The Sinking Of An Oil Tanker, Recognition Of Judgements, Arbitration Proceedings And Insurance Contracts

• Published date: 31 October 2022
• Subject Matter: Corporate/Commercial Law, Insurance, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Insurance Laws and Products, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Finance Malta
• Author: Ganado Advocates

On the 20 June 2022, the Court of Justice of the European Union (Grand Chamber) (the "Court") declared that a judgement confirming an arbitral award can only prevent the recognition of a judgement from another Member State if that award could have been the subject of a judicial decision adopted in accordance with the provisions and fundamental objectives of Regulation 44/2001¹. The judgement was delivered in case C-700/20 concerning a request for a preliminary ruling under Article 267 of the Treaty of the Functioning of the European Union from the High Court of Justice (England & Wales), Queen's Bench Division (Commercial Court) (United Kingdom) in the proceedings London Steam-Ship Owners' Mutual Insurance Association Limited (the "London P&I Club") v. Kingdom of Spain.

The case involved the London P&I Club's potential liability in respect of the Spanish State, under the insurance contract concluded between the London P&I Club and the owners of the Prestige, an oil tanker which sank off the coast of Spain in November 2002, for the significant environmental damage to the Spanish and French coastlines caused by the sinking of the vessel. This event initiated a number of civil claims in Spain, in the context of criminal proceedings, against the master and the owners of the vessel, and against the London P&I Club, the liability insurer of both the vessel and its owners, in terms of the Spanish Criminal Code which provides for a right of direct action. After the introduction of those civil claims, the London P&I Club commenced arbitration proceedings in the United Kingdom pursuant to an arbitration clause included in the insurance contract with the owners of the Prestige.

The arbitral tribunal in the United Kingdom decided that the claims for damages brought by the Kingdom of Spain before the Spanish courts should have been referred to arbitration in London and that the 'pay to be paid' clause in the insurance contract must be respected, meaning that the insured party (the owners of the vessel) must first pay the injured party (the Kingdom of Spain) the compensation due before recovery from the insurer (the London P&I Club) is permissible. The London P&I Club obtained a judgement of the High Court of Justice (England & Wales), Queens Bench Division (Commercial Court) (United Kingdom) in terms of the arbitration award which was subsequently confirmed on appeal.

In the meantime, the proceedings in Spain also progressed and resulted in the master and owners of...