On January 2001, Civil Procedural Law 1/2000 (hereinafter “cpl”) came into force, the main purpose whereof was to improve operation of the courts, modernising civil proceedings, consistently structuring the material provisions thereof and undertaking a partial reform of several other laws connected with the civil procedural law.
Among the laws directly affected thereby was old Law 36/1988, of December 5, on arbitration (“oal”), whose regulation, after the civil procedural reform, was excessively dispersed, heterogeneous and dependent on the cpl.
This opinion, shared in part by authors, made the Ministry of Justice announce, on February 2001, before the Justice and Home Commission of Congress (Comisión de Justicia e Interior), a reform of the oal, modernising arbitration in Spain and adapting it to future requirements in this matter. Immediately after making this commitment, a Restricted Codification Commission was created, consisting of a reduced group of reputed lawyers, with a concise mandate: to draft a legal text articulating all necessary technical amendments to consolidate arbitration in our legal system as an effective alternative to ordinary jurisdiction.
To understand the scope of the oal reform, it is necessary to remember that the 1988 legislator faced the challenge of introducing a concept of arbitration to improve the deficient prior regulation of the old Law, dated 1953, and drafted from a procedural law standpoint, always reticent and suspicious towards arbitration. The oal at the time embodied the necessary evolution of this legal institution, giving rise to a rather one-sided transitional text, concentrating on domestic arbitration to the detriment of international arbitration, which catalysed the greatest boost to the institution until then. However, the balance of the oal’s achievements and failures is not positive. Among its achievements, which are centred on domestic arbitration, authors highlight: (i) simplification of the scope and effects of the arbitration agreement and; (ii) consolidation of arbitration in our legal system. Its failures, shared between domestic and international arbitration, can be summarised as follows: (i) its inability to make arbitration a real alternative to ordinary jurisdiction and; (ii) for international arbitration, the lack of depth in its regulation, making the Courts refer to the provisions of the European convention on international commercial arbitration, dated April 21, 1961 (the “Geneva Convention”) and of the Convention on recognition and enforcement of foreign arbitral awards, dated June 10, 1958 (the “New York Convention”).
Finally, after a fast parliamentary debate and approval, on December 26, 2003, the National Official Gazette (Boletín Oficial del Estado) published Law 60/2003, of December 23, on Arbitration (“nal”). The new Arbitration Law entered into force last March 26, 2004.
The nal reflects the legislator’s decided commitment towards arbitration in general and international arbitration in particular, setting forth an easily recognisable regulation, inspired in the Form of Law dated June 21, 1985, drafted by the United Nations Commission for International Trade (“uncitral form law”), which responds to the needs of international trade arbitration, provides acceptable solutions for parties belonging to different countries and legal systems and simplifies arbitration proceedings.
The nal’s stated purpose leaves no doubts as to the new law’s obvious international vocation. Thus, the oal’s suspicious and antiquated notions concerning international arbitration, inattentive to dominant commercial trends, are abandoned.
This international vocation is reflected not only in the nal’s coincidences with the uncitral form law both as regards structure and in the definition of its scope, or in the defining criteria for international arbitration, but also in the specific content of its regulation, in particular as regards: (i) the importance granted to private autonomy in the regulation of arbitration; (ii) the great flexibility introduced into the arbitration proceedings; (iii) the flexibility also governing the rendering of the arbitral award; (iv) the detailed regulation of the appointment of arbitrators by the Courts; and (v) the admission of new media derived from electronic technology, both for the execution of the arbitration agreement and for notices or communications, and the suppression of the compulsory nature of the official legalisation of the award.
In its most recent judgements, the Supreme Court, departing from its traditional position, applauds the advantages of international arbitration, deeming it the most effective jurisdictional instrument to respond to the requirements of legal certainty, agility and speed required by international trade (see, as an example, its judgement dated July 3, 2003).
Furthermore, the nal shows a clear and ambitious commitment to provide our country with the appropriate legal mechanisms in order to turn Spain into a seat for international trade arbitrations. In particular, it shows a special interest towards attracting arbitrations between Spanish-speaking parties to Spain.
In this respect, it must be noted that, without prejudice to the parties’ freedom to set forth the seat of the arbitration, the provisions of the nal make Spain meet all the requirements traditionally considered by the International Arbitration Court of the International Chamber of Commerce (icc) in order to fix the seat of arbitrations subject to its regulations. i.e.: (i) the Country’s neutrality; (ii) ratification of or adhesion to the New York Convention; (iii) a modern regulation adapted to the uncitral form law; (iv) attitude of the Country’s domestic courts towards the arbitration institution; (v) availability of the necessary logistics services for the arbitration to be adequately performed and; (vi) similar distance of the seat in respect of the parties’ place of residence.
Thus, to Spain’s traditional advantages with regard to Latin America (neutrality, good logistics services, similar distance) can now be added a modern regulation adapted to the uncitral form law, and a decided commitment to arbitration, which, undoubtedly, will make it a preferred option for either the parties or the ICC to fix therein the seat of arbitration.
The nal reflects the legislator’s decision to base the Spanish legal regulation of arbitration in the uncitral form law for international trade arbitration recommended by the General Assembly of the United Nations in its Resolution 40/72, dated December 11, 1985.
The uncitral form law, which was drafted to serve as an effective instrument for the harmonisation and improvement of the regulation of arbitration leans toward a unitary regulation of domestic and international arbitration, also provided by the nal.
This is clearly expressed in the Stated Purpose of the Law, in Recital II, setting forth that “as regards the difference between domestic and international arbitration, this Law clearly opts for a unitary regulation of both. Within what has been called the dual (in which international arbitration is completely or largely regulated by different rules to domestic arbitration) and unitary (in which, save for a few exceptions, the same rules are applied to domestic and international arbitration) alternatives, the Law follows the unitary system. The rules where international arbitrations require a different regulation to domestic arbitration are few and very justified”.
Spain is thus included in the more than 30 countries which as of the date hereof have incorporated in whole or in part the uncitral form law into their legal systems, which shall undoubtedly result in a greater certainty for economic operators regarding the content and legal regulation of arbitration in Spain.
Notwithstanding the foregoing, please note that the nal is not an exact replica of said uncitral form law, but incorporates certain different solutions, inspired in other state legislations and in uncitral’s work subsequently to 1985, which purport to respond to the new requirements of international arbitration.
Following the territorial principle which governs the ordinary jurisdiction (“lex fori regit procesum”), Article 1 of the nal includes within the scope of the Law arbitrations the seat is whereof located within Spanish territory, opting for a unified regulation of domestic and international arbitration.
The NAL follows the uncitral form law recommendation regarding determination of the scope thereof, as has also been done by other legal systems such as the British (Arbitration Law of 1996), German (Arbitration Law of 1996), Dutch (Civil Procedural Code of 1986) or Japanese (Arbitration Law of 2003). This is also consistent with Article VI of the New York Convention, which sets forth as grounds for refusal of recognition of an arbitral award the fact that it has been annulled or suspended by a competent authority of the country in accordance with whose Law it has been rendered.
However, the general rule shows in the same Article 1 three exceptions. In the first place, as is natural, special arbitration regulations included in international treaties on arbitration whereof Spain is a party are declared to apply, among which are bilateral conventions with countries such as France, Switzerland or Italy, and certain multilateral conventions, such as the European convention on international trade arbitration, executed in Geneva on April 21, 1961 (section 1). In the second place, it is declared that, as a general Law, it shall apply only subsidiarily to arbitrations subject to special regulation (section 3). In the third place, it shall not apply to labour arbitrations (section 4).
On the other hand, some of the nal’s provisions shall apply and are even specifically addressed to arbitrations held outside Spain, as shall be explained below.
