Nineteen years on — the Prestige saga, continued

Nearly twenty years after the VLCC Prestige broke up and sank off the Galician coast, spreading filth far and wide, Spain and France remain locked in battle with the vessel’s P&I club Steamship Mutual. Put briefly, they want to make Steamship pay out gazillions on the basis of judgments they have obtained locally on the basis of insurance direct action statutes. Steamship, by contrast, refers to the Prestige’s P&I entry, and says that both states are bound by “pay to be paid” clauses and in any case have to arbitrate their claims in London rather than suing in their own courts.

The background to the latest round, The Prestige (Nos 3 and 4) [2021] EWCA Civ 1589, is that Steamship, having got a declaratory arbitration award in its favour substantiating the duty to arbitrate, which it has transmuted into a judgment under s.66 of the Arbitration Act 1996, now wants to take the battle to the enemy. It wants (a) to commence another arbitration claiming damages for breach of the original arbitration agreement, reckoned by the damages and costs represented by the court proceedings in France and Spain; (b) damages for those states’ failure to abide by the declaratory award; and (c) damages for failure to abide by the s.66 judgment. Spain and France resist service out on the basis that they are entitled to state immunity, and that the claims based on the award and the judgment must in any case fail.

The High Court held, in two different proceedings (see here and here), that sovereign immunity did not apply; that claims (a) and (b) succeeded; and that claim (c) failed because of the effect of the insurance provisions in what is now Articles 10-16 of Brussels I Recast (this being, of course, a pre-Brexit affair). Both sides appealed, and the appeals were consolidated.

On sovereign immunity the Court of Appeal have now sustained the judgment of non-applicability and as a result allowed claim (a) to go ahead. They have equally upheld the first instance judgment against Steamship on claim (c): although in name a claim under a judgment this is, it says, still in substance a claim by an insurer against its insured which, under what is now Art.14 of Brussels I Recast, can only be brought in the domicile of the latter. On claim (b), however, it has held (contrary to an earlier suggestion in this blog – nostra culpa, we can’t be right every time) that while the jurisdiction rules of the Brussels regime do not stand in the way, the claim is bound to fail. The award being merely declaratory, there can be no duty to perform it because there is nothing to perform, and hence no liability for disregarding it.

The arbitration will now therefore go ahead. Assuming it leads to an award in Steamship’s favour, Steamship will then no doubt seek New York Convention enforcement and/or get a s.66 judgment which they will oppose to any attempt by France and Spain to get judgment here, and doubtless also try to weaponise in order to get their Spanish and French costs back. (Meanwhile they may rather regret not having asked in the original arbitration proceedings for a positive order not to sue in France or Spain, rather than a mere declaration: but that’s another story.)

There’s little to add at this stage. But there is one useful further confirmation: s.9 of the State Immunity Act, removing state immunity in the case of a written agreement to arbitrate, applies not only to a direct contractual obligation to arbitrate, but also to an indirect duty to do so Yusuf-Cepnioglu-style. Useful to know.

Will France and Spain now come quietly, thus putting an end to this saga (which has already appeared in this blog here, here, here, here and here)? It’s possible, but We’re not betting. We have a sneaking suspicion that the events of November 2002 may well continue to help lawyers pay their children’s school fees for some little time yet.