Spain is no longer problematic when it comes to interim relief
2008 Global Arbitration Review, n.º 4
Arbitration proceedings, swift as they are, retain a temporal dimension: arbitration takes time. And during that time, there is a risk that the respondent could take action that impairs the effectivenees of any eventual award.
Interim relief is the legal instrument specifically intended to avert such risk.
The last few years have witnessed dramatic improvements in the Spanish regulation of interim relief, in general and as it relates to arbitration. A brief outline of the current state of affairs now follows.
Under the previous law, interim relief in support of arbitration was poorly regulated in
Spain. The two serious gaps were:
- it was unclear whether, and under what conditions, the parties or the arbitrators were entitled to resