EU Court says insurer must pay Spanish claim for Galicia oil spill

Spain has gained the backing of Europe’s top court in its significant damage claim against The London Steam-Ship Owners Mutual Insurance Association (London Club) for the massive oil spill on the north-western Galician coast in 2002.

The sinking of the Greek oil tanker Prestige, which was sailing to Gibraltar, saw some 63,000 tonnes of fuel pollute the Galician coast. It temporarily forced the closure of Spain’s richest fishing grounds.

That event led to a lengthy dispute between The London Steam-Ship Owners’ Mutual Insurance Association Ltd, the liability insurer of the vessel, and Spain, with the latter taking its case to a Spanish court. That court subsequently ordered the insurer to pay compensation, capped at $1bn.

London Club in turn started arbitration proceedings in London, which resulted in a ruling that Spain could only seek damages claims through arbitration in London under English law.

Spain then asked a UK court to enforce the Spanish ruling, gaining its backing in 2019. London Club appealed, which led the UK High Court to seek guidance from the Luxembourg-based Court of Justice of the European Union (CJEU).

The CJEU has taken the side of Spain.

“The arbitration proceedings initiated in the United Kingdom cannot block the recognition of the Spanish judgment ordering the insurer to pay compensation for the damage caused by the oil spill,” judges said.

They added that  “to accept that a judgment entered in the terms of an arbitration award by which an arbitral tribunal declared itself to have jurisdiction on the basis of such an arbitration clause may prevent the recognition of a judgment given in another Member State following a direct action for damages brought by the injured party would be liable to deprive that party of effective compensation for the damage suffered,” they said.

The case is C-700/20 London Steam-Ship Owners’ Mutual Insurance Association.