 2008 recites that on 19th March
2008 NNC had asked the court to decline jurisdiction on the grounds that
the dispute was subject to arbitration in London. That application was
rejected on the grounds that NNC had waived any right to arbitrate by
commencing proceedings in London (paragraph 1 of the Reasons) and
because the arbitration agreement on which NNC sought to rely was not
sufficiently expressed in the bill of lading (paragraphs 2-4) and was not
therefore binding on the parties. The court then referred to the stay of
proceedings sought by NNC on 2nd June 2008 under Article 27 of the
Regulation. It recognised that the proceedings in Folio 667 concerned
the same subject matter as those before it and therefore stayed its
own proceedings pending a decision by the English court on its own
jurisdiction.
79.On reconsideration at the request of NNC the court reaffirmed its
original reasoning. It refers in paragraph 4 of the judgment to evidence
that had been placed before it of the approach of English law to the
commencement of substantive proceedings before the courts and their
effect on a party's ability to pursue a claim by arbitration. The court noted
that there might be differences between the approaches of the English
and Spanish courts in that respect, but held that it was for the English
court in the first instance to decide whether to exercise jurisdiction
itself or allow NNC to pursue a claim in arbitration. That discussion
provided the context in which the court made the observation, on which
Miss Selvaratnam Q.C. so heavily relied, that its decision was "without
prejudice to the fact that these points do not bind the London court which
may well decide the opposite..."
80.Miss Selvaratnam submitted that the decision of the Spanish court as
a whole was no more than provisional in nature, being conditional upon a
decision of the Commercial Court, as the court first seised, whether it was
entitled to exercise jurisdiction in respect of the dispute. In other words,
it amounted to no more than an indication by the Spanish court of how
it would decide the question of its own jurisdiction if and when the stay
were lifted. That was said to follow from the fact that the court stayed the
proceedings and was said to be reinforced by the express statement that
its decision was not intended to and did not bind the court in London.
81.In my view that interpretation of the Spanish court's judgment
is untenable and indeed illogical. It is clear from the nature of the
applications made by NNC in Spain, the order in which they were made
and the summary of the arguments that is to be found in the judgment
itself that NNC's primary case was that the court should decline to
exercise jurisdiction altogether because the parties had agreed to submit
the dispute to arbitration. It seems clear that if NNC had established
the existence of an arbitration agreement the court would have declined
jurisdiction and the action would have stopped there. It may have been
necessary for the Spanish court, applying its own procedure, to determine
that application before taking any other step, but whether that is so or
nor, it is clear that NNC did not seek a stay at the outset, preferring,
for whatever reason to invite the court to deal with the existence of
the arbitration agreement first. Had NNC been successful, there would
have been no need for the court to stay the proceedings under Article 27
because they could not have continued in any event. It was only once the
court had decided that NNC had failed to show that the parties had agreed
to refer the dispute to arbitration, with the result that the court could
assume jurisdiction (subject only to the prior claim of the Commercial
Court), that it became necessary to impose a stay pending a decision by
the Commercial Court whether to exercise jurisdiction as the court first
seised.
82.That being so, I have no doubt that the judgment of the Spanish
court is to be understood as embodying a decision on the merits that no
enforceable arbitration agreement existed between NNC and Endesa in
relation to the subject matter of the proceedings before it.
Are the English courts bound to recognise the judgment of the Spanish
court under Regulation 44?
(a) The general principles
83.Article 33(1) of the Regulation provides:
"1. A judgment given in a Member State shall be recognised in the other
Member States without any special procedure being required.",
but the scope of the Regulation as a whole is limited by Article 1 which
provides:
"1. This Regulation shall apply in civil and commercial matters whatever
the nature of the court or tribunal. It shall not extend, in particular, to
revenue, customs or administrative matters.
2. The Regulation shall not apply to:
...
(d) arbitration."
It follows that an English court is not obliged to recognise the judgment
of the Spanish court if it relates to arbitration within the meaning of the
Regulation.
84.The scope of the exception from the Regulation of matters relating to
arbitration, which has been a matter of debate over the years, has in my
view now been settled by the decisions of the European Court of Justice
in Marc Rich and Co. AG v Società Italiana Impianti PA (The 'Atlantic
Emperor') (C-190/89) [1991] E.C.R. 1-3855 and Allianz S.p.A. v West
Tankers Inc (The 'Front Comor') (C-185/07) [2009] 3 W.L.R. 696.
85.In Marc Rich the claimant applied to the Commercial Court for the
appointment of an arbitrator on behalf of the defendant, Impianti, which
had failed to appoint an arbitrator on the grounds that there was no
agreement to arbitrate. The real dispute, therefore, was whether an
arbitration agreement existed between the parties. Impianti said that
dispute fell within the Brussels Convention and should be determined in
Italy. Marc Rich said it fell outside the Convention.
86.Advocate General Darmon pointed out in paragraph 25 of his
opinion that the existence of an arbitration agreement had to be
established before the court could exercise its jurisdiction to appoint an
arbitrator. In that sense the existence of an arbitration agreement was a
preliminary issue. He referred in paragraph 26 to the distinction between
a preliminary issue and the main issue in the proceedings which is said to
be familiar to continental lawyers. The German government, basing itself
on the Jenard Report, submitted that matters fall outside the Convention
only if they constitute the principal subject matter of the proceedings – in
that case the appointment of an arbitrator.
