On 20 June 2022, the CJEU rendered its judgment in London Steam-Ship Owners’ Mutual Assistance Association Ltd v Spain. The judgment, which dramatically altered the understanding of the arbitration exception under the Brussels instruments, gave rise to heated comments and debates, including an on-line symposium on this blog.
On 6 October 2023, the English High Court rendered a new judgment in the case where Justice Butcher discussed, inter alia, the meaning of the CJEU jugdment and the extent to which he was bound by it.
Interestingly, the insurers had initiated a second arbitration in 2019 which was still in progress when the CJEU delivered its judgment. As a result, the arbitrator, Sir Peter Gross, also had to express views on the meaning of the CJEU judgment in the two partial awards he made on 6 January 2023 and 27 March 2023.
The English proceedings are highly complex, with a number of challenges initiated by each of the parties against the various arbitral awards and application to enforce the Spanish judgment. Without getting into all these details, I focus below on the issues addressed by the CJEU and how they were perceived and addressed by the English court.
Concept of Judgment in Article 34(3) Brussels I
A first argument made by Spain before the English court was that the English judgments on the arbitral awards were no relevant ‘local’ judgments for the purposes of Article 34(3), as they were not judgments of ‘a judicial body of a Contracting State deciding on its own authority on the issues between the parties’. (Solo Kleinmotoren GmbH v Emilio Boch [1994] ECR I-2237).
Justice Butcher ruled that the CJEU confirmed that the argument based on Solo Kleinmotoren was incorrect.
123. In the judgment of the CJEU, at paras. [48-50], the CJEU said that a judgment entered in terms of an arbitral award was capable of being regarded as a ‘judgment’ within the meaning of Article 34(3). In that regard, the CJEU pointed out at para. [49] that the concept of a ‘judgment’ set out in Article 32 was a broad one and ‘covers any judgment given by a court of a Member State, without its being necessary to draw a distinction according to the content of the judgment in question, provided that it has been, or has been capable of being, the subject, in the Member State of origin and under various procedures, of an inquiry in adversarial proceedings’. At para. [50] the CJEU said that this interpretation of the concept of ‘judgment’ in Article 34(3) was supported by the purpose of the provision, which was to protect the integrity of a Member State’s internal legal order. At para. [53] the CJEU said that, ‘a judgment entered into in the terms of an arbitral award is capable of constituting a ‘judgment’ within the meaning of Article 34(3) …’.
A second argument made by Spain before the English Court was that the whole of the English proceedings, and the resulting English s. 66 Judgments (declaring the first arbitral awards enforceable in England), fell within the arbitration exception to the applicability of the Brussels Regulation enshrined in Article 1(2)(d). Spain’s contention was that a non-Regulation judgment, or at least a judgment which is a non-Regulation judgment because it falls within the arbitration exception, did not count as a relevant ‘home’ judgment for the purposes of Article 34(3).
Again, Justice Butcher ruled that the CJEU confirmed that the argument, that he labelled ‘the material scope point’, was incorrect.
142. (…) the Court’s reference, at para. [50], to the purpose of Article 34(3) as being the protection of the integrity of a Member State’s legal order is relevant to this point as it is to the ‘Solo’ point. Further at paras [51-52], the CJEU said that it was ‘apparent from the Court’s case-law that the exclusion of a matter from the scope of Regulation No.44/2001 does not preclude a judgment relating to that matter from coming within the scope of Article 34(3) of that regulation and, accordingly, preventing the recognition of a judgment given in another Member State with which it is irreconcilable’, and made reference to Hoffmann v Krieg.
Jurisdictional Qualifications of the CJEU
The most novel, far reaching and debatable aspects of the ruling of the CJEU were, however, the introduction of new requirements relating to lis pendens and the privity of jurisdiction clauses.
