West Tankers 2012: Pro-Arbitration Through Enforcement Of Declaratory Awards

This article was originally published in International Arbitration Law Review, Issue 2, 2012

Introduction

West Tankers' decisions are to arbitration practitioners what JK Rowling novels are to Harry Potter fans: each brings the reader a new insight into their otherwise ordinary world. Readers will recall the 2009 European Court of Justice (ECJ) decision in West Tankers which brought into question the availability and use of anti-suit injunctions (in the European Union) in order to enforce arbitration agreements.1 The most recent "episode" in West Tankers concerns a 2012 English Court of Appeal judgment on whether an arbitral award in the form of a negative declaration may be entered as a judgment under the terms of s.66 of the Arbitration Act 1996 (the Act); the intention being that it may circumvent some of the difficulties posed by the ECJ decision in West Tankers 2009, while adhering to the current position under the Brussels Regulation 44/2001 (the Brussels Regulations).2 This paper will look at West Tankers generally, the nature of declaratory awards and, in particular, the most recent development in the English court. While there is no magic regarding the English court's 2012 decision, its effect may serve as a useful tool in the arsenal of arbitration practitioners while the proposed amendments to the Brussels Regulations continue to be deliberated.

Background: West Tankers 2009

The ECJ decision in West Tankers 2009 is well-known to most arbitration practitioners (especially those with UK connections) and the facts need not be repeated in detail.3 However, the legal issues serve as a useful backdrop against which the tactics and rationale deployed in West Tankers 2012 can be better understood.

The House of Lords, when referring the matter to the ECJ, expressed their support for the English anti-injunction previously issued. This was for two principle reasons. First, that arbitration is excluded from the scope of the Brussels Regulations by art.1(2)(d), which states that "the Regulation shall not apply to ... arbitration", a position that has been held, by the ECJ itself, to extend to court proceedings in which the subject matter is arbitration.4 Secondly, and more fundamentally, the nature of the Brussels Regulations were intrinsically unsuited to dealing with arbitration agreements, where the parties had by definition chosen to apply different principles to the allocation of jurisdiction.5

The ECJ's approach was that while the application for an anti-suit injunction was to enforce an arbitration agreement, and therefore did not come within the scope of the Brussels Regulations, there was concern that they undermined the effectiveness of the Brussels Regulations.6 The ECJ held that the injunction granted by the English courts "runs counter to the trust which the Member States [must] accord to one another's legal system and judicial institutions".7 The ECJ also had regard to art.II(3) of the New York Convention which states the courts of a contracting state:

"... when seised of an action in a matter in respect of which the parties have made an arbitration agreement, that will, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null, void, inoperative or incapable of being performed".8

Fundamentally, the ECJ took the view that an EU court's jurisdiction, including the validity or otherwise of an arbitration agreement, is necessarily an incidental and preliminary question to the substantive dispute. To remove the court's power to address that "amounts to stripping that court of the power to rule on its own jurisdiction under Regulation No 44/2001"; a jurisdiction which is not, or should not be, subject to review by the courts of another Member State.9 The ECJ continued in that if an arbitral tribunal was prevented from examining itself the preliminary of the validity or the applicability of the arbitration agreement, a party could avoid the proceedings—which would otherwise be provided for under the Brussels Regulations—merely by relying on that agreement. The effect being that the applicant, who considers that the agreement is void or inoperative, would be barred from access to the court and therefore be deprived of a form of judicial protection to which it is entitled."10

The ECJ's decision effectively left (primarily English) arbitration practitioners to reconsider how best to uphold and enforce arbitration agreements in the European Union when their magic wand, namely the anti-suit injunction, was taken from them. In the period following West Tankers 2009, many academics theorised about ways to maneuver around West Tankers 2009. Principal among these was the use of declarations, but that spell was yet to be cast in the confines of a court room.

Declaratory awards in arbitration

Declaratory awards are nothing new to international commercial arbitration. The circumstances and terms of such an award are generally at the discretion of the arbitral tribunal, subject to the terms of the arbitration agreement.11 Such awards decide questions as to the respective rights and obligations of the parties; they are not "executory" in form in that they do not formally order either party to do or to refrain from doing anything.12 Turner notes that declaratory awards may be issued in disputes on, for example:

1. the meaning or interpretation of a term of a contract, or specification, or other document;

2. whether or not a particular event or circumstance falls within a contractual definition

3. whether or not the terms of a contract have been complied with;

4. whether one event was the direct consequence of another.13

In the context of arbitration disputes, some of the more common declaratory awards concern whether a party is [or is not] liable in respect of the matter alleged (as was the case in West Tankers 2012), and whether a party's interpretation of the clause in contention is correct. The latter is frequently deployed when a party challenges the jurisdiction of the arbitral tribunal. Inevitably that party says the tribunal lacks jurisdiction and the other party asserts it does. Resolution of this if often dealt with swiftly by virtue of doctrines of separability14 and competence-competence.15 Consequently, an interim award may be issued which, while binding on the parties to the arbitration, is not a panacea as it...