As noted in the foregoing section, the nal provides a unitary regulation for domestic and international arbitration, which, contrary to our previous regulation, it expressly acknowledges and defines. However, it does not forget that international arbitration presents certain peculiarities and, consequently, offers certain specific solutions thereto.
Letters a) and b) section 1 Article 3 of the nal follow the first four criteria to define international arbitration adopted by the uncitral form law, declaring that arbitration shall be deemed international if any of the following circumstances should concur: (i) that at the time of execution of the arbitration agreement, the parties should be resident in different Countries; (ii) that the seat of the arbitration should be located outside of the parties’ Country of residence; (iii) that the place of performance of a substantial part of the obligations of the legal transaction wherefrom the controversy should be derived is located outside the parties’ Country of residence; or (iv) that the place most closely linked to the controversy should be located outside the parties’ Country of residence.
However, the nal does not include the last criterion recommended by the uncitral form law (that “the parties should have expressly agreed that the question subject to arbitration relates to more than one Country”), choosing for letter c) Article 1.3 a flexible criterion: “that the legal transaction wherefrom is derived the controversy affects international trade interests”. This criterion, which is reflected in the 1961 Geneva Convention (Article I), and in the arbitration legislation of several neighbouring countries (such as Article 1492 of the French civil procedural code), clearly embraces an undetermined legal concept, the scope and effects whereof shall be delineated by future case law, helped, of course, by other courts’ interpretation of such provisions.
As regards the aforementioned criterion (ii) (that the seat of the arbitration should be located outside of the parties’ Country of residence), please note that, as analysed below: (i) the parties are free to determine such seat, which must be fixed by the arbitrators in the absence of agreement between the parties thereof (Article 26 of the Law); and (ii) whichever the place of issuance of the award, it shall be deemed rendered at the seat of the arbitration (Article 37.5)
Consideration of an arbitration as an international arbitration entails relevant consequences, as it triggers the application of the nal’s specific provisions for this kind of arbitration. As explained below, these provisions mainly (but not only) affect: (i) applicable law to the controversy subject to arbitration; and (ii) validity of the arbitration agreement.
Article 2.2 of the nal sets forth that, for international arbitration, no State, company, organisation or undertaking may invoke “any prerogatives to which it may be entitled to escape the obligations arising from the arbitration agreement”. Thus the Law purports, as set forth in its Statement of Purpose, for States to be treated the same as individuals in international arbitrations.
The inclusion of this legal provision in our legal system is consistent with the growing participation of States in international trade, and entails recognition of States’ capacity to enter into agreements with foreign economic players, submitting to international arbitration any controversies which may arise.
The nal thus includes a common international arbitration practice reflected in several international treaties, among which may be mentioned the aforementioned 1961 Geneva Convention, and the Washington Convention dated March 18, 1965 on Resolution of Differences relating to Investments between States and Nationals of other States (“icsid”), ratified by Spain on May 11, 1994.
A special mention is also deserved for the more than 2000 bilateral Agreements regarding promotion and protection of investments (“appris”) executed between many States (Spain is a party to 47) which provide that, in the event of dispute regarding an investment performed within the territory of one of the parties by an investor of the other, the latter may lodge an arbitration claim against the host State of the investment. The number of international arbitrations based on appris is growing, and most of them are submitted to the ICSID and, to a lesser extent, to the uncitral Arbitration rules set forth in the Regulations approved by the General Assembly dated December 15, 1976.
Three major consequences derive from the prohibition set forth in Article 2.2. of the nal against States’ using their prerogative in international arbitrations and Spanish case law on foreign States immunity:
In the first place, once a clause for submission to arbitration has been agreed upon, the State may not invoke immunity from suit in the event of being claimed against in international arbitration proceedings.
In the second place, the State may also not invoke immunity from seizure in any event to prevent enforcement of the award finding against it. The State shall only be immune to enforcement of an award to the extent that said enforcement is directed to the seizure of public assets allocated to a sovereign function, in the terms of the project Convention on States’ and their properties’ immunity from suit, adopted on March 2003 by the United Nations’ special Committee for such matters. On the contrary, the State may not enter as an objection such immunity from seizure in the enforcement of awards directed to the seizure of properties operated commercially by the State in international trade.
In this respect, the well-known Constitutional Court Judgement dated July 1, 1992 (R.Ar. 107) clearly provides that:
“In view of the facts provided by the international legal background, one can only conclude that Article 21.2 OLJF, as regards International Public Law, does not impose the rule of absolute immunity from seizure of foreign States. On the contrary, it allows to declare relativity of such immunity [...] as a general rule, when a certain activity or the seizure of certain properties does not impair the sovereignty of the foreign State, both international legal regulations and, by reference, domestic regulations advise against non-execution of a judgement and, consequently, a decision not to enforce shall entail violation of Article 24.1 SC (spanish constitution)”.
Finally, the State shall not be entitled either to create internal laws in order to avoid the arbitration or the terms contained in the arbitration agreement, in particular, in terms of procedure and applicable law.
Certain provisions of the nal also apply to foreign arbitrations, i.e. “the location whereof is outside Spain”. Indeed, Title IX thereof is dedicated exclusively to exequatur procedures for foreign arbitral awards (see Section 10 hereof).
Please note in this respect that foreign arbitration and international arbitration correspond to different legal concepts. Thus, an international arbitration performed in Spain shall give rise to a domestic award, which shall require no specific recognition procedure in Spain and enforcement whereof in Spanish territory shall be governed by Spanish regulations for awards rendered in Spain. On the contrary, an award rendered by a foreign arbitral tribunal shall be deemed a foreign award and, consequently, if it is to be effective in Spain, it must be duly recognised and enforced in accordance with the nal and international treaties executed by Spain in this matter.
On the other hand, pursuant to section 2 Article 1 of the Law, the following provisions shall also apply to foreign arbitration: (i) Article 8.6, regarding the competent court to hear the application for exequatur; (ii)) Articles 8.3 and 11.3, regarding application to the court for precautionary measures (see section 7.2); (iii) Article 8.4 and Title VIII, regarding mandatory enforcement of the award (see section 8 hereof); (iv) sections 1 and 2 Article 11, regarding declinatory plea of jurisdiction in favour of arbitration (see section 3.3); and (v) Article 23, regarding the arbitrators’ capacity to adopt precautionary measures (see section 7.3)
The form and content of the arbitration agreement are regulated in Article 9 of the nal, which significantly improves the regulation set forth in Articles 5 and 6 of the oal.
The legislator, reflecting the latest technologies and current regulations directed to ensure legal certainty in the rendering and receipt of declarations of will –such as the Law passed regarding the electronic signature -, has designed material regulations which, with the favor negotii principle as starting point, regulate the arbitration agreement from an essentially anti-formalist standpoint. Indeed, even though it maintains the requirement of clearly setting forth the will of the parties to submit to arbitration (an unavoidable requirement) and for the agreement to be in writing, the nal makes these requirements more flexible and thus admits in sections 3 to 5 Article 9: (i) for the agreement to be set forth in a document signed by the parties or “in an exchange of letters, telegrams, telex, faxes or other means of communication which leave sufficient record of the agreement”, specifying that “this requirement shall be deemed fulfilled when the arbitration agreement is recorded and is accessible for its subsequent consultation in electronic, optic or other kinds of media”; (ii) for the agreement to be set forth in a document referenced by the parties in any of the aforementioned manners (arbitration agreement by reference); or (iii) for it to be affirmed by one of the parties and not refused by the other in an exchange of writs of claim and response to claim.
For arbitration agreements included in a standard form contract, section 2 of the rule warns that their validity and construction shall be governed by the rules applicable to this kind of contract.
