A. LEGISLATION AND RULES
There have been no relevant legal developments on arbitration in Spain during 2022.
B.1 Award annulment proceedings: Spanish Constitutional Court revokes two Judgments of the Madrid High Court of Justice on the grounds that they imply an unjustified review under an extensive and unfounded interpretation of the concept of Spanish “public policy.” Judgments of Constitutional Court no. 50/2022, dated 4 April 2022, and no. 79/2022, dated 27 June 2022.
The Judgments of Spanish Constitutional Court refer to two different arbitration proceedings arising from a dispute regarding a public contract between one unique public company, as the defendant, and two private companies, as the claimants, respectively. Although both are different proceedings, judgment merits and arguments are equivalent.
During the arbitration proceedings, a criminal court initiated an investigation into the administrative procedure for awarding the public contract. Then, the public company filed a request with both arbitration courts to suspend the arbitration proceedings until the investigation, and eventually the criminal judgments, had finished in order to grant legal certainty (prejudicialidad penal) and avoid contradictory decisions.
The arbitration courts analyzed the requests for suspension and rejected them, on the grounds that the public company had not demonstrated or proved how the conducted investigation could have a relevant effect on the resolutions and on the final awards of the arbitration proceedings, to the extent that such proceedings were exclusively related with the execution and termination of the public contract.
Both arbitration proceedings continued until the final awards were rendered. Then the public company filed two award annulment claims with the Madrid High Court of Justice alleging that Spanish “public policy” had been infringed, since it is mandatory for courts to declare suspension of proceedings when legal requirements for declaring prejudicialidad penal were met.
The High Court of Madrid upheld the public company´s allegations and briefly stated that the arbitral tribunals should have upheld the suspension before the final awards were rendered, since legal requirements of the Spanish Procedural Act had been fulfilled and, consequently, the arbitration court´s reasonings were not correct. On this basis, the High Court of Madrid annulled both awards.
The private companies filed an extraordinary appeal based on breach of Spanish Constitution (recurso de amparo) with the Spanish Constitutional Court, alleging that the judgments of High Court of Madrid had infringed their fundamental right to effective judicial remedy and protection in its aspect of the right to obtain a reasoned decision that is not arbitrary, unreasonable or patently erroneous (article 24, Spanish Constitution).
In addition, the Public Prosecutor Office, whose intervention is mandatory during recurso de amparo supported the claim. However, from its point of view, the judgments had infringed the fundamental right as regards the enforcement of final decisions and excess of jurisdiction, rather than the claimant´s right to obtain a reasoned decision.
The Constitutional Court admitted both merits and revoked the decisions issued by High Court of Justice of Madrid, stating that, as long as an arbitration award or decision cannot be considered arbitrary, illogical, absurd or irrational (as the case was), it cannot be declared null and void on the basis of the concept of “public policy.” In addition, the Constitutional Court noted that, within the award annulment proceedings, the High Court analysis shall be limited to in procedendo errors and essential procedural rules and it is not possible for the court to make a new assessment on the correctness of the arbitral court´s decision.
In the case in hand, the Constitutional Court ascertains that the arbitration court had carefully studied, considered and reasoned its decision, so the High Court of Justice of Madrid made an extensive and unjustified interpretation of the concept of public policy that infringed article 24 of the Spanish Constitution, as well as parties´ willingness to confer competence to the arbitration court.
B.2 Effectiveness of the award: Possibility of bringing a judicial action after an arbitration to ensure the enforceability of the award where the relief is not clear or unenforceable. Spanish Supreme Court Judgment No. 333/2022, dated 27 April 2022.
In an inheritance dispute, the heirs started an arbitration in equity to determine and execute the testators’ last wills. Once the award was rendered, one of the parties sought its enforcement before Spanish courts. However, the enforcement of the award was refused, since the court considered that the award was not specific enough and, therefore, it could not be enforced.
The party that tried to enforce the award brought ordinary judicial proceedings requesting that the court specified the relief granted in the award, so that it could be effective and enforceable. The opposing party alleged the existence of res judicata, since the subject matter of the proceedings was identical to that of the previous arbitration. However, the Supreme Court declared that, where the enforcement of an award is refused due to lack of precision in the relief of the award, the parties must resort to ordinary courts to ensure its effectiveness and its enforceability, in the event that it was not complied voluntarily. In this sense, the Supreme Court considers that, in such cases, there is no res judicata, as the object of the arbitration was not being re-adjudicated, but the judgment just specified the concrete actions that the heirs should take under the award.
