The Prestige saga: clarifications on enforcement and State immunity from injunctions

State immunity from injunctions granted by arbitral tribunals

This decision is the latest in a long-running dispute arising out of an oil spill from a tanker, the Prestige, which polluted the coasts of Spain and France in 2002. This resulted in claims by Spain and France against the insurers of the owners of the Prestige. Spain has pursued those claims in Spanish litigation, resulting in a USD 1 billion judgment in its favour, while the insurers argue that the claims should be decided in arbitration, and had obtained an award on jurisdiction in their favour which predated the Spanish judgment. The insurers had also tried, but failed, to obtain an anti-suit injunction from an arbitral tribunal, restraining Spain from pursuing its claims outside arbitration.

The latest decision addressed a number of issues. This post focuses on just two of them: (1) whether the Spanish judgment should be enforced in the UK under the original Brussels Regulation (which applied as the Spanish proceedings commenced before 2015); and (2) whether an arbitral tribunal had the power to grant an anti-suit injunction against Spain. 

In a unanimous decision, the Court of Appeal agreed with the High Court that: (1) the Spanish judgment should not be enforced in the UK, albeit for different reasons; and (2) the arbitral tribunal had no power to grant an injunction against a State. 

On the first issue, the Court of Appeal held that the Spanish judgment could not be enforced because it had already been decided in the arbitration that the arbitral tribunal had jurisdiction over Spain’s claims. This created an issue estoppel such that the Spanish judgment should not be enforced. Under the original Brussels Regulation regime, refusing enforcement of the Spanish judgment would only be justified if registering it would be treated as a breach of public policy. The Court of Appeal held that enforcing the Spanish judgment would result in “a manifest breach of a rule of law regarded as essential” in the UK, and enforcement was rejected. 

On the second issue, the Court of Appeal settled a debate caused by contradictory High Court judgments on whether an English-seated arbitral tribunal can render an anti-suit injunction against a State. It is now clear that English seated arbitral tribunals lack the power to do so, in the absence of consent from the State. This was the conclusion reached as a matter of interpretation of two statutory provisions:

• section 13(2)(a) of the State Immunity Act 1978 (the SIA), which provides States with immunity from injunctive relief in the English courts.
• section 48(5)(a) of the Arbitration Act 1996 (the AA), which confers arbitral tribunals with the same powers as the English courts to order a party to do or refrain from doing anything.

The Court of Appeal found that the combined effect of s.13(2)(a) of the SIA and s.48(5)(a) of the AA is that, if the English court does not have the power to grant an injunction against a State in a particular case, then neither does an arbitral tribunal (unless parties had agreed otherwise pursuant to s.48(1) of the AA).

As a corollary, since an injunction could not be granted, the Court of Appeal then confirmed that equitable damages in lieu of (or in addition to) an injunction under s.50 of the Senior Courts Act 1981 were not available to compensate the insurers for the breach by Spain of the arbitration agreement.

Implications

Both of the above aspects of this decision are of interest.  On the first issue, it is notable that the Court of Appeal held in effect that the New York Convention regime for recognising arbitration agreements and awards should take precedence over a subsequent judgment under the original Brussels Regulation. This is a victory for the insurers, but it is effectively limited to the UK because the Court of Appeal’s decision that it had no power to grant an anti-suit injunction against Spain means that the same issue as to whether the arbitral award or the Spanish judgment takes precedence will play out again in any other jurisdiction where Spain seeks to enforce the Spanish judgment.

Nevertheless, the Court of Appeal has at least brought clarity to the nature of the relationship between s.13(2)(a) of the SIA and s.48(5) of the AA, which was previously the subject of conflicting authority. This decision, together with the Court of Appeal’s decision in The Resolute, which found that refusing to grant an injunction against a State was not a breach of Article 6 of the ECHR, makes it clear that there is limited recourse available in England to prevent a State from acting in breach of an arbitration agreement, unless it consents to injunctive relief. For non-State parties contracting with State counterparties, this reinforces the importance of including carefully drafted immunity waiver provisions that include a clear consent to enforcement and injunctive relief.

Judgment: The Club v Spain