Notwithstanding this anti-formalist regulation framework, the wording of the arbitration agreement is extraordinarily relevant, as the will of the parties expressed through it shall determine the essential aspects of a possible arbitration. In particular, when drafting the agreement it is necessary to consider the following:
(i) The dispute resolution whereof is intended to be submitted to arbitration, avoiding any restrictive wording which may exclude therefrom certain matters which the parties also intended to submit to this form of resolution;
(ii) If the parties should whish to opt for an ad hoc arbitration or an arbitration managed by an international institution; in this last case it is crucial to include in the agreement the correct name of the arbitration institution to which the parties submit (see section 5.2 hereof);
(iii) The seat of the arbitration, being necessary to set forth not only the country but also the particular town in such country wherein the parties wish to hold the arbitration (see section 7).
It must be noted that determination of the seat of the arbitration is particularly important n that, as shall be analysed below, the law of the country of the seat of the arbitration shall determine in which instances self-regulation by the parties is inadmissible, and the applicable regime to these instances. Following the icc criteria, it is recommended for the seat of the arbitration to be neutral (town –for domestic arbitration – or country- international arbitration- which is not the place of residence of any of the parties).
(iv) The language of the arbitration (see section 6.3 hereof);
(v) Applicable procedural rules to the arbitration (see section 6.1);
(vi) Possibility of adopting precautionary measures by the arbitral tribunal (see section 7.3);
(vii) Confidentiality of information disclosed as a result of the arbitration proceedings (see section 6.4);
(viii) Possibility of assigning the arbitration agreement: it is important to provide in the arbitration agreement that, in the event of a subjective change of one of the parties or assignment of the contract, the arbitration agreement shall be fully applicable to the new party.
Please note, in particular, that the Courts, when determining whether an arbitration agreement is binding for a party which did not initially execute the contract (but joined it subsequently, relieving one of the initial intervening parties) usually deem this new party not to be bound by the arbitration agreement (see Supreme Court judgement dated July 19, 2001 and Barcelona Provincial Court judgement dated February 1, 2003). In order to avoid this happening and given the nal’s silence in this regard, it is necessary to include an express provision for the event of assignment of the contract or subjective change of one of the parties, setting forth that the assignee of the contract or such third party as may replace one of the initial parties thereto must give its express consent to the arbitration agreement, in order for it to be bound thereby.
(ix) Waiver of appeal for annulment (recurso de anulación): finally, please note that, although certain legal systems –such as the Swiss or the English- allow waiver of the appeal for annulment, the Spanish legal system does not –neither in the oal, nor in the nal, as the ability to exercise such action is deemed to form part of the right to due process (tutela judicial efectiva) and this right is not capable of any waiver (Supreme Court judgement dated March 10, 1986).
In this regard, the provisions on proof of existence of the arbitration agreement of the New York Convention on recognition and enforcement of foreign arbitral awards of 1958 should be taken into account (see section 10.1).
Please note that, in order for the arbitration agreement to be deemed valid, the arbitrators must comply with such arbitration agreement, considered separately from the contract to which it refers. Consequently, the contract’s invalidity shall not affect the board's objective competence.
The principle of severability of the arbitration agreement is commonly admitted by authors and by arbitration case law and even by the courts of several States.
Regarding the validity of the arbitration agreement in international arbitrations, section 6 Article 9 of the nal opts, as mentioned in the Statement of Purpose thereof, for a solution inspired in the principle of conservation, declaring that it is enough for the agreement to be valid pursuant to any of the following regimes: the law chosen by the parties to govern the arbitration agreement, the law applicable to the merits of the case or Spanish law.
However, please note that Article ii of the New York Convention is more restrictive (from a literal interpretation) regarding formal requirements for the validity of the arbitration agreement.
Our legal system currently includes two rules which regulate formal validity of the international arbitration agreement: Article 9 of the nal and Article ii of the New York Convention. Notwithstanding the foregoing, it is possible to hold that it is appropriate to examine the validity of the arbitration agreement in the light of Article 9 of the nal, pursuant to the provisions of Article vii of the Convention, which sets forth that the provisions thereof shall not deprive any of the interested parties “of any right which it may hold to enforce an arbitration judgement in the form and to the extent admitted by legislation of or international treaties executed by the country wherein it is invoked”.
From a different standpoint, the new regulation reflects the most recent trend in case law, headed by the Supreme Court judgement dated July 23, 2001 which, for the first time in Spain, and in spite of the literal wording of Article 61 of the oal, defended the position that the arbitration agreement for international arbitration should be governed by the applicable material law chosen by the parties, without requiring any connection between applicable law chosen and the principal contract or the dispute.
The most relevant change in the nal in connection with the negative effect of the arbitration agreement (declinatory plea) is contained in Section two Article 11, which sets forth that the lodging thereof shall not prevent initiation or continuation of the arbitration proceedings: “The declinatory plea shall not prevent the initation or continuation of the arbitration proceedings”.
This provision is completed by the provisions of Section 1 Article 11 of the nal “[t]he arbitration agreement binds the parties to comply with its provisions and prevents the courts from hearing any disputes submitted to arbitration, provided that the interested party should invoke such ground by lodging a declinatory plea”.
The purpose of this new regulation is to maintain the so-called negative effect of the arbitration agreement, and the rule whereby it must be exercised by the parties and, specifically by the defendant through the declinatory plea is declared to persist. Furthermore, the specification that a pending court procedure wherein a declinatory plea has been lodged shall not prevent the initiation or continuation of arbitration proceedings tries to prevent the initiation of court proceedings for the sole purpose of blocking or hindering the arbitration proceedings.
Please note that the declinatory plea is configured for these purposes under Article 63.1 of the cpl as the suitable instrument for the defendant to submit, among other issues, lack of competency of the court before which the claimant has lodged the claim, on grounds that the matter is submitted to arbitration.
The declinatory plea must be lodged by the defendant before the Court proposed by the claimant within the first ten days of the period provided to respond to the claim, for ordinary proceedings, or in the first five days following the summons to the hearing for oral proceedings (Article 4.1 of the cpl).
Upon lodging the declinatory plea, its inherent effect is produced: suspension of the proceedings until it is resolved, without prejudice to the Court’s being entitled to perform any action directed to secure evidence or to the adoption of precautionary measures, in order to prevent possible irreparable damages.
The Court shall resolve the declinatory plea by means of an order the contents whereof, in the event of its finding in favour of the submission of the dispute to arbitration, shall declare its obligation to refrain from hearing the dispute, and shall order dismissal of the proceedings, and the claimant must submit to the arbitration proceedings set forth by the parties in the arbitration agreement.
Under Section 1 Article 2 of the nal, “disputes regarding matters disposable at will in accordance with the Law” shall be capable of resolution by arbitration.
As set forth in the Statement of Purpose: “It is sufficient to provide that disputes which are capable of being arbitrated are the same as those which have the possibility to dispose of its subject matter at will by the parties. In principle, disposable matters are matters which may be subject to arbitration. It is conceivable, for reasons of legal policy, for there to exist matters which are capable of disposition by the parties and in respect of which the legislator wishes to exclude or limit arbitration. But this would exceed the scope of a general regulation of arbitration and may be subject, as the case may be, to specific legal provisions in other laws”.
The inability of a dispute to be submitted to arbitration is directly related to the right of States to forbid in their internal legislation the submission of certain disputes -rationae personae or rationae materiae- to arbitration. From this perspective, the arbitrability of a dispute (i) is a condition precedent to the validity of the arbitration agreement and, consequently, a necessary requirement for the arbitral tribunal to be able to exercise its duties and (ii) depends on the law applicable to the arbitration agreement.
