Spain as an Import Jurisdiction

Miguel Virgós Soriano.

2006 Chambers Client Report, n.º 15

International arbitration, as international trade in services, is a game of “imports and exports”.

The 2003 Arbitration Act has done a great deal to promote Spain as a seat of choice where international arbitrations can take place in a stable and arbitration-friendly legal environment. The three pillars of the 2003 Act - procedural fairness, party autonomy and limited judicial intervention - are also the foundations of Spain as “export jurisdiction”: an attractive venue for the hosting of international arbitrations.

It is no secret that one of the main objectives of the Act has been to turn Spain into the “natural venue” for arbitrations linked to Latin America. Since it was enacted, the number of international arbitrations in Spain has grown steadily.

When it comes to acting as an “import jurisdiction”, Spain is also an open country. The Act does not implement a specific regime for the recognition and enforcement of arbitral awards; instead, it remits the matter to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, even with regard to non-signatory States.

The 1958 NYC establishes the obligation to recognize and enforce foreign arbitral awards but is silent with regard to the manner in which it is executed:  In Spain, in particular, it is necessary to obtain an exequatur of the foreign award from the local courts. The competent bodies to hear these exequatur proceedings are the courts of first instance (Juzgados de Primera Instancia e Instrucción and Juzgados de lo Mercantil). It should be noted, however, that the exequatur regime actually in place stems from the 19th century and is bound to be modified by the future International Judicial Cooperation Act (Ley de Cooperación Jurídica Internacional), still at an early drafting stage. 

The grounds for denial provided for in the 1958 NYC are exhaustive and well known to all. Case law reveals that the grounds most often alleged to oppose recognition of foreign awards in Spain are two: invalid or non-existent arbitration agreement (Art.V.1.a) and public policy (Art.V.2.b). But, as explained below, the fact is that only in very few instances have these grounds prevented recognition.   

As regards the former, Art. 9 of the Arbitration Act has cut down the formalities required by Art. II of the 1958 NYC and established for the validity of the arbitration agreement a conflict rule with alternative connecting factors operating in favor validitatis. Art. 9 also comes into play when recognition of foreign awards is sought, due to the “most-favourable provision clause” within the 1958 NYC, thereby reducing the range of application of this ground.

In relation to the latter, it is difficult to offer a specific definition of public policy. Given its role as a “general clause”, it has no independent meaning, deriving its content from other areas of the law. Its function is to inform the recognition and enforcement system with the fundamental principles and values inherent in the Spanish legal system and with other social principles (like morality), to uphold them.

However, these principles and values are not directly opposed to foreign awards so as to automatically deny their recognition. Public policy operates within the international cooperation system which is a public good that must be “produced” by the States: Without international cooperation, justice cannot cross over national borders. For this reason the principles and values inherent in international cooperation must be kept in view too, thereby requiring a balancing of both groups of principles. This explains why public policy is not applied in the same way when it comes to the domestic or the international sphere. Spanish courts have consistently acknowledged this by differentiating between “national” and “international” public policy.

International public policy includes both substantive and procedural principles. Substantively, it protects mandatory rules designed to serve public interests of social or economic nature (loi de police), such as anti-trust, capital market transparency or double-technology and weapon control, to name but a few. Notwithstanding, only rarely have Spanish courts denied recognition of foreign arbitral awards for this reason. This fact also shows that arbitral tribunals have always been careful not to issue awards contradictory to those interests. 

Procedural public policy includes fair notice, equal treatment of parties and fair opportunity to present one’s case. These rights enjoy constitutional protection and courts take special heed of them. Be that as it may, Spanish courts consider the conduct of the parties in the foreign proceedings to be of relevance. For instance, should a party strategically decide not to resort to the procedural remedies available under the applicable law, it may be precluded to reinstate the matter in the exequatur proceedings in Spain. In sum, Spanish courts apply public policy restrictively.