87.Subject to one matter, Advocate General Darmon thought that the
position was clear: the Convention did not apply to the principal subject
matter of the proceedings in that case because they were concerned with
a matter directly relating to arbitration – the appointment of an arbitrator.
He considered it to be well-established that if the principal issue in the
proceedings falls outside the scope of the Convention, any proceedings
relating to a preliminary issue are not governed by the Convention,
even if the subject matter of that preliminary issue would fall within it
if viewed in isolation. In paragraph 32 he referred to a commentary on
the Convention in which it is said that, if the principal subject matter
falls outside the Convention, so does the incidental issue and that in
those circumstances the judgment cannot benefit from the conditions
laid down on the Convention concerning recognition and enforcement.
He therefore concluded in paragraph 33 that if the principal subject
matter falls outside the Convention, it cannot be brought within it by the
preliminary matter, even if that matter would otherwise fall within it. In
his view, therefore, it was unnecessary for the court to decide whether
the dispute about the existence of an agreement to arbitrate fell within or
outside the Convention because the principal matter in issue fell outside
it. In the alternative, however, he expressed the view that in any event a
dispute about the existence of an arbitration agreement fell outside the
Convention.
88.Pausing there, I think it is reasonably clear that Advocate General
Darmon thought that the better view was that the nature of the
substantive proceedings (in that case the appointment of an arbitrator)
determines the question whether the preliminary issue (the existence of
an arbitration agreement) fell within or outside the Convention. However,
if the question were to be determined by reference to the nature of the
preliminary issue itself, he considered that it should be regarded as falling
outside the Convention. That is consistent with the reasons he gives in
paragraph 88 and 92 of his Opinion for rejecting an argument to the
effect that the nature of the substantive proceedings in Italy were such
as to bring the proceedings in the English court within the scope of the
Convention. As he observed in paragraph 40, therefore, whichever course
was adopted, the matter fell outside the Convention.
89.In paragraphs 41-104 of his opinion Advocate General Darmon
considered various arguments put forward by different parties, including
the Commission, some in favour of a very broad and some in favour of a
very narrow interpretation of Article 1(4). I do not think there is anything
to be gained by summarising his responses to them. Suffice it to say that
he rejected them all and that nothing he said in the course of doing so
casts any doubt on what he considered to be the true principles which he
had identified in the earlier part of his opinion.
90.The court itself considered first whether proceedings for the
appointment of an arbitrator fell within the Convention. In paragraph 9 of
its judgment it held that the appointment of an arbitrator by a national
court is a measure adopted by the state as part of the process of setting
arbitration proceedings in motion. It therefore comes within the sphere of
arbitration and is thus covered by the exclusion contained in Article 1(4)
of the Convention. The second question the court considered was whether
a preliminary issue concerning the existence or validity of an arbitration
agreement affected the application of the Convention to the dispute in
question. It held that it did not. In paragraph 26 and 27 it said:
"26. In order to determine whether a dispute falls within the scope of
the Convention, reference must be made solely to the subject-matter of
the dispute. If, by virtue of its subject-matter, such as the appointment
of an arbitrator, a dispute falls outside the scope of the Convention, the
existence of a preliminary issue which the Court must resolve in order
to determine the dispute cannot, whatever that issue may be, justify
application of the Convention.
27. It would also be contrary to the principle of legal certainty, which is
one of the objectives pursued by the Convention (see judgment in Case
38/81, Effer v. Kantner [1982] ECR 825, paragraph 6) for the applicability
of the exclusion laid down in art. 1(4) of the Convention to vary according
to the existence or otherwise of a preliminary issue, which might be raised
at any time by the parties."
91.The case before the court concerned proceedings in which the principal
issue was held to fall outside the Convention, but the reasoning holds
good for a case in which the principal issue falls within it. In such a case
the applicability of the Convention (now the Regulation) cannot depend
on the nature of any preliminary issue. Paragraph 26 therefore applies in
such a case mutatis mutandis.
92.In my view, both the opinion of Advocate General Darmon and the
judgment of the court itself in that case support the following conclusions:
(a) that when deciding whether the Regulation applies it is necessary to
examine the nature of the proceedings rather than individual issues to
which they give rise; (b) whether the Regulation applies depends on the
essential subject matter of the dispute; (c) the essential subject matter
of the dispute is not determined by the nature of a preliminary issue,
even if the nature of that issue differs from that of the principal dispute;
and (d) that therefore some issues which, viewed in isolation, would fall
outside the Regulation may, if they arise as a preliminary issue, have to
be treated as falling within the Regulation and vice versa.
93.Finally, it is necessary to mention that one finds nothing in either the
opinion of the Advocate General or the judgment of the court to suggest
that whether a judgment falls within the Regulation depends on anything
other than whether the proceedings themselves did so. It may be said
that the court in that case was not directly concerned with the question
of recognition, but in fact the only purpose of obtaining a decision on
whether the proceedings fell within the Convention was to determine
whether the Italian court should decide the substantive dispute and
thus whether its judgment would have to be recognised as one falling
within the Convention. The question of recognition was therefore clearly
present in the background. Quite apart from that, however, if the principal
issue is such that the proceedings are to be treated as falling within the
Regulation, it would be highly anomalous if a judgment given in those
proceedings did not also fall within it.
94.In Van Uden Maritime B.V. v Kommanditgesellschaft in firma Deco-
Line (C-391/95) [1999] Q.B. 1225 Advocate General Léger took the same
view, basing himself on the Jenard and Schlosser reports.