It seems clear that the legislator’s intention was to extend as much as possible the objective availability of matters capable of resolution by arbitration, in the same line as the uncitral form law adopted by a large portion of international treaties and foreign laws (United Kingdom, Holland or United States). For international arbitrations, said circumstance must be appreciated taking into account the provisions of the aforementioned Article 9.6 of the Law, in accordance with which “when the arbitration is international, the agreement shall be valid and the dispute shall be capable of arbitration if the requirements set forth in the regulation chosen by the parties to govern the arbitration agreement are met, or those set forth under the law applicable to the merits of the dispute, or under Spanish law” (our underlining).
Without prejudice to the future delimitation of the objective breadth of Article 2 of the nal –the wording whereof is certainly vague- by case law, it must be understood that matters traditionally considered incapable of disposal shall be excluded from arbitration, such as rights of personality, marital status or matrimonial matters concerning change of marital status.
Notwithstanding the foregoing, we understand that one should not confuse a dispute’s arbitrability and the application of mandatory regulations of the law of the country set forth as applicable law to the merits of the case. Indeed, the fact that a matter is not capable of free disposition or, in other words, is not capable of compromise, has nothing to do with its being subject to mandatory rules. Thus, many contractual disputes arise precisely in relation to a mandatory rule of the Civil Code (for example, rules regarding circumstances which render a contract void for lack of proper consent, prohibition of pledge agreements, leaving determination of the contract to the will of one party, etc.) and nobody doubts as to their capacity to be submitted to arbitration.
On the other hand, regarding matters of corporate law, the Supreme Court’s current case law (judgement dated April 18, 1998), taking up the first case-law again (Supreme Court Judgement dated April 26, 1905 and July 9, 1907), declares that such matters are capable of being resolved by arbitration.
Competition law also illustrates this issue. Indeed, the mandatory nature of Competition law regulations is undisputed (regarding EC competition law, see ECCJ judgement dated December 14, 1995 for the Van Schijndel case, as. ac. C-430 and 431/93). This does not prevent disputes on this matter from being resolved by arbitration (see, for all of them, the famous U.S. Supreme Court judgement of 1985 for the Mitsubishi case), save for rules which attribute exclusive jurisdiction to a certain body (to continue with the EC competition law example, imposition of fines by the European Commission). Thus, for example, in ICC case no. 7146 (1992 Partial award), after deeming applicable Article 85 (current Article 81) of the EC Treaty, forbidding and deeming void any agreements which restrict competition, the arbitral tribunal declared itself competent to hear a dispute derived from breach of an agreement conferring an exclusive right relating to after-sales services.
This question is of serious importance, as one of the causes of an arbitral award’s being declared void is, precisely, the matters unsuitability for resolution by arbitration. Consequently, the parties which decide to submit their dispute to arbitration must know beforehand, as precisely as possible, whether the subject of the dispute is unsuitable for arbitration.
It is also convenient to analyse, even succinctly, the problems raised by these connected issues, where the nal is silent.
The 1988 legislator treated this matter restrictively: instead of favouring arbitration for all disposable issues, whether or not they were connected to other non-disposable issues, it decided, contrary to the provisions of the uncitral form law and of international treaties, to exclude arbitration for such issues.
In view of the wording of Article 2 of the nal, the similarities between the new law and the uncitral form law and the legislator’s clear intention to broaden disputes’ capacity to be resolved by arbitration, its silence regarding connected issues must be construed positively: for matters inseparably connected which the parties are not entitled to dispose of, the principle of severability or even the principle of absorption shall govern in favour of capacity to be resolved by arbitration. Thus, for example, for matters concerning assets derived from a marriage separation (the civil aspects whereof are non-disposable, and, therefore, unsuitable for submission to arbitration).
Lastly, please note that, in accordance with Article 10 of the nal, arbitration of testamentary issues, provided in Article 7 of the oal on an exceptional basis, loses such condition, and is established as an appropriate means “for the resolution of disputes among voluntary heirs or beneficiaries in matters concerning distribution or management of the estate.”.
Notwithstanding the foregoing, on the basis of the testament, heirs by necessity are still precluded from initiating arbitrations to solve their differences relating to distribution or management of the estate, a circumstance which, although logical regarding the portion passed equally to all heirs apparent (tercio de legítima) and the third for betterment of one or several heirs (tercio de mejora), makes no sense in respect of the portion reserved for free disposal, which is, furthermore, the aspect in respect whereof most problems occur.
One of the nal‘s most significant novelties is in section 1 Article 34, which provides that “[A]rbitrators shall only resolve in equity if the parties have expressly authorised them to do so”. Thus, arbitration in equity shall be limited to cases where the parties expressly agree to its performance, either pursuant to strict reference to equity or using equivalent expressions (declaring their will for the arbitrator to make its decision “according to his/her conscience” or “ex aequo et bono”, or deeming the arbitrator a “amicable thirdsman (amigable componedor)”). This prevalence of arbitration in law, which reverses the assumption of the oal, entails adopting the criteria accepted in many European and Latin American countries.
Among others, this preference in favour of arbitration in law over arbitration in equity has been set forth under Article 1496 of the French Civil Procedural Code, Article 187 of the Swiss Rules of International Private Law, Article 1054 of the Dutch Civil Procedural Code, Article 1051 of the German Arbitration Law or Article 1445 of the Mexican Commercial Code.
In the event of arbitration in equity, the arbitrator shall not be obliged to decide in accordance with the applicable legal rules for arbitration in law. Consequently, declaring the prevalence of arbitration in law means opting for the certainty of the rule to be applied by the arbitrator to solve the dispute, thus approaching the concepts of arbitration and jurisdiction.
Following the criteria of Article 10.5 of the Civil Code, the oal required a certain connection between applicable law and the dispute subject to arbitration, in accordance with its Statement of Purpose, “in order to prevent what has been called escape from the Law of certain international legal transactions through arbitration”. This solution was sharply criticised by authors, as it entailed ignoring the reality of international trade.
The nal, more conscious of the needs of international trade, and following the attitude of neighbouring legal systems, has granted the parties the greatest freedom so that, in the case of international arbitrations, they may chose the law according to which they wish their disputes to be solved, eliminating the requirement whereby applicable law should be related to the legal transaction or to the dispute. Furthermore, the new Law does not subject the arbitrators to a system of conflict of law provisions.
Thus, Section 2, Article 34 sets forth the following:
“2. Without prejudice to the provisions of the foregoing section [regarding arbitration in equity], for international arbitration, the arbitrators shall resolve the dispute in accordance with the legal rules chosen by the parties. Any indication of the law or legal system of a certain State shall be deemed to refer, save as otherwise set forth hereunder, to the material law of such State and not to its conflict of law provisions”.
Notwithstanding the foregoing, Section 3 thereof warns that:
“3. In any event, the arbitrators shall decide pursuant to the provisions of the agreement, and shall take into account the customs of the applicable legal system”.
Please note the legislator’s decision to refer in Article 34 of the nal to the “legal rules” and not to applicable law or the legal system chosen by the parties. This option is not random, and answers to the general trend in neighbouring legal systems to increase the parties’ freedom of choice, admitting their submission to the provisions of several different legal systems or to common international trade rules.
Thus, the nal opens the possibility for the parties to choose undroit principles as applicable law to the dispute, rules that can be applied in international arbitrations to resolve disputes occurred in international legal transactions.
The International Institute for the Unification of Private Law (unidroit) is an inter-governmental agency whose mission is to examine possible means and methods to modernise, harmonise and coordinate private Law, in particular, commercial law between different States. The Institute published in 1994 the UNIDROIT principles for International Trade Contracts, a set of rules which purport to offer a general and homogenous regulation to international contract law. These principles have been well received by economic operators, which can adopt them as applicable law to contracts submitted to international arbitration. The UNIDROIT principles are currently frequently used by arbitrators as grounds for their awards rendered within the framework of international commercial arbitration proceedings.
