Which Strategy for West Tankers?
As reported yesterday, West Tankers has now won its arbitration against the insurers of Erg Petroli and obtained a judgment in England in the terms of the award.
The purpose of this last move, it seems, was to create a defense against the enforcement in England of any forthcoming Italian judgment finding in favour of the insurers. This would create a conflict of judgments in England, and West Tankers hopes that pursuant to Article 34 of the Brussels I Regulation, the English judgment (in the terms of the award) would prevail.
If this strategy was to prevail, this would mean that the Italian judgment could not be enforced in England. But West Tankers may have assets in other European jurisdictions where the Italian judgment would be recognised almost automatically. In particular, it is likely that it owns vessels which could be attached in any European harbour where they stop. It might therefore be that the Italian judgment could be enforced in France, Greece, Spain, etc…
It seems, therefore, that West Tankers has two ways forward.
The most obvious one would be to seek recognition of the arbitral award in most jurisdictions of Europe, and hope that in each of these jurisdictions, a local judgment declaring the award enforceable would be considered as a judgment in the meaning of Article 34 of the Brussels I Regulation. The insurers would then be left with Italy, that West Tankers’ vessels might find wise to avoid.
Alternatively, West Tankers might want to focus on the UK and try to rely on the English judgment to obtain restitution of any payment it would be forced to make abroad on the basis of the Italian judgment (for a similar example, see here). I have no idea whether this could work as a matter of UK law. But it might be a theoretical question, as the Italian insurers of Erg Petroli might not have assets there.
Just a few remarks on the issue: Whether an enforceable arbitral award qualifies as a “judgment” within the meaning of Article 34 No. 4 of the Brussels I-Reg. must obviously be answered in accordance with the term’s definition given in Article 32 of the said Regulation. According to this provision, “judgment” means “any judgment given by a court or tribunal of a Member State”. From the words “of a Member State”, it is commonly inferred that arbitral awards, decisions by ecclesiastic courts etc. do not constitute judgments in the sense of Article 32. Moreover, “arbitration” is explicitly excluded from the material scope of the Regulation by Article 1(2)(d). The German Federal Court of Justice has recently decided that even a judgment by a Member State court which, according to the so-called “doctrine of merger”, incorporates a foreign (U.S.) arbitral award, may not be enforced under the Brussels I regime (BGH July 2nd, 2009 – IX ZR 152/06, para. 17, available at http://www.bundesgerichtshof.de, published in: RIW 2009. 721). Thus, a direct recourse to Article 34 No. 4 is barred. Nevertheless, one may well apply the provision by way of an analogy, i.e. extending the principle of priority to enforceable arbitral awards (see, e.g., Kropholler/von Hein, Europäisches Zivilprozessrecht, 9th ed. 2011, Article 34 note 60). At least it’s worth trying…
I think it is worthwile distinguishing three issues.
1) can a judgment in the meaning of Article 32 be an arbitral award? Obviously not. We are talking about the local judgment declaring enforceable the award.
2) can this local judgment of enforceability circulate? To me, the answer is again obviously no. This is a judgment ruling on enforcement in the forum. It makes no sense whatsoever to recognize or enforce it in a third state. Exequatur sur exequatur ne vaut.
3) can this local judgment of enforceability be a judgment of the forum barring recognition to any inconsistent foreign judgment? It seems to me that, here, there is room for debate. I take your point about the exclusion of arbitration from the scope of the Regulation, of course. But I am not sure the concepts of jugdment in the meaning of Article 34 and 32 must be the same. After all, Article 34 considers judgments given in third states. In any case, it is certainly worth trying!
I agree with Giles, judgment in the meaning of Article 32 and Article 34 can not be an arbitral award. I state this because of the exclusion of arbitration in the Regulation.
However, the recent ruling in the West tankers case highlights the conflict of jurisdiction between national courts and arbitral tribunals.