95.In paragraph 39 of her opinion in The 'Front Comor' Advocate General
Kokott noted the divergence between the Anglo-Saxon and continental
European views of the scope of the arbitration exception in Article 1(4) of
the Convention, the latter turning on the nature of the substantive subject
matter of the proceedings (paragraph 44). She noted that in paragraph
26 of its judgment in Marc Rich the court had taken up the distinction
between the subject matter of the proceedings and preliminary issues and
said in paragraphs 52-54:
"52. As the court confirmed in its judgment in the Van Uden case,
whether or not proceedings fall within the scope of the Convention
or Regulation No 44/2001 must therefore be determined from the
substantive subject matter of the dispute.
53. In the dispute before the court in Syracuse, the defendants are
claiming damages by right of subrogation for loss caused to the insured
party, Erg Petroli, following a collision betweenFront Comor and the jetty.
The subject matter is therefore a claim in tort (possibly also in contract)
for damages, which falls within the scope of Regulation No. 44/2001, and
not arbitration.
54. The existence and applicability of the arbitration clause merely
constitute a preliminary issue which the court seised must address
when examining whether it has jurisdiction. Even if the view were taken
that that issue fell within the ambit of arbitration, it could not change
the classification of the proceedings, the subject matter of which falls
within the scope of the Regulation. It can be left undecided here how
proceedings which concern similar findings in the main case should be
evaluated."
96.The final sentence of paragraph 54 is a little difficult to understand,
but an examination of the French text ("... une procédure qui porte au
fond sur ces matières") suggests that the Advocate General had in mind
a case in which the existence of an arbitration agreement is the principal
subject of the proceedings.
97.I think it is clear from these passages that Advocate General Kokott
was adopting the principle to be derived from Marc Rich and Van
Uden that the proceedings are to be characterised as a whole and
that whether they fall within or outside the Regulation depends on the
essential nature of the substantive dispute and the rights which the
proceedings are brought to protect. It follows that proceedings involving
the determination of a dispute as to the existence of an arbitration
agreement will fall outside or within the Regulation depending on whether
that represents the principal subject matter of the proceedings (as it
would if proceedings were brought for a declaration that there is, or is
not, such an agreement between the parties) or an issue that is merely
ancillary to the determination of a substantive dispute that itself falls
within the scope of the Regulation (as where, in a claim for breach of
contract or tort, jurisdiction is disputed on that ground).
98.Finally, I come to the judgment of the court itself in The 'Front Comor'.
Three paragraphs, 22, 26 and 27, are of particular importance. The court
said:
"22. In that regard it must be borne in mind that, in order to determine
whether a dispute falls within the scope of Regulation No 44/2001,
reference must be made solely to the subject-matter of the proceedings
(Rich, paragraph 26). More specifically, its place in the scope of
Regulation No 44/2001 is determined by the nature of the rights which
the proceedings in question serve to protect (Van Uden, paragraph 33).
...
26. In that regard, the Court finds, as noted by the Advocate General
in points 53 and 54 of her Opinion, that, if, because of the subject-
matter of the dispute, that is, the nature of the rights to be protected
in proceedings, such as a claim for damages, those proceedings come
within the scope of Regulation No 44/2001, a preliminary issue concerning
the applicability of an arbitration agreement, including in particular
its validity, also comes within its scope of application. This finding is
supported by paragraph 35 of the Report on the accession of the Hellenic
Republic to the Convention of 27 September 1968 on Jurisdiction and the
Enforcement of Judgments in Civil and Commercial Matters (OJ 1978 L
304, p. 36) ('the Brussels Convention'), presented by Messrs Evrigenis
and Kerameus (OJ 1986 C 298, p. 1). That paragraph states that the
verification, as an incidental question, of the validity of an arbitration
agreement which is cited by a litigant in order to contest the jurisdiction
of the court before which he is being sued pursuant to the Brussels
Convention, must be considered as falling within its scope.
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." (My emphasis).
99.In my view there is no real doubt that in these paragraphs the court
was adopting for the purposes of deciding whether proceedings fall within
the Regulation the principle of looking to the nature of the principal
subject matter of the proceedings. That seems to me to be quite clear
simply from the terms of paragraphs 26 and 27 themselves, but I do not
think that should come as any surprise or that it should be regarded as
involving a departure from the previous position. I do not think that there
can be much doubt, particularly having regard to paragraph 22, that the
court was adopting and applying the principles to be found in the earlier
cases and expounded by the Advocate General in her opinion. In my view,
therefore, Mr. Lord Q.C. was right to submit that the court's decision in
The 'Front Comor' is no more than the latest step in a consistent line of
authority.
100.Miss Selvaratnam submitted, however, that the court was not
concerned in that case with questions of recognition and that therefore
not only were we not bound by the decision, but we were free to reach
a different conclusion on the question whether the judgment given by
the Spanish court falls within the Regulation. It is quite true that in The
'Front Comor' the court was not directly concerned with a question of
recognition; indeed at the time of the judgment no decision had yet been
made by the court in Syracuse. However, if automatic recognition under
Article 33 depends on whether the judgment in question was given in
proceedings falling within the Regulation (a question to which I shall
return in a moment), whether a judgment must be recognised necessarily
depends on the application of the principles enunciated in that case and
earlier authorities. I do not think, therefore, that the court's decision can
be distinguished on that ground. Nor do I consider that we can properly
treat paragraphs 26 and 27 of the judgment as mere obiter dicta to
be applied only insofar as we find them persuasive. In my view they
contain a clear statement of principle, consistent with earlier decisions of
the court, which represents the current state of the law. The judge was
therefore right in my view to treat them as binding and we must do the
same.