The second paragraph of Article 34.2 of the nal sets forth that, if the parties should not indicate applicable law “the arbitrators shall apply whichever rules they deem suitable”, in any event taking into account, as set forth in Article 34.3, the provisions of the agreement and applicable usual practices.
Article 34 of the nal is mainly inspired in the contents of Article 28 of the uncitral law, which in its turn is similar to Article 15 of the Regulations of the ICC Court of Arbitration.
The nal opts for an undetermined legal concept, the rules “they deem suitable”, which, however, is usual in international arbitration practice as regulated under neighbouring legal systems, and in actual international arbitration institutions.
Notwithstanding the foregoing, to determine applicable law to the dispute, the arbitrators must take into account the international treaties executed by Spain concerning applicable law. Thus, for example, they must take into account the 1961 Geneva Convention, Article VII whereof sets forth that, in the absence of indication of applicable law by the parties, the arbitrators shall apply the relevant law in accordance with the conflict of law provisions deemed suitable for the case at hand. We can also mention the Rome Convention dated June 19, 1980, on Applicable Law to Contractual Obligations.
It is relevant to underline that, according to the ICC’s Statistics, one fifth of the cases resolved by the ICC arbitral tribunals during 2002, the parties had not indicated applicable law to the merits of the case, which was selected by the arbitral tribunals.
The obligation set forth under Section 3 Article 34 of the nal for the arbitrators fully to take into account trade practices when solving disputes submitted to arbitration is quite commendable, as it opens the possibility to apply the lex mercatoria even in the event that it should not have been designated by the parties as applicable law.
The nal has once again followed in this respect the uncitral form law, Article 28 whereof sets forth that the arbitrators must decide taking into account trade practices. This formula is also to be found in other international arbitration provisions, and in foreign law.
In this respect, please note the 1961 Geneva Convention (Article VII), the 1987 Arab Commercial Arbitration (Article 5), the Regulations of the ICC Court of Arbitration (Article 17), the LCIA Regulations and Article 59 of the Worldwide Organisation for Intellectual Property (“ompi”) Regulations (Article 22).
As regards foreign Law, one may mention Article 1496 of the French Civil Procedural Code, Article 187 of the Swiss Rules of International Private Law, Article 1054 of the Dutch Civil Procedural Code, Article 1051 of the German Arbitration Law or Article 834 of the Italian Procedural Code.
The arbitrators’ obligation to apply trade practices introduces in Spain one of the most debated issues in international arbitration, i.e., the possibility for the arbitrators to decide exclusively based on trade practices or lex mercatoria, without taking into account any domestic law where the parties have not submitted the dispute to specific rules.
An analysis of arbitration case law shows that, although such solution has been adopted on some occasions by arbitral tribunals within arbitrations submitted before the ICC (among others ICC Awards no. 7375/1996, 9875/ 1999, 117/1999 ó 3131/2000), on other occasions application of the lex mercatoria as sole grounds for the award has been rejected in the absence of an agreement by the parties admitting such possibility (among others ICC Awards number 4650/1987, 5835/ 1996 ó 9419/1998).
Finally, and as a substantial novelty, the nal provides in Article 36 thereof for the possibility of the arbitrators’ issuing an award based on the contents of a prior agreement reached by the parties. This enables the parties to provide any compromises reached within the framework of arbitration proceedings with the enforceability inherent to all arbitral awards.
Please note that this provision of the nal should solve any doubts relating to the possibility of recognition of a foreign arbitral award with these features under the New York Convention.
Regulations of all major international arbitration institutions provide for the possibility of issuing a mutually agreed award; this is the case, for example, of the ICC Regulations (Article 27), LCIA Regulations (Article 26.8), American Arbitration Association Regulations (Article 29) the ompi Regulations (Article 65).
Please note that, according to the statistics published by the icc for the year 2002, approximately 10% of icc arbitrations end in a compromise between the parties documented in the so-called “award by consent”.
As set forth in the nal‘s Statement of Purpose, “the parties directly or the arbitration institutions shall appoint the arbitrators with total freedom and without restriction”. This principle of freedom of appointment of arbitrators is embodied in Section 2 Article 15 of the Law, which expressly sets forth that “the parties may freely agree on the procedure to appoint the arbitrators, provided that it does not infringe the principle of equality”.
This agreement, or procedural contract, is different from the arbitration agreement and an ancillary agreement thereto, given that it shall only be effective in the event of a prior valid submission of the dispute to arbitration, which entails that it may be agreed on a separate document to the arbitration agreement.
In the absence of an agreement between the parties on the procedure to appoint the arbitrators or, which is the same thing, a reference to the relevant regulations of an arbitration institution, Article 15.2 provides as follows:
(i) For arbitration proceedings with one sole arbitrator, he/she shall be appointed by the competent court at the request of any of the parties.
(ii) For arbitration proceedings with three arbitrators, each party shall appoint one arbitrator and both appointed arbitrators shall appoint a third arbitrator, who shall act as chair of the arbitral tribunal.
Notwithstanding the foregoing, if one of the parties should fail to appoint an arbitrator within 30 days as from receipt of the other’s notice requesting such appointment, appointment of the arbitrator shall be performed by the competent court body, at the request of the other party. The same shall apply in the event that the appointed arbitrators were unable to agree on the third arbitrator within 30 days counting from the last acceptance thereof.
In the event of plurality of claimants or defendants, Article 15.2 specifies that the latter shall appoint one arbitrator and the former another, adding that “if the claimants or the defendants were unable to reach an agreement regarding the arbitrator to be appointed thereby, all arbitrators shall be appointed by the competent court at the request of any one of the parties”.
(iii) For arbitration proceedings with more than three arbitrators, at the request of the parties, all arbitrators shall be appointed by the relevant court.
It is possible that, in spite of having agreed on the procedure for the appointment of the arbitrators, the parties are unable to proceed to their designation. In such case, section 3 Article 15 provides that any of the parties may request for appointment thereof to be performed by the competent court, or for the latter to adopt the necessary measures for such appointment.
As regards acceptance by the arbitrators, according to Article 16, save as otherwise provided by the parties, each arbitrator must communicate its acceptance to the party which appointed it within 15 days counting from the day following notice of the appointment, and, if it should fail to give notice thereof within the period provided, shall be deemed not to accept.
Domestic or international arbitration adopts different variations depending on several criteria, which may be combined in practice. Depending on the organisation of the arbitration, one may distinguish institutional arbitration and ad hoc arbitration.
Institutional arbitration is entrusted to a specialised institution, which organises and manages, in accordance with its regulations, the proceedings and each phase thereof. This means that the institution provides the necessary resources to constitute the arbitral tribunal, proceeds, as the case may be, to appoint the arbitrators, makes any relevant summons and notices, helps the arbitral tribunal administer any evidence and resolves, within the framework of its mandate, any disputes arisen in the organisation and conduct of the proceedings.
Article 14 of the nal expressly refers to institutional arbitration, and sets forth the following:
“1. The parties may entrust the management of the arbitration and appointment of the arbitrators to:
a) Public corporations which may perform arbitration functions, in accordance with their rules and regulations and, in particular, the [Spanish] Court for Defence of Competition
b) Non-profit Associations and entities whose by-laws provide for the performance of arbitration functions
2. Arbitration institutions shall perform their duties in accordance with their regulations”
There are both domestic institutions, which hear both domestic and international cases, and international institutions.
Among the first, we may highlight, as regards Spain, and without limitation, the Spanish Court of Arbitration, the Civil and Commercial Court of Arbitration, the Barcelona Court of Arbitration or the Madrid Court of Arbitration.
