CJEU backs Spain in €1bn Prestige oil spill claim against London P&I Club

The Court of Justice of the European Union (CJEU) has ruled that arbitration proceedings brought in the UK by The London P&C Club to contest a Spanish court ruling that it owes up to $1bn in damages to Spain for the 2002 Prestige oil tanker spill are not valid. In case C-700/20, the CJEU ruled: “The arbitration proceedings initiated in the United Kingdom cannot block the recognition of the Spanish judgment ordering the insurer to pay compensation for the damage caused by the oil spill.” In November 2002, the MV Prestige oil tanker split in two following a violent storm and sank off the coast of Galicia, Spain. It was transporting 70,000 tons of fuel oil that spilled and caused significant damage to beaches, towns and villages along the north coast of Spain and the west coast of France. A lengthy legal dispute followed between the vessel’s insurer, The London P&I Club, and Spain, in two different sets of proceedings initiated in two EU member states. The CJEU explained that the Spanish state, among other victims of the damage, brought a civil action before the Spanish courts. That action resulted in The London P&I Club being ordered to pay compensation for the damage caused, up to a limit of €1bn stipulated in the its contract. London P&I Club then initiated arbitration proceedings in London on the basis of a clause in the insurance contract. The proceedings resulted in an arbitral award that said claims for damages brought by Spain before the Spanish courts should have been made in those arbitration proceedings. In addition, the UK arbitral award concluded that, in accordance with another clause in the insurance contract – the ‘pay to be paid’ clause – The London P&I Club could not be liable to Spain in the absence of the prior payment of damages by the vessel’s owners. That judgment was confirmed in appeal proceedings brought by Spain. Spain, however, applied to the UK courts to recognise the Spanish order enforcing the judicial ruling finding The London P&I Club liable to pay compensation for the damage caused. The UK High Court granted that application in May 2019. The London P&I Club brought an appeal and the UK High Court decided to refer questions to the CJEU concerning the interpretation of Regulation No 44/2001. It basically asked the CJEU whether that recognition could be refused on the basis of the existence, in the UK, of a judgment entered in the terms of an arbitral award and the effects of which are irreconcilable with those of the judicial ruling. “By its judgment delivered today, the court holds that Regulation No 44/2001 must be interpreted as meaning that a judgment entered by a court of a member state in the terms of an arbitral award cannot prevent, in that member state, the recognition of a judgment given in another member state where a judicial decision resulting in an outcome equivalent to the outcome of that award could not have been adopted by a court of the first member state without infringing the provisions and the fundamental objectives of that regulation, in particular as regards the relative effect of an arbitration clause included in the insurance contract in question and the rules on lis pendens,” explained the CJEU. “In doing so, the court ensures, in essence, that those provisions and fundamental objectives cannot be circumvented by means of arbitration proceedings followed by judicial proceedings seeking to have the terms of the arbitral award entered in a judicial decision,” it added. The CJEU noted that a jurisdiction clause agreed between an insurer and an insured party cannot be invoked against a victim of insured damage who, where permitted by national law, wishes to bring an action directly against the insurer before the courts in the place where the harmful event occurred, or before the courts in the place where the victim is domiciled. “To accept that a judgment entered in the terms of an arbitration award by which an arbitral tribunal declared itself to have jurisdiction on the basis of such an arbitration clause may prevent the recognition of a judgment given in another member state following a direct action for damages brought by the injured party would be liable to deprive that party of effective compensation for the damage suffered,” explained the CJEU.

CJEU backs Spain in €1bn Prestige oil spill claim against London P&I Club

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