Following this, the West Tankers ruling may constitute conflict of judgments in England.The West Tankers stand on Article 34 of the Brussels I Regulation in English judgment is yet to be seen regarding the award. Moreover, in Article 1 (2)(d) Brussels 1 Regulation it expressly states ‘the Regulation shall not apply to arbitration’.
The issue of arbitrability can be raised regarding national or regional jurisdictional rules that grant exclusive jurisdiction to national courts over specific disputes as seen in Article 22 (4) of the Brussels Regulation.
I am afraid i have difficulty in concuring with the second point raised by Giles, on the enforceability of a judgment declaring an award enforceable in other members States of the EU. First, this is an award emanating from arbitration proceeding between parties from different jurisdictions, possibly having assets in different MS of the EU. It is a dispute with an international dimension, so it will not be within the contemplation of parties at the time the arbitration agreement was made and England was choosen as the forum of arbitration, that any award or judgment emanating thereof, would only be enforceable in England. Is it not possible that the parties may not have any assets in the place of arbitration and this may be one of the reasons for choosing the forum. The element of neutrality becomes relevant here. So it will be completely commercial suicidal to contemplate that any award or judgment declaring the award enforceable can only be enforced in the place of arbitration.
Secondly, the articles in the regulation, did not make any distinction as to the nature of the judgment or what it seeks to achieve, the bottom line is that a judgment of a competent court, has declared an award enforceable and if the judgment is to be enforeced in any other MS, it is not the duty of the court of the enforcing MS to review the merits of the judgment, except on grounds provided for in the regulation.
Thirdly, we should not lose sight of the supportive role the courts of MS, play in giving effects to arbitration proceedings and the resultant award, nor should we forget that even the Regulation itself enjoins the preservation of the aims and objectives of international convention MS entered into before the comming into effect of the Regulation, one of such is the NYC. Therefore, there is nothing out of place for a court to give effect to an award by a judgment declaring it enforceable and this is not only limited to the place of arbitration, but such judgment enjoys the freedom of circulation in all MS where the applicants might reap the benefits of such judgment.
Finally if such judgment comes for recognition and enforecment in any MS and such is given, it serves as a bar to any subsequent inconsistent judgment ruling on the same subject matter. As to his third point, the reasons stated here might serve to defuse any arguments in that direction.
I agree with you that the parties hope that their award will be enforceable outside of the seat of the arbitration. And they are right, but the reason for this, I think, is not the Brussels I Regulation but rather the NY Convention. The primary instrument for ensuring that arbitral awards are enforced wherever assets can be found is the NY Convention. Using the Brussels I regulation for that purpose first raises the issue of the exclusion of arbitration from its scope, and second the issue of by passing the NY Convention. In other words, since the NY Convention is there, why on earth would you want to seek enforcement of a judgment on the award?
Of course, I agree with you that the Articles of the Regulation do not distinguish between dfferent kinds of jugements. But Article 1 certainly provides for a special regime in arbitration matters.
Thank you for your response. I tend to see your point and the angle you are comming from. However, also bear in mind that the NYC does not stand on its own, its intent and purposes are well achieved by the different national laws of contracting States on arbitration as well as their procedural laws dealing with judgments recognition and enforcement. Life is given to the provisions of the Convention by these domestic procedural rules, with the aim that such support arbitration as an alternative means to dispute resolution.
Again you will agree, that at the level of the EU, all the arguments going back and effort on arbitration and its interface with the Regulation is to ensure that the aspirations of the NYC are promoted and its effectiveness and benefits to disputants are not undermined. Unfortunately the ECJ judgment in West Tankers, has brought us to this present difficulty.
I am sure you are aware of the EU Parliament resolution of Sept.7 2010, on the need to have the arbitration exception maintained and that question dealing on the validity of the arbitration agreement whether as a preliminary matter or as a principal question to fall outside the scope of the Regulation. If so, i wonder why the debate still on, though i believe that the Regulation itself has not been finally amended to reflect this position.
On a personal note, i align myself with the view that the arbitration exception in all its entirety should be maintained.