Can a Declaratory Arbitral Award Be Enforced Like a Monetary Award? The West Tankers Case and Strategic Implications

Japanese Attorney at Law - Bengoshi L.L.

• 9 min read

In international arbitration, an award typically orders one party to pay a sum of money or perform a specific act. However, arbitral tribunals can also issue "declaratory awards," which simply declare the rights and obligations of the parties without ordering any specific performance or payment. A common example is an award declaring that a party is not liable under a contract. The question then arises: can such a non-monetary, declaratory award be "enforced" in the traditional sense, and what strategic value might such enforcement hold? The long-running saga involving the vessel "Front Comor," commonly known as the West Tankers case, culminating in a key English Court of Appeal decision on January 24, 2012 (West Tankers Inc. v. Allianz SpA and Generali Assicurazione Generali SpA [2012] EWCA Civ 27), provides a fascinating insight into these questions, particularly within the complex legal framework of the European Union at the time.

I. The "Front Comor" Incident and the Bifurcated Dispute

The dispute originated from a voyage charter party between West Tankers Inc., the shipowner, and Erg Petroli SpA (Erg), the charterer. The contract was for the carriage of crude oil by the vessel "Front Comor" to Erg's refinery in Syracuse, Italy. This agreement was governed by English law and contained a clause stipulating London arbitration for all disputes.

In August 2000, the "Front Comor" collided with Erg's jetty at the Syracuse refinery. Erg subsequently initiated arbitration proceedings in London against West Tankers, claiming damages. Simultaneously, Erg's insurers, Allianz SpA and Generali Assicurazione Generali SpA (collectively, the "Insurers"), who had presumably indemnified Erg for its losses, commenced subrogated court proceedings against West Tankers in Syracuse, Italy, based on the same incident. This created a classic scenario of parallel proceedings—arbitration in London and litigation in Italy concerning the same underlying events and liability.

II. The Anti-Suit Injunction Battle and the ECJ's Intervention

To protect the London arbitration agreement and avoid the burden of fighting on two fronts, West Tankers sought an anti-suit injunction from the English Commercial Court to restrain the Insurers from pursuing the Italian court proceedings.

  • Initially, West Tankers found success. Mr. Justice Colman granted an anti-suit injunction on March 21, 2005.
  • This position was later affirmed by Mr. Justice Andrew Smith in the High Court on May 7, 2008, who held that the Insurers were bound by the arbitration agreement and that all disputes should be resolved exclusively in the ongoing London arbitration.

However, the landscape shifted dramatically due to the involvement of EU law. The English High Court made a reference to the European Court of Justice (ECJ) asking whether an anti-suit injunction granted by a court of one EU Member State to restrain court proceedings in another Member State was compatible with Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the "Brussels I Regulation"). The Brussels I Regulation aimed to create a unified system for allocating jurisdiction and ensuring free movement of judgments among EU Member States, but its interaction with arbitration was a contentious area.

On November 10, 2009, in Case C-185/07, Allianz SpA and Generali Assicurazione Generali SpA v. West Tankers Inc., the ECJ delivered a landmark ruling. It held that it was incompatible with the Brussels I Regulation for a court of a Member State to issue an anti-suit injunction restraining a party from commencing or continuing proceedings before a court of another Member State on the ground that such proceedings would be contrary to an arbitration agreement. The ECJ reasoned that such injunctions interfered with the jurisdiction of the foreign court to determine its own competence, a principle embedded in the Brussels I Regulation. This ruling effectively stripped West Tankers of its primary tool for halting the Italian litigation.

III. The London Arbitral Award: A Declaration of Non-Liability

Despite the ECJ ruling and the ongoing Italian proceedings (in which the Insurers were active, while they refused to participate in the London arbitration), the London arbitration continued.

  • On October 7, 2008, the arbitral tribunal issued a partial award in the arbitration between West Tankers and Erg, finding that West Tankers was not liable to Erg for the incident.
  • More significantly for the subsequent enforcement battle, on November 12, 2008, the same arbitral tribunal issued a final declaratory award in favor of West Tankers against the Insurers. This award declared that, owing to certain contractual limitation or exemption clauses in the charter party (to which the Insurers were found to be effectively bound as subrogated claimants), West Tankers had no liability whatsoever to the Insurers in respect of the collision. This award did not order the Insurers to pay any money; it simply declared West Tankers' non-liability.