Readers will recall that the CJEU ruled that where a judicial decision resulting in an outcome equivalent to the outcome of an arbitral award could not have been adopted by a court of the Member State of enforcement without infringing the provisions and the fundamental objectives of the Brussels I 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, the judgment on the arbitral award cannot prevent the recognition of a judgment given by a court in another Member State.
The issue before both the arbitrator and the English court was whether this part of ruling had deprived the arbitrator from its jurisdiction and thus prevented the operation of Art. 34(3), as the relevant arbitral awards should be set aside for lack of jurisdiction.
Both of them rejected the argument on the ground that they were not bound by answers to questions not referred to the CJEU.
209. I have also reached the conclusion (as did Sir Peter Gross at paragraph [122(3)] of the Gross First Award) that, if the CJEU purported to answer a question not or falling outside those referred to it, the national court would not be bound to follow any such purported answer, though it would not lightly so hold. This appears to me to be the corollary of the limited jurisdiction established by Article 267 of the TFEU. (Reference to precedents omitted)
Justice Butcher then concluded:
214. Applying the principles set out above, in my judgment the CJEU, in paragraphs [54] to [73] of its Judgment, gave answers to questions which had not been referred to it, and which this Court had refused to refer. In doing so, it trespassed on the facts of the case.
215. Thus, the first two questions referred to the CJEU in relation to Article 34(3) raised clearly defined issues of EU law. They asked whether a s. 66 judgment was capable of falling within Article 34(3) in light of two specific points, the ‘Solo point’, and the material scope point. The nature of the questions and the reasons why they were asked were set out both in the Reference Judgment, and very clearly in the Reasons for the Reference section of the Order for Reference.
216. There was no question aimed at whether there were other reasons why Article 34(3) might be inapplicable, and specifically no question directed at whether Article 34(3) might be inapplicable because the English s. 66 Judgments had been entered in circumstances where the English Court could not have entertained the claim which was the subject of the Spanish proceedings. That, in my view, raised different questions (including but certainly not limited to different questions of EU law).
Justice Butcher then wondered whether, although he was not bound, he would still want to follow the CJEU. He ruled he would not.
236. Further, while I am clearly entitled to have regard to the reasoning of the CJEU in those paragraphs, if I am not bound by them I would not follow them. In my judgment they fail to give effect to the exclusion of arbitration from the Regulation, and they fail to have regard to the jurisprudence of the ECJ/CJEU which has recognised that the arbitration exception is effective to exclude arbitration in its entirety, including proceedings in national courts the subject matter of which is arbitration, in particular the decisions in Marc Rich & Co AG v Società Italiana Impianti PA (The ‘Atlantic Emperor’) (Case C-190/89), and Proceedings Concerning Gazprom OAO (Case C-536/13).
237. Instead I would follow, and may be bound by, the reasoning of the Court of Appeal in The Prestige (Nos. 3 and 4), in relation to an argument which was raised there with reference to Assens Havn, to the effect that an analogy with that case indicated that the Award Claims there under consideration did not fall within the ‘arbitration exception’ to the Regulation. The argument of the States was that the reasoning in Assens Havn, which was to do with an exclusive jurisdiction clause in a liability insurance policy, was ‘equally applicable to an arbitration clause’. At [79]-[84] the Court of Appeal said this:
(…)
[84] For these reasons we hold that the reasoning in Assens Havn cannot apply to an arbitration clause. We note that this is also the view of Professor Briggs (Civil Jurisdiction and Judgments, 7th ed (2021), para. 9.05). Accordingly the “arbitration” exception applies to the Award Claims and jurisdiction must be determined in accordance with domestic law principles.’
Res Judicata as English Public Policy
The English judgment also addressed the argument of whether res judicata was a principle of English public policy, and whether the Spanish judgment could be denied recognition under the public policy exception in Article 34(1), on the ground that the English judgments declaring enforceable the first arbitral awards were res judicata.
Justice Butcher found that the Spanish judgments would also be contrary to public policy on that ground, but the argument was subsidiary, given that he had already found that the Spanish judgments should be denied recognition on the ground of Article 34(3).
