Issuu on Google+

MEALEY’S™

International Arbitration Report Madrid Update: Concurrence Of Applicable Treaties Recognizing Arbitral Awards, And The Unrelated Yet Binding Nature Of An Award And Its Recognition By The Judiciary In Country Where Award Was Rendered

by Calvin A. Hamilton and Luis Capiel

HAMILTON Madrid, Spain

A commentary article reprinted from the August 2008 issue of Mealey’s International Arbitration Report


MEALEY’S International Arbitration Report

Vol. 23, #8 August 2008

Commentary Madrid Update: Concurrence Of Applicable Treaties Recognizing Arbitral Awards, And The Unrelated Yet Binding Nature Of An Award And Its Recognition By The Judiciary In Country Where Award Was Rendered By Calvin A. Hamilton and Luis Capiel

[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. Luis Capiel is an associate with the firm and is admitted to the Madrid and the Munich Bar. Copyright 2008 by Calvin A. Hamilton and Luis Capiel. Replies to this commentary are welcome.] Today’s analysis draws on an examination of Exequatur No. 129/2002, handed down by the Spanish Supreme Court (Civil Chamber, Section 1)1 on July 20, 2004, in an action for recognition of an institutional arbitral award under the auspices of the International Chamber of Commerce (ICC) in Paris.2 The Plaintiff, Antilles Cement Corporation, is a Puerto Rican corporation. The Defendant against whom recognition is sought, Transficem, is a Spanish corporation. The Defendant’s main argument for opposing recognition is based on the contention that the award is not binding. The Defendant argues that, pursuant to articles 1477 and 1478 of the New French Civil Procedure Code, the enforceability of the award requires that recognition be pronounced by the competent French court. The Defendant also points out that until such recognition, the validity of the award is suspended, and in the meantime the award cannot be the subject of an appeal or a claim for annulment.

Further, the Defendant proffers support for the aforestated contention in provisions from two different supranational sources of law. On the one hand the Defendant opposes recognition on the grounds of non-compliance by the Plaintiff of several provisions of the French-Spanish Treaty on the recognition and enforcement of judicial and arbitral decisions in civil mercantile matters.3 For purpose of today’s Update we shall deal only with the allegation of infringement of Article 15.4 of said Treaty, which states:4 The Party which seeks recognition or requests the enforcement shall submit: [. . .] 4.

Any document which proves that the decision is enforceable in the territory of the State of origin and that it cannot be appealed.

In addition, the Defendant alleges that the recognition is to be denied due to infringement of several provisions of the New York Convention. For purpose of today’s Update the relevant provision is Article 5.1.e) of said Convention, which establishes: Recognition and enforcement of the award may be refused, at the request of the party 1


MEALEY’S International Arbitration Report

Vol. 23, #8 August 2008

against whom it is invoked, only if that party furnishes to the competent authority where recognition and enforcement is sought, proof that: [. . .] (e)

The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

With regard to the conflict rules, the Spanish Supreme Court begins its analysis by examining which is the applicable system of recognition, given the concurrence of two relevant sets of supranational rules, i.e. the French-Spanish Treaty and the New York Convention. The Spanish Supreme Court explains that such concurrence is to be resolved, first, in accordance with the conflict rules contained in each of the mentioned international instruments, and second and foremost, in accordance with the principles which inspire the regulation of the recognition of decisions and the extraterritorial validity of resolutions. With regard to the former, article VII.1 of the New York Convention stipulates that its provisions shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by Contracting States nor deprive any interested Party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by law or the treaties of the country where such award is sought to be relied upon. Article 19 of the French-Spanish Treaty5 stipulates that the Treaty shall not affect other treaties entered into or to be entered into by the Parties, governing special matters on the recognition and enforcement of decisions. The Spanish Supreme Court concludes that the conflict is to be solved in accordance with the lex specialis principle, which provides for the precedence of the special over the general supranational rule, and in accordance with the principle of maximum effectiveness for recognition of foreign decisions. Both these principles exclude the application of the bilateral Treaty in favor of the multilateral Convention, which 2

establishes a presumption of validity for both the arbitral agreement and the arbitral award (articles V.1, IV.1 and V.2), thus setting up a more favorable system for recognition than the rules found in the bilateral Treaty. Hence, the Defendant can only invoke article V.1.e) of the New York Convention in support of its argument that the award is not binding, and is therefore not to be recognized. However, the Spanish Supreme Court disregards this argument and explains that the quality of “binding” for the purposes of article V.1.e) of the New York Convention is to be understood as the impossibility to challenge the award, which impossibility was proved in the case at bar by means of a certificate issued by the Secretary of the Arbitral Court of the ICC in Paris. The Spanish Supreme Court states further that the binding character of an award is not to be examined in light of the laws of the country where the arbitration took place or the award was rendered but in light of the rules which govern the arbitral procedure, i.e., in the present case, the ICC rules, which establish the enforceability of the award, as an effect inherent to submission to arbitration, and as a consequence of the valid waiver of any means of appeal which was implicit in the submission to institutional arbitration. The Spanish Supreme Court concludes that it is not possible, as the opposing Party puts forward, to link the binding character of the award, to the recognition by the courts of the country in which it was rendered, since this would incorrectly identify the binding character of the award, vis-à-vis its recognition, with the enforceability of the award in the State in which it was rendered. Unlike article V.1.e) of the New York Convention, which for the recognition of the award only requires that it has become “binding on the parties,”6 Article 15.4 of the French-Spanish Treaty requires that the award is “enforceable in the territory of the State of origin.” If the latter treaty were to be applied, recognition would have to be denied. However, the Spanish Supreme Court holds that the New York Convention has precedence and that the award’s binding nature for the purposes of Article 5.1.e) of the New York Convention has no relation to its recognition by the courts of the country in which it


MEALEY’S International Arbitration Report

Vol. 23, #8 August 2008

was rendered. Therefore, the Spanish Supreme Court grants recognition.

Real Decreto de 3 de febrero de 1881), in its former version. 3.

Convenio entre el Gobierno español y el Gobierno de la República francesa sobre el reconocimiento y la ejecución de las decisiones judiciales y arbitrales y actas auténticas en materia civil mercantil.

4.

Translation by the authors.

5.

The Treaty is of later date but came into force earlier than the New York Convention.

6.

More precisely, the contrary is a requirement for opposition. n

Endnotes 1.

Tribunal Supremo (Sala de lo Civil, Sección 1ª).

2.

Until December 31, 2003, the Spanish Supreme Court had jurisdiction over exequatur requests pursuant to article 955 of the Spanish Civil Procedure Act of 1881 (Ley de Enjuiciamiento Civil de 1881,

3


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.


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: mealeyinfo@lexisnexis.com Web site: http://www.lexisnexis/mealeys ISSN 1089-2397


2008_08