The Supreme Court Judgment of the 18/12/2018 – Damages for oil pollution quantified at approx.  €1.5bn

On the 18th December 2018, the Spanish Supreme Court issued the final quantification of the losses claimed by the Spanish and French governments, as well as all other claimants in Spain.  The total final judgement debt has been reduced from the originally claimed total damages circa €4.3bn, to just over €1.5bn. 

This latest Spanish Supreme Court judgment marks the end of a 16-year journey through the Spanish legal system, holding the Master criminally liable for the environmental disaster and holding the PandI Club directly liable as the marine insurers of the tanker up to the policy limit of USD1bn. With criminal liability and quantum of the civil damages now settled, the States of Spain and France, as the claimants with the largest share of the €1.5bn judgment debt, will now focus on enforcement.

For those of you who may not recall the basic facts of this casualty, on the 13th November 2002, whilst sailing off the northern coast of Spain, the PRESTIGE, a 25-year-old tanker carrying 77,000 tonnes of persistent heavy fuel oil, began to list dramatically and leak fuel oil into the sea.  Spain successfully rescued the crew and then forced the tanker on an erratic course out of Spanish waters. On the 19th November the tanker broke in two and sank and her fuel oil cargo contaminated thousands of kilometres of Spanish and French coastline. 

Even before the tanker had split in two, criminal proceedings were opened in the local Spanish criminal Court against the Master, the first officer and chief engineer.  Those criminal proceedings were then extended to include the Spanish Director General of the Merchant Marine at that time, for his role in failing to offer the tanker a place of refuge on the Spanish coast.

On the 19th February 2016, the Spanish Supreme Court (reversing the 2013 judgment of the A Coruna Appeal Court that bravely found no criminal liability for the environmental pollution) held the Master criminally liable for the condition of the tanker at the time of the casualty and the resulting oil pollution damage to the coasts of Spain and France.  The first officer did not stand trial because he could not be located, and the Chief Officer and the former Spanish Director General of the Merchant Marine were both acquitted.

The criminalization of the Master - a means to an end:

However, the criminalisation of the Master was only a means to an end.  That end was twofold, first to break the limitation of liability imposed on any award of civil damages under the terms of the CLC’92 and secondly, to make the PandI Club as the shipowner’s marine insurers, directly liable to pay up to the policy limit of USD1bn. 

Having thus sacrificed the Master for the perceived greater good of offering unlimited compensation to the third-party victims of the environmental disaster, beyond the CLC’92 limitation fund and the approx. €113m available from the IOPC Fund, the next step is to enforce the Supreme Court judgments against the PandI Club and the USD1bn policy limit. 

The Arbitration Award – a means to an end:

The PandI Club always knew they could be a target– regardless of any potential right the shipowner, and by extension, the PandI Club enjoyed regarding limitation under the CLC’92, because they always knew that it was more likely than not that the Master would ultimately be made the scape-goat – as the only way to break limitation and trigger a right to meaningful compensation for the claimants. 

Forewarned is forearmed.  The PandI Club devised a three-pronged strategy patiently played out over the 16 years of the litigation in Spain. First, and in accordance with its CLC’92 obligations, the PandI Club constituted the limitation fund at the Spanish court in the sum of approx. €22.7m. The PandI Club then disappeared off the radar in Spain.

The second prong of the strategy was to play out in the UK.  On the 16th January 2012, the PandI Club commenced arbitration in London regarding the “non-CLC ‘92” claims and sought negative declaratory relief that they were not obliged, to pay any sum beyond the CLC’92 limitation fund of €22.7m already paid into the Spanish court.  The sole English arbitrator, in the absence of any appearance by Spain or France in those proceedings, and in an Award dated 13th February 2013, granted the negative declaratory relief.  However, the PandI Club knew that an arbitration award granted in default by a sole arbitrator, could not act as a shield against a potential Supreme Court ruling of an EU State.

So, in accordance with English procedural law, the PandI Club applied to have that Award “converted” into an English High Court Judgment for the purpose of enforcement. Spain and France attempted unsuccessfully to block this move – basically too little too late, and the challenge was rejected in the Court of Appeal judgement of 2015.

As a result, and for all intents and purposes in the UK, at least as far as the English legal profession appears to be concerned, there exists an arbitration award converted into an English High Court Judgment for the purpose of enforcement, that can fend off any contradictory subsequent Spanish Supreme Court Judgments.

With prongs one and two of the PandI Club strategy complete, the third prong has yet to play out – very likely in the UK.

On a collision course?

We now fast forward to January 2019.

Both sides argue they act in accordance with the terms of the CLC’92 – both sides lay claim to the moral and legal high ground – the Supreme Court protecting the rights of innocent third-party victims to receive meaningful compensation; the PandI Club protecting the marine insurance industry’s rule of pay to be paid as a matter of English law. Both sides with opposing and legitimate agendas and both sides now on a potential collision course.

However, many will say that the Spanish Supreme Court deliberately overruled the findings of the trial court and sacrificed the Master to break the CLC’92 limit to reach out to the PandI Club.  And that the PandI Club in turn, deliberately ignored the Spanish criminal proceedings to carve a route out of the CLC’92 into the UK to undermine any attempt to break the CLC’92 limit. These agendas were always in plain sight.

But 16 years is a long time, even for litigation in Spain.  The PandI Club may well win this battle. Spain may no longer have an appetite for further complicated, costly and likely very lengthy and unpredictable enforcement proceedings, if forced to fight in the UK – at least that seems to be the underlying message from the local Spanish press. 

Add to that mix the legal and political uncertainty created by Brexit on all matters concerning the predominance of the ECJ, it will take a very brave Spain to keep fighting. But it may take an even braver Spain to abandon 16 years of litigation and not now see that journey through to the end.

We will all now just have to wait and see.