August 9, 2022

T-Break

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Spanish-seated arbitration improves its standing through current Spanish Constitutional Court docket scenario law | Dentons

The recent choice of the Spanish Constitutional Court will be of excellent desire to functions, who are picking the seat of arbitration when concluding the arbitration clause in their deal or when distributing a pre-current dispute to arbitration. This is mainly because the seat of arbitration is the discussion board exactly where an arbitral award can be challenged i.e., sought to be annulled, and so regarded null and void.  This can, in change, substantially reduce the chances of the award getting regarded and enforced by courts of other jurisdictions where by the property to satisfy the award might be located. It is for that reason significant for the parties to be certain that the related courts of the seat show deference to the arbitral tribunal’s findings and do not seek out to “re-open” the merits of the situation decided in the award. It is this assurance that the Initially Chamber of the Spanish Constitutional Court docket gave in its choice of 15 February 2021, buttressing a strong cloth of Spanish situation legislation endorsing the integrity of the arbitral approach. The situation in Spain now warrants favorable analogies with the tactic of courts in pro-arbitration jurisdictions these as France.

The choice overturned the determinations of the Madrid Higher Court relating to an award, rendered ex aequo et bono (“en equidad”) pursuant to an arbitration clause in a company’s content, in regard of a EUR 600 million dispute. The Superior Courtroom held that award should be annulled –on the basis of (i) failure to take care of all of the difficulties offered, (ii) reasoning which was insufficient and arbitrary, and (iii) failure to sufficiently assess the evidence adduced. The Large Court docket discovered that, for these causes, there had been a violation of the suitable to judicial defense guaranteed less than art. 24(1) of the Spanish Constitution. 

Despite the fact that the arbitration clause in question may be considered very particular, it is noteworthy that the Constitutional Court’s statements were wide and strongly supportive of arbitration as a method, unique from the courts, for get-togethers to obtain a final decision with res judicata effect. For instance, the Court docket held that:

  • Arbitration is synonymous with negligible judicial intervention in accordance with the constitutional theory of occasion autonomy (art. 10, Constitution) and waiver of judicial protection under artwork. 24 of the Constitution
  • Annulment actions have a minimal intent of addressing a) procedural faults that violate elementary ensures this sort of as the appropriate to a protection, equality and so forth., b) awards that deficiency reasoning, are inconsistent, breach mandatory law or the inviolability of a prior final decision with res judicata influence
  • Annulment steps do not allow for a court to revisit the merits of the issues made a decision by the arbitrator employing general public coverage as a pretext. The award in dilemma could have been annulled on community plan grounds only if it were being “arbitrary, illogical, absurd or irrational”
  • The requirement for reasoned awards has a basically lawful basis (art. 37.4 of the Spanish Legislation on Arbitration (“LA”)) which is unique from the constitutional need for reasoning that applies to judicial decisions (artwork. 24, Constitution). Article 37.4 LA simply demands the fundamental grounds for the choice to be set out and that the award not be “unreasonable, arbitrary or that contains a patent error”, with out demanding the grounds of the award to be “convincing or sufficient” from the standpoint of the courts. 

The Courtroom reaffirmed the definition of general public order, from its 15 June 2020 decision, as “the elementary legal rights and liberties confirmed by the Constitution, as well as crucial rules, inalienable by the legislator by requirement of the Structure or through software of internationally accepted principles”. This definition is, in by itself, pro-arbitration to the extent that the reference to “internationally recognized principles” – as potentially the sole “essential principles” to be examined alongside the Constitution – displays an openness to the concept of international community policy (which is widely regarded as narrower than domestic community plan) in spite of the context of the scenario staying totally domestic. It may well, hence, be thought of that the Court docket was producing a strong statement for the establishment of all types of arbitration in Spain.

The Courtroom concluded that the Significant Court had breached the constitutional canon of reasonableness of judicial decisions enshrined in artwork. 24.1 of the Constitution, all the more so due to the fact the Superior Court had surpassed its constitutional limits by delving into the merits of the scenario. The Court docket reinstated the arbitral award.

The posture with regards to general public coverage critique of awards in annulment actions can now be reported to be increasingly comparable to jurisdictions this sort of as France and Switzerland, in which courts restrictively interpret grounds to established apart awards, together with general public coverage. This expanding rapprochement of Spanish arbitration law to its European counterparts is welcome news for the Spanish arbitration neighborhood. This is specifically the scenario in regard of annulment proceedings which, contrary to recognition and enforcement proceedings, are not included by the New York Convention but constitute a critical thought at the time of selecting the seat of global arbitrations.

 

The authors are grateful to Estefania Mendivil for her contribution.