African Fertilisers v BD Shipsnavo, the Christian D
African Fertilizers and Chemicals NIG Ltd (Nigeria) v BD Shipsnavo GmbH & Co Reederei KG (The “Christian D”): English Commercial Court: Beatson J:  EWHC 2452 (Comm): 29 September 2011
ARBITRATION: JURISDICTION OF COURT: DECLARATORY JUDGMENT: SECTION 66 OF THE ARBITRATION ACT 1996: ARTICLE 34(3) OF REGULATION 44/2001: WHETHER COURT HAD JURISDICTION TO MAKE PURELY DECLARATORY JUDGMENT UNDER SECTION 66: WHETHER SECTION 66 DECLARATORY JUDGMENT WAS A “JUDGMENT” FOR PURPOSE OF ARTICLE 34(3)
Available on BAILII @ http://www.bailii.org/ew/cases/EWHC/Comm/2011/2452.html
Dominic Happé (instructed by MFB) for Owners, Respondent/Claimant, BD Shipsnavo
Nichola Warrander (instructed by Winter Scott) for Cargo Interests, Applicant/Defendant, African Fertilizers
The English court has jurisdiction to grant a declaratory judgment pursuant to section 66 of the Arbitration Act 1996 to enforce a purely declaratory arbitration award where there was an appreciable risk of the losing party obtaining an irreconcilable judgment in a member state which it might then try to enforce within the jurisdiction of the English court. So to grant made a positive contribution to securing the material benefit of the award by furthering the successful party's objective to establish the primacy of such a declaratory order, because it would then be contrary to article 34(3) of the Brussels Regulations 44/2001 to allow recognition of an irreconcilable subsequent judgment made in another member state.
Case note by Jim Leighton, BSc (Hons), LLB (Hons), LLM (Maritime Law), Solicitor of England & Wales, Foreign Qualified Lawyer (Practising Foreign Law) in Singapore, Associate at Hill Dickinson LLP and International Contributor to DMC’s CaseNotes [
Cargo interests (‘Cargo’) applied to set aside an order of the English court that had been granted under section 66 of the Arbitration Act 1996 (fn.1) to enforce an arbitration award and to enter judgment against them in the terms of that award. Cargo submitted that the Court had no jurisdiction to make that order on the grounds that the material parts of the award were in purely declaratory terms.
The award had been made pursuant to an arbitration agreement contained in a bill of lading for the carriage of Cargo’s goods on board the vessel of BD Shipsnavo ("Owners") from Romania to Nigeria. The bill of lading incorporated the underlying charterparty terms, including the English law and arbitration clause. The underlying dispute concerned the grounding of the carrying vessel, following which general average had been declared.
Prior to the London arbitration, Cargo had commenced arbitration proceedings in Romania, against which Owners had obtained a restraining injunction from the English court. Cargo had also commenced proceedings in the Romanian court. The English court granted Owners an order/interim declaration that the London arbitration clause was valid and the Romanian arbitration and court proceedings were in breach of the London arbitration agreement. Cargo did not appeal against that order and the English court hearing was adjourned to permit the London arbitration to take place.
Owners sought an order under section 66 because of their concern that, notwithstanding the arbitration award, Cargo would obtain judgment in their favour in the Romanian court and would then seek to have that judgment recognised and enforced in England under Regulation 44/2001 (fn.2). However, if an English judgment were obtained first, Owners would then be able to rely on article 34(3) of the Regulation to resist the recognition of an irreconcilable subsequent judgment of the Romanian court.
Cargo made two principal submissions:
(1) Enforcement of a purely declaratory arbitration award under section 66 was not possible. The decision to the contrary at first instance in The "Front Comor" (fn.3) was wrong and should not be followed because it (a) failed to distinguish between the purpose of the section and the meaning of the word "enforced", (b) attributed to the word "enforced" an unnaturally wide meaning, and (c) ignored the distinction that is present in the 1996 Act between "recognition" and "enforcement", leaving no room for a concept of recognition distinct from enforcement; and
(2) A judgment entered under section 66 in the terms of an arbitration award did not constitute a judgment within the meaning of the term in article 34(3), because it did not involve any consideration by the court of the issues between the parties but was simply a mechanism for summary enforcement. In consequence, it would not give Owners what they wanted and there would therefore be no purpose in doing so - following the ECJ decision in Solo Kleinmotoren v Boch (fn.4).
The judge concluded that the English court had jurisdiction to make the order in the terms sought by Owners and therefore dismissed Cargo's application.
