The UK Supreme Court has restored arbitral awards protecting the London Steam-Ship Owners’ Mutual Insurance Association from enforcement of Spanish and French judgments arising from the Prestige oil spill.
The tanker sank off Spain in 2002, causing extensive pollution damage. Criminal proceedings in Spain eventually produced civil awards against the vessel owner and the London P&I Club, including liabilities running into billions of euros. The club’s policy contained a London arbitration clause and a US$1 billion liability limit. Spain and France sought to enforce their judgments in England as third parties claiming directly against the insurer.
In a final judgment delivered on 28 October, the Supreme Court held that the states could not take the benefit of the insurance contract while disregarding its arbitration clause. It characterised the obligation to arbitrate as contractual rather than equitable. The proper relief was therefore common-law damages for breach, not equitable compensation.
The court allowed the club’s appeal and confirmed the arbitral awards, subject to wording variations. It declined to send the dispute back for further proceedings. The decision resolves the remedies issue left in the long-running enforcement litigation while preserving the procedural distinction between the underlying pollution claims and the insurer’s contractual rights.
