Saturday, June 10, 2023 | Back issues
Courthouse News Service Courthouse News Service

British insurer ordered to pay Spanish bill for oil spill cleanup  

The cleaning bill for the 2002 Prestige oil spill off the coast of Spain totaled an estimated $2.5 billion, surpassing that of the 1989 Exxon Valdez disaster.

LUXEMBOURG (CN) — The European Union’s top court handed a victory to Spain on Monday, ordering a British insurance company to pay hundreds of millions in damages after 70,000 tons of oil was spilled off the Spanish coast. 

The European Court of Justice found the London Steam-Ship Owners Mutual Insurance Association was responsible for about $900 million in clean-up costs ordered by a Spanish court, despite an arbitration ruling that said Madrid needed to make its case in a British court. 

The Luxembourg-based court found that under EU law, arbitration proceedings, a private avenue for dispute resolution, cannot block judgments made by the national courts of an EU member state. 

Prestige, a Greek oil tanker, was traveling from Russia to Gibraltar during a storm in 2002 when its captain heard a loud bang and noticed the ship was taking on water as it was sailing off the coast of Spain. Apostolos Mangouras called Spanish authorities, who evacuated the entirely Filipino crew and reported they saw that the ship was already leaking oil. 

Fearing the environmental damage, the French, Spanish and Portuguese governments refused to allow the ship to dock in their ports and instead forced Prestige to be towed further out to sea. Several days later, the ship split in two, dumping some 70,000 tons of oil into the ocean, causing the largest environmental disaster in Spanish history. The cleaning bill totaled an estimated $2.5 billion, surpassing that of the 1989 Exxon Valdez disaster.

A subsequent investigation found that the 26-year-old Prestige had not been properly inspected before it left St. Petersburg and that refusing to allow the ship to dock had considerably worsened the damage. 

The wreck led to a raft of legal cases. Madrid brought a suit in New York against the American Bureau of Shipping, the company which rated the Prestige as safe for its final voyage. A U.S. judge dismissed the case, finding American courts lacked jurisdiction.

Spain also brought charges against the London Steam-Ship Owners Mutual Insurance Association, as well as the ship’s owner, the captain and several other officials, in 2012. The ship’s 78-year-old captain was convicted of disobedience and given a nine-month suspended sentence. The court also ordered the British insurer to pay 855 million euros in damages ($900 million).

The insurance company refused to participate in the trial, instead initiating arbitral proceedings in London. The arbitration tribunal ruled that under the insurance contract, a case for damages had to be made in a British court. Madrid asked a British court to recognize the Spanish court's order, which the High Court of Justice did in 2019.

The London Steam-Ship Owners Mutual Insurance Association appealed and the Court of Appeal referred the matter to the European Court of Justice in December 2021, only days before the United Kingdom left the EU, making it one of the last British cases to be sent to Luxembourg for consideration. 

The Grand Chamber found Monday that under a 2000 EU regulation on jurisdiction in legal matters, the arbitration decision can't block a court ruling in another EU country.

“A judgment entered in the terms of an arbitral award, such as that at issue in the main proceedings, cannot prevent … the recognition of a judgment from another Member State,” the court wrote. 

In the aftermath of the Prestige disaster, local fishermen tried to scoop out the oil by hand. Some 300,000 sea birds died as a result of the spill and marine life is still impacted, even two decades later. 

Categories:Appeals, Business, Environment, International

Read the Top 8

Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.