The Civil and Commercial Court of Arbitration (cima), created on July 1989 and with seat in Madrid, decides on all kinds of civil and commercial disputes, irrespective of the economic sector in which they have arisen. Through the provisions of its procedural regulations, foreign law is easy to adduce, and can be a valid instrument to solve any differences arisen in commercial or international transactions or in relation to disputes with foreign individuals or legal entities (www.cima-arbitraje.com/).
Spanish Court of Arbitration, ascribed to the High Council of Chambers of Commerce, Industry and Navigation, it manages both domestic and international commercial arbitrations, in practically all economic sectors (www.camaras.org/publicado/arbitrajen/corte_330.html).
The Madrid Court of Arbitration, ascribed to the Madrid Chamber of Commerce and Industry and founded on 1989, hears domestic and international civil and commercial arbitrations www.camaramadrid.es/apoyo_empresa/gestion_cotidiana_6.htm)
The Barcelona Court of Arbitration (tab), founded in 1989 by the Barcelona Official Chamber of Commerce, Industry and Navigation, the Barcelona Solicitors’ Bar, (Colegio de Abogados), the Catalonia College of Notaries and the Consell de Collegis d' Advocats de Catalunya, is an arbitration body which institutionally encompasses management of civil and commercial arbitrations (www.tab.es).
Among international arbitration institutions, we can highlight the International Court of Arbitration of the International Chamber of Commerce (icc), the International Centre for the Resolution of Disputes Regarding Investments (icsid), the London Court of Arbitration or the American Arbitration Association.
Founded in 1919, the icc currently unites hundreds of companies and associations in more than 130 countries, contributing decidedly to the drafting and codification of commercial practices and other material regulations specific to international trade. Its universal nature, expressed both from a geographical standpoint, pursuant to the number of countries included therein, and from the perspective of the breadth of issues submitted thereto and to its acquired prestige, makes it deserve the trust of international economic operators.
In principle, there are no limitations to the nature of cases which may be submitted to conciliation and arbitration before the icc, which extend to matters in several legal, political and economic sectors. The icc has full powers to ensure the complete success of the mission entrusted to it by the parties. In this respect, it has powers which may be called executive, i.e. enforcement of the conciliation and arbitration regulations, and it holds all necessary competence for such purposes (www.iccwbo.org/index_court.asp).
As regards the icsid, as mentioned above, it was created pursuant to the 1966 Washington Convention and consists in an institution appointed to facilitate resolution of disputes between governments and foreign investors. In the past few years, one may highlight the numerous arbitrations submitted before the icsid within the framework of international treaties regarding investment protection (www.worldbank.org/icsid)
The London Court of Arbitration is a prestigious multi-sector, professional and private institution with great international fame, the purpose whereof is to facilitate the management of arbitrations at any seat and under any applicable law. Its regulations, last amended in 1998, take into account a peculiarity under English law for international arbitrations, which allows excluding the possibility of judicial review of the award by agreement between the parties (www.lcia-arbitration.com/lcia/arb/es.htm).
The American Arbitration Association is an institution which is not dedicated exclusively to organising and managing arbitration proceedings, but also performs broad scientific and promotional activities (www.adr.org/index2.1.jsp).
As regards ad hoc arbitration, it is arbitration where the parties themselves and the arbitrators appointed thereby organise the arbitration proceedings. Consequently, in ad hoc arbitration cases, it is convenient for the arbitration agreement to be as precise as possible (see section 3.1 hereof), and, in accordance with Article 25.1 of the nal, for all matters not provided for by the parties “the arbitrators may, subject to the provisions hereof, direct the arbitration as they deem fit” (see section 6.1).
Notwithstanding the foregoing, however precise the arbitration agreement, it is possible that, in the event of disagreement or malicious or negligent attitude of the parties, there will arise conflicts which may hinder the conduct of the arbitration proceedings.
Please also note that there exist international texts offering rules of arbitration to which the parties may submit, when they have not agreed to submit their disputes to an arbitration institution, such as the cnudmi/uncitral Arbitration Regulations (“uncitral regulations”), approved by Resolution 31/98 of the United Nations’ General Assembly of December 15, 1976.
As mentioned above, in the absence of an agreement between the parties on the procedure to appoint the arbitrators or on their particular designation, the courts shall intervene (see section 5.1).
Section 1 Article 8 of the nal sets forth different competence criteria to designate the competent First Instance Court (Juzgado de Primera Instancia) charged with the judicial appointment of the arbitrators: (i) firstly, the court of the seat of the arbitration; (ii) if the seat of the arbitration is undetermined, the court of any of the defendants’ domicile or usual residence; (iii) if none of the defendants should be domiciled or resident in Spain, the court of the claimant’s domicile or usual residence; and (v) if the latter should not be domiciled or resident in Spain, any court chosen thereby.
Judicial procedure for the appointment of arbitrators is regulated in Sections 4 to 7 Article 15 of the nal, in which procedure the following elements may be highlighted:
(i) This proceeding must be held according to the rules for oral proceedings (juicio verbal);
(ii) The court may only refuse the application if, pursuant to the documents provided, it cannot appreciate the existence of an arbitration agreement. Resolutions issued by the court refusing the application for this reason shall be capable of appeal.
(iii) Having admitted the application, the court shall make a list with three names for each arbitrator to be appointed, taking into account the conditions to be an arbitrator set forth by the parties, the need to ensure their independence and impartiality and, in the event of appointment of one sole arbitrator or a third arbitrator, the suitability of appointing an arbitrator of different nationality to the parties’ and, as the case may be, to the arbitrators already appointed. After making such list, the arbitrators shall be appointed by lot.
Please note that there is no appeal against the court’s final resolutions, save in the aforementioned event that the court should reject the application pursuant to the non-existence of an arbitration agreement.
All in all, reflecting a widely accepted doctrine and based on the principle of anonimous court intervention in arbitration proceedings, the legislator has reduced the role of the judiciary to the mere appointment of the arbitrator, excluding the possibility of its deciding on the validity of the arbitration agreement or the dispute’s suitability for resolution by arbitration.
Article 13 of the nal sets forth the following:
“Individuals in full possession of all civil rights may be arbitrators, provided that they are not forbidden to do so by the regulations governing their profession. Save as otherwise agreed by the parties, an individual’s nationality shall not be an obstacle for acting as arbitrator”.
Contrary to the provisions of the oal, the transcribed Article does not require the arbitrators to be practising attorneys at the time of resolution of the matter, in accordance with applicable Law. However, as the arbitration framework leans in favour of arbitration in law, the Law’s parliamentary debates showed the risks associated with suppressing such requirement. Therefore, and thanks to an amendment in voce, introduced in the Senate Justice Commission, section 1 Article 15 of the nal, was added, which reads as follows:
“Domestic arbitrations which are not to be resolved in equity in accordance with Article 34, shall require the arbitrator to bea practising attorney, save as otherwise expressly agreed”.
In other words, an exception is included to the general rule in Article 13 for domestic arbitrations in Law, requiring the arbitrator to be a practising attorney, unless the parties expressly agree otherwise.
Notwithstanding the foregoing, for international arbitration, including arbitration in law, the nal opts for acknowledging the greatest possible freedom to the parties. In this regard, its Statement of Purpose sets forth that:
“As regards capacity to be an arbitrator, the legislator opts for the criterion of giving the parties the greatest possible freedom, which is currently the general rule in the most advanced countries in matters concerning arbitration: the law only prescribes for them to be individuals with full civil capacity”.
Inspired in the uncitral form law, the legislator expressly sets forth in the nal the Kompetenz-Kompetenz principle, commonly admitted by authors and in international treaties and in national arbitration legislations.
