The fallout from the European Court of Justice decision in West Tankers (The Front Comor)(1) continues as parties strive to navigate around the English courts' inability to restrain proceedings in other EU member states brought in breach of an arbitration agreement. In African Fertilizers and Chemicals NIG Ltd v BD Shipsnavo GmbH(2) the High Court enforced an award made in London, declaring that the tribunal had jurisdiction to determine a dispute that had been referred to both arbitration and court proceedings in Romania. Despite the arbitral declaration and an interim declaration by the English court, the defendant had continued with the Romanian court proceedings.
The claimant shipowner, BD Shipsnavo, commenced arbitration in London pursuant to an arbitration agreement in a bill of lading for the carriage of the cargo of the defendant, African Fertilisers and Chemicals NIG, from Romania to Nigeria on the claimant's vessel. A dispute arose following the grounding of the vessel.
Before the London arbitration, the defendant had started arbitration proceedings in Romania. The English court had granted an injunction to restrain the defendant from continuing the Romanian arbitration. The defendant also commenced proceedings in the Romanian courts.
The English court granted an interim declaration that the London arbitration clause in the bill of lading was valid and binding on the defendant, and that the Romanian arbitration and Romanian court proceedings were in breach of the arbitration agreement. Subsequently, the London tribunal upheld the arbitration agreement and declared that it had jurisdiction over the dispute.
The claimant applied for the enforcement of the award under Section 66 of the Arbitration Act 1996. The claimant sought to convert the award into a judgment to prevent the enforcement of a judgment of the Romanian court in the defendant's favour under Article 34(3) of the Brussels I Regulation, on the basis that the Romanian judgment would be "irreconcilable with a judgment given in a dispute between the same parties in the Member State in which recognition is sought".
The defendant argued that a declaration could be recognised, but not enforced; therefore, Section 66 did not apply. The defendant also argued that Article 34(3) applies only to substantive judgments on the merits by a court, not a procedural decision to enforce a substantive decision given by arbitrators.
The judge did not accept the defendant's arguments. He found that the act did not draw such a stark distinction between recognition and enforcement. Acknowledging the view that a declaratory award may be enforced "provided the terms of the award are sufficiently clear", he focused on whether the enforcement would assist the claimant - the benefit here being that the conversion of the award into a judgment may ensure the primacy of the award over any Romanian judgment.
The judge also rejected the defendant's approach to Article 34(3) of the regulation. Referring to the recent decision in The Front Comor, where a similar scheme was followed, the judge in the present case emphasised the underlying policy considerations of ensuring that a foreign judgment does not undermine or contradict an existing arbitral award. The decision in The Front Comor is being appealed to the Court of Appeal.
Enforcement of an award is the fundamental objective of any arbitration proceedings. Enforcement of a declaratory award may be just as important as enforcement of a monetary award, particularly in circumstances where one party has commenced one or more proceedings in breach of the arbitration agreement. It is reassuring that the English court has recognised the need to support the arbitral process through the enforcement of not only the arbitration agreement, but also any award that declared the jurisdiction of the tribunal. Such an approach may provide parties with a suitable course to navigate around West Tankers.
For further information on this topic please contact Robert Lambert or Jo Delaney at Clifford Chance LLP by telephone (+44 20 7006 1000), fax (+44 20 7006 5555) or email ([email protected] or [email protected]).
Endnotes
(1) See Allianz SpA (formerly Riunione Adriatic di Sicurta SpA) v West Tankers Ic (C-185/2007) (The Front Comor) [2009] ECR I-663; and West Tankers Inc v Allianz SpA, The Front Comor, [2011] EWHC 829 (Comm).