101.Mr. Whitehead submitted that Article 32 read together with Article
1(2) requires the court when considering whether to recognise a
judgment of a court of another Member State to determine whether the
nature of the operative part of the judgment is such as to bring it within
the scope of the Regulation. Thus a judgment which determines that there
is or is not an arbitration agreement between the parties falls outside the
Regulation, whatever else the judgment may also determine, since the
Regulation does not apply to arbitration matters. This submission raises
the question to which I adverted earlier, namely, whether judgments
are to be characterised by reference to the nature of the proceedings
in which they are given or by their particular content; and if the latter,
whether only that part which falls within the scope of the Regulation is to
be recognised under Art. 33.
102.The Regulation itself contemplates that a single judgment may deal
with matters, some of which fall within and some outside its scope. Article
48 provides as follows:
"1. Where a foreign judgment has been given in respect of several
matters and the declaration of enforceability cannot be given for all of
them, the court or competent authority shall give it for one or more of
them.
2. An applicant may request a declaration of enforceability limited to parts
of a judgment."
103.In Van den Boogaard v Laumen (C-220/95) [1997] Q.B. 759 the
English court following the grant of a divorce ordered the husband to
transfer certain property to the wife for the purposes of achieving a
"clean break" between the parties. When the wife sought to enforce the
agreement in the Netherlands a question arose whether the judgment
related to maintenance (in which case it would fall within the scope
of the Regulation) or to rights in property arising out of a matrimonial
relationship (in which case it would not). The court held that because on
divorce the English court could regulate both rights of property arising
out of matrimonial relationships and matters of maintenance, it was
necessary for the court in the Netherlands to distinguish between the
different aspects of the decision. A judgment which relates to matters
falling both within and outside the Regulation may be enforced in part if
the necessary distinction can be clearly drawn.
104.Miss Selvaratnam submitted that the present case fell within that
principle: the part of the Spanish court's decision that granted a stay
under Article 27 must be recognised under Article 48, whereas the part
that related to the existence of an arbitration agreement need not. In my
view that submission is too wide, however, since it would inevitably lead
to the conclusion that the court's judgment on a preliminary issue could
be viewed in isolation from the principal subject matter of the proceedings
for the purposes of recognition and enforcement. It is in reality another
way of expressing Mr. Whitehead's submission that the operative part of
the judgment must be viewed in isolation and characterised by the nature
of the matter with which it is concerned, but that would be contrary to the
decisions in Marc Rich and The 'Front Comor'. In my view, the proceedings
can be treated as relating to two or more different subject matters and
the consequent judgment as falling partly within and partly outside the
scope of the Regulation only in cases where they embrace more than
one principal subject matter, so that the determination of one is not a
step on the way to the determination of another and cannot therefore
be classed as a preliminary issue. In the present case it was necessary
for the Spanish court to determine whether an arbitration agreement
existed as a step on the way to determining the substantive dispute
between the parties. It was therefore a preliminary issue within the
principle enunciated in the cases to which I have referred and therefore
the proceedings relating to it take their character from the substantive
issue. Article 48 therefore has no application in this case.
105.The substance of the claim made by Endesa in Spain was to recover
damages for breach of contract. It follows that the matter before the
Spanish court was a civil or commercial matter and that in principle the
judgment must be recognised under Article 33(1) of the Regulation.
The judge accepted that in the light of the decision of the European
Court of Justice in The 'Front Comor' the judgment of the Spanish court
in this case was to be characterised as falling within the scope of the
Regulation, but held that she was not obliged to recognise it in the
proceedings in Folio 667 because the subject matter of those proceedings
was arbitration. On that basis she held that the Regulation "simply
does not apply to the conduct of those proceedings". In reaching that
conclusion she relied on the decision of this court in Through Transport
Mutual Insurance Association (Eurasia) Ltd v New India Assurance Co. Ltd
[2005] 1 Lloyd's Rep. 67.
(b) Recognition in Folio 667
106.The judge's analysis was supported and adopted by Miss
Selvaratnam, who sought support from some dicta of Burton J. in CMA
CGM S.A. v Hyundai Mipo Dockyard Co. Ltd [2008] EWHC 2792. Mr. Lord,
on the other hand, submitted that the terms of Article 33 apply to the
judgment itself and that the obligation to recognise judgments of the
courts of other Member States is not qualified by reference to the nature
of the proceedings in which recognition is sought. It was open to Endesa,
he said, to apply at any time to have the Spanish judgment registered in
England under a process that is automatic, subject only to the provisions
of Article 34. Once registered, the judgment would have the same force
as a judgment of the High Court and could not be ignored in proceedings
relating to arbitration any more than any other kind of proceedings.
107.One of the purposes behind the Brussels Convention, and now
the Regulation, was to facilitate the free movement of judgments of
the courts of Member States in relation to matters falling within its
scope: Krombach v Bamberski (C-7/98) [2000] E.C.R. 1-01935. It is
consistent with that purpose that recognition should depend on whether
the judgment was given in proceedings falling within the Regulation,
rather than by reference to the nature of the proceedings in which a
party seeks to rely on it. Moreover, there is nothing in Chapter III of
the Regulation to indicate that recognition depends on the nature of the
proceedings currently before the court. Recognition as such is not defined
in the Regulation and unlike enforcement, which is dealt with in Articles
38 to 52, is not subject to any procedural requirements or preconditions.
