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International arbitration case law update

13th April 2012

Yet another significant judgment has emerged from the long running West Tankers dispute. On 4 April 2012, the Honourable Mr Justice Flaux handed down judgment in an appeal brought under s69 of the Arbitration Act 1996 by West Tankers against a Final Partial Award of an arbitral tribunal ("the Tribunal").

In essence, the issue of law was whether the Tribunal had been correct to find that it was deprived of the jurisdiction to award the Appellant equitable damages for breach of an obligation to arbitrate, in circumstances in which the Respondents had commenced judicial proceedings in the Italian Courts (in breach of that agreement to arbitrate), by reason of EU law. 

Famously, in the mid 2000s, issues in the West Tankers dispute, including the right of the English Court to grant anti-suit injunctions to restrain proceedings brought in the courts of the European Union, in breach of agreements to arbitrate, were referred to the ECJ.

Against the backdrop of Advocate General Kokott’s Opinion and the ECJ’s judgment, the Tribunal found (with apparent reluctance) that the principle of effectiveness or effective judicial protection protecting the Respondent’s right to sue the Appellant in Italy under Article 5(3) of Council Regulations (EC) 44/2001 ("the Regulation") was one that bound the Tribunal so as to prescribe its jurisdiction to grant damages for breach of the obligation to arbitrate or an indemnity [see paragraphs 25 to 26 of the present Judgment].

Mr Justice Flaux concluded to the contrary and allowed the appeal. The learned Judge found, in summary, that the principle of effectiveness protecting the Respondents’ right of access to (here) the Italian courts under Article 5(3) was engaged before the courts of European member states and not arbitral tribunals. Accordingly, as the Tribunal did not have to give effect to the right under Article 5(3), there was no reason why the Tribunal lacked the jurisdiction to grant equitable damages or an indemnity [paragraph 64]. Further, the Judge found that arbitration fell outside the Regulation and that an arbitral tribunal is not bound to give effect to the principle of effective judicial protection [paragraph 68]. 

The Judgment bears close review, exploring as it does a range of issues going to the heart of the relationship between arbitral and court proceedings in the European Union (and more generally).

The Judgment may be found at Bailii.

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Sally Wollaston
Sally Wollaston
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