Intransigent defendants: Prestige 4.0

Most parties who lose English court cases or arbitrations give in (relatively) gracefully. In the long and ongoing Prestige saga, however (already well documented in this blog: see here, here, here, and here), the French and Spanish governments have chosen to fight tooth and nail, something that is always apt to give rise to interesting legal points. Last Friday’s episode before Butcher J (SS Mutual v Spain [2020] EWHC 1920 (Comm)) was no exception, though in the event nothing particularly novel in the way of law emerged.

To recap, nearly twenty years ago the laden tanker Prestige sank off northern Spain, grievously polluting the French and Spanish coasts. Steamship Mutual, the vessel’s P&I Club, accepted that it might be potentially liable to direct suit up to the CLC limit, but pointed out that its cover was governed by English law, contained a “pay to be paid” clause and required arbitration in London. Nothing daunted, the French and Spanish governments came in as parties civiles when the owners and master were prosecuted in Spain, and claimed their full losses. The Club meanwhile protected its position by obtaining declaratory arbitration awards in England against both governments that all claims against it had to be arbitrated here; for good measure it then successfully transmuted these awards into High Court judgments under s.66 of the 1996 Arbitration Act (see The Prestige (No 2) [2013] EWHC 3188 (Comm). These decisions the French and Spanish governments blithely ignored, however; instead they took proceedings in Spain to execute the judgments they had obtained there.

In the present litigation, the Club’s claim (slightly simplified) was against both governments for damages for continuing the Spanish proceedings, based either on breach of the arbitration agreement, or in the alternative on failure to act in accordance with the s.66 judgments. The object, unsurprisingly, was to establish an equal and opposite liability to meet any claim asserted by the governments under their judgments in the Spanish proceedings.

The Club sought service out on the French and Spanish governments: the latter resisted, arguing that they were entitled to state immunity, and that in any case the court had no jurisdiction.

On the state immunity point, the Club succeeded in defeating the governments’ arguments. The proceedings for breach of the arbitration agreement were covered by the exception in s.9 of the State Immunity Act 1978 as actions “related to” an arbitration agreement binding on the governments. Importantly, Butcher J regarded it as unimportant that the proceedings did not relate to the substantive matter agreed to be arbitrated, and that the governments might be bound not by direct agreement but only in equity on the basis that they were third parties asserting rights arising from a contract containing an arbitration clause.

The proceedings on the judgments, by contrast, were not “related to” the arbitration agreement under s.9: understandably so, since they were based on failure to give effect to a judgment, the connection to arbitration being merely a background issue. But no matter: they were covered by another exception, that in s.3(1)(a), on the basis that the breach alleged – suing in the teeth of an English judgment that they had no right to do so – was undoubtedly a “commercial transaction” as defined by that section.

The judge declined to decide on a further argument now moot: namely, whether suing abroad in breach of an English arbitration agreement was a breach of a contractual obligation to be performed in England within the exception contained in s.3(1)(b) of the 1978 Act. But the betting, in the view of this blog, must be that that exception would have been inapplicable: there is a big and entirely logical difference between a duty not to do something other than in England, and an obligation actually to do (or omit to do) something in England, which is what s.3(1)(b) requires.

State immunity disposed of, did the court have jurisdiction over these two governments? Here the holding was yes, but only partly. The claim based on the s.66 judgments was, it was held, subject not only to the Brussels I Recast Regulation but to its very restrictive insurance provisions dealing with claims against injured parties (even, note, where the claims were being brought, as some were in the case of Spain, under rights of subrogation). Since the governments of France and Spain were ex hypothesi not domiciled in England, but in their respective realms, there could be no jurisdiction against them.

On the other hand, the claims based on the obligations stemming from the arbitration award were, it was held, within the arbitration exception to Brussels I, and thus outside it and subject to the national rules in CPR, PD6B. The only serious question, given that the arbitration gateway under PD6B 3.1(10) or the “contract governed by English law” gateway under PD6B 3.1(6)(c) pretty clearly applied, was whether there was a serious issue to be tried as to liability in damages. Here Butcher J had no doubt that there was, even if the governments were not directly party to the agreements and the awards had been technically merely declaratory of the Club’s rights. It followed that service out should be allowed in respect of the award claims.

