Insurer Must Pay Spanish Claim in Galicia Oil Spill, EU Court Says

Spain on Monday won backing from Europe's top court in its mutlimillion euros damage claim against The London Steam-Ship Owners Mutual Insurance Association for a massive oil spill on its northwestern coast two decades ago.

The 2002 sinking of the Greek oil tanker Prestige, which was sailing to Gibraltar, released an estimated 63,000 tones of foul-smelling black fuel along the Galicia coast and forced the closure of Spain's richest fishing grounds.

It led to a lengthy dispute between The London Steam-Ship Owners' Mutual Insurance Association Limited, the insurer of the vessel, and Spain.

The latter took its case to a Spanish court which subsequently ordered the insurer to pay compensation, capped at $1 billon, for the damage.

The London Steam-Ship Owners' Mutual Insurance Association Limited in turn initiated 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 and got its backing in 2019. The insurer appealed, prompting the UK High Court to seek guidance from the Luxembourg-based Court of Justice of the European Union (CJEU).

The CJEU took Madrid's side.

"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.

"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.

(Reuters - Reporting by Foo Yun Chee; Editing by Alison Williams)