Assessment
The most interesting part of the English judgment is its interpretation and treatment of the most controversial aspects of the CJEU judgment, namely the jurisdictional qualifications.
The debates before the English court show how far reaching the CJEU judgment might be and raise the issue of whether the CJEU has indeed laid down jurisdictional requirements for arbitrators.
On the one hand, a narrow reading of the CJEU judgment could be that nowhere does it expressly say that it has a bearing on the jurisdiction of arbitrators. And that, in the case at hand, it had not ruled on the issue of whether Spain was bound to arbitrate. This, I understand, was the position of the arbitrator. Justice Butcher reported:
77. At [126] Sir Peter Gross considered whether the CJEU Judgment had any bearing on his jurisdiction as an arbitrator. He concluded that, whatever its ambit in other respects, the CJEU Judgment said nothing at all about his jurisdiction; and that he entertained no doubt at all about his having jurisdiction.
78. At [127]-[132] Sir Peter Gross considered whether the CJEU Judgment had decided that Spain had not been obliged to arbitrate its dispute with the Club and hence was not in breach of any equitable obligation by pursuing its Article 117 claims and seeking to enforce the Spanish Judgment. The Arbitrator found that the CJEU Judgment did not contain any such decision. He said (at [130]) that ‘Part 2’ of the CJEU Judgment went to the status of English court judgments, not whether Spain was in breach of its obligation to arbitrate. He said (at [131]) that the CJEU Judgment had said nothing about whether Spain had been obliged to pursue its dispute in arbitration, and that he could see no proper basis for reading in any such decision.
On the other hand, a less cautious reading of the CJEU judgment is that it has indeed laid down jurisdictional requirements for arbitrators. Spain made the argument repeatedly (which is fair enough).
Justice Butcher avoided addressing the issue by ruling that he was not bound by that part of the CJEU judgment. But the views he expressed when he declined to consider the CJEU judgment persuasive enough to follow it may well reveal that he did think that the CJEU has indeed laid down jurisdictional requirements.
Debate to be continued, on the Continent.
Thank you for your report on this very interesting case, Gilles. I am not an expert on preliminary references to the Court of Justice, but I find the way in which Butcher J dismissed a key aspect of the CJEU judgment somewhat strange. This is surely not the first case where the CJEU decided a reference for a preliminary ruling by addressing relevant issues that do not form part of the reference. The CJEU has consistently stated, at least since 1978 (see Case 83/78 Pigs Marketing Board v Raymond Redmond at [26]), that ‘the Court is free to extract from all the factors provided by the national court and in particular from the statement of grounds contained in the reference, the elements of Community law requiring an interpretation…having regard to the subject-matter of the dispute’. A leading authority on the subject, Broberg and Fenger on Preliminary References to the European Court of Justice (OUP, 3rd edn, 2021), has a whole section in chapter 11 on ‘potentially relevant issues that do not form part of the preliminary reference’, which essentially argues that the Court of Justice can decide on such issues, albeit it is in practice reluctant to do so. The CJEU judgment is a mess. I am not sure that this part of the EWHC judgment is much better.
