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High Court rules MV Prestige €855mn oil spill judgment must be settled through UK arbitration


The High Court of Justice in London has ruled a Spanish judgment forcing a UK Protection and Indemnity insurance club (P&I) to pay £743m (€855m) following the MV Prestige sinking and oil spill in 2002 cannot be upheld and must go through arbitration in London in what has become an increasingly complex case.

The High Court backed a request from London Steam-Ship Owners’ Mutual Insurance Association, also known as the London Club, that its case over liability for the oil spill should be settled in London.

P&I cover includes environmental damage such as oil spills and pollution and in the UK P&I clubs are subject to the Marine Insurance Act.

The case concerned the MV Prestige, which sank off the Spanish coast in 2002 carrying 77,000 tonnes of heavy fuel oil causing the largest environmental disaster in the history of Spain and Portugal and also impacting the southern Atlantic coast of France.

The oil spill polluted 2300 kms (1429 miles) of coastline and affected more than one thousand beaches and had a significant effect on the local fishing industry.

It initiated a lengthy legal dispute between the London Club, the insurer of the vessel, and Spain. In 2020 a Spanish court ordered the insurer to pay compensation, capped at $1bn, but this was appealed with the club initiating arbitration proceedings in London, which resulted in a ruling that Spain could only seek damages claims through arbitration in London under English law.

As a result, Spain asked a UK court to enforce the Spanish ruling and received its backing in 2019. However, the insurer appealed, prompting Spain to seek guidance from the Court of Justice of the European Union (CJEU) in Luxembourg.

The European Court’s judgment dealt with the relationship between arbitration and the recognition and enforcement of judgments in Member States and the existence of more than one judicial decision on the same matter. The Court of Justice ruled the arbitration proceedings initiated in the UK could not block the recognition of the Spanish judgment.

However, The Rt Hon Lord Justice Peter Gross, the arbitrator, found in 2023 the CJEU judgment did not deprive him of jurisdiction nor decide that Spain was not bound to arbitrate its disputes with the insurer in London.

The insurers had initiated a second arbitration in 2019 which was still in progress when the CJEU delivered its judgment. As a result, Sir Peter Gross had to express views on the meaning of the CJEU judgment in the two partial awards he made on 6 January 2023 and 27 March 2023.

Gross also found that Spain should pay London Club compensation for the country’s breach of its arbitration obligations. Spain challenged the arbitration findings and the London Club appealed the CJEU decision.

Subsequently, Justice Julian Butcher found the London Club’s appeal succeeds, on the grounds that the Spanish judgment is “irreconcilable with the English judgments, and if that were wrong, recognition of the Spanish judgment would be contrary to principles of English public policy”.

He also dismissed Spain’s first challenge to the arbitration, ruling that Gross was right in his finding that the CJEU judgment did not prevent him from having jurisdiction as arbitrator. However the judge did grant Spain’s request to appeal the arbitration on other grounds.

The spill has led to criminal cases against the ship’s master, a UK arbitration, a Spanish liability decision over Spanish and French efforts to force the insurers to pay out in the English courts.

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