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MEALEY’S™

International Arbitration Report ‘Exequatur in Spain — Respect For Articles II, IV And V Of The New York Convention’

by Calvin A. Hamilton

HAMILTON Madrid, Spain

A commentary article reprinted from the July 2009 issue of Mealey’s International Arbitration Report


MEALEY’S International Arbitration Report

Vol. 24, #7 July 2009

Commentary ‘Exequatur In Spain — Respect For Articles II, IV And V Of The New York Convention’ By Calvin A. Hamilton

[Editor’s Note: Calvin A. Hamilton is founding partner with the firm HAMILTON, Madrid, and heads the arbitration department. He is admitted to the New York and the Madrid Bar. Copyright 2009 by Calvin A. Hamilton. The author would like to acknowledge the contributions to this comment of Guillermo Cano Guerrero, Graduate of the Public University of Navarra School of Law. Replies to this commentary are welcome.] Spain And The New York Convention

This month’s commentary focuses on a Spanish court’s application of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).1

fault as Defendant was not correctly notified of the arbitration proceedings and was thus a violation of article V.1.b) of the New York Convention; second, invoking article II of the New York Convention, the Defendant argued that the arbitration clause was invalid as the contract had been signed by a mediator company that did not possess the authority to bind Defendant to arbitration. For these reasons, together with the fact that it was unaware of the existence of the arbitration clause, Defendant claimed that it was not obliged to submit to arbitration. The arguments were rejected by the Court of First Instance of Aranda de Duero in its decision authorizing the exequatur. Application For Appeal Of Exequatur

In this case, the Provincial High Court of Burgos2 granted an appeal of an exequatur,3 thus denying the recognition and enforcement of the foreign arbitral award.

Defendant appealed the lower court decision before the Provincial High Court of Burgos. During the hearings, Defendant repeated the same grounds for appeal as had been previously presented.

In this instance, Plaintiff-Appellee (Granit Negoce, S.A.) commenced arbitration proceedings against Defendant-Appellant (Abonos y Cereales, S.L.) pursuant to the procedure of the Arbitration Chamber of Paris (ACP). The ACP Tribunal rendered a decision in favour of the Plaintiff, who then sought to enforce the award before a Spanish lower court.4

In respect to the inexistence of the arbitration clause, the Plaintiff-Appellee indicated that the issue had already been addressed by the arbitral Tribunal, which had concluded that there indeed was a valid arbitration clause, and that therefore, if an award was issued it was because this point was indisputable.

Lower Court Permits Exequatur

During the lower court hearings, the Defendant presented two arguments against the recognition and enforcement of the arbitral award: First, the Defendant argued that the award had been issued by de-

With respect to the matter of the improper notification, Plaintiff-Appellee affirmed that Defendant was indeed duly notified of the commencement of the arbitration proceedings. Under the facts provided, ACP attempted to notify Defendant of the arbitration proceedings via a letter sent with acknowledgment of 1


Vol. 24, #7 July 2009

receipt. The letter was eventually returned to ACP with a stamp stating “Caducado estuvo en lista” The latter mentioned stamp indicates that the letter was held at the relevant post office but never claimed by Defendant. The Provincial High Court ruled as follows: Defendant Was Unable To Defend

With respect to the notification of the commencement of the arbitration proceedings, the Court found that, since no other form of personal service was attempted after the initial letter was returned to the ACP, “there [was] no conclusive evidence that Defendant had prior knowledge of the arbitration proceedings against it and therefore could not exercise its power to defend itself.”5 Since Defendant’s due process rights were violated, the exequatur could not be granted. The Arbitration Clause Was Not Valid