Thus, much more accurately and clearly than in the oal, section 1 Article 22 of the nal sets forth the following:
“The arbitrators shall be entitled to decide on their own competence, even regarding objections relating to the existence or validity of the arbitration agreement or any others appreciation whereof would prevent hearing the merits of the case [...]”.
The wording of this provision shows, on the other hand, that the rule of competence regarding competence includes any other issue which may prevent the continuation of the arbitration proceedings, thus ensuring performance of the arbitration.
Furthermore, Article 22 declares the severability of the arbitration agreement in respect of the contract, by admitting that the agreement’s validity does not depend on the contract’s, and acknowledging the arbitrators’ competence to decide on the validity of the former. Section 1 thereof adds in this regard that: “[...] the arbitration agreement forming part of a contract shall be deemed a separate agreement to the remaining clauses thereof. The arbitrators’ decision to declare the contract void shall not in itself entail annulment of the arbitration agreement”.
On the other hand, in order to prevent strategies by the parties which may hinder the proper continuation of the arbitration proceedings, section 2 Article 22 requires that questions of competence of the arbitrators –in the broadest meaning of the term competence, as provided under section 1- be adduced “a limine”. Thus, the aforementioned section sets forth that “objections mentioned in the foregoing section must be adduced not later than at the time of submitting the response to the claim”, adding that “the objection that the arbitrators are exceeding the scope of their competence must be lodged as soon as the mater exceeding such scope is ascertained during the proceedings”.
Notwithstanding the foregoing, this Article provides that the arbitrators may admit late objections, provided that the delay is “justified”, i.e., that the party was unable to formulate the objection previously and, according to the Statement of Purpose, provided that “its attitude during the proceedings cannot be interpreted as acceptance of the arbitrators’ competence”.
On the other hand, Article 22.2 expressly rejects the possibility that appointment or taking part in the appointment of the arbitrators may prevent the formulation of objections on competence, as could not be otherwise.
Lastly, Section 3 Article 22 allows the arbitrators to resolve any questions relating to their competence prior to hearing the case, issuing a partial award in this respect, or together with the merits of the case, in the same final award. In the first case, the arbitrators’ decision may be contested by the action for annulment of the award, understanding that “if the decision should dismiss the objections and is adopted prior to the main proceedings, exercise of the action for annulment shall not entail suspension the arbitration proceedings”.
In the nal’s regulation of abstention, challenge, waiver and removal of the arbitrators, set forth in Articles 17, 18 and 19, the legislator has based the Law, almost literally, on the uncitral form law.
The nal conveniently eliminates the reference included in the oal to judges’ grounds for abstention and grounds to challenge judges, and offers in lieu thereof a specific regulation.
As regards abstention, after setting forth that all arbitrators must be and remain independent and impartial during the arbitration proceedings, Article 17 sets forth in Section 2 thereof that “the person suggested as arbitrator must disclose all circumstances which may give rise to justified doubts regarding his/her impartiality and independence”, and “any circumstance subsequently occurred”, and to reply to any request for clarification which at any time during the arbitration proceedings may be made by any party regarding its relation to any of the other parties.
As regards challenge thereof, Section 3 of said Article limits the grounds for challenge to the following two: (i) if there are justified doubts as to the impartiality and independence of the arbitrator; and (ii) if the arbitrator should lack any of the qualifications agreed by the parties.
The rules governing the challenge procedure may present more problems. Section 2 Article 28 sets forth that, in the absence of an agreement between the parties regarding the challenging procedure:
“[...] the party challenging the arbitrator shall set forth its grounds therefore within fifteen days following the date on which it should have become aware of acceptance or of any circumstances which may give rise to justified doubts regarding his/her impartiality or independence. Unless the challenged arbitrator should resign or the other party should accept the challenge, the arbitrators shall resolve on such challenge”.
Consequently, unless the other party accepts the challenge, the challenged arbitrator is called to decide, either by resigning from its position or by participating in the decision relating to his/her challenge (in the event of a three-arbitrator tribunal) or taking the decision him/herself (in the event of a sole arbitrator).
Notwithstanding the foregoing, please note that this shall only apply in the absence of an agreement between the parties, which, in accordance with the provisions of Article 18.1 of the nal, shall be free to establish whichever procedure to challenge the arbitrators deemed appropriate. On the other hand, please note that Section 3 Article 18 provides that, in the event that such challenge should not prosper pursuant to the procedure agreed by the parties or as set forth in Section 2, the challenging party may adduce such challenge if it should subsequently contest the award.
Furthermore, please note that, in the event of institutional arbitration, the Regulations of the institution in question shall provide a series of specific rules for the challenge of arbitrators which shall be preferred to the regulations of the nal.
As regards waiver and removal of arbitrators, according to Article 19.1 of the nal, this shall occur in the event that “the arbitrator should be prevented in law or in fact from exercising its duties, or if he/she should fail to do so for any reason within a reasonable period”. If the parties should fail to reach an agreement regarding removal of the arbitrator, and unless they have provided for a procedure to surmount this disagreement, the following rules shall apply: (i) for an arbitration submitted to the decision of a sole arbitrator, the claim for removal shall be substantiated according to the procedure for oral proceedings; and (ii) for arbitrations with several arbitrators, the remaining arbitrators shall resolve on the issue and, if they should not reach an agreement, the decision shall be submitted to the Court, pursuant to oral proceedings. The Article specifies that the application to appoint arbitrators, in the terms provided under Article 15, may be joined to the application for removal in the event that the court should find for the latter, and that there shall be no appeal against any final resolutions issued thereunder (regarding judicial appointment of the arbitrators, see Section 5.3 hereof).
As regards appointment of the replacement arbitrators, the court shall in any event follow the appointment procedure set forth in Article 20.
Article 21.1 of the nal considerably restricts direct liability of the arbitrators and, as the case may be, of arbitration institutions. Thus, while Article 16 of the oal provided that arbitrators and arbitration institutions would be liable for all damages caused by their conduct pursuant to “wilful misconduct or negligence”, the current Article 21.1 of the nal, as a result of an amendment introduced in the Senate’s Justice Commission, limits liability to damages caused to the parties “with reckless disregard or pursuant to wilful misconduct”.
Consequently, Articles 1104 and 1902 of the Civil Code no longer apply to arbitrators and arbitration institutions, and the burden of proof of reckless disregard or wilful misconduct shall fall on the party which adduces it.
The Article adds, as did the oal, that in arbitration proceedings entrusted to an institution, the injured party shall hold a direct remedy against the former, irrespective of any actions for recovery held by the institution against the arbitrators.
In this matter, the nal also holds the principle of autonomy of the parties, setting forth as the only limitations due respect to the principle of equality between the parties and the right of defence.
This is inferred from Articles 24.1 and 25.1 of the nal. The former provides that “the parties must be treated with equality and each must be given sufficient opportunity to defend its rights”, while the latter sets forth that “in accordance with the provisions of the foregoing Article, the parties may freely agree on the procedure to which the arbitrators must adjust their actions”.
In the absence of an agreement between the parties, Section 2 Article 25 provides that “the arbitrators may, subject to the provisions hereunder, direct the arbitration proceedings as they deem fit”, specifying that “this power held by the arbitrators includes the power to decide on the admissibility, relevance and use of evidence, on the practice thereof, even ex officio, and valuation thereof” (regarding evidence, see Section 6.5 hereof).
Consequently, as set forth in the Statement of Purpose, once the basic principles of equality between the parties and right of defence have been guaranteed, any rules regarding the arbitration procedure set forth in the nal are voluntary and, thus, are only applicable in respect of such matters as have not been agreed upon by the parties, either directly or by reference to the regulations of any arbitration institution.
