African Fertilizers brought proceedings before the Commercial Court to set aside a previous order issued pursuant to section 66 of the Arbitration Act 1996. The order granted leave to enforce a declaratory award and to enter judgment in the terms of the award in favour of BD Shipsnavo and against African Fertilizers.

African Fertilizers' application was based on two limbs:

With very similar reasons to those given by Field J in West Tankers Inc v Allianz Spa and another [2011] EWHC 829 (Comm) (see Legal updates, Declaratory award can be enforced (Commercial Court) and West Tankers [2011]: Herbert Smith comment), Beatson J refused African Fertilizers' application.

As to the first limb, Beatson J held that section 66, being a summary form of proceeding, grants the same common law contractual remedies as in an ordinary action to enforce an award and, therefore, also applies to a declaration as to rights. Moreover, the purpose of section 66 is to provide the winning party in arbitration with a means to obtain the material benefit of the award, which is exactly the case when that party needs to establish the primacy of the award over a subsequent inconsistent court judgment.

As to the second limb, Beatson J held that this case differs from Solo Kleinmotoren v Boch [1994] ECR I-2237, in which the European Court of Justice (ECJ) held that a settlement agreement recorded in a court order is not a judgment for the purpose of Article 34(3) since, while a settlement is consensual, the outcome of an arbitration is not. Moreover, in such circumstances, the refusal to enforce an inconsistent judgment according to Article 34(3) is necessary in order to ensure legal certainty.

Given that reform of the Brussels Regulation has yet to be concluded, this decision is made at a transitional stage. Indeed, the interpretation of the term "judgment" in Article 34(3) is strictly linked to the exact scope of the arbitration exclusion in Article 1(2)(d) of the Brussels Regulation.

The two texts circulating at the moment and modifying the Brussels Regulation offer different results.

The European Parliament's Committee on Legal Affairs is proposing a broader arbitration exclusion (see Legal update, European Parliament committee report on proposed amendment of Brussels Regulation). Presumably, the definition of "judgment" for the purpose of Article 34(3) would not include a decision enforcing an award. If this is the case, the mechanism put in place by Article 34(3), blocking recognition of inconsistent foreign judgments, would not operate in favour of a court judgment enforcing an award and the risk of conflicting decisions will remain. Accordingly, under this text, in a case similar to African Fertilizers, even if a judgment enforcing an award pursuant to section 66 is issued in England, it would not impede the recognition and enforcement of a decision of the Romanian (or any other EU Member States') courts.

Similarly, according to the Commission's Proposal, a judgment enforcing an arbitration award may not be a judgment for the purpose of Article 34(3). Nonetheless, Article 29(4) of the Commission's Proposal would oblige the courts of a Member State not at the seat of the arbitration to stay proceedings in the presence of an arbitration agreement, thus impeding from the beginning the circulation of two conflicting decisions within Europe. Accordingly, under this text, in a case similar to African Fertilizers, the Romanian (or any other EU Member States') courts would be obliged to stay their proceedings, avoiding any risk of judgment conflicting with the award or any court decision recognising or enforcing it.

The precise scope of the term "judgment" for the purpose of Article 34(3) is likely to remain in doubt until the ECJ is requested to finally resolve this issue.

For more details on the case, see Legal update, Enforcement of declaratory award (Commercial Court). For more information about the reform of the Brussels Regulation, see Reform of the Brussels Regulation: tracker.