With respect to the inexistence of the arbitration clause the Provincial High Court made two points. First, the Court noted that a valid arbitration clause did not exist. The Court was not convinced that Defendant-Appellant had declared its intention to submit the matters in dispute to arbitration. Following the requirements of article IV.1.b) of the New York Convention which reads in relevant part: “To obtain the recognition and enforcement mentioned in the preceding article, the party applying for the recognition and enforcement shall, at the time of the application, supply: b) the original agreement referred to in article II or a duly certified copy thereof ”6 The Spanish Supreme Court requires that there be a manifest declaration of the will of the parties to submit to a arbitration, something which cannot be deduced per se from the mere correspondence arising from commercial relations. Second, and most importantly, as stated in accordance with the Spanish Supreme Court Judgement dated October 2, 2001 — “the certification given by the arbitration tribunal is not sufficient to satisfy the requirement of article IV.1.b) of the [New York] Convention.” Therefore it is up to the Court of First Instance hearing the application for exequatur to verify whether the requirements of the New York Convention are met. 2

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Independence Of The Arbitral And Execution Proceedings

Though not explicitly mentioned in the Provincial High Court of Burgos’ decision, it is nonetheless apparent that the granting of the award and its recognition and execution (by means of an exequatur) are two separate procedures. The court does not mention them directly, but the Brussels Convention, EU Regulation 44/2001 and EU Regulation 1347/2002 — which all regulate the jurisdiction, recognition and enforcement of judgments in civil and commercial matters — agree in that the court that grants an exequatur cannot review the substance of an award.7 As a result, it cannot correct a decision taken by the tribunal of the country of origin, neither as relates to the results of said decision, nor concerning the law applicable to the substance of the dispute, nor for the interpretation or application of the lex causae. Nonetheless, the court must guarantee that the foreign award respects all the requisites of articles IV and V of the New York Convention. The circumstances under which recognition and enforcement can be denied are listed in article V of the Convention. Relevant here is article V.1.b), for cases where “the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case.” The New York Convention, which establishes the requirements necessary to grant the recognition and enforcement of foreign arbitral awards, is configured as a further guarantee for the parties to enforce their rights in the case that the arbitral award had infringed them. Guarantees For The Parties In Litigation

The Order of the Provincial High Court of Burgos stated that the arbitration tribunal that granted the award did not have sufficient evidence to satisfy the requirements of the New York Convention. As discussed above, the requirements revolve around the existence of an arbitration clause (which implies the voluntary submission to settle disputes by arbitration) and the proper notification of the initiation of said arbitration proceedings (articles II and IV of the New York Convention, respectively). Said notification requirements must be again examined by the court in each country with the appropriate judicial authority to recognize and enforce foreign awards. In the case of Spain, as established in article 955 of the Civil Procedure Act,8 “the ability to decide whether or not to recognize and execute foreign court decisions and


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other foreign judicial or arbitral rulings corresponds to the Courts of First Instance of the domicile of the party against which recognition and enforcement of the award is sought.” The applicability of the New York Convention is directed, among other things, to securing arbitration as an effective method of dispute resolution. On one hand, the Convention guarantees that the Plaintiff receives a solid recognition and enforcement order with all the power of the law behind it, in order to be able to exert the rights recognized in the arbitral award. On the other, the Convention guarantees that the defendant be able to challenge the decision, not the award’s substance, but rather the procedural points that by error or omission were not correctly perceived by the foreign tribunal that granted the award. Such guarantees contribute to an increased sense of judicial security  throughout the arbitration process, and therefore lead to a strengthening of arbitration as a means to resolve disputes.

Endnotes 1.

United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (signed in

Vol. 24, #7 July 2009

New York on June 10, 1958 and ratified by Spain on May 12, 1977). 2.

Order of the Provincial High Court of Burgos (3rd Section), of April 27th, 2009 (Order Number 180/2009).

3.

Recognition and execution order.

4.

Order of the Court of First Instance (Number 1) of Aranda de Duero, of October 10th, 2008 (Order Number 86/2009).

5.

Finding 5 of the Order of the Provincial High Court of Burgos (3rd Section), of April 27th, 2009 (Order Number 180/2009).

6.

Article IV.1.b) of the New York Convention of 1958.

7.

See article 29 of the Brussels Convention, article 36 of the EU Regulation 44/2001 and article 19 of the EU Regulation 1347/2002.

8.

Law of June 21th of 1880 of Civil Procedure, modified by the Law 1/2000 of January 7th of Civil Procedure, and the Law 62/2003 of December 30th. n

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Š 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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