The submissions of Cargo were contrary to the judgment of Field J in The "Front Comor". That case indicated that a declaratory judgment is available where this will have the practical utility of ensuring that the positive result of an arbitration award can be achieved, so that an inconsistent judgment that might be obtained in another member state cannot be enforced.
The cases cited by Cargo (fn.5) were distinguishable from the position in both The "Front Comor" and the present case. It was clear that, at common law, contractual remedies in an action to enforce an award included a declaration that the award was valid or as to its construction or effect (fn.6). There was also jurisdiction to enforce a declaratory judgment by issue of a writ of sequestration pursuant to the inherent power of the court to see that orders are carried out (fn.7). While that option was only available in "exceptional" circumstances, the present case could be described as such, given that Cargo was still pursuing proceedings in the Romanian court despite Owners seeking and obtaining the assistance of the English court on two occasions.
The submissions of Cargo also sought to introduce overly technical niceties into the interpretation of the 1996 Act by making a distinction between "enforcement" and "recognition" of arbitration awards. Making such a distinction was contrary to the approach of the Departmental Committee on Arbitration's guide to the 1996 Act, which indicated that such technical distinctions were to be avoided. That non-technical approach to interpreting the 1996 Act was reinforced by the Court of Appeal’s opinion in The "Amazon Reefer" (fn.8), which itself made clear that section 66 was a summary form of proceeding which was intended to dispense with the full formalities of the other way of enforcing an award, by an ordinary action on the award in the English court.
The decision in Solo Kleinmotoren v Boch did not preclude a declaratory judgment pursuant to section 66 from being a judgment for the purpose of article 34(3). What was precluded from being a judgment by that case was a mutually agreed settlement of the parties entered into a court order. Such a settlement was essentially contractual in nature, thus was consensual between the parties and not decided by the court or tribunal on its own authority. The arbitration and the contents of the award in this case, although resulting from initial consent between the parties to arbitrate disputes, were not contractual/consensual. Cargo's argument to the contrary was itself contrary to an obiter opinion of the Court of Appeal (fn.9), were inimical to the underlying policy considerations in this area (fn.10) and were also implicitly rejected by Field J in The "Front Comor", who did not regard Solo Kleinmotoren v Boch as precluding a section 66 declaratory order from article 34(3).
This judgment follows that of Field J in The "Front Comor". That judgment is presently under appeal. Once the Court of Appeal delivers an opinion in that case, the availability of a declaratory judgment under section 66 will hopefully be confirmed. The court should, in the writer’s view, strive to assist a party to obtain practical utility through section 66 where intransigent behaviour by an adversary might otherwise deprive a successful party of the material benefit of properly complying with an arbitration agreement pursuant to which a favourable arbitration award is obtained. To do otherwise undermines one of the benefits of choosing arbitration over litigation, as the successful party would have to revert to the long-form process of suing on the arbitration award.
Footnote 1: Section 66 states:
"66 Enforcement of the award
(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.
(3) Leave to enforce an award shall not be given where, or to the extent that, the person against whom it is sought to be enforced shows that the tribunal lacked substantive jurisdiction to make the award…
Footnote 2: Article 34 Brussels Regulation 44/2001 materially states:
"A judgment shall not be recognised:
1. if such recognition is manifestly contrary to public policy in the Member State in which recognition is sought ...
3. if it is irreconcilable with a judgment given in a dispute between the same parties in the Member State in which recognition is sought."
Footnote 3:  EWHC 829 (Comm),  2 Lloyd's Rep 117.
Footnote 4: Case C-414/92  ECR I-2237.
Footnote 5: Margulies Brothers v Danis Thomaides & Co  1 Lloyd's Rep 205 (CA), Tongyuan (USA) International Trading v Uni-Clan (19 January 2001), St George's Healthcare NHS Trust v S  EWCA Civ 1349,  Fam 26, Haji-Ioannou v Frangos  EWHC 2310 (QB).
Footnote 6: Commercial Arbitration (2nd ed) para 417.
Footnote 7: Webster v Southwark LBC  QB 698.
Footnote 8:  EWCA Civ 1330,  1 Lloyd's Rep 220.
Footnote 9: The "Wadi Sudr"  EWCA Civ 1397,  1 Lloyd's Rep 193.
Footnote 10: Civil Jurisdiction and Judgments (5th ed) para 7.22: "once an English court has given leave to enforce an arbitral award, it would be gravely damaging to legal certainty for it to be required to recognise and enforce a foreign judgment which undermined or contradicted that arbitral award".