In my view it means no more than accepting the judgment as an effective
decision of the court in question and thus as conferring on it the same
authority as would be accorded to it in the Member State in which it was
given: see Hoffmann v Krieg (C-145/86) [1988] E.C.R. 645.
108.Against that background the notion that the court is obliged to
recognise a foreign judgment in one set of proceedings but not another
strikes me as surprising, if not anomalous. The argument in favour of
such a conclusion is that decisions of the courts of Member States in
proceedings falling within the Regulation were intended to be portable for
some purposes but not others, but that is to give primacy to the nature of
the subsequent proceedings rather than the nature of the proceedings in
which the judgment was given.
109.Some support for that view can, however, be found in the latest (5th)
edition of Civil Jurisdiction and Judgments (Briggs, ed. Rees), paragraphs
2.41-2.42 and elsewhere, to which our attention has been drawn. The
authors there argue that a judgment given by a court in another Member
State in a civil or commercial matter need not be recognised in later
proceedings which themselves fall outside the scope of the Regulation.
In other words, that the exception in Article 1(2)(d) has the effect not
only of excluding from the operation of Article 33(1) judgments given in
relation to matters falling outside the Regulation, but also of excluding
the operation of Article 33(1) in any proceedings falling outside its scope.
Thus, in proceedings falling outside the Regulation a judgment given
in earlier proceedings between the same parties in relation to a civil or
commercial matter would not be entitled to automatic recognition under
Article 33(1) for the purposes of giving rise to estoppel by record. That is
said to follow from the decision in Hoffmann v Krieg.
110.There were strong arguments for excluding from the scope of the
Convention (and now the Regulation) proceedings brought in support
of arbitration, particularly having regard to the pre-eminent role that is
played by the courts of the state in which the arbitration has its seat, and
there were no doubt similarly strong arguments for excluding the other
matters now falling within Article 1(2). Having said that, however, there
is no obvious reason why a judgment of a court of another Member State
in a civil or commercial matter between the same parties should not be
entitled to automatic recognition in subsequent proceedings of any kind,
assuming it to be relevant. On the contrary, if the judgment takes its
character from the nature of the proceedings in which it was given, as I
think it must, there is every reason to expect that it should be recognised
if those proceedings fall within the scope of the Regulation.
111.Miss Selvaratnam referred in the course of her argument to Hoffmann
v Krieg. The case was concerned with an order for maintenance made
by a German court in favour of a wife against her husband following
their separation. The proceedings in which it was made did not fall within
Article 1(1) of the Convention and were thus not excluded from its scope.
In principle, therefore, the order was entitled to automatic recognition
in other Member States under Article 26 (now Article 33). The husband,
who had settled in the Netherlands, subsequently obtained a divorce
from the Dutch courts. He then applied to the German court to discharge
the maintenance order, but his application was dismissed (though the
amount of the order was reduced) because the divorce had not then been
recognised by the German courts. (The Dutch decree did not fall within
the scope of the Convention, since divorce proceedings concern status;
it was therefore not entitled to automatic recognition in Germany.) When
the wife sought to enforce the maintenance order in the Netherlands the
question arose whether it could be enforced there notwithstanding the
decree of divorce.
112.Advocate General Darmon approached the matter in terms of the
reconcilability of the two judgments and the need to subordinate the
enforcement of a foreign judgment to the effect of a national judgment.
The court held that the maintenance order presupposed the existence
of the marriage and that since in the view of Dutch law the parties had
ceased to be married, the Dutch courts were no longer obliged to give
effect to it.
113.The court itself identified the question for decision as follows
(judgment, paragraph 12):
"... whether a foreign judgment whose enforcement has been ordered
in a Contracting State pursuant to Article 31 of the Convention must
continue to be enforced in all cases in which it would still be enforceable
in the State in which it was given even when, under the law of the State
in which enforcement is sought, the judgment ceases to be enforceable
for reasons which lie outside the scope of the Convention."
It observed that the maintenance order necessarily presupposed
the existence of a matrimonial relationship and that therefore it was
necessary to consider whether the dissolution of that matrimonial
relationship by a decree of divorce granted by a court of the Member
State in which enforcement was sought could prevent the enforcement
of the foreign judgment even when that judgment remained enforceable
in the State in which it was given, the decree of divorce not having been
recognised there. Having noted that the Convention did not apply to
status, the court observed that it also contained no rule requiring the
courts of the State in which enforcement was sought to make the effects
of a national decree of divorce conditional on its recognition in the State
in which the foreign maintenance order was made. Moreover, it also
pointed out that Article 27(4) (which has no equivalent in the Regulation)
specifically excluded the recognition of a foreign judgment which was
inconsistent with a rule of the private international law of the State in
which recognition was sought relating to the status of natural persons. As
a result it held that the Dutch courts were entitled to proceed on the basis
that the foundation for the maintenance order had fallen away.