Dear Ugljesa,
I am not an expert either. Justice Butcher relied on the following authorities:
The conclusion appears to me to be supported by authority in this jurisdiction, including in: R v Secretary of State for Transport ex parte Factortame (No. 5) [2000] 1 AC 524, where at [550] A-C Lord Hope (with whom Lord Nicholls and Lord Hoffmann agreed) said that he would not place weight on certain expressions of opinion by the European Court because the national courts had sole jurisdiction to find the facts; Arsenal FC v Reed [2003] 3 All ER 865 (CA) at [25] (to like effect); and in HMRC v Aimia [2013] UKSC 15 at [55]-[56] per Lord Reed JSC (with whom Lords Hope and Walker agreed). In the last of these cases, Lord Reed said (at [56]:
‘… Nevertheless, this court’s responsibility for the decision of the present case on the basis of all the relevant factual circumstances, and all the arguments presented, requires it to take into account all the facts found by the [VAT Tribunal], including those elements left out of account by the Court of Justice, and to consider all those arguments, including those which were not reflected in the questions referred. That responsibility under domestic law is also recognised in EU law, as the Court of Justice explained in the AC-ATEL judgment …. In the exceptional circumstances of this case, this court cannot therefore treat the ruling of the Court of Justice as dispositive of its decision, in so far as it was based on an incomplete evaluation of the facts found by the tribunal or addressed questions which failed fully to reflect those arguments…’
Lord Reed then continued to say that the court had to reach its conclusion in the light of such guidance as to the law which could be derived from the European Court’s ruling; but that was not, I consider, dealing with guidance in answer to questions which had not been posed.
Thanks, Gilles. Interestingly, the authorities mentioned by Butcher J in these paragraphs appear to concern fact finding. I think it is undisputed that it is for domestic courts to establish facts and to apply EU law, as interpreted by the CJEU, to those facts. But Butcher J did something different in his judgment.
The judge reminded himself of the questions which he had himself settled as requiring a preliminary ruling to allow him to do his duty and adjudicate; discerned what the CJEU had said by way of answer to those questions, and in adjudicating the matters before him, declined to consider his hands tied by those expressions of quasi-judicial opinion which discussed matters which did not fall within the terms of the reference which he had made. What the judge was faced with, and did, may have been unusual, but in the circumstances, that is hardly a point against him. His reasoning seems to have been entirely rational, entirely sound. And as he gave permission to Spain to appeal, if he did go wrong in law, the Court of Appeal will be able to say so; and that, as I see it, makes his judgment impeccable.
A comment from Vienna on these interesting remarks regarding the judgment of the English High Court and the issues raised in the post and some of the comments to it. I apologise for my late reaction.
“An ultra-vires judgment of the CJEU”? With all due respect, I disagree with this headline. One might disagree with the line of arguments of the CJEU in the decision – but why should this judgment of a Grand Chamber, the most prominet composition of the CJEU, be ultra vires? The line of reasing of the first instance judge in London was to say: ‘I did not ask the question, therefore the CJEU was not competent to enlarge my question’ (paras 214 ff, 232). However, this definition of the role of the referring judge does not corrspond to the structure nor to established case law on preliminary references. Of course, the CJEU can give an answer (in law) that is based on a systemic interpretation of Union law, transgressing the narrow (and from the perspective of Union law: not exhaustively formulated) question of a national judge. In other words: the referring judge is not the sole master of the preliminary reference; this point of departure is not correct. Therefore, the designation of the CJEU’s judgment as “ultra vires” does not seem to be a correct headline – despite all criticisms this judgment might raise – I explained and commented it (more positively than many colleagues) in CMLR 2023, 533 ff.
Furthermore, the way the English judge tries to re-assessthe case-law of the CJEU (alining with sole (unilateral) arbitrator – Spain did not participate in the arbitration proceedings and did not bring any argument there) – finally appears as a kind of patchwork interpretation of the jurisprudence of the CJEU (paras 92 ff., 162 ff). What methodology was applied here? English law of precedents – European law? The lengthy quotes of judgments do not clarify the standards applied. Again, I am wondering why the referring judge, obviously uncomfortable with the answer provided to him from Luxemboug, did not send a second preliminary reference to the CJEU. Brexit was not an impediment, as the case at hand had started in the transitorial period of the WA and, thus, is still subject to it (Butcher, J. qualified this differently in para 213 – but not convincingly).
However, this attitude does not come as a surprise. When the adverse consequences of Brexit for European private international law were discussed, some authors (not only from England) proposed to simply substite the Brussel regime by ratifying the 2007 Lugano Convention. However, the European Commission did not propose that the Lugano Convention should bridge the gap between the UK and the Continent after Brexit, One reason was the expectation that English judges might not follow the case-law of the CJEU as prescribed by the Protocol 2 to the 2007 Lugano Convention (cf. B. Hess, MPIL Research Paper 3/2018). Unfortunately, this judgment seems to confirm this prognostic.