Further than this his Lordship did not go, for the very good reason that he had no need to. But in our view the better position is that indeed there would in principle be liability under the award claims. If, as is now clear, an injunction is available on equitable grounds to prevent suit in the teeth of an arbitration clause by a third party despite the lack of any direct agreement by the latter, there seems no reason why there should not also be an ability to an award of damages, if only under Lord Cairns’s Act (now the Senior Courts Act 1981, s.50). Further, there seems no reason why there should not be a an implied obligation not to ignore even a declaratory award by suing in circumstances where it has declared suit barred.

For final answers to these questions we shall have to await another decision. Such a decision might even indeed come in the present proceedings, if the intransigence of the French and Spanish governments continues.

One other point to note. The UK may be finally extricating itself from the toils of the EU at the end of this year. But that won’t mark the end of this saga. Nor indeed will it mark the end of the Brussels regime on jurisdiction, since the smart money is on Brussels I being replaced with the Lugano Convention, which is in fairly similar terms. You can’t throw away your EU law notes quite yet.

Prestige 3.0 — the saga continues

The Spanish government and SS Mutual are clearly digging in for the long haul over the Prestige pollution debacle eighteen years ago. To recap, the vessel at the time of the casualty was entered with the club under a contract containing a pay to be paid provision and a London arbitration clause. Spain prosecuted the master and owners and, ignoring the arbitration provision, came in as partie civile and recovered a cool $1 bn directly from the club in the Spanish courts. The club meanwhile obtained an arbitration award in London saying that the claim against it had to be arbitrated not litigated, which it enforced under s.66 of the AA 1996 and then used in an attempt to stymie Spain’s bid to register and enforce its court judgment here under Brussels I (a bid now the subject of proceedings timed for this coming December).

In the present proceedings, London Steam-Ship Owners’ Mutual Insurance Association Ltd v Spain (M/T PRESTIGE) [2020] EWHC 1582 (Comm) the club sought essentially to reconvene the arbitration to obtain from the tribunal an ASI against Spain and/or damages for breach of the duty to arbitrate and/or abide by the previous award, covering such things as its costs in the previous s.66 proceedings. By way of machinery it sought to serve out under s 18 of the 1996 Act. Spain claimed sovereign immunity and said these further claims were not arbitrable.

The immunity claim nearly succeeded, but fell at the last fence. There was, Henshaw J said, no agreement to arbitrate under s.9 of the State Immunity Act 1978, which would have sidelined immunity: Spain might be bound not to raise the claim except in arbitration under the principle in The Yusuf Cepnioglu [2016] EWCA Civ 386, but this did not amount to an agreement to arbitrate. Nor was there, on the facts, any submission within s.2. However, he then decided that s.3, the provision about taking part in commercial activities, was applicable and allowed Spain to be proceeded against.

Having disposed of the sovereign immunity point, it remained to see whether the orders sought against Spain — an ASI or damages — were available in the arbitration. Henshaw J thought it well arguable that they were. Although Spain could not be sued for breach of contract, since it had never in so many words promised not to sue the club, it was arguable that neither Brussels I nor s.13 of the 1978 Act barred the ASI claim in the arbitration, and that if an ASI might be able to be had, then there must be at least a possibility of damages in equity under Lord Cairns’s Act.

No doubt there will be an appeal. But this decision gives new hope to P&I and other interests faced with opponents who choose, even within the EU, to treat London arbitration agreements as inconsequential pieces of paper to be ignored with comparative immunity.

EU to get tough on GHG emissions from shipping?

 

In October 2014, the EU set domestic GHGs reduction target of at least 40% below 1990 levels by 2030. Shipping is currently outside those targets with climate change regulation for international shipping being parked in the slow lane in the International Maritime Organization. That may be about to change over the next two years.

 

  1. COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS The European Green Deal Brussels, 11.12.2019 COM(2019) 640 final

 

The Commission indicated that it would be looking at measures extending the emissions trading system (ETS) to shipping and would look closely at the current tax exemptions including for aviation and maritime fuels and at how best to close any loopholes will take action in relation to maritime transport, including to regulate access of the most polluting ships to EU ports and to oblige docked ships to use shore-side electricity.

 

  1. On 4 March 2020 the Commission proposed a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing the framework for achieving climate neutrality and amending Regulation (EU) 2018/1999 (European Climate Law) under which, by September 2020, the Commission would review the Union’s 2030 target for climate referred to in Article 2(11) of Regulation (EU) 2018/1999 in light of the climate-neutrality objective set out in Article 2(1), and explore options for a new 2030 target of 50 to 55% emission reductions compared to 1990.