When drafting the arbitration agreement, the parties must weigh the advantages and disadvantages of one or the other solutions. Reference to the regulations of an arbitration institution presents the indubitable advantage of their being rules contrasted in usual arbitration practice, and which possibly offer greater guarantees of respect to the principles of equality, the right to a hearing and the principle of contradiction. The same shall be true for agreements which reference arbitration regulations, such as the aforementioned uncitral regulations.
It may be convenient to remember, in summarised form, the procedural rules provided in the regulations of some of the major arbitration institutions, such as the icc.
The icc‘s Arbitration Regulations provide for the claim to be addressed to its Secretariat, which shall summon the defendant so that to may reply within thirty days. Once the arbitral tribunal has been constituted, the Secretariat shall deliver the roll of the proceedings thereto. As soon as it receives the record from the Secretariat, the arbitral tribunal shall draft a document setting forth its mission (the so-called “Terms of Reference”, establishing, among other matters, the parties’ claims and requests and a list of matters under dispute). Once this Statement is signed by the parties, none of them may formulate new claims outside the limits set forth thereunder, save with the arbitral tribunal’s authorisation. Subsequently, the arbitral tribunal shall proceed to investigate the case within as short a period as possible using any means deemed suitable (hearing of the parties’ arguments, witnesses, experts...). The tribunal then declares the close of the investigation when it considers that the parties have had sufficient opportunity to state their claims. After the date thereof, no writ, allegation or evidence may be submitted, unless required or authorised by the arbitral tribunal. The arbitral tribunal must issue its final award within six months counting from the Terms of Reference; notwithstanding the forgoing, the Court may, at the request of the tribunal or ex officio, extend such time limit. Before signing the award, the tribunal must submit it, as a Project award, to the Court. The latter may order any formal amendments thereto and, always respecting the tribunal’s autonomy, call its attention to certain related points regarding the merits of the dispute.
All these proceedings are governed by the Regulations and, in the absence of regulation thereunder, by the rules determined by reference to a domestic law applicable to the arbitration or otherwise, and by the parties or, in their absence, by the arbitral tribunal.
In its turn, determination of procedural rules by the parties gives them greater flexibility, but does undoubtedly require a greater effort on their part.
Please find below some of the basic questions to be taken into account when drafting the arbitration agreement or establishing the rules of procedure: (i) the basic structure of the proceedings; (ii) if it proceeds to conduct any discovery (an obligation existing in some Anglo-Saxon countries to show the other party all documents which may be of interest to the case at hand); (iii) if there will be a limited number of witnesses or if, on the contrary, there will be no limitation thereof; (iv) the procedure to document evidence (by video, written record, etc.); (v) if the tribunal is entitled to refuse evidence adduced by the parties if it should deem such evidence to be irrelevant or useless.
Of course, nothing prevents the parties to adapt, when establishing such rules, the rules set forth in the regulations of an arbitration institution or in arbitration regulations such as uncitral’s.
Article 26.1 of the nal gives the parties freedom to agree on the seat of the arbitration, providing that, in the absence of an agreement, it shall be determined by the arbitrators “considering the circumstances of the case and the convenience of the parties”.
Please remember that, in accordance with Article 1.1 and except for the provisions of Article 1.2 (see Section 2.4 hereof), the nal only applies to domestic or international arbitrations the seat whereof is located within Spanish territory.
The seat of the arbitration shall determine the competent court for the judicial appointment of the arbitrators, for court assistance for the practice of evidence, for enforcement of the award and to resolve on the action for annulment of the award (see Sections 5.3, 6.5, 7.2, 8.1 and 9.1 hereof).
This explains the fact that, in practice, the parties study both the applicable law and jurisdiction of places which are candidates to be appointed seat of the arbitration.
Whatever the seat of the arbitration, the arbitrators may, prior consultation with the parties and unless otherwise agreed thereby, meet wherever they deem suitable to hear the witnesses, the experts or the parties “or to examine or reconnoitre objects, documents or persons”. This is provided under Section 2 Article 26, which also grants the arbitrators freedom to hold deliberations wherever they deem fit.
On the other hand, pursuant to Section 5 Article 37, the award shall be deemed in any event rendered at the seat of the arbitration. It shall thus be deemed issued at the seat of the arbitration even if it has in fact been signed somewhere else, breaking the traditional criterion according to which the only relevant element was the place where the award is rendered.
In this respect, the nal also follows the same criterion as the uncitral form law. However, this criterion is not maintained throughout the Law. Indeed, as regards the exequatur proceeding for foreign awards, Article 46.1 provides that “an award rendered outside Spanish territory shall be deemed a foreign arbitral award”; in this respect the new Law maintains the traditional criterion, no doubt because it is more certain and easier to determine.
In considering that the award shall be deemed rendered at the seat of the arbitration, the nal prevents the possibility to lodge a claim for annulment pleading that the award was rendered at a location other than as set forth in the arbitration agreement as seat of the arbitration. This was precisely the case of the Valencia Provincial Court judgement dated February 19, 2003, which found in favour of the appellant in an appeal for annulment lodged by the injured party in the arbitral award.
Arbitration proceedings shall be conducted in the language set forth by the parties or, in the absence thereof, by the arbitrators, in accordance with the provisions of section 1 Article 28, which adds that, save as otherwise provided in the agreement between the parties or in the arbitrators’ decision, the agreed language or languages shall be used in the parties’ writs, at hearings and for decisions or communications by the arbitrators.
Notwithstanding the foregoing, Section 2 thereof makes official a rule which is extended in arbitration practice –especially in international arbitrations- according to which, unless any of the parties should object to it, the arbitrators may order any document to be submitted or any action performed in a language other than that of the arbitration, without requiring translation thereof.
In practice it is usual for the language of the arbitration to be the same as the language of the contract including or to which refers the arbitration agreement.
On the other hand, in determining the language of the arbitration, the language of the place where any action for annulment may be lodged must be taken into account, as, otherwise, the parties shall have to bear the cost of translating the whole record of the arbitration proceedings.
It is also recommended to agree on one language as main language of the proceedings, as dual languages in the same proceedings may give rise to several problems. Thus, in the Vera-Jo Miller Aryehlaura Case, resolved by the arbitral award rendered by the Iran-United States Claims Court dated May 22, 1997, which debated on the lawfulness of certain expropriations effected by the Iranian Government, the arbitral tribunal rejected an expert’s report because it had been submitted only in one of the two languages of the arbitration –the Persian language.
Notwithstanding any other formula which the parties may invent, the nal structures the initial allegations phase within the writs of claim and response to the claim to be submitted by the parties within the time limit provided or determined by the arbitrators, specifying that “the claimant must assert the facts on which its claim is based, the nature and circumstances of the dispute and the pleas formulated thereby, and the defendant may respond to the facts of the claim”, and they may, when formulating their allegations, submit as many documents as they deem fit or refer to any documents or pieces of evidence which they are to submit or adduce (Article 29.1).
Notwithstanding the foregoing, in accordance with the anti-formalist principles of the uncitral form law, the Law departs from some of the structuring principles of the Spanish judicial system, and contemplates the possibility that the parties may extend or amend their initial allegations during the course of the arbitration proceedings, save as otherwise agreed between them or save if the arbitrators should deem it unsuitable based on the delay wherein it incurs (Article 29.2). In any event, the arbitrators shall take good care that any elements purported to be introduced in the debate subsequently to preliminary establishment of the terms of reference the dispute do not impair the right of defence of any of the parties and do not alter the principles of equality and contradiction.
Spanish judicial procedure is based, inter alia, in the principles of perpetuatio iurisdictionis and mutatio libelli, according to which the parties’ claims must be established in the initial writs of allegation, and the subject matter of the dispute may not subsequently be amended. However, the flexibility of the arbitration proceedings is ill-suited to the rigid formal