The Kingdom of Spain (Appellant) v The London Steam-Ship Owners' Mutual Insurance Association Limited (Respondent)

Case summary

Case ID

UKSC/2025/0031

Parties

Appellant(s)

The Kingdom of Spain

Respondent(s)

The London Steam-Ship Owners' Mutual Insurance Ass

Issue

Did the Court of Justice of the European Union (“CJEU”) determine that a res judicata created by an arbitration award cannot permit non-recognition of a foreign judgment in England on the grounds of public policy under Article 34(1) of Regulation (EC) No. 44/2001 (“Brussels I”)? If the CJEU did not determine the point, can such an award permit non-recognition of a judgment under Article 34(1)?

Facts

In 2002, an oil tanker (the “M/T Prestige”) sank. The resulting oil spill significantly damaged the Spanish and French coastlines. The London Steam-Ship Owners’ Mutual Insurance Association (the “Club”) insured the vessel. The insurance contract required all disputes to be referred to arbitration under English law in London. The contract also contained a “pay to be paid” clause, which excluded the Club’s liability to third parties unless and until the vessel’s owners had paid the full amount of any insured liability. Spain and France (the “States”) brought claims for compensation against the Club in Spanish court. In response, the Club brought an arbitration in London. On 13 February 2013, the arbitrator found that: (i) the States were bound in equity to arbitrate any claims against the Club; and (ii) the “pay to be paid” clause meant that the Club had no liability to the States (until payment was made by the vessel’s owners) (the “Schaff Award”). The English High Court then permitted enforcement of the Schaff Award as a judgment of an English court under section 66 of the Arbitration Act 1996 (the “s.66 Judgment”). Meanwhile, the parties continued litigating in Spanish court. On 1 March 2019 (i.e. pre-Brexit), the Spanish court ordered that the States could seek enforcement of €855m in damages against the Club (the “Spanish Judgment”). Spain applied to have the Spanish Judgment registered in England under Brussels I, a regulation that requires EU states to recognise the judgments of other EU courts. Article 34(1) of Brussels I is an exception to that requirement, where recognition would be contrary to public policy. The Spanish Judgment was registered in England. The Club appealed the registration order to the English High Court. It argued that the Schaff Award (see point (ii), above) had determined the Club’s liability to the States, so the point was “res judicata” and it would be contrary to public policy under Article 34(1) to register the contradictory Spanish Judgment. The judge, Butcher J, made a preliminary reference to the CJEU. The parties in the present appeal dispute precisely what the CJEU decided. Butcher J found that the CJEU: (a) decided that res judicata due to a previous court judgment could not render registration contrary to public policy under Article 34(1); but (b) did not decide whether the same applied to a res judicata due to a previous arbitration award. Absent a binding decision on (b), Butcher J found that the Schaff Award did create a res judicata, rendering the registration of the Spanish Judgment contrary to English public policy under Article 34(1). The registration order was overturned. The Court of Appeal upheld Butcher J’s finding. Spain now appeals against that decision.

Date of issue

18 February 2025

Case origin

PTA

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