In Banco Nacional de Comercio Exterior SNC v Empresa de Telecomunicaciones de Cuba SA – Butterworths Law Direct 11.10.07 the dispute arose out of two contracts. The first was a loan agreement including an arbitration clause, between the Claimant and BNC, with the Defendant making repayments on the loan. The second was an escrow agreement between the Claimant and Defendant providing for Italian law.
The Claimant brought proceedings against the Defendant in Turin under the escrow agreement. The Defendant subsequently filed arbitration proceedings under the loan agreement. The Turin proceedings were suspended pending the outcome of the arbitration. The arbitrator issued an award in favour of the Claimant, and the Defendant sought to have that award annulled. The Turin proceedings were resumed, and judgment therein was entered for the Claimant. The Defendant appealed, and obtained an interim order suspending the enforceability of that judgment. However, that order was set aside by the Turin Court of Appeals on the basis that the Defendant would suffer no prejudice in the event of a successful appeal over and above the mere fact of execution. The arbitration was annulled and, consequently, the Defendant sought to stay execution of the Turin judgment. Meanwhile, the Claimant successfully applied without notice, inter alia, to register the Turin judgment as enforceable in the UK under Council Regulation (EC) 44/2001 (the Judgments Regulation). The defendant appealed.
It sought a stay of the present appeal, with the consequential effect of a stay of execution of the Turin judgment, under art 46(1) of the Judgments Regulation. The Defendant also argued, inter alia, that as the factual basis for the judgment, namely the findings in the award, had been removed upon that award being quashed, enforcement of the judgment in the UK was manifestly contrary to public policy within the meaning of art 34(1) of the Regulation such that the appeal ought to be allowed.
The Commercial Court emphasised the permissive nature of the jurisdiction conferred by Art.37 and Art.46 indicated that in general judgments were enforceable without waiting for the outcome of an appeal. Nor could the substance of the foreign judgment be reviewed by the enforcing court, and an assessment by the enforcing court of the chances of success of an appeal lodged or to be lodged in the state in which judgment had been given amounted to a review of the foreign judgment as to its substance.
It therefore held that the fully reasoned decision of the court seised of the case should be respected. The annulment of the award was of no relevance to that exercise of discretion; in the event of a successful appeal, the Turin Court of Appeals would be in a position to direct the Claimant to repay to the Defendant such sums as it had recovered. Considerations that the Turin Court of Appeals might make a decision that the English court might regard as resolving issues that fell to be submitted to arbitration under the loan agreement, were irrelevant to the question of prejudice that would be likely to accrue in the event of a successful appeal following unconditional enforcement.
As regards the appeal against registration, it held that it was far from a foregone conclusion that the annulment of the award would lead inexorably to the setting aside or even a variation of the Turin judgment, but, however it was dressed up, the exercise was an assessment of the chances of success of an appeal, which amounted to a review of that judgment as to its substance which was impermissible under arts 36 and 45(2) of the Regulation. Furthermore, applying settled principles, the effect, if any, of the annulment of the award should, so far as possible, be dealt with by the courts of the state enjoying the original jurisdiction, namely Italy.