Arbitration
The Kingdom of Spain and another v The London Steam-Ship Owners’ Mutual Insurance Association Ltd No 2 [2026] UKSC 36
The Supreme Court allowed the appellant insurer’s, The London Steam-Ship Owners’ Mutual Insurance Association Ltd, appeal from a decision of the Court of Appeal ([2024] EWCA Civ 1536) which held against the respondent states, that arbitral tribunals had no power to award equitable compensation for breach of an ‘equitable obligation to arbitrate’. The case concerned whether, where a third party asserting rights under an insurance contract containing a London arbitration clause breaches the resulting obligation to arbitrate by litigating instead, the insurer may recover compensation. The court held that the obligation arising under the conditional benefit principle is contractual, not equitable, as the benefit and burden principle requires that the burden assumed retains the character, legal or equitable, of the right exercised. Consequently, breach of the obligation to arbitrate is a breach of contract attracting common law damages, not equitable compensation. The Court of Appeal’s four reasons for refusing relief were rejected,
