The Court of Appeal's recent decision in West Tankers Inc v Allianz SPA & Generali Assicurazione Generali SPA is the latest in a long line of cases involving the same parties that have been heard both by the English courts and the Court of Justice of the European Union (CJEU).

This latest decision may have important implications for parties seeking to protect their right to arbitrate, particularly where they are facing conflicting proceedings.

The underlying dispute

Erg Petroli SpA chartered a vessel from West Tankers Inc. The vessel was involved in a collision with a pier in Italy owned by Erg Petroli. Responsibility for the collision was disputed.

The charterparty contained a London arbitration clause, and a London-seated arbitral tribunal was appointed under it. However, while the arbitration was in process, Erg Petroli's insurers brought a subrogated claim against West Tankers in the Italian courts to recover the monies the insurers had paid to Erg Petroli in respect of the same incident.

English/CJEU proceedings

The High Court granted an anti-suit injunction restraining the insurers from proceeding with their claims otherwise than before the tribunal (West Tankers Inc v RAS Riunione Adriatica di Sicurta SpA (The Front Comor) [2005] EWHC 454 (Comm)).

The insurers appealed to the House of Lords ([2007] UKHL 4). The House of Lords asked the CJEU whether it was consistent with the Brussels Regulation (44/2001/EC) (the "Regulation") for the court of an EU member state to make an order restraining a party from continuing proceedings in another member state where those proceedings were in breach of an arbitration agreement. (The Regulation governs jurisdiction over civil and commercial claims; it does not apply to arbitration (the arbitration exception).)

The CJEU found that such an anti-suit injunction was inconsistent with the Regulation (Case C-185/07). The CJEU noted the arbitration exception, but relied on the principle of mutual trust which member states accord to the judicial systems of other member states.

In the meantime, the tribunal had made an arbitration award in West Tankers' favour (the arbitration award). The Italian proceedings remain pending.

Court of Appeal's decision

West Tankers, concerned that the insurers might obtain a favourable judgment from the Italian courts and then seek to have it recognised in England under the Regulation, sought to bypass the effect of the CJEU's ruling on the availability of anti-suit injunctions by applying to the English courts to enforce the arbitration award under section 66 of the Arbitration Act 1996 (section 66). The insurers appealed ([2011] EWHC 829 (Comm)).

In the leading judgment, Toulson LJ favoured a broader interpretation of section 66, and emphasised that the stipulation in section 66 for awards to be enforced in the same manner as a court judgment to the same effect refers to any means of giving judicial force to an award, and not just the normal forms of execution of a judgment.

The role of the courts in supporting arbitration can include giving judicial force to an arbitral award under section 66; the (merely) declaratory nature of the award was not a bar to its enforcement by the courts in an appropriate case.

Examples of situations in which it may not be appropriate to enter judgment in the terms of a declaratory award are those where there is a serious question as to the validity of the award, or where it is not in the interests of justice for the court to make such an order.

Implications

Although the Court of Appeal's decision is primarily focused on the interpretation of section 66, it may have implications beyond statutory interpretation; in particular, for parties who may not be able to enforce an arbitration agreement in the face of conflicting proceedings.

For example, following the CJEU's decision, and pending the European Commission's (the "Commission") proposals for reforming the Regulation (which seek to clarify the precise scope of the arbitration exception), the English courts have refrained from granting anti-suit injunctions in proceedings brought in breach of arbitration agreements where the "offending" proceedings have been brought in other member states.

Meanwhile, parties seeking anti-suit relief from the English courts may choose to obtain a declaratory judgment (where possible) to circumvent the practical effect of the CJEU's restriction on granting anti-suit relief (in other words, to use the subsequent award as a means to "shield against" enforcement of a future conflicting judgment, thereby securing the benefit of the outcome of the arbitration agreement).

In West Tankers' case, pending the outcome of the Commission's proposals, it remains to be seen whether it is, in practice, able to use the award in the form of a judgment to impede enforcement in the English courts by the insurers of any judgment of the Italian courts.

This article first appeared in the March 2012 edition of PLC magazine.