The West Tankers dispute arose following damage to a jetty in Italy owned by Erg Petroli SpA (Erg), caused by a vessel owned by West Tankers under charter to Erg (for more detail of the case, see Legal update, West Tankers ECJ judgment: full report). The dispute gave rise to arbitral proceedings in London between West Tankers and Erg pursuant to the arbitration agreement in the charterparty, and court proceedings brought by the Insurers against West Tankers in Italy to recover sums they had paid to Erg. West Tankers' attempts to obtain an anti-suit injunction from the English courts to restrain the Insurers from pursuing the Italian court proceedings failed after the ECJ ruled, in February 2009, that anti-suit injunctions in support of arbitration proceedings are incompatible with the Brussels Regulation.

The English courts did however make a finding that the Insurers were bound by the relevant arbitration agreement, and the arbitral tribunal rendered an award (the third final award) declaring that West Tankers had no liability to the Insurers.

By an order dated 15 November 2010, Simon J granted leave to enforce the third final award pursuant to section 66(1) of the Act and entered a judgment against the Insurers in the terms of the award pursuant to section 66(2) of the Act. The Insurers applied to set aside the order, on the basis that a purely declaratory award of this nature cannot ordinarily be enforced as a judgment.

In his judgment on the Insurers' application, Field J concluded that the purpose of section 66(1) and (2) of the Act was to provide a means by which the successful party in an arbitration could obtain the material benefit of the award other than by suing on it. As the successful party's objective in seeking an order was to establish the primacy of a declaratory award over a possible future inconsistent judgment, Field J indicated the court had jurisdiction to make a section 66 order because to do so would make a positive contribution to the securing of the material benefit of the award.

In seeking to secure the benefit obtained by the successful party in the arbitration the judgment reflects the pro-arbitration traditions of the English courts. The judgment however further complicates the interplay between arbitration proceedings in England and court proceedings elsewhere in the EU.

In a judgment handed down in 2009 in National Navigation v Endesa [2009] EWCA Civ 1397 (see Legal update, National Navigation v Endesa: Herbert Smith comment), in which it applied the ECJ's decision in West Tankers, the English Court of Appeal concluded that a preliminary ruling in the courts of another European member state to the effect that an arbitration agreement does not apply to the dispute in question would bind the English courts. However, Field J's judgment suggests that if an arbitral tribunal acts expeditiously, issuing an award prior to a preliminary ruling being issued in competing court proceedings, that award may be enforced, at least in England, pursuant to section 66 of the Act.

This result may lead to a race not only to commence proceedings, but where parallel arbitration and court proceedings are already underway, also to a race to obtain the first substantive ruling. This could give rise to procedural abuses on both sides as each party seeks to slow down the proceedings commenced by the other, a situation that is not conducive to the expeditious resolution of disputes.

Field J also expressly declined to rule on what would happen if and when the Italian court renders a judgment that is irreconcilable with the English judgment on the arbitral award, if the defendants seek to enforce the Italian judgment in England. The English court would then be presented with a judgment of the Italian court it would ordinarily be bound to enforce pursuant to the Brussels Regulation, and a conflicting judgment of the English court raised in defence.

Field J's reasoning suggests he believed the answer to this difficulty may lie in Article 34(3) of the Brussels Regulation, which provides that a foreign judgment (such as any issued by the Italian court) is not to be recognised under the Brussels Regulation if it is contrary to a judgment in the dispute between the same parties in the English courts. However, if a judgment in arbitration proceedings, such as under section 66 of the Act, falls within the arbitration exception to the Brussels Regulation (as the Court of Appeal's decision in the Endesa case suggests), this may preclude its triggering Article 34 of the Brussels Regulation. The correct outcome in such circumstances is far from clear.

It remains to be seen whether the Italian courts will in fact rule in favour of the Insurers and therefore whether this difficulty will arise in this case. In the meantime, however, the case highlights the need for reform. The EU Commission has proposed amendments to the Brussels Regulation that, if adopted, would require the courts of a member state whose jurisdiction is contested on the basis of an arbitration agreement, to stay proceedings in favour of the courts at the seat of arbitration or the arbitral tribunal once the latter are seised. This would be a welcome amendment, which in this case would have required the Italian courts to stay their proceedings. If adopted, the amendments will hopefully resolve the difficult issues raised in West Tankers and other recent cases.

Case: West Tankers Inc v Allianz Spa and another [2011] EWHC 829 (Comm).