 

  1. On 24 January 2020 Green MEP, Jutta Paulus, as Rapporteur for the European Parliament’s Committee on the Environment, Public Health and Food Safety produced a draft report (COM(2019)0038 – C8-0034/2019 -2019/0017(COD)) on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) 2015/757 in order to take appropriate account of the global data collection system for ship fuel oil consumption data. The report recommends the following amendments to the 2015 MRV Regulation ((Regulation (EU) 2015/757 on the monitoring, reporting and verification of carbon dioxide emissions from maritime transport, and amending Directive 2009/16/EC)):

– the inclusion of maritime transport in the ETS;

– the establishment of a maritime transport decarbonisation fund to foster research and development in the energy efficiency of ships and support investments in innovative technologies and infrastructure to decarbonise maritime transport, including short sea shipping and ports, and the deployment of sustainable fuels. The fund would be established for the period from 2021 to 2030 and would be financed from revenues of the ETS;

– Establishing a target of reduction of CO2 emissions per transport work by at least 40 % by 2030 over the first reporting year of the MRV, 2018;

– The extension of the scope of the amended regulation to all GHG emissions, especially methane, from ships of 5000 grt or above. The amended regulation would cover GHG emissions released during voyages of such ships from their last port of call to a port of call under the jurisdiction of a Member State and from a port of call under the jurisdiction of a Member State to their next port of call, as well as within ports of call under the jurisdiction of a Member State;

– The Commission to set targets for member states for deployment of shore side electricity.

 

These proposed changes to EU law may make last year’s anxiety over the IMO’s Sulphur Cap come to seem like very small beer indeed.

England v Spain grudge match. Appeal against registration of ‘Prestige’ judgment against London Club likely to be heard in December 2020.

 

Following the break up of ‘The Prestige’, Spain brought proceedings for compensation for the resulting pollution against various defendants, including the owner’s P&I Club. The Club got its response in early by obtaining an arbitration award against Spain which declared that, as a result of the “pay to be paid” clause in the policy the Club had no liability to Spain. The arbitrator’s jurisdiction was challenged unsuccessfully in the English Courts and the award was converted into a judgment. London SS Mutual v Kingdom of Spain, [2015] EWCA Civ 333; [2015] 2 Lloyd’s Rep. 33

In 2016 the Spanish Supreme Court held that the owners and their club were liable for the damage caused and in execution proceedings in La Coruna the court held that the club would liable in respect of the claims up to a global limit of liability in the sum of approximately €855 million. Spain has obtained an order in England registering the Spanish judgment to enable its enforcement here in England. The Club have appealed against that order, principally on the ground that, under art 34.3 of the Brussels Regulation the judgment is irreconcilable with the previous decisions of the English courts converting the award into a judgment.

In a Case Management Conference before Teare J [2020] EWHC 142 (Comm) it was ordered that the trial be after 1 December 2020. It is estimated that it will last 5-6 days. Disclosure has been ordered of documents held by Spain which relate to the alleged refusal of the Spanish Courts  to allow the master to participate in an underwater investigation of the strength of the vessel’s hull and to disclose the results of the investigation (so that there was a breach of the master’s right to equality of arms and to be able to prepare a defence) or whether the results were disclosed to the master in sufficient time to allow him to prepare his defence.

The Club were also given permission to adduce evidence of a naval architect on the question whether the results of the underwater inspections enabled conclusions to be drawn as to the strength of the hull and if so what those conclusions were. On both issues the Club is to provide its evidence first.

Shipping casualties and clearing-up

After a casualty the clear priority for shipowning, P&I and insurance interests alike is to clear up the mess as soon as possible and start trading again. The last thing they want is a run-in with well-meaning administrators saying that nothing can be done until form after form has been filled in, checked, rubber-stamped and filed, and permission to act obtained from Old Uncle Tom Cobleigh and all. Yet this was exactly what happened in 2012 to the owners of the 86,000 dwt container vessel MSC Flaminia. A fire broke out on a voyage from Charleston to Antwerp, forcing the crew to abandon ship and resulting in the vessel being towed dead to Wilhelmshaven in Germany. The owners wanted to send her directly to an entirely reputable ship-repairer in Romania for cleanup and repair, but the German environmental authorities were having none of it. The vessel was full of filth, sludge, metal debris and the dirty water used to extinguish the fire. This was, they said, waste and subject to the Waste Directive 2008 and Regulation 1013/2006, requiring extensive documentation, planning and administrative oversight before any transfer could take place. Owners argued in vain that Art.1.3(b) specifically excepted waste produced on board ships, trains, etc and later discharged for treatment: debris from a casualty, said the bureaucrats, was not within the exception. The result was that the ship remained marooned in Wilhelmshaven for seven months before it was finally allowed to go to Romania. The German courts, in proceedings to recover the resulting losses from the state, initially supported the Teutonic bureaucracy, but the Munich Landgericht then sent the question off to the ECJ: was waste resulting from a marine casualty within the exception?

