Factorías Vulcano S.A. v. Arrow Seismic Invest II Limited

At a glance

Parties

Factorías Vulcano S.A. (Spain) v. Arrow Seismic Invest II Limited (now PGS Geophysical (UK) Limited)

Case no.

STS 1447/2019; Judgment No. 253/2019; Appeal No. 3245/2016 (ECLI:ES:TS:2019:1447)

Court

Spain, Tribunal Supremo, Civil Chamber (Sala de lo Civil, Section 1), Madrid

Underlying award(s)

Arbitral award of 8 January 2010 on a programme to build seismic vessels. It ordered Vulcano to repay EUR 39,695,000 in advance payments, plus interest and costs. A Vigo commercial court recognised the award under the New York Convention on 23 November 2010.

Judges

Ignacio Sancho Gargallo (reporting judge), Francisco Javier Orduña Moreno, Rafael Saraza Jimena, Pedro Jose Vela Torres

Sector

Shipbuilding (seismic vessels); insolvency

Outcome

Both of Arrow II's appeals were dismissed: the appeal for procedural infringement and the cassation appeal. The lower courts' order stands: Arrow II must withdraw its enforcement of the award in Bergen, Norway, and lift its attachments.

Amount

Arrow II's claims in Vulcano's insolvency were EUR 7,952,427.83 (ordinary) and EUR 1,643,616.58 (subordinated). The 80% write-off in the composition agreement reduced them to EUR 1,591,685.57 and EUR 328,723.32. Arrow II was ordered to pay the costs of both appeals and lost its appeal deposits.

The dispute

Factorías Vulcano S.A., a Spanish shipyard, was to build seismic vessels for Arrow Seismic Invest II Limited (Arrow II), but the programme failed. An award of 8 January 2010 upheld Arrow II's termination of the contract. It ordered Vulcano to repay EUR 39,695,000 in advance payments. After payment under a Banco Popular Español guarantee, EUR 9,302,232.36 and NOK 109,867 remained unpaid. Arrow II enforced the award in Norway. It obtained attachments (utlegg) over Vulcano's receivables from Armada Seismic Invest I and II. It also obtained exequatur of the award in Vigo. Vulcano then entered voluntary insolvency in Spain, and its composition agreement, which wrote off 80% of ordinary and subordinated claims, was approved on 27 March 2012. Vulcano sued in Spain for a declaration that Arrow II's claims were bound by the composition agreement and reduced by it, and for an order that Arrow II withdraw the Norwegian enforcement. Arrow II argued that the Spanish courts lacked international jurisdiction, that Norwegian judgments refusing to lift the attachments were res judicata, and that Norwegian law governed the attachments as rights in rem.

Key holdings

1. The Spanish courts have international jurisdiction, but on a different basis from the lower courts. Regulation 44/2001 excludes insolvency matters. Jurisdiction therefore follows Regulation 1346/2000, Article 3(1), as interpreted by the CJEU in Seagon (C-339/07): the courts of the State where insolvency proceedings opened may hear actions that derive directly from those proceedings and are closely linked to them. An action to enforce a Spanish composition agreement against a creditor meets this test, so the Court did not need to refer a question to the CJEU on 'matters relating to a contract'. Second Legal Ground, ¶¶ 2–4
2. There is no international res judicata. The Norwegian decisions (Bergen, 15 February 2012; appeal court, 21 August 2012; Supreme Court, 24 April 2013) concerned the effect of opening insolvency proceedings on pending enforcement. The Spanish action is broader. Even its claim to lift the attachments rests on a different cause of action: the novation of Arrow II's claims by the composition agreement. There is therefore no identity of subject matter under Article 222.1 of the Spanish Civil Procedure Act (LEC). Third Legal Ground
3. Arrow II cannot rely on Article 201 of the Insolvency Act (LC), which applies foreign law to rights in rem. When it filed its claims in the insolvency, it did not say they were secured by any right in rem. Its claims were classified as ordinary and subordinated, and it did not challenge that classification. They are therefore subject to the 80% write-off under Article 136 LC. Fourth Legal Ground
4. The declaration that the claims are reduced complies with Article 136 LC and is unconditional. The possibility that the agreement may later be terminated for non-performance (Article 140.4 LC) does not prevent enforcing it now against the creditors it binds. Fifth Legal Ground
5. Article 133.2 LC is not infringed. The judgment does not order the Norwegian enforcement office to lift the attachments. It orders the reluctant creditor to comply with the composition agreement: to withdraw its enforcement in Bergen and to repay to the insolvency estate anything it collects from Vulcano's assets. Sixth Legal Ground
6. Arrow II pays the costs of both appeals and loses its appeal deposits (Article 398.2 LEC). Seventh Legal Ground; operative part

Procedural history

1. 8 January 2010Arbitral award: Arrow II's termination of the contract was lawful, and Vulcano must repay EUR 39,695,000 plus interest and costs.
2. 10 September and 14 October 2010Norwegian attachments (utlegg) secure EUR 500,000 and then EUR 10,380,000.
3. 23 November 2010A Vigo commercial court grants exequatur of the award under the New York Convention of 10 June 1958.
4. 19 January 2011Vulcano is declared in voluntary insolvency by Commercial Court No. 3 of Pontevedra, sitting in Vigo.
5. 27 March 2012The insolvency judge approves the composition agreement, with an 80% write-off of ordinary and subordinated claims.
6. 24 April 2013The Norwegian Supreme Court confirms the refusal to lift the attachments.
7. 31 July 2015Court of First Instance No. 13 of Vigo upholds Vulcano's claim in part.
8. 28 July 2016The Audiencia Provincial of Pontevedra (Section 6) dismisses Arrow II's appeal.
9. 7 May 2019The Supreme Court dismisses Arrow II's appeal for procedural infringement and its cassation appeal.

Tribunal, counsel and experts

Decided by

• Ignacio Sancho Gargallo Judge, Tribunal Supremo, Sala de lo Civil (reporting judge (ponente))
• Francisco Javier Orduña Moreno Judge, Tribunal Supremo, Sala de lo Civil
• Rafael Saraza Jimena Judge, Tribunal Supremo, Sala de lo Civil
• Pedro Jose Vela Torres Judge, Tribunal Supremo, Sala de lo Civil

For the claimant

Bernardo Fernández Vázquez · José R. Curbera Fernández

For the respondent

María del Valle Gili Ruiz · Paula Llordén Fernández-Cervera

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Keywords

• New York Convention
• enforcement
• exequatur
• insolvency
• composition agreement
• creditors' agreement
• Regulation 1346/2000
• Regulation 44/2001
• Seagon
• international jurisdiction
• res judicata
• utlegg
• Norway
• attachment
• par conditio creditorum
• seismic vessels
• shipbuilding
• PGS Geophysical

Summary generated with AI from the published documents — refer to the award for the authoritative text.