Marine & Transit - April 2010

Set back for London arbitration

National Navigation Co v Endesa Generacion SA (The “Wadi Sudr”) – Court of Appeal (Waller, L.J.; Carnwath, L.J.; Moore-Bick, L.J.) [2009] EWCA Civ 1397

In a set back for London as a forum for maritime arbitrations, the Court of Appeal has overturned an earlier decision of the Commercial Court granting owners a declaration that a London arbitration clause in a voyage charter was incorporated into a bill of lading contract and should be upheld.

The “Wadi Sudr” was chartered to carry a cargo of coal from Indonesia to Spain. During the voyage the vessel’s rudder was damaged and the cargo was discharged at an alternative port in Spain. The bill of lading receivers commenced court proceedings in Spain claiming damages for the costs of the onward delivery of the cargo. The Spanish Mercantile Court ruled that a London arbitration clause in a voyage charter for the vessel was not incorporated into the bill of lading contract and that it had jurisdiction to hear the claim.

The owners started proceedings both in the English Court and by arbitration in London seeking (i) a declaration that the arbitration clause was incorporated in the contract; and (ii) an anti-suit injunction preventing the receivers from continuing with the claim other than by arbitration in London.  The subsequent decision of the European Court in The “Front Comor” [2009] 1 LLR 413 made it clear that the English Court could not grant an injunction in such circumstances and this issue fell away.  However the Spanish receivers argued that the decision of the Spanish Court was binding on the English Court under Article 33 of Council Regulation (EC) 44/2001. 

Gloster J in the Commercial Court ruled that the Spanish Court decision, while being a judgment within the Regulation, was not binding in the arbitration proceedings which were excluded from the regulation by Article 1 (2) (d).  The judge further granted the owners a declaration that under English law the bill of lading did contain the arbitration clause. 

The receivers appealed and the primary issues before the Court of Appeal were whether the decision of the Spanish Court was a judgment to which the EC Regulation applied and if so was it fully binding in England whatever the nature of the proceedings commenced there.

The Court of Appeal has allowed the receiver’s appeal holding that the Commercial Court was not entitled to refuse recognition of the Spanish Court’s judgement. In reaching this decision the Court of Appeal followed the ECJ decision in The “Front Comor” in holding that the Spanish Court decision, although dealing with a preliminary issue on whether arbitration applied, was a judgment within the Regulation.  Further the Court decided the Judge had been wrong to rely on Through Transport Mutual v New India Assurance (The “Hari Bhum”) [2005] 1 LLR 67 to find that a Regulation judgment would not be binding on arbitration proceedings.  The Court of Appeal decided that case did not mean that a Regulation judgment could not be recognised by the court in relation to English arbitration proceedings even though the arbitration proceedings lay outside of the ambit of the Regulation.  The declaration upholding the arbitration clause should not have been made in view of the Spanish Court judgment and the Court accordingly allowed the appeal.

The case raises further concern on the use of maritime arbitrations in London for the resolution of disputes between parties based in the European Union.