August 20 2015   Martin Aquilina, Business Lawyer

In our previous article, “Lawsuits in the European Union: disarming the “Italian torpedo” with the Recast Brussels Regulation”, we discussed the impact the changes to the Brussels Regulation has on choice-of-court clauses.

In this article, we will discuss the impact of the new rules on arbitration clauses. Often, such clauses will specify the jurisdiction in which the arbitration will be carried out.

The Brussels Regulation

The Brussels Regulation[i] explicitly provided in Article 1.2(d) that the Regulation does not apply to arbitration. The arbitration exclusion made sense given that all EU states are parties to the 1958 New York Convention[ii] which deals with arbitration. However, the Regulation did not make any reference to the Convention. The limited clarity on the scope of the exclusion was the source of many issues, including the possibility of a torpedo action to disrupt the arbitration process and the impossibility of obtaining an anti-injunction suit to stop such an action.

The famous Allianz v West Tankers[iii] case is a good illustration of the shortcomings of the Brussels Regulation in respect to its arbitration exclusion. This is what happened:

Erg Petroli SpA chartered a vessel owned by West Tankers. In Italy, the vessel collided with a jetty which was owned by Erg. The contract between the Erg and West Tankers contained an arbitration clause specifying London as the jurisdiction for arbitration. The insurers, Allianz and Generali, paid Erg compensation up to the limit stipulated in the insurance policies. Erg commenced arbitration proceedings against West Tankers in London as per the arbitration clause to claim the amount not covered by the insurance. Allianz and Generali brought proceedings against West Tankers in Italy to claim the amount they had paid to Erg.

West Tankers then brought proceedings in the United Kingdom seeking a declaration that the arbitration agreement be honoured and to enjoin Allianz and Generali from proceeding further in Italy. The English court granted the anti-suit injunction against Allianz and Generali. However, the issue was referred to the European Court of Justice and it was held there that the granting of an anti-suit injunction runs contrary to the Brussels Regulation.

The Recast Brussels Regulation

The Recast Brussels Regulation[iv] retains Article 1.2(d) which states that the Regulation does not apply to arbitration. It also added Article 73.2 which provides that “This Regulation shall not affect the application of the 1958 New York Convention”.

In addition, Recital 12 was added. In summary, it states that:

  • The Recast Regulation should not prevent Member State courts from referring parties to arbitration, from staying or dismissing the proceedings, or from examining whether the arbitration agreement is null and void.
  • A ruling giving by a Member State court as to whether or not the arbitration agreement is null and void should not be subjected to the rules of recognition and enforcement laid down in the Recast Regulation, regardless of whether the court decided this as a principal issue or as an incidental question.
  • Once the Member State court determines that an arbitration agreement is null and void, this should not stop that court’s judgment on the substance of the matter from being recognised or enforced in accordance with the Recast Regulation.
  • The New York Convention takes precedence over the Recast Regulation.
  • The Recast Regulation should not apply to actions or ancillary proceedings such as the establishment of an arbitral tribunal and the powers of arbitrators.

We were hoping that the recent Gazprom[v] decision would have shed more light on the applicability (or lack thereof) of the Recast Brussels Regulation to arbitration clauses and provide more clarification on Recital 12.  Unfortunately, while the Advocate General’s opinion addressed Recital 12, the Court made no mention of it. However, the Court did emphasize that arbitration falls outside the scope of the Brussels Regulation.

The Recast Regulation has definitely brought in new improvements to different areas such as enforceability of choice-of-court clauses (as we discussed in our last article) and to applicability of arbitration exclusion. Although there are still some remaining uncertainties, the Recast Regulation is a step forward in the right direction for the development of European Union Law.

[i] Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

[ii] Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958).

[iii] Allianz SpA and Generali Assicurazioni Generali SpA v West Tankers Inc, Case C‑185/07, [2009] ECR. I-663.

[iv] Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

[v] ‘Gazprom’ OAO, Case C-536/13, [2015] WLR (D) 212.

This article is for informational purposes only and does not constitute legal advice. If you wish to discuss your issue with a lawyer, contact Martin today.  613-747-2459 ext.308, maquilina@hazlolaw.com