Powers of arbitrators to grant injunctive relief against a state

9 October, 2023

On 6 October 2023, the High Court handed down judgments in The Prestige litigation (The London Steam-Ship Owners Mutual Insurance Association v. the Kingdom of Spain and the French State), the latest in a long-running series of cases in respect of the clean-up costs of the environmental disaster caused by the total loss of the M/T Prestige in 2002. The judgments arose from appeals by France and Spain under s.69 Arbitration Act 1996 against separate awards made in ad hoc arbitrations by Dame Elizabeth Gloster DBE and Sir Peter Gross, and on a separate appeal by the London Steamship Mutual against registration of an €855 million judgment of the Spanish Supreme Court under the Brussels I Regulation.

Dame Elizabeth Gloster granted an anti-enforcement injunction against France to prevent it from enforcing the Spanish judgment outside of Spain, having concluded that s.48(5) Arbitration Act 1996 gave her the power to do so even in the absence of any institutional rules granting such a power. France contended that the arbitrator had no such power on the basis that s.48(5) granted the tribunal the same powers as a court, and the court had no power to grant an injunction against a state, absent the state’s consent, by reason of s.13 State Immunity Act 1978. The High Court (Mr Justice Butcher) agreed.

Given the Court had no power to grant an injunction, Mr Justice Butcher also concluded, in relation to Spain, that the arbitrator had no power to grant damages in lieu of an injunction under s.50 Senior Courts Act 1981 (the successor to Lord Cairns’ Act).

However, the Court upheld awards of compensation granted by both arbitrators for contravention by the states of an equitable obligation to arbitrate, the states having been found obliged to arbitrate their disputes with the Club pursuant to the conditional benefit principle (not being parties to the relevant arbitration agreement but third parties claiming under a Spanish direct-action statute). This is only the second case in which compensation has been awarded for breach of an equitable obligation to arbitrate, and the first to grant it in an equal and opposite equal and opposite sum to the amount of the foreign judgment, in order to neutralise the effect of that foreign judgment.

In relation to the Club’s appeal, the Court had to decide the status, including under the Withdrawal Agreement, of the judgment given by the CJEU in London Steam-Ship Owners’ Mutual Association Ltd v Spain (C-700/200) on a reference made immediately before the end of the Transition Period. In a highly unusual decision, the Court concluded that the CJEU had gone beyond the terms of the reference and did not have jurisdiction to decide as it did, such that the Court was not bound to follow it. The Court also declined to follow the decision of the CJEU on the merits and called into question the fairness of the process.

The judgment may be of interest to practitioners in relation to the powers of tribunals and courts to grant injunctive relief against states, the remedies available in conditional benefit/‘DRO’ cases, and the approach of the Courts to decisions of the CJEU post-Brexit.

Anna Dilnot KC and Naomi Hart appeared for France, instructed by Ian Meredith of K&L Gates LLP.

A copy of the judgment in relation to France can be found here and in relation to Spain here.