On the other hand, the Supreme Court established that this judicial action to construe the relief of the award in order to make it enforceable was not subject to the limitation period of 5 years under Spanish legislation for the enforcement of awards. Said limitation period starts to run from the date on which the judgment specifying the relief of the award becomes final.
B.3 Award annulment proceedings: The arbitration agreement is null and void since it does not comply with the imperative requirements of the Convention on the Contract for the International Carriage of Goods by Road (CRM) which governs the agreement and relationship between the parties. Judgment of Cataluña High Court of Justice No. 28/2022 dated 27 May 2022.
In the context of an international arbitration case, the claimant request for nullity of an arbitration award is claimed under article 41.1(a) of the Spanish Arbitration Act (inexistence of arbitration agreement), arguing that the arbitration clause agreed in a contract of carriage does not respect the CRM (Convention on the Contract for the International Carriage of Goods by Road, signed in Geneva on 19 May 1956), which indisputably governs the litigious relationship as it is imperative and must be the applicable law to resolve the dispute.
The claimant contends that the clause agreed in the contract is contrary to CRM because it does not establish that the arbitration court must apply the Convention, as required by the Convention in its article 33 (“The contract of carriage may contain a clause conferring competence on an arbitral court if the clause conferring competence on the tribunal provides that the tribunal shall apply this Convention”), although it provides for a prior negotiation to settle disputes and, then, submission to arbitration in the absence of such negotiation. Claimant further alleges that this issue was duly raised and not resolved by the arbitral court.
The High Court of Cataluña upholds the nullity claim on the grounds that the arbitral agreement validity should comply with intrinsic formal requirements resulting from the sectorial regulations that are applicable to the case, to the extent that International Treaties and Conventions (such as CRM) are also part of Spanish Law, once signed and formally published (Spanish Constitution, article 96).
B.4 Award annulment proceedings: Time period to file a claim against an interlocutory or partial award must be counted from the day it is rendered and not from the date of final award. Judgment of Madrid High Court of Justice No. 17/2022 dated 11 May 2022.
The case refers to an arbitration proceeding in which the defendant had alleged lack of competence on the arbitration court and improper extension of Arbitration Agreement to a third party who had not been a signatory to any of the disputed contracts (a promise of sale agreement and subsequent sale and purchase agreement). These arguments were raised as two procedural objections or exceptions (excepciones procesales), to be considered and resolved by Arbitration Court before analyzing and resolving the grounds and main allegations. The arbitration court dismissed both objections by means of an interlocutory or partial award and rendered a final award after the remaining procedural steps had been fulfilled. Eventually, the defendant filed an award annulment claim.
The Madrid High Court of Justice dismissed the claim due to the expiration of the annulment action, since more than 2 months had elapsed since the interlocutory award had been rendered. The judgment holds that what is really intended by the defendant is to indirectly attack the final award, in which these issues were not addressed because they had already been rejected, therefore the 2 month period must be counted from the interlocutory award.
The judgment also states that the period for filing this action is one of expiration (caducidad) and not of prescription, therefore it must be counted from date to date from the notification of the award, without excluding the month of August (non-working for civil court proceedings), and without being subject to interruption or suspension, not even when the action is brought before a court that lacks jurisdiction or due to a judicial error. Likewise, the short limitation period established in section 41.4 Spanish Arbitration Act applies to the annulment action as a whole, and to all the grounds and merits for annulment provided for therein.
B.5 Exequatur proceedings: Effects of the failure of the arbitration agreement to comply with consumer protection law on the exequatur of the award. Dissenting Opinion. High Court of Justice of Madrid Judgment No. 8/2022, dated 5 May 2022.
This case refers to a consumer loan agreement entered into by an English company (“lender”) and a Spanish consumer (“borrower”). The agreement was governed by English law and provided for the resolution of any disputes arising under it by arbitration in the United Kingdom. Upon the nonpayment by the borrower of the relevant installments, the lender initiated an arbitration against the debtor, who did not appear in the arbitration. The award finally ordered the consumer to pay the amounts due under the loan agreement.
The High Court of Justice of Madrid analyzed whether the award rendered in the absence of the respondent could be contrary to Spanish public policy, by virtue of the provisions of article 5.2 of the New York Convention of 1958, due to an irregular serving of the arbitral claim to the respondent. The court found no infringement of Spanish public policy, considering that the respondent had full knowledge of the proceedings, so the application for exequatur was upheld.