The ECJ, much to everyone’s relief, today said that it was. The Directive had to be interpreted purposively and there was no reason to give special treatment to waste resulting from a casualty, especially as the terms of Art.1.3(b) were unqualified. Within the EU this now means that vessels can get out of ports of refuge quickly and be sent with due expedition to wherever they can be cleaned up and repaired most efficiently. And a good thing too.

The decision, under the name of Conti II v Land Niedersachsen (Case C‑689/17) [2019] EUECJ C-689/17, is here (unfortunately only in French).

Clearing up after a marine casualty: comfortable words from the Advocate-General.

As a matter of EU law, moving waste across borders can be an expensive bureaucratic nightmare. Regulation 1013/2006 on waste shipments lays down all sorts of notification, insurance, and other requirements that must be satisfied before any such shipment can take place.

The German owners of the MSC Flaminia got a taste of this in 2012. En route from Charleston to Antwerp with a cargo of nearly 5000 containers, including 151 stated to contain dangerous cargo, the vessel suffered a fire and a number of explosions. These left her in an unholy mess, with quantities of scrap metal, possibly contaminated sludge and water used to put out the fire slopping about everywhere. She ran for Wilhelmshaven and made arrangements for cleaning-up operations in Romania. The German environmental authorities then said “Not so fast”, arguing that all the rigmarole of the waste shipments directive had to be gone through. The owners argued that the exception in Art.1(3)(b) applied, which excises from the Regulation “waste generated on board vehicles, trains, aeroplanes and ships, until such waste is offloaded in order to be recovered or disposed of.” The government argued that this did not cover waste created by a casualty outside normal ship operations; a Munich court duly sent the issue to the ECJ.

The Advocate-General’s opinion came down clearly for the shipowners: there was no specific exception for waste arising from an accident or casualty, and no need to imply one. One suspects the ECJ will follow suit. The relief for shipowners is likely to be considerable: it means that cleaning-up operations can now proceed smoothly wherever is easiest. And a good thing too.

See Schifffahrts GmbH MSC Flaminia v Land Niedersachsen (Case C698/17), as ever available on BAILII (unfortunately in French).

Oil spill in EEZ. Rights of coastal state to instigate proceedings against offending vessel.

 

 

In The Bosphorus Queen Case C-15/17, ECLI:EU:C:2018:557, the CJEU has ruled on the interpretation of art. 220(6) of the UN Convention on the Law of the Sea 1982 (UNCLOS) in relation to the rights of a coastal state to initiate proceedings against a vessel arising out of pollution in its exclusive economic zone (EEZ). The vessel spilt oil on the edge of Finland’s EEZ and on its return through the Finnish EEZ it was detained and required to provide security to cover the amount of a possible fine for the spill. A fine of 17,112 Euros was subsequently imposed on the ground that the spill had caused  major damage to or a threat of major damage to Finland’s coastline or related interests, or to resources of its territorial sea or EEZ. In the event the oil spilt did not reach the coastline, caused no damage, and no counter-measures were taken.

The CJEU held:(1) The EU as a party to UNCLOS, had jurisdiction to interpret its provisions. UNCLOS had primacy over secondary EU legislation. The EU was not a party to the 1969 Intervention Convention but could take account of it as it formed part of the relevant rules for interpreting UNCLOS.

(2) The relevant EU legislation was art.7(2) of Directive 2005/35 which incorporated  into EU law the provisions of art.220(6) with almost identical wording, and had to be interpreted in accordance with art. 220(6).

(3) Article.220(6) provides: “ Where there is clear objective evidence that a vessel navigating in the [EEZ] or the territorial sea of a State has, in the [EEZ], committed a violation referred to in paragraph 3 resulting in a discharge causing major damage or threat of major damage to the coastline or related interests of the coastal State, or to any resources of its territorial sea or [EEZ], that State may, subject to section 7, provided that the evidence so warrants, institute proceedings, including detention of the vessel, in accordance with its laws.” Paragraph 3 of art.220 refers to “violations of applicable international rules and standards for the prevention, reduction and control of pollution from vessels or laws and regulations of that State conforming and giving effect to such rules and standards.”

