In National Navigation Co v Endesa Generacion SA [2009] EWCA Civ 1397 the Court of Appeal overturned the first instance judgment of Mrs Justice Gloster (previously reported on the blog here) and held that the English court was bound by an earlier decision of the Spanish court to the effect that no arbitration clause was incorporated into the relevant contract.

The original dispute related to a ship owned by National Navigation Co (National) which was shipping coal owned by Endesa Generacion SA (Endesa) pursuant to a charterparty and bill of lading. A dispute arose and Endesa brought proceedings in Spain against National (the Spanish Proceedings) in which it was held that the arbitration clause was not validly incorporated into the contact. The court then stayed the action pending determination from the English court as to whether it was the court first seized under the Regulation. At the same time as the Spanish Proceedings, National brought proceedings in the English Commercial Court (the Commercial Court Action) seeking a declaration that it was not liable to Endesa and that the English court was the court first seized of the dispute under the European Judgments Regulation 44/2001 (the Regulation). National subsequently commenced further proceedings in London (the Arbitration Action) and sought: (i) a declaration from the High Court that the London arbitration clause was validly incorporated; and (ii) an anti-suit injunction against the Spanish Proceedings.

At first instance, Mrs Justice Gloster held that although no anti-suit injunction would be granted, the English courts were not bound to recognise the Spanish Proceedings in proceedings which were not themselves within the Regulation. She therefore granted a declaration that the English arbitration clause was incorporated into the relevant contract.

The Court of Appeal agreed with Mrs Justice Gloster that the the judgment in the Spanish Proceedings relating to the incorporation of the arbitration clause was a judgment that fell within the ambit of the Regulation. However, it did not agree that the English courts could ignore the decision in the Spanish Proceedings. It was held by Lord Justice Waller that although it may be arguable that a Regulation judgment was not automatically binding in non-Regulation proceedings under Article 33 of the Regulation, such a judgment (being a decision on the same issue as the Arbitration Proceedings) could still give rise to an issue estoppel, such that decision in the Spanish Proceedings must be recognised. Section 32(4) of Civil Jurisdiction and Judgments Act 1982 allowed a Regulation judgment to be recognised by virtue of an issue estoppel, despite the fact that the action was commenced in breach of an arbitration agreement. Lord Justice Moore-Bick also held that the appeal ought to be allowed, but did not find it necessary to refer to an issue estoppel in any detail, holding instead that the judgment in the Spanish Proceedings would be automatically recognised by the English courts by virtue of Article 33 of the Regulation. As such, the appeal was allowed, and the Arbitration Action was dismissed.

This decision overturns what was a controversial first instance decision, and brings English law into line with the reasoning in West Tankers. It is now clear that even where English proceedings are not themselves within the ambit of the Regulation, the English court will still be bound by European decisions on the same issue, if not by virtue of the Regulation itself, then by virtue of an issue estoppel."