Therefore, contrary to A. Briggs, I cannot consider the judgment of the High Court as “sound” or “impeccable”, but rather as a starting point of additional costly parallel litigation in the never-ending Prestige saga.
Dear Burkhard,
I agree that it is not really satisfactory that the English court relied on English precedents to define the power of the CJEU. If there were CJEU cases on point, then they should have been the basis for the discussion. But I do not know whether there are, and whether the CJEU has indeed defined the limits of its power to answer questions referred beyond their scope.
But, while I am not specialist of the procedure before the CJEU, I cannot believe that the CJUE has unlimited power to redefine the questions referred. Its power is based on referrals from the Member States, and it cannot decide to address a question and issue an interpretation on its own motion. So there must be a limit that it cannot cross.
Suppose that, at the end of the judgment that we are discussing (London Steam-Ship v. Spain), the CJEU had added a last paragraph ruling: “and by the way, please note that same sex marriage is from now on legal in Poland.” Would that be an interpretation of EU law binding on all Member States? That cannot be.
I would be grateful for a pointer to where it is provided that the courts of the United Kingdom might refer questions to the CJEU for a preliminary ruling after 31 December 2020. Articles 66-68 of the Withdrawal Agreement do not provide for it, albeit that they make provision for the continued effect of certain legislative instruments in proceedings instituted prior to 1 January 2021. As for the observations about what an English court would do if the United Kingdom were party to the Lugano Convention, the proposition that this can be predicted by reference to what a judge did in circumstances in which the United Kingdom had been turned away is, I would suggest, unconvincing. As for ‘saga’, it’s not easy to see this as a tale of heroic achievement, though I see that the end is still probably some way off.
Thank you for your insightful comments, Burkhard. I would like to add one point. I do not think the judge had the power to send a second preliminary reference to the CJEU. Section 6(1)(b) of the European Union (Withdrawal) Act 2018 provides that “A court or tribunal cannot refer any matter to the European Court on or after exit day.” This is subject to some exceptions, which do not apply in this case. The power of English courts to send preliminary references to the CJEU is a complicated topic. There is a good analysis in https://eurelationslaw.com/blog/preliminary-references-during-the-transition-period-business-as-usual and https://eurelationslaw.com/blog/preliminary-references-after-transition-out-with-the-old-in-with-the-new.
The approach and reasoning of the Court of Justice in this case is, of course, open to criticism. However, the Judge’s decision to prefer his own reasoning, even on specific points where he did not dispute that he had made a reference, seems wrong. There are two possibilities. Either the Court, although it may have been imprudent and its processes may have been open to criticism, was entitled to reframe the first and second questions in the way that it did and to provide what it saw as a complete answer to the issue as to whether Art 34(3) applied to a judgment of this kind. If so, the Judge was bound to accept and apply the Court’s reasoning whether he agreed with it or not. Or the Court violated EU law when it acted as it did. That, however, does not obviously render its decision ultra vires and of no effect or entitle any court in a Member State to ignore it. The question of a Member State’s entitlement to disregard decisions of the CJEU is, as I understand, a live one amongst EU constitutional experts and different views have been expressed by the highest constitutional courts in different countries (including France and Germany). However, the need for the utmost caution is evident, and I am unable to agree that the Judge exercised it here. Although I don’t see that he could have made a further reference (as would have been appropriate if the UK had remained a Member State), he could have adjourned the proceedings while asking the United Kingdom to consider invoking the dispute resolution provisions in the Withdrawal Agreement to determine the effect of the preliminary reference. As things stand, no doubt Spain will appeal, but if its appeal is unsuccessful, the EU may itself choose to invoke that procedure. This case, ongoing for more than a decade, has a long way to run.