Factual Background
In “Milantic Trans SA (“Plaintiff”) v. Ministry of Production (Río Santiago Shipyard et al.) (“Respondent”) the Plaintiff requested the recognition and enforcement of two awards rendered by an arbitral tribunal seated in London, England (“Arbitral Tribunal”). The award on the merits was issued on November 15, 2004. The award on court costs and attorneys’ fees was issued on July 1, 2005.
Decision of the Court of First Instance
On November 17, 2006, the Court of First Instance on Administrative Litigation Matters N° 2 of the judicial department of La Plata recognized and granted the request for recognition and enforcement of the awards. The State Prosecutor’s Office of the Province of Buenos Aires filed an appeal against the recognition and enforcement of the award on costs.
Decision of the Court of Appeals
On August 30, 2007, the Court of Appeals on Administrative Litigation Matters for the city of La Plata (“Court of Appeals“) reversed the Court of first Instance’ decision and rejected the enforcement of the award on costs.
Despite only having jurisdiction to rule on the recognition and enforcement of the award on costs (because the State Prosecutor’s Office only appealed the first instance decision in that regard), the Court of Appeals made a ruling on the recognition and enforcement of both awards. The Court of Appeals noted that in the absence of express provincial authorization to arbitrate, there is no consent to arbitrate. A provincial authorization is conferred by law.
The Court of Appeals considered that there was no such authorization because there was no law of the Buenos Aires Province Legislature conferring an authorization to arbitrate matters related to the relevant contract, which involved the State. The arbitration agreement was thus invalid.
The Arbitral Tribunal therefore lacked jurisdiction, and enforcement of both awards was refused.
Decision of the Province Buenos Aires Supreme Court
The Plaintiff filed extraordinary appeals for nullity and inapplicability of the law against the decision of the Court of Appeals.
On March 30, 2016, the Supreme Court of the Province of Buenos Aires (“Buenos Aires Supreme Court“) rejected these appeals and upheld the judgment of the Court of Appeals.
The Buenos Aires Supreme Court explained that, before enforcing the awards, the Court of First Instance should have verified whether both the award on the merits and the award on costs were in compliance with Argentine constitutional principles and public policy.
Decision of the National Supreme Court[1]
The Plaintiff filed an extraordinary federal appeal before the National Supreme Court of Justice (“National Supreme Court”) against the decision of the Province Buenos Aires Supreme Court. It alleged that the interpretation of federal norms such as the NY Convention was at stake.
On August 5, 2021, the National Supreme Court admitted the extraordinary appeal and revoked the judgment on appeal. The Supreme Court clearly established that the framework of the issue to be addressed was “whether the power provided for in section V.2. of the New York Convention, which enables judges to refuse a request for recognition and enforcement of a foreign arbitration award on grounds of public policy, authorizes them to reintroduce defences on its own motion that had been asserted and rejected in first instance as final and non-appealable“[2].
The National Supreme Court held that a Court has discretion to determine what is “public policy“, but that the award on the merits could no longer be challenged on that ground because the decision of the Court of First Instance became res judicata. The Court of First Instance had decided to recognize and enforce the award on the merits and the award on costs. However, the State Prosecutor’s Office did not appeal the decision to recognize and enforce the award on the merits, but only the decision on the award on costs.
In short, the Supreme Court confirmed that both the Court of Appeals and the Buenos Aires Supreme Court ruled extra-petita, going into the merits of the decision rendered by the Judge of First Instance, which was final and binding.and constituted res judicata. It was not possible to revoke the decision by which the petition for recognition and enforcement of the arbitration award on the merits issued in London was granted[3]
[1] Corte Suprema de Justicia de la Nación (National Supreme Court of Justice), rulings 344:1857, 5 August 2021, “Milantic Trans S.A. v. Ministerio de la Producción (Astillero Río Santiago y otro) s/ ejecución de sentencia – recurso extraordinario de inaplicabilidad de ley y nulidad”, Exp. No. 1460/2016/CS1.
[2] Opinion of Judges Rosenkrantz and Highton de Nolasco, recital 10.
[3] All this, “without prejudice to the responsibility that may eventually fall on the professionals who acted in this case on behalf of Astilleros Río Santiago and the Province of Buenos Aires due to their lack of diligence in defending the interests of their clients” (vote of judges Rosenkrantz and Highton de Nolasco, recital 18; vote of judges Lorenzetti and Maqueda, recital 16).