114.I do not think that the decision in Hoffmann v Krieg supports the
broad proposition that a judgment in a civil or commercial matter is not
entitled to automatic recognition in proceedings before a court of another
Member State which fall outside the Regulation. The important question
for present purposes, however, is whether it supports the narrower
proposition that a judgment in a civil or commercial matter which also
relates incidentally to an excluded matter need not be recognised in
proceedings in another Member State relating principally to that excluded
matter. I do not think it does. The court proceeded on the basis that the
German maintenance order was entitled to recognition and had been
recognised in the Netherlands. The question was simply whether it could
be enforced despite an inconsistent decision of the national court which
was not itself recognised (and did not qualify for automatic recognition)
in the Member State where that order had been made. There was no
discussion of the effect of recognition as giving rise to estoppel by record,
which is the question that we have to decide, and the judgment does not
contain any clear indication of how that question should be decided. The
terms of Articles 1 and 27(4) were regarded by the court as supporting
the conclusion that enforcement of the maintenance order did not take
precedence in the Netherlands over the decree of divorce, but I do not
think that one can draw any wider principle than that from the decision.
115.Before leaving this part of the case it is worth pausing for a moment
to consider what was said on the question of recognition in CMA CGM
S.A. v Hyundai Mipo Dockyard Co. Ltd. The case came before the court
by way of an appeal against an arbitration award. The argument that
had commended itself to the arbitrators was that if the word "tribunal"
in Article 32 does not include an arbitration tribunal (as it plainly does
not), so the word "tribunal" in Article 1.1 does not include an arbitration
tribunal. Accordingly, the Regulation does not apply to arbitration
tribunals, which are therefore not obliged to recognise judgments of
courts of Member States.
116.The judge dealt with the matter in the following way in paragraph 46
of his judgment:
"It is plainly right that, if the Judgments Regulation does not apply to an
arbitration tribunal, then arbitration tribunals are not obliged to recognise
foreign judgments, even if UK courts are so obliged, and to that extent
the Arbitrators were right not to be persuaded by the beguiling argument
that arbitrators are applying English law, and if English law requires
recognition of a foreign judgment then the arbitrators must recognise
the foreign judgment. This argument does not differentiate between
substantive and procedural law. Of course arbitrators will apply English
law, but they would not then be bound by the procedural requirement, if it
be imposed only on a court, to recognise a foreign judgment, estopping it
from considering the facts underlying that judgment."
117.Miss Selvaratnam relied on that passage and submitted that, since in
this case Gloster J. was determining the jurisdiction of the tribunal with
its permission under section 32 of the Arbitration Act 1996, the same
principles must apply.
118.I am unable to accept that submission for two reasons. 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.
119.Quite apart from that, however, even if the arbitrators in this case
were entitled to disregard the Spanish judgment, I do not think that the
court can properly do so, since Article 33(1) of the Regulation imposes a
legal duty on Member States to recognise judgments given by the courts
of other Member States, subject only to the terms of the Regulation itself.
The fact that in this case the arbitrators had given their permission to the
court's hearing an application under section 32(1) of the Arbitration Act
cannot affect the court's duty to recognise the judgment of the Spanish
court, nor can it affect Endesa's right to rely on it as giving rise to an
issue estoppel.
120.The judge found some support for her conclusion in the judgment
of this court in the Through Transport case, but in my view some of the
comments made in that case must be read with caution in the light of the
decision in The 'Front Comor'. In Through Transport the Finnish court had
held that New India was not bound by the arbitration agreement in the
Club's rules because the claim was made under the Finish statute, not
under the contract of insurance. In proceedings in this country, however,
it was for the English court applying the English conflict of laws rules
to determine the nature of the issues that arose for decision in those
proceedings. At first instance I held that that the issue whether New India
was bound by the arbitration agreement was to be characterised as one of
obligation and that decision was upheld on appeal. That meant that it was
necessary to identify the terms of the obligation, in particular whether
they included an agreement to arbitrate. New India did not suggest before
me that the decision of the Finnish court should be recognised and treated
as binding for any purpose, although it did argue that the proceedings in
this country should be stayed because the Finnish court was first seised
of the issue relating to the applicability of the arbitration clause. However,
it was accepted that the issue fell within Article 1(2)(d) of the Regulation
and that there were therefore no grounds for imposing a stay under
Article 27 pending a decision on the merits in Finland.
121.The judge in this case found support for her conclusion in paragraphs
50 and 51 of the judgment of the Court of Appeal, but it is worth noting
that when in paragraph 49 the court observed that the Regulation had no
application to the claims brought in the English proceedings it was dealing
with New India's argument that the court should decline jurisdiction or
stay the proceedings under the Regulation. The court made it clear that
although the question whether the judgment of the Finnish court was
entitled to recognition under Article 33 had been discussed in argument, it
did not arise for decision because it related only to whether the court had
jurisdiction to entertain a claim under the statutory provisions. It does
not appear that New India sought to argue that the Finnish judgment
should be recognised as binding on the parties in some other respect. In
my view there is nothing in these comments to support the conclusion
that a foreign judgment given in civil or commercial proceedings does
not have to be recognised in subsequent arbitration proceedings. To the
extent that the decision of the Finnish court was to the effect that there
was no relevant arbitration agreement between the parties, the comments
in paragraph 50 of the judgment must now be read in the light of the
decision in The 'Front Comor'.
122.In paragraphs 88-90 of his opinion in Marc Rich, to which the judge
also referred, Advocate General Darmon was dealing with the argument
put forward by Professor Jenard (see paragraph 86) that if a court
with jurisdiction to deal with a dispute falling within the scope of the
Convention was already seised of that dispute and had to determine as
an incidental issue the existence of an arbitration agreement, that was
sufficient to bring that issue within the scope of the Convention for all
purposes, even when raised as the principal subject matter of separate
proceedings in another Member State. Not surprisingly, perhaps, in
paragraph 90 he roundly rejected that suggestion as being contrary to
principle, but I do not think that it has any bearing on the question we
have to decide.
