Page 1


International Arbitration Report Madrid Update: Enforcement Vs. Annulment Of Awards

by Calvin Hamilton� and Eva M. Vázquez

Monereo, Meyer & Marinel-lo Madrid, Spain

A commentary article reprinted from the November 2007 issue of Mealey’s International Arbitration Report

MEALEY’S International Arbitration Report

Vol. 22, #11 November 2007

Commentary Madrid Update: Enforcement Vs. Annulment Of Awards By Calvin A. Hamilton and Eva M. Vázquez

[Editor’s Note: Calvin A. Hamilton is a partner with the firm Monereo Meyer Marinel-lo, Abogados, Madrid and heads the arbitration department. He is admitted to the New York and the Madrid Bar. Eva M. Vázquez is an associate with the firm and practices in the arbitration department. She is admitted to the Madrid Bar. Copyright 2007 by the authors. Replies to this commentary are welcome.]

that, even if annulment proceedings are pending or the time limit for bringing such an action has not expired, the interested party may still seek compulsory enforcement of the award, and neither the imminence of the annulment action nor the imminence of the deadline for bringing it will suffice to suspend enforcement.

Today’s comment analyzes Court Order No. 148/2007 of the Madrid Court of Appeal (Section 18) of 27 June (JUR 2007\258068).

Notwithstanding the above, under the Spanish Civil Procedure Act (Ley de Enjuiciamiento Civil) enforcement of judicial or arbitral decisions continues to be subject to a waiting period of twenty days following the date upon which notice of the adverse sentence or ruling has been served on the party against whom enforcement is sought (Article 548 Civil Procedure Act).

This ruling touches on the matter of immediate enforcement of awards envisaged under Article 45 of the prevailing Arbitration Act (Ley de Arbitraje) 60/2003 of 26 December, which provides as follows: “An award is enforceable even where an action has been brought to have same set aside. In such a case, however, the party against whom the award is being enforced may apply to the competent court for a stay of enforcement, provided that he offer to deposit a security for the value of the sum awarded plus any such damages as might derive from delay in enforcing same (. . .)”. The above Article consolidates one of the major reforms of Spanish arbitration law, and marks an important advance towards ensuring the greater effectiveness of arbitral awards. Specifically, it recognizes the principle of the non-suspensive effect of an action for annulment. This means

In the case that concerns us here, a court order was issued by Madrid Court of the First Instance No. 26, denying leave for compulsory enforcement of the arbitral award. This ruling was then taken on appeal, which was in turn heard and decided by the Court Order under review. The line of legal reasoning followed by the Provincial High Court acknowledges that one of the requirements for filing a suit for enforcement of an arbitral award is that the arbitration agreement must be furnished along with the formal application for enforcement of the award. The High Court states that: “The fact that production of the arbitration agreement may be demanded is to establish the possibility that the Court may proceed and its obligation to examine the 

Vol. 22, #11 November 2007

formal validity of said agreement as well as the reality of the award and notification thereof. However, such a duty may not, per se, render the content of Article 45 of the prevailing Arbitration Act without effect (the Article whereby an award is enforceable even though an application for annulment may have been lodged), with the possibility of a stay of enforcement being sought where applicable.” In the light of the above, it can be concluded that, when the arbitration agreement refers to issues that are not freely disposable, i.e., issues that are contrary to public policy or fundamental rights, or that flow from an unlawful or criminal cause, the immediate consequence will be that the Court will forthwith refuse to implement enforcement. Yet, this possibility cannot be extended to cases which are, at least, debatable, and which the allegedly aggrieved party either failed to argue in the arbitral proceedings or contested but with adverse consequences, or, in this latter case, in which he filed the pertinent action for annulment. In the case reviewed here, the grounds for the court order which was issued at first instance and taken on appeal, leads one to the conclusion that implementation of enforcement was denied because an arbitration agreement incorporated into a standard contract was deemed to be null and void. Hence, what the Court Order handed down on appeal concludes is that, even though subsection two of Article 9 of the prevailing Arbitration Act provides that, “If the arbitration agreement is contained in a standard contract, the validity of said agreement and the interpretation thereof shall be governed by the rules applicable to this type of contract”, this merely means that said arbitration clause may not run counter to good contractual faith or constitute an abuse in detriment to the fair balance of contractual quid pro quo. It thus follows that application of this subsection in no way excludes application of subsection one of the

MEALEY’S International Arbitration Report

same provision, which lays down that, “The arbitration agreement, which may be in the form of an arbitration clause in a contract or in the form of a separate agreement, must express the will of the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether or not contractual.” By virtue of the above reasoning, even if one were faced with a standard contract, the arbitration clause would nonetheless be valid provided that the requirements stipulated in Article 9.1 of the Arbitration Act were present. Accordingly, the Provincial High Court held that, “in order for there to be nullity as stated in the court order issued at the first instance, the sole ground of the contract’s being standard cannot suffice. Instead, the clause must cause disproportionate prejudice to one of the parties, due to the impossibility of its having been negotiated, and said party must be a consumer in all cases. It is evident that the former requirement, at least, cannot be deduced from the content of the contract per se, with the aggrieved consumer’s plea to this effect and the other side’s rebuttal thereof being necessary at minimum; and, in the absence of any evidence of such a plea having been entered by means of the pertinent action for annulment, then if he himself failed to lodge it, his acquiescence and acceptance are obvious.” The High Court thus concluded that the court order refusing to implement enforcement was to be revoked and the Court of the First Instance be required to grant leave for implementation of the enforcement sought. The subject Court Order addresses one of the most important improvements to the Spanish Arbitration Law, namely the possibility to enforce the arbitral award notwithstanding that an action for annulment has been brought. This Court Order also addresses other significant questions but we focus our discussion today on the enforcement issue as a reference to an important aspect of the arbitration process. n

Arbitration and the Fisc: NAFTA’s ‘Tax Veto’ by William W. (Rusty) Park Professor of Law at Boston University Vice President, London Court of International Arbitration Arbitrator, Claims Resolution Tribunal for Dormant Accounts in Switzerland

A case of note reprinted from the May 2001 issue of Mealey's International Arbitration Report.

© Copyright 2001 Mealey Publications. All rights reserved. Reproduction strictly prohibited without written permission.

MEALEY'S International Arbitration report edited by Edie Scott The Report is produced monthly by

1018 West Ninth Avenue, 3rd Floor, King of Prussia Pa 19406, USA Telephone: (610) 768-7800 1-800-MEALEYS (1-800-632-5397) Fax: (610) 962-4991 Email: Web site: http://www.lexisnexis/mealeys ISSN 1089-2397


MEALEY’S ™ A commentary article reprinted from the November 2007 issue of Mealey’s International Arbitration Report by Calvin Hamilton and E...