The maritime industry is well used to navigate English law which is the chosen legal system for the major part of the industry. The English courts and London arbitration are much used to solve disputes and one of the features of the English legal system is the anti-suit injunction which is a powerful weapon when an opponent chooses to ignore that a charter party or bill of lading includes a choice of law and venue clause. The anti-suit injunction can help compel an opponent (typically a cargo claimant) to refrain from starting or continuing a legal action before the courts outside England (typically in the country of discharge where cargo claims are involved). In order to achieve legal certainty, it must be preferable to compel, as far as possible, claimants against vessel to comply with agreed choice of law and venue clauses.
The availability of the anti-suit injunction was, however, limited somewhat when the European Court of Justice (ECJ) a couple of years ago handed down its decision in the so-called “Front Comor”.
In The “Front Comor”, the ECJ held that an English Court could not grant an anti-suit injunction to protect English arbitration proceedings against Italian proceedings. To uphold the anti-suit injunction would be contrary to the general principle in Regulation (EC) 44/2001 that every court seized (within the EU) itself was to determine whether it had jurisdiction to resolve the dispute before it. The prohibition against the anti-suit injunction is relevant only within the EU - the anti-suit injunction can still be used as before against parties taking action before courts outside the EU.
The ECJ made its decision in The “Front Comor” in the context of an action taken by the Italian terminal operators against the Vessel owners before the Italian courts. The vessel owners applied for an anti-suit injunction against this but this was denied when the ECJ handed down its decision.
Nothing barred the vessel owners from commencing arbitration in London and here the owners applied to the arbitration tribunal for a declaration of non-liability.
In advance of the conclusion of the Italian court procedings, the London arbitration tribunal made a declaratory award in favour of the vessel owners and in The “Front Comor “(No 2) the vessel owners applied to have the English arbitration award (declaring that they were not liable) converted into a judgment (which is possible under the Arbitration Act). They wanted to do this so that any subsequent Italian judgment would not be enforced by the English courts. The EC Judgments Regulation provides that a judgment will not be recognised if it is” irreconcilable with a judgment given in a dispute between the same parties in a Member State in which recognition is sought”. The English court accepted that there was a right to have the award converted into an enforceable judgment as this contributed to the claimant securing the material benefit of the award.
On the other hand, this option would not be available if the Italian Court had made its decision prior to the London Arbitrators - in that situation the English courts would be barred from allowing an incompatible award to be converted into a judgment. There is consequently still a “race to the court” or, rather, a “race to the tribunal” which can be relevant. Certainly, there is a “race to the finish” and get a decision before the other party does the same.
With this being the situation, the urgency to get a decision in one’s own favor may therefore, in itself, deter some claimants who would otherwise commence legal action in a jurisdiction where the courts are slow. It goes without saying that until the foreign EU court (i.e. a court in an EU country) has made its ruling, the London arbitration award can be presented to that court for any persuasive force it may have. The court is, however, under no obligation to decide its case in accordance with the London arbitration award.
The simple existence of the award is perhaps unlikely to lead the foreign EU court to decide the jurisdictional and other issues differently as far as its own jurisdiction is concerned, but it may be that an award could nevertheless at least be enforced in some way via the New York Convention (the opponents may themselves have assets outside an EU country), and in any event it could make matters sufficiently complicated and costly and help to persuade cargo claimants to drop the matter.
Within the EU the situation would presumably be that the English award having been converted into a judgment before an EU court makes its decision would bar the recognition in any other EU country of any contrary judgment. The cargo claimant would therefore have little use outside its home EU jurisdiction for any judgment it may obtain .
This method may, at the very least, prevent enforcement of EU-originated proceedings in England and this can therefore be especially relevant where the a vessel owner is domiciled in or has assets in England and perhaps also where a P&I club LOU has been provided (most P&I Club LOU’s are made subject to English law & jurisdiction). It is an open question whether vessel owners elsewhere will have any real or practical benefit from this solution but some benefit can perhaps be gained : a party pursuing a claim against a Vessel owner must be made to understand that where ever they seek to enforce their own judgment (outside their home jurisdiction at least) they will be met with the fact that the vessel owner will be able to show up anywhere with an arbitration award in his favour obtained on the basis of the agreed choice of law and venue. This could be a very persuasive factor in countries outside the EU and certainly it would expose opponents to far from easy ride to enforcement – trying to enforce competing decisions is likely to attract disproportionate costs.
This does not escape the risk in the EU home jurisdiction where a judgment is obtained : if the foreign EU court end up with a result different form the London arbitrators, then the vessel owners will continue to be at risk when calling in that EU jurisdiction. Whether or not this is significant will of course depend on circumstances such as usual trading area for the vessel, location of owners’ assets etc.
This way of defeating a legal action before a court in an EU country is not in itself an option which can be used without caution. It is, of course, an option which will have to be considered but a number of factors will have to be taken into account such as the amount in dispute, the costs of the arbitration as well as the litigation in the foreign EU court, whether the courts in the foreign EU court can be expected to decide quickly or not, etc.
[2009] 1 Lloyd’s Rep 413. The “Front Comor”
[2011] 2 Lloyd’s Rep 117 The Front Comor (No 2)
A result similar to that of The “Front Comor” (No 2) was reached in [2011] 1 Loyd’s Rep 85 (The “Christian D”)