Update on June 2022 at the Court of Justice – Judgment on C 700/20

This is an update on my monthly post on the Court of Justice of the European Union, in order to announce the publication today (Monday 20) of the decision in case C-700/20,  The London Steam-Ship Owners’ Mutual Insurance Association.

I reported on the facts and the questions referred by the High Court of Justice Business and Property Courts of England and Wales, United Kingdom here, but I believe it worth reproducing them again. The main proceedings are based on a dispute between London Steam-Ship Owners’ Mutual Insurance Association Limited (‘the Insurer’), having its registered office in the United Kingdom, and the Kingdom of Spain; it concerns claims for damages arising from the sinking off the coast of Spain of a vessel carrying fuel oil – the Prestige. The insurance contract contained, inter alia, an arbitration agreement governed by English law.

The Kingdom of Spain asserted its rights to receive compensation from the Insurer under the insurance contract, in the context of criminal proceedings instituted in Spain in 2002. Following a first-instance decision in 2013 and several appeals, the Spanish proceedings culminated in a finding that the Insurer was liable for the loss caused by the shipping accident subject to the limitation of liability provided for in the insurance contract. The Spanish court issued an execution order on 1 March 2019. On 25 March 2019, the Kingdom of Spain applied for recognition and enforcement of that order in the United Kingdom in accordance with Article 33 of the Brussels I Regulation. That application was granted. The Insurer appealed against that decision in accordance with Article 43 of the Brussels I Regulation.

The Insurer, for its part, initiated arbitration proceedings in London in 2012. In the resulting award it was established that the Kingdom of Spain would have to initiate arbitration proceedings in London in order to assert claims under the insurance contract. The Commercial Court of the High Court of Justice of England and Wales, before which enforcement of the award was sought under section 66 of the Arbitration Act 1996, entered a judgment in the terms of the award against the Kingdom of Spain in October 2013, which was confirmed on appeal. The Kingdom of Spain took part neither in the arbitration proceedings nor in the judicial proceedings in the United Kingdom.

The referring court asked the Court of Justice the following questions:

(1) Given the nature of the issues which the national court is required to determine in deciding whether to enter judgment in the terms of an award under Section 66 of the Arbitration Act 1996, is a judgment granted pursuant to that provision capable of constituting a relevant “judgment” of the Member State in which recognition is sought for the purposes of Article 34(3) of EC Regulation No 44/2001?

(2) Given that a judgment entered in the terms of an award, such as a judgment under Section 66 of the Arbitration Act 1996, is a judgment falling outside the material scope of Regulation No 44/2001 by reason of the Article 1(2)(d) arbitration exception, is such a judgment capable of constituting a relevant “judgment” of the Member State in which recognition is sought for the purposes of Article 34(3) of the Regulation?

(3) On the hypothesis that Article 34(3) of Regulation No 44/2001 does not apply, if recognition and enforcement of a judgment of another Member State would be contrary to domestic public policy on the grounds that it would violate the principle of res judicata by reason of a prior domestic arbitration award or a prior judgment entered in the terms of the award granted by the court of the Member State in which recognition is sought, is it permissible to rely on Article 34(1) of Regulation No 44/2001 as a ground of refusing recognition and enforcement or do Articles 34(3) and (4) of the Regulation provide the exhaustive grounds by which res judicata and/or irreconcilability can prevent recognition and enforcement of a Regulation judgment?

An opinion by AG Collins was published on May 5, 2022. He proposed the Court of Justice to answer that

“A judgment entered in the terms of an arbitral award pursuant to section 66(2) of the Arbitration Act 1996 is capable of constituting a relevant ‘judgment’ of the Member State in which recognition is sought for the purposes of Article 34(3) of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, notwithstanding that such a judgment falls outside the scope of that regulation by reason of Article 1(2)(d) thereof.”

In practical terms, if followed by the Court of Justice, the Spanish decision would not be recognized in the UK under the Brussels Regulation. Very bad news for the Spanish government and also for all those, many, affected by the heavy oil spill, the worst marea negra ever experienced in Galicia.

The Grand Chamber, with M. Safjan acting as reporting judge, has decided otherwise in a decision already available  in English and French.

On the first and second questions, that she addresses together, the Court of Justice has decided

“Article 34(3) of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters must be interpreted as meaning that a judgment entered by a court of a Member State in the terms of an arbitral award does not constitute a ‘judgment’, within the meaning of that provision, where a judicial decision resulting in an outcome equivalent to the outcome of that award could not have been adopted by a court of that Member State without infringing the provisions and the fundamental objectives of that regulation, in particular as regards the relative effect of an arbitration clause included in the insurance contract in question and the rules on lis pendens contained in Article 27 of that regulation, and that, in that situation, the judgment in question cannot prevent, in that Member State, the recognition of a judgment given by a court in another Member State.”

And on the third

“Article 34(1) of Regulation No 44/2001 must be interpreted as meaning that, in the event that Article 34(3) of that regulation does not apply to a judgment entered in the terms of an arbitral award, the recognition or enforcement of a judgment from another Member State cannot be refused as being contrary to public policy on the ground that it would disregard the force of res judicata acquired by the judgment entered in the terms of an arbitral award.”

I expect the judgement and its reasoning to be very much commented in academic circles.

For the record, Prof. Adrian Briggs very kindly provided this piece of information in a comment to my post: “So far as concerns C-700/20, it should be noted that on March 1, the Court of Appeal, in The Prestige (No 5) [2022] EWCA Civ 238, ruled that the reference should not have been made as a matter of European law, and (in effect) remitted the matter to the judge with its advice that he should withdraw the reference. On March 31 the Supreme Court gave permission to appeal against the decision of the Court of Appeal.” If I am not wrong, the UKSC decision on the issue will be known this week as well.