International Arbitration Report Madrid Update: The Setting Aside Of A Clarification Award
by Calvin A. Hamilton and Fiona Borthwick
Monereo, Meyer & Marinel-lo Madrid, Spain
A commentary article reprinted from the March 2008 issue of Mealey’s International Arbitration Report
MEALEY’S International Arbitration Report
Vol. 23, #3 March 2008
Commentary Madrid Update: The Setting Aside Of A Clarification Award By Calvin A. Hamilton and Fiona Borthwick
[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. Fiona Borthwick is an associate with the firm and is admitted to the Madrid Bar. Copyright 2008 by the authors. Replies to this commentary are welcome.]
that the arbitral procedure was not in accordance with the Law due to infringement of Article 39.1 (concerning notice to the other party on requesting a clarification award) and secondly, for the reason that the clarification award was in conflict with public policy under Article 41.1.f of the same Law (because it modified substantially the content of the main Award).
This month’s article concerns a clarification award given in an arbitration in equity heard under the auspices of the Arbitration Court of the Chamber of Commerce and Industry of Madrid (la Corte de Arbitraje de la Cámara de Comercio e Industria de Madrid).
The opposing party in its response argued that (i) since the clarification award was an integral part of the main Award, it could not be challenged separately from the main Award; (ii) that the 2003 Arbitration Law was not applicable to the case but rather the previous Arbitration Law 36/1988; and (iii) that in any case the clarification award was not contrary to public policy given that the arbitrators sought merely to interpret the award and clarify where the goods had actually been stored and therefore which invoices were payable.
The clarification award, but not the main Award, was challenged in an annulment proceeding heard by the Court of Appeal of Madrid (Audiencia Provincial). The clarification award was dated September 27, 2004. The main Award had stipulated a time limit within which one party had to provide the original invoices proving payment of the storage expenses. The clarification award added that the original invoices were those issued by the Senegalese port authorities. The main Award had referred the parties to the enforcement proceedings before the ordinary jurisdiction in the event of any incidence relating to the invoices. In its July 18, 2006 decision, the Court of Appeal allowed the challenge setting aside the clarification award and reinstating the main Award dated July 20, 2004 as the definitive Award.
The Court of Appeal began its decision by reiterating the limitations of the scope of the request for annulment: that is, that it is consolidated doctrine of the Supreme Tribunal that the task commended to the ordinary jurisdiction is merely to issue an external judgment about the fulfillment of essential formalities and the compliance of the arbitrators with the limits agreed by the parties, permitting a correction of any excess but preventing an analysis of the substantive issues of the dispute, precisely because the parties by mutual agreement have previously waived their right to submit their disputes to the ordinary jurisdiction.
Annulment was sought on two grounds, firstly under Article 41.1.d Arbitration Law 60/2003 for the reason
The Court of Appeal ruled that the applicable law as regards the first ground for annulment was the 1988 1
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Arbitration Law by virtue of the Sole Transitory Provision stipulated in the 2003 Law, which states in its paragraph 1 that “in the cases where before the entry into force of this law the respondent has received the request to submit a dispute to arbitration, or the arbitral proceedings have been commenced, the arbitration shall be governed by the provisions of the Law 36/1988, of 5 December, of Arbitration. This notwithstanding, the provisions of this law relating to the arbitration agreement and its effects shall apply in all cases.” The provision of the 1988 Law that the Court of Appeal relied on to reach its decision was Article 36 of the 1988 Law which reads as follows: “1.
Within five days following the notification of the award any party may request the arbitrators to correct any error in computation, any clerical or typographical errors or any errors of similar nature or to clarify any obscure concept or omission of the award. The arbitrators will rule on the matter within the following ten days, will notarize their decision and will adequately notify the parties of its decision. If in the term indicated the arbitrators have not ruled, the request is understood to have been denied.”
This provision does not provide for notice to the other party of the request for clarification, unlike Article 39 of the new Arbitration Law, which states, in paragraphs 1 and 2, that “within ten days of notification of the award, unless another term has been agreed to by the parties, any party, with notice to the other party, may request the arbitrators: a)
to correct any errors in computation, any clerical or typographical errors or any errors of similar nature.
To give an interpretation of a point or specific part of the award.
To make an additional award as to claims submitted but not decided upon therein.
After hearing the other parties, the arbitrators shall decide on an application for correction of errors and for clarification within ten days, and on an application for an additional award to the award within twenty days.”
The plaintiff had not been notified of the request for a clarification award and therefore had not been able to put its case to the arbitrators. Nevertheless the Court of Appeal dismissed this first ground of annulment on the basis that Article 36 of the 1988 Arbitration Law was the applicable provision, not Article 39.1 of the new Arbitration Law, and the former did not stipulate any requisite to notify or hear the other party, a circumstance that was reinforced by the institution’s own arbitration rules. The second ground for annulment was that the clarification award was in conflict with public policy because it substantially modified the content of the main Award. The plaintiff sought annulment on this ground by relying on Article 41.1.f of the 2003 Arbitration Law. The Court of Appeal allowed the challenge based on this ground; however the court applied Article 45.5 of the 1988 Law in its reasoning. The two provisions are very similar, however the new provision prevents the ordinary jurisdiction from acting of its own volition and must limit itself to the claims made by the challenging party (the new Article 41.1.f. reads “an arbitral award may be set aside only if the party making the application alleges and proves that…the award is in conflict with public policy”; the old Article 45.5 reads “an arbitral award may only be set aside on the following grounds . . . when the award is in conflict with public policy”). Nevertheless, paragraph 2 of the Sole Transitory Provision of the 2003 Law states that “the provisions of this law relating to setting aside and revision shall apply to awards made after the entry into force of this law.” The 2003 Arbitration Law came into force on March 26, 2004: the Award was issued on July 20, 2004 and the clarification award on September 27, 2004. Therefore Article 41.1.f. of the new Arbitration Law should have been applied in this case. That said, the Court of Appeal decided that the clarification award was in conflict with public policy because the arbitrator exceeded their powers by decid-
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ing extemporaneously in the clarification award on a matter that had already been decided in the main Award. Specifically, the main Award had stipulated a time limit within which the now-challenging party had to provide the original invoices proving payment of the storage expenses. The clarification award added that the original invoices were those issued by the Senegalese port authorities, thus limiting the amounts that were recoverable as a result of the arbitration.
that they had expressly referred to the enforcement proceedings. It is usual that public policy considerations in arbitration be restricted to infringements of fundamental rights and liberties guaranteed in the Constitution but the infringement of the right to due process is also a public policy issue. In this case the Court of Appeal prevented a partyâ€™s right to due process from being infringed as a result of a clarification award.
Most importantly, the main Award referred the parties to the enforcement proceedings before the ordinary jurisdiction in the event of any incidence relating to the invoices. Regardless of this stipulation in the main Award, the arbitrators, on request of the losing party, modified the Award precisely on the issue
Finally, although the decision omitted any express reference to the matter, despite the defendantâ€™s argument to that effect, it is assumed that any supplementary award, whether corrective, clarifying or additional, may be challenged separately from the main Award and indeed be set aside. n
ÂŠ Copyright 2001 Mealey Publications. All rights reserved. Reproduction strictly prohibited without written permission.
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.
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Published on Dec 20, 2010