However, one of the judges rendered a dissenting opinion, alleging that the exequatur of the award should have been refused due to the invalidity of the arbitration agreement, for breach of the Spanish public policy, which should have been assessed ex officio by the court under article 5.2.b of the New York Convention of 1958. The dissenting judge considered that the arbitration agreement was abusive and, therefore, should be declared null and void, as it contravened Spanish and European consumer protection legislation, given that: (i) the arbitration clause was not individually and expressly accepted or negotiated by the consumer; (ii) it was entered into before the dispute arose; and, (iii) it was not a consumer arbitration.
The judge considered that the above would lead to the impossibility of recognizing the award in Spain due to the infringement of mandatory rules, which are unequivocally part of the Spanish public order, as they refer to an especially protected group, such as consumers.
B.6 Exequatur proceedings: Refusal of the exequatur of an arbitral award since the recognition proceedings were only addressed against a defendant that was not a party to the arbitration. High Court of Justice of Madrid Judgment No. 3/2022, dated 15 March 2022.
This case refers to a construction agreement in which the contractor provided a first demand guarantee to secure the proper execution of the works. Upon the owner’s default of the agreement, the contractor filed an arbitration claim in Morocco. An award was rendered ordering the owner to pay a compensation to the claimant and declared the first demand guarantee terminated. Despite the award, the owner tried to enforce the first demand guarantee and the contractor opposed to such enforcement. Although the award was being enforced in Morocco, the guarantor (a Spanish entity) refused to cancel the guarantee alleging that it was not a party to the arbitration proceedings and that the award was not recognized in Spain.
The contractor applied for the exequatur of the award in Spain and, in these proceedings, requested, as interim measures, that the court ordered the guarantor to refrain from making any payment under the first demand guarantee. The exequatur claim and the interim measures application were only addressed against the guarantor, without including the owner, who was part to the arbitration.
The court rejected the exequatur claim and the interim measures, stating that the exequatur proceedings should necessarily be addressed against the same parties that intervened in the arbitration. Therefore, the court declared that the exequatur proceedings were badly constituted, since the only defendant was the guarantor, who had not been a party to the arbitration proceedings. Consequently, as the main proceedings were not properly constituted, the ancillary interim measure related to the first demand guarantee was also dismissed.
B.7 Award annulment proceedings: The notification of the commencement of arbitration is considered defective because it was served on the e-mail address of an employee who was on sick leave. Judgment of Aragón High Court of Justice No. 7/2022 dated 16 March 2022.
The Aragon High Court of Justice upholds defendant´s award annulment claim on the basis that due process, and in particular, basic service rules and Spanish “procedural public order” had been infringed (Spanish Arbitration Act, article 41.1. (b) and (f)).
In this case, the defendant was not duly notified of the commencement of arbitration, since the claimant, in its request for arbitration, had included the e-mail address of a defendant´s employee, who was on medical leave, despite the fact that the defendant had made public another e-mail address for notifications, as well as its legal representative´s address. Since the defendant´s employee did not access to her mail during her leave, the arbitration proceeding continued until the award was rendered without any intervention of the defendant.
B.8 Exequatur proceedings: The recognition and enforcement of arbitral awards cannot be refused due to the existence of closely connected civil proceedings. High Court of Justice of Andalusia Judgment No. 9/2022, dated 25 April 2022.
Within exequatur proceedings of an English arbitral award, the defendant opposed its recognition invoking the existence of closely connected civil proceedings in Spain brought by the defendant in which it claimed civil liability for alleged false testimony to some witnesses that deposited in the arbitration.
The Court established that, since the arbitral award is equivalent to a final judgment, its enforceability could not depend on a new claim filed by the defendant against some of the witnesses in the arbitration proceedings claiming compensation for false testimony. Even less when it was a civil claim, not criminal. In addition, since the civil claim was precisely based on the existence and enforceability of the arbitral award (otherwise, no damage could be claimed for the alleged false testimony), the outcome of the civil proceedings would not affect the enforcement of the award.
The judgment outlines that such defective notification had caused a real and effective prejudice to the defendant which is attributable, firstly, to the claimant due to having indicated an erroneous email address and, secondly, to the arbitration court for not checking the reliability of the information given by the applicant, and for not attempting notification by any other method.