123.The fact that, subject to Article 34 of the Regulation, the judgment
of the Spanish court could be registered in England subject to minimal
formalities and would then have to be recognised for all purposes points
strongly in favour of the conclusion that judgments given in proceedings
falling within the scope of the Regulation must be recognised for all
purposes in Member States. In my view that is consistent both with the
language of Article 33 and the wider purpose of the Regulation. In my
view, therefore, the judge was wrong to hold that the judgment of the
Spanish court did not have to be recognised in the proceedings in Folio
667.
(c) Public policy
124.Article 34 provides that a judgment shall not be recognised if
recognition is manifestly contrary to the public policy of the Member State
in which recognition is sought. The judge held, albeit with some degree
of hesitation, that it would be manifestly contrary to the public policy
of the United Kingdom to recognise the Spanish court's judgment that
there was no arbitration agreement between the parties. The principal
grounds for her conclusion were (a) that it would be contrary to English
public policy to recognise a judgment obtained in breach of an arbitration
agreement that was valid by its proper law; (b) that the court has a
clear obligation to give effect to an arbitration agreement that is valid
in accordance with its proper law; and (c) that (on the assumption that
there was in existence a binding arbitration agreement) Endesa was in
breach of contract in not agreeing to submit the dispute to arbitration.
125.In my view these are essentially three different ways of putting the
same point, namely, that at common law it is contrary to public policy
to recognise a foreign judgment given in proceedings which, in the eyes
of English law, have been pursued in contravention of a valid arbitration
agreement. Important though arbitration agreements undoubtedly are,
I think that puts the matter rather too high. It is not, I think, contrary
to public policy to recognise a judgment of a foreign court of competent
jurisdiction simply on the grounds that an English court would have
come to a different decision. For example, if a foreign court purporting
to apply English law to a contract with the aid of expert witnesses were
to reach a conclusion that an English court would think wrong, it would
not be contrary to public policy to enforce the judgment and it is difficult
to see why for this purpose arbitration agreements should be given a
status above that of other obligations. Whether a foreign judgment will
be recognised depends primarily on whether under English conflict of
laws rules the court in question is regarded as having jurisdiction over
the parties. In my view the question whether the courts of this country
should recognise a foreign judgment given in proceedings taken in breach
of an arbitration agreement is also essentially one of jurisdiction. There
is apparently no common law authority on the point (see Dicey, Morris
& Collins, paragraph 14-091), but if the court in question is regarded
as being of competent jurisdiction (for example, because both parties
were resident within the territorial area of its jurisdiction) I do not think
that it would be contrary to public policy to recognise the judgment,
even if an English court would have held that the parties had agreed to
refer the dispute to arbitration. Different considerations might arise if the
judgment had been obtained through conscious wrongdoing, for example
by pursuing proceedings in defiance of an injunction, but that is not this
case.
126.It may be partly for these reasons that it was considered desirable
to make specific provision in section 32 of the Civil Jurisdiction and
Judgments Act 1982 in respect of the recognition of foreign judgments
made in proceedings brought contrary to an agreement under which
the dispute in question was to be settled otherwise than by proceedings
in the courts of that country. These provisions protect both exclusive
jurisdiction clauses and arbitration clauses and the ordinary rules relating
to the recognition of foreign judgments are excluded by subsection (3).
Provisions of that kind would not be required at all if there were a clearly
established rule of public policy that foreign judgments obtained contrary
to arbitration agreements were not to be enforced in this country.
Moreover, by virtue of subsection (4) subsection (1) does not prevent the
recognition or enforcement of judgments of the courts of other Member
States of the European Union. In the face of that specific exception it
is difficult to see how a simple failure on the part of a court in another
Member State to give effect to an arbitration agreement could justify a
refusal to recognise and enforce its judgment on the grounds of public
policy.
127.Miss Selvaratnam submitted that to recognise a judgment given in
proceedings brought contrary to an arbitration clause would place this
country in breach of its obligations under the New York Convention. This
argument appears to have held some attraction for the judge, but I am
unable to accept it. It is quite true that the United Kingdom as a party
to the Convention has an obligation to recognise and enforce arbitration
agreements where they exist, but it does not follow that the courts of this
country have a duty to examine the question for themselves whenever it
is alleged that the parties have entered into an agreement of that kind.
Whether they have done so in any given case is a question which, for the
purposes of the New York Convention, may be determined by any court of
competent jurisdiction, there being nothing in the Convention itself which
precludes the application of established rules of estoppel by record.
128.However, it is unnecessary to pursue these lines of enquiry because
the European Court of Justice has provided authoritative guidance
in the case of Krombach v Bamberski on the principles that apply to
the operation of Article 34. In that case the claimant, Mr. Krombach,
was indicted in France in connection with the death of the defendant's
daughter. He failed to appear at the hearing, was treated as being in
contempt of court and as a result was tried in his absence and denied
legal representation. A civil claim for damages by the girl's father had
been attached to the proceedings and Mr. Krombach was ordered to
pay FF350,000 in damages and costs. When Mr. Bamberski sought to
enforce the judgment in Germany Mr. Krombach argued that to enforce
the judgment would be contrary to public policy because he had not been
given a proper opportunity to defend himself.