IV. Seeking to "Enforce" the Declaratory Award in England: A Strategic Move

With the Italian litigation still pending and the ECJ having nullified its anti-suit injunction, West Tankers faced the prospect of the Italian court potentially reaching a judgment contrary to the London arbitral award. If the Italian court found West Tankers liable, the Insurers could then seek to enforce that Italian judgment in England under the Brussels I Regulation.

To preempt this, West Tankers adopted an innovative strategy. It applied to the English High Court for leave to "enforce" its declaratory arbitral award against the Insurers under Section 66 of the UK Arbitration Act 1996. Section 66 provides:

  • (1) An award made by the tribunal pursuant to an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect.
  • (2) Where leave is so given, judgment may be entered in terms of the award.

West Tankers' objective was not to execute a monetary claim (as there was none in the declaratory award) but to have the arbitral award formally converted into an English court judgment. The strategic thinking was that if an English judgment embodying the arbitral declaration of non-liability existed before any conflicting Italian judgment was obtained, West Tankers could then argue that the Italian judgment was "irreconcilable" with a prior judgment of the state where enforcement was sought (i.e., the UK). Under Article 34(3) of the Brussels I Regulation, a judgment shall not be recognized if it is irreconcilable with a judgment given in a dispute between the same parties in the Member State in which recognition is sought.

The central legal question was whether a purely declaratory arbitral award, which does not require any positive action from the losing party, could be "enforced" under Section 66, which speaks of enforcement "in the same manner as a judgment."

V. The English Courts' Interpretation of Section 66

The English courts, through several instances, ultimately supported West Tankers' position.

  • Mr. Justice Simon (High Court, November 15, 2010): Initially granted West Tankers leave to enforce the declaratory award under Section 66(1) and permitted judgment to be entered in terms of the award under Section 66(2).
  • Mr. Justice Field (High Court, April 6, 2011): The Insurers applied to set aside Simon J.'s order. Field J. dismissed this application. He reasoned that a key purpose of Section 66 was to enable a successful party in arbitration to obtain the benefit of the award without needing to initiate a new lawsuit based on the award. While leave to enforce a purely declaratory award might be refused if there was no prospect of a conflicting foreign judgment (as it would offer no additional practical benefit), the situation was different here. Field J. held that where the objective of seeking a judgment in terms of a declaratory award was to "obtain priority for it over a potential conflicting judgment of the court of another Member State," this did serve to preserve the benefit of the arbitral award. He found that the court had jurisdiction under Section 66 and that it was sufficient that the aim was to preempt a potential conflicting judgment, even if one had not yet materialized.
  • Court of Appeal (January 24, 2012): The Insurers appealed Field J.'s decision. The Court of Appeal unanimously dismissed the appeal.
    • It addressed the core issue of whether "enforced in the same manner as a judgment" in Section 66(1) was confined to methods of executing monetary judgments or could encompass other ways of giving judicial effect to an award, such as entering a judgment in its terms.
    • The Court of Appeal favored a broader, purposive interpretation, consistent with the overall objective of the Arbitration Act 1996 to promote the efficacy of arbitration. It rejected the narrow argument that only the rights determined by an award, rather than the award itself, are enforced.
    • It noted that, even under common law (before Section 66 or its predecessors), a party obtaining a favorable declaratory award could bring an action on the award to obtain a court judgment to the same effect. Section 66 was intended to provide a more summary and efficient route to achieve this.
    • The Court emphasized that granting leave under Section 66 is discretionary ("may be enforced"). The court must make a judicial determination as to whether it is appropriate in the circumstances to enter judgment in terms of the award. Leave might be refused if, for example, there were serious doubts about the validity of the award or if obtaining a judgment served no legitimate purpose (e.g., it was wholly unnecessary).
    • In this specific case, the Insurers had only challenged the court's jurisdiction to make such an order for a declaratory award, not the appropriateness of the court exercising its discretion if jurisdiction existed. Given the strategic context of the parallel Italian proceedings, the Court of Appeal found no reason to interfere with the High Court's exercise of discretion.

The West Tankers saga, particularly the ECJ's ruling on anti-suit injunctions, highlighted a significant tension and lack of coherence between the EU's regime for court judgments (Brussels I Regulation) and the international arbitration framework (primarily the New York Convention). The inability of courts in one EU Member State to protect arbitration agreements by enjoining parallel court proceedings in another Member State was seen as undermining arbitration within the EU.

