26 Apr 2012
Can an arbitrator's declaration be enforced as a judgment?
by Vincent Holland
An English court has held an arbitrator's declaration can be enforced as a judgment.
The English Court of Appeal has held in West Tankers Inc v Allianz SPA & Generali Assicurazione Generali SPA  EWCA Civ 27 that a declaration made by an arbitrator can be enforced as a judgment.
What is a declaration?
A declaration is an order which establishes the legal position of the parties, usually before a dispute has escalated to trial. Declarations are frequently sought by a potential respondent to resolve a preliminary question; the Tribunal's finding may limit:
the forum in which the dispute is to be referred;
when the dispute is to be referred; and
whether the claimant can in fact prosecute the claim at all.
Enforcing an arbitral award
Both the Arbitration Act 1996 (UK) and the International Arbitration Act 1974 (Cth) empower the Court to enter judgment in terms of an arbitral award enabling the successful party to enforce the award as a judgment.
What has, however, been uncertain is whether the Court has the power to enforce an award which is purely in the form of a declaration. The reason for this uncertainty is that, unlike other forms of relief such as an award of monetary compensation, an injunction or specific performance, a declaration is not coercive; it does not require a party to do or refrain from doing a particular act.
In West Tankers, the Court was faced with precisely this question: was an award in the form of a declaration capable of being enforced?
The dispute and arbitration in West Tankers
A vessel owned by West Tankers Inc, under charter to Erg Petroli SpA, collided with a pier at Erg's oil refinery in Italy. The Claimant referred the dispute to arbitration in London in accordance with an arbitration clause in the charterparty, seeking a declaration that it was not liable for damages arising out of the collision. In its award, the Tribunal found in favour of West Tankers and granted the declaration sought.
West Tankers subsequently sought leave to enforce the award as a judgment.
The reason for taking that step can be understood by what transpired before the tribunal handed down its award. Erg's subrogated insurer had commenced Court proceedings against West Tankers in Italy over the same incident. West Tankers had obtained an anti-suit injunction restraining the insurer from prosecuting the Italian proceeding, but this was overturned on appeal.
West Tankers contended that if the award was converted into a judgment, it would then be able to rely on article 34(3) of the Brussels Convention which prevents enforcement of a foreign judgment which is irreconcilable with a judgment of an English court in relation to a dispute between the same parties.
The insurer, however, argued that the award was not capable of being enforced as a declaration.
What did the court find?
The Court found that a declaratory arbitral award was enforceable under the English Arbitration Act. In reaching this conclusion, it was persuaded by the increasing commercial significance of declaratory relief and the need for the Court to facilitate (rather than hinder) the arbitral process.
The Court was not satisfied that the word "enforced" was limited to normal forms of executing a judgment (for example, by issuing a writ of execution for failure to pay a monetary sum). The Court, in particular, noted that a declaration could be used to establish an issue estoppel.
The decision is a welcome development as it clarifies previous uncertainty in this area of the law and will of course be persuasive in Australia. The decision is also consistent with the pro-arbitration stance generally taken by the English courts, with the court promoting the primacy of an arbitral award over an inconsistent foreign judgment.
 The uncertainty can be traced back to the case of Margulies, Brothers Ltd v Dafnis Thomaides & Co (UK) Ltd  1 Lloyd's Law Report 205 in which Lord Evershed said "You cannot enforce a document which merely says by way of declaration (in effect) that certain contracts with three numbers should be set against certain other contracts with three other numbers and that [the appellant] ought to pay the differences between them."
You might also be interested in...