The coastal state’s powers under paragraph 6 were subject to clear objective evidence both  of the commission of a violation under paragraph 3 and also of the consequences of that violation.

(4) The reference to ‘coastline or related interests’ in art. 220(6) and art 7(2) of Dir 2005/35 could be interpreted as having the same meaning as the definition of these terms in art II(4) of the 1969 Intervention Convention, bearing in mind UNCLOS also applied to non-living resources. ‘Resources’ referred to harvested species and living species associated with them or which depended on them.

(5) It was not necessary to take account of the concept of ‘significant pollution’ referred to in art. 220(5) when assessing the consequences of a violation under art. 220(6). In assessing the extent of damage caused or threatened to the resources or related interests of the coastal state account should be taken of, inter alia,

– the cumulative nature of the damage on several or all of those resources and related interests and the difference in sensitivity of the coastal State with regard to damage to its various resources and related interests;

–  the foreseeable harmful consequences of discharge on those resources and related interests, not only on the basis of the available scientific data, but also with regard to the nature of the harmful substance(s) contained in the discharge concerned and the volume, direction, speed and the period of time over which the oil spill spreads .

The specific geographical and ecological characteristics and sensitivity of the Baltic Sea area have an effect on the conditions of applicability of Article 220(6) would have an effect on this assessment.

(6) Although art 1(2) of Dir 2005/35 allowed Member States to impose more stringent measures, it did not allow them to impose more stringent measures in accordance with international law that those laid down in Article 7(2) which authorised coastal states to take measures equivalent in scope to those laid down in Art. 220(6).

What a waste. The hazards of ship recycling.

 

On 15 March 2018 in the Rotterdam District Court, Seatrade were heavily fined and  two of its executives have been banned from working as a director, commissioner, advisor or employee of a shipping company for one year. The court declined to impose prison sentences on the directors, as requested by the prosecutor. The criminal charges arose out of the sale of four reefer vessels for scrapping which was done in Bangladesh, India and Turkey, in contravention of Regulation (EC) No 1013/2006 of 14 June 2006 on shipments of waste, which implements the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal”. The Regulation prohibits E.U. Member States from exporting hazardous waste to countries outside the OECD. Ships sailing to their final destination will contain large quantities of hazardous substances such as bunker oil, lubricating oil, PCBs and asbestos and, in the case of reefer vessels, HCFCs. The court determined that the four ships were to be categorised as waste as the decision to dismantle them had been made when they sailed from Rotterdam and Hamburg in 2012 and that their sale was in contravention of the Regulation. Seatrade intend to appeal.

In another development relating to the sale of ships for dismantling in Asia, London solicitors Leigh Day announced in December 2017 that they will be bringing a claim in tort for injuries sustained by a metal cutter while dismantling a container ship in Chittagong. The claim is being brought against the ship’s managers, Zodiac Maritime, who had sold the vessel for scrap. Leigh Day maintain that Zodiac knew the methods involved in dismantling vessels in Chittagong, yet it sold the vessel in the full knowledge that it would be broken up in unsafe conditions.

EU Member States urged to ratify/accede to 2010 HNS Convention by 6 May 2021.

 

COUNCIL DECISION (EU) 2017/769 of 25.4.2017 authorises Member States to ratify or accede to the 2010 Protocol of the HNS Convention with the exception of the aspects related to judicial cooperation in civil matters. The decision also provides that they “shall endeavour to take the necessary steps to deposit the instruments of ratification of, or accession to, the Protocol of 2010 within a reasonable time and, if possible, by 6 May 2021”.

 

A parallel COUNCIL DECISION (EU) 2017/770 contains a similar authorization in relation to those aspects related to judicial cooperation in civil matters, subject to depositing the standard declaration preserving the effect of the Brussels I (Recast) Regulation, the Lugano Convention, and the 2005 agreement between the EU and Denmark in respect of judgments covered by the 2010 HNS Protocol.

Polar Code now in force.

The IMO Polar Code came into force on 1 January 2017 for new vessels constructed on, or after, that date. Older vessels must satisfy the Code’s requirements by their first intermediate or renewal survey after 1 January 2018, whichever occurs first.

The Polar Code applies to vessels operating in polar regions and prohibits: discharge into the sea of oil or oily mixtures from any vessel; discharge into the sea of noxious liquid substances, or mixtures containing such substances; discharge of sewage and garbage unless in accordance with the requirements of the Polar Code and Annexes IV and V respectively of MARPOL.