This led to extensive debate and proposals for reform. Ultimately, when the Brussels I Regulation was recast (as Regulation (EU) No. 1215/2012, which generally applied from January 2015), a significant change was made regarding arbitration. Article 1(2)(d) of the Recast Regulation explicitly states that the Regulation "shall not apply to... arbitration." Recital 12 further clarifies this exclusion, indicating an intention to sever most links between the Regulation and arbitration proceedings and awards.

This "arbitration exclusion" in the Recast Regulation was a major development. It effectively meant that issues like the validity of an anti-suit injunction in support of arbitration, or the recognition of judgments related to arbitration proceedings (like the one West Tankers obtained), would no longer be governed by the Brussels regime but by the national law of the relevant Member State (including its international obligations under the New York Convention). This change largely addressed the specific problem faced by West Tankers regarding the anti-suit injunction, as the ECJ's 2009 ruling was based on the (now superseded for this purpose) old Brussels I Regulation.

However, the Recast Regulation's exclusion of arbitration does not necessarily resolve all potential conflicts. For example, an arbitral award itself is enforced under the New York Convention. If a court in an EU Member State issues a judgment on the merits of a dispute that is also the subject of an arbitration agreement (perhaps because it refuses to stay its proceedings for arbitration), that court judgment would still be subject to recognition and enforcement under the Recast Regulation among other EU Member States. The potential for conflicting outcomes, one from an arbitral tribunal and another from an EU Member State court, thus persists, albeit with the procedural tools and battlegrounds having shifted.

VII. Strategic Implications for International Businesses (Including U.S. Companies)

The West Tankers case offers several strategic takeaways for businesses engaged in international commerce:

  1. Declaratory Awards as Proactive Tools: The case demonstrates that a declaratory arbitral award, affirming non-liability or clarifying rights, can be a valuable strategic tool, especially when facing or anticipating parallel litigation in other jurisdictions.
  2. Leveraging National Law for "Enforcement" of Declaratory Relief: National arbitration laws, like Section 66 of the UK Arbitration Act 1996, may provide mechanisms to convert such declaratory awards into domestic court judgments. This can enhance their standing and provide a basis for resisting the enforcement of subsequent conflicting foreign court judgments under applicable international conventions (like the "irreconcilable judgments" provisions in the Brussels regime or similar principles of comity elsewhere).
  3. Understanding the Interplay of Legal Regimes: International disputes often involve multiple layers of law: the substantive law of the contract, the procedural law of the arbitration (lex arbitri), national arbitration acts, and international conventions (like the New York Convention and, in specific contexts, regional judgment recognition treaties). Navigating these successfully requires sophisticated legal advice.
  4. For U.S. Companies: While the EU-specific elements of the West Tankers anti-suit injunction saga and the Brussels Regulation are unique to that bloc, the underlying strategic principles have broader relevance. U.S. companies facing multi-jurisdictional dispute risks might similarly consider:
    • The utility of seeking prompt declaratory relief through arbitration.
    • The possibility of converting favorable arbitral awards into domestic judgments at the seat of arbitration to bolster their legal position.
    • The rules governing recognition and enforcement of foreign judgments versus foreign arbitral awards in key jurisdictions where counterparties have assets. The New York Convention's wide reach for arbitral awards often provides a distinct advantage over relying on the more fragmented and less certain regime for enforcing foreign court judgments.

Conclusion

The West Tankers litigation, particularly the English Court of Appeal's decision on the enforcement of a declaratory arbitral award, underscores the dynamic and often creative legal strategies employed in complex international disputes. It affirmed that "enforcement" of an arbitral award under a statute like Section 66 of the UK Arbitration Act 1996 is not limited to the execution of monetary obligations but can extend to giving judicial imprimatur to a declaration of rights if doing so serves a legitimate purpose in protecting the benefit of that award.

While the specific EU legal context concerning anti-suit injunctions and the Brussels I Regulation has evolved with the Recast Regulation's exclusion of arbitration, the West Tankers case remains a significant study. It highlights the proactive use of arbitration to secure a declaration of non-liability and the subsequent leveraging of national court procedures to fortify that declaration against potential challenges from parallel foreign litigation. For businesses, it serves as a reminder of the versatility of international arbitration and the importance of understanding how arbitral awards interact with national and international legal frameworks to achieve strategic dispute resolution objectives.