Commercial Court Confirms Arbitral Tribunal Can Award Damages For Breach Of The Obligation To Arbitrate

West Tankers Inc v. (1) Allianz SpA (formerly known as Riunione Adriatica Sicurta) and (2) Generali Assicurazioni Generali SpA (Front Comor) [2012] EWHC 854 (Comm)

On an appeal from an arbitration award, the Commercial Court was asked to consider whether an English arbitral Tribunal is deprived of jurisdiction, by reason of European law, to award damages (and/or an indemnity) for breach of an obligation to arbitrate. More specifically, the question was whether a Tribunal has jurisdiction to award damages against a party who starts judicial proceedings in breach of an obligation to arbitrate, when those proceedings are commenced before a Court in the EU pursuant to the Brussels Regulation.

In a judgment handed down on 4 April 2012, Mr Justice Flaux has held that the Tribunal did in fact have such jurisdiction.

The background facts

This is yet another chapter in the widely reported Front Comor litigation, which reached the European Court of Justice ("ECJ") in 2009 on the issue of whether it was incompatible with the Brussels Regulation (Council Regulation (EC) No.44/2001) for the Court of one EU member state to grant an anti-suit injunction restraining Court proceedings brought in another EU member state, on the ground that those proceedings were contrary to an arbitration agreement. The ECJ, concurring with the earlier opinion of the Advocate General, held that such injunctions were incompatible with the Brussels Regulation.

The original dispute arose out of a collision between the laden tanker vessel, Front Comor, owned by West Tankers ('the shipowners'), and a pier in Italy belonging to Erg Petroli SpA, the vessel's charterers. Erg Petroli asserted claims for substantial damages arising from the collision and obtained security. Those claims for damages were referred to arbitration in London, pursuant to the arbitration agreement in the charterparty. Notwithstanding the ongoing London arbitration proceedings, the charterers' subrogated insurers (Allianz and Generali) subsequently commenced proceedings in tort in the Italian Court against the shipowners.

The shipowners applied for and obtained an anti-suit injunction from the English Court to restrain the insurers from pursuing their claims in Italy, in the course of which Colman J in the Commercial Court in London (after hearing full argument from the insurers) declared that the insurers were obliged to arbitrate their claims in London. Colman J's declarations were not appealed by the...