129.In its judgment the court said:
"36. By disallowing any review of a foreign judgment as to its substance,
Article 29 and the third paragraph of Article 34 of the Convention prohibit
the court of the State in which enforcement is sought from refusing to
recognise or enforce that judgment solely on the ground that there is a
discrepancy between the legal rule applied by the court of the State of
origin and that which would have been applied by the court of the State in
which enforcement is sought had it been seised of the dispute. Similarly,
the court of the State in which enforcement is sought cannot review the
accuracy of the findings of law or fact made by the court of the State of
origin.
37. Recourse to the public-policy clause in Article 27, point 1, of the
Convention can be envisaged only where recognition or enforcement of
the judgment delivered in another Contracting State would be at variance
to an unacceptable degree with the legal order of the State in which
enforcement is sought inasmuch as it infringes a fundamental principle.
In order for the prohibition of any review of the foreign judgment as to
its substance to be observed, the infringement would have to constitute a
manifest breach of a rule of law regarded as essential in the legal order of
the State in which enforcement is sought or of a right recognised as being
fundamental within that legal order.
38. With regard to the right to be defended, to which the question
submitted to the Court refers, this occupies a prominent position in the
organisation and conduct of a fair trial and is one of the fundamental
rights deriving from the constitutional traditions common to the Member
States." (My emphasis.)
130.These paragraphs are important for two reasons: first, because
they make it clear that public policy may not be invoked on the grounds
that the foreign court has reached a decision which the court of the
recognising or enforcing state thinks is wrong (this ties in with the point
made earlier); second, because it makes it clear that a judgment can
properly be refused recognition or enforcement on public policy grounds
only in cases where recognition would be inconsistent with a fundamental
principle of the legal order of the enforcing Member State.
131.It is unnecessary for the purposes of this case to consider the scope
of this principle which the court clearly intended should apply in only a
very narrow class of cases. In my view, however much importance is
attached to arbitration, or even to the principle that contracts are to be
performed, it cannot be said that the failure on the part of the Spanish
court in good faith to give effect in this case to an arbitration agreement
imperfectly spelled out in the bill of lading (but in the eyes of English law
sufficiently incorporated by reference) would involve a manifest breach
of a rule of law regarded as essential in the legal order of the United
Kingdom or of a right recognised as being fundamental within that legal
order.
132.In those circumstances I do not think it helpful to spend time
considering the judgments in Philip Alexander Securities and Futures
Limited v Bamberger and Others [1997] I.L.Pr. 73 on which the judge
relied. The facts of that case were very different from those of the present
case and the courts did not have the benefit of the more recent decisions
of the European Court of Justice to guide them.
133.For these reasons I have reached the conclusion that the court in
Folio 667 was not entitled to refuse recognition of the Spanish court's
judgment and that the judge ought to have refused the declaration sought
in Folio 667. I agree, therefore, that the appeal should be allowed.
Commercial Court action Folio 64
134.The judge dismissed the action Folio 64 on the grounds that, since
the parties had not agreed that the High Court was to have jurisdiction
to determine disputes arising under the bill of lading, there was no basis
on which it could properly assert jurisdiction. Miss Selvaratnam sought to
persuade the judge that the court could properly assert jurisdiction over
Endesa under Article 5(1) of the Regulation and she sought permission to
amend NNC's pleadings to raise that additional claim. However, the judge
considered such a claim to be unsustainable, dismissed the application to
amend and struck out the proceedings. She refused leave to appeal, as
did the single Lord Justice who considered NNC's application on paper.
135.Before us Miss Selvaratnam sought once more to argue that the
court was entitled to assert jurisdiction under Article 5(1). In the view of
this court, however, that argument could not succeed and we therefore
refused permission to appeal against the judge's decision for reasons to
be given at a later date.
136.Article 5(1) provides as follows:
"A person domiciled in a Member State may, in another Member State, be
sued:
1. (a) in matters relating to a contract, in the courts for the place of
performance of the obligation in question;"
Miss Selvaratnam submitted that the court could exercise jurisdiction in
this case because Endesa was in breach of an agreement to arbitrate,
the place of performance of which was London. As Mr. Lord pointed
out, however, the first difficulty facing NNC was that it was forced to
submit that a claim for damages for breach of an agreement to arbitrate
falls within the scope of the Regulation, contrary to its submissions in
Folio 667. That might not matter too much if the argument were well-
founded, but in my view it is not. If one asks what is the nature of the
right which the proceedings were brought to protect (see paragraph 22
of the judgment in The 'Front Comor'), the answer must be that they
were brought to protect the right to have the dispute determined by
arbitration. However, it is clear that in Marc Rich proceedings to determine
whether an arbitration agreement existed between the parties were
regarded by Advocate General Darmon as falling outside the scope of the
Convention. If that is so, it is difficult to see why a claim for damages
for breach of such an agreement should not do so as well. Moreover, I
agree with Waller L.J. that it would not be right to allow NNC to amend
its claim in such a radical manner simply in an attempt to ensure that the
Commercial Court retains its position as the court first seised, nor do I
think that there would be any point in doing so. NNC could not proceed
with its substantive claim in England because there was no basis on
which the court could assume jurisdiction over Endesa in respect of it.
Equally, a claim for breach of an arbitration agreement would be doomed
to failure because the judgment of the Spanish court that there was
no such agreement in existence between the parties would have to be
recognised: see section 32(4) of the Civil Judgments and Jurisdiction Act.
For all these reasons it would not have been right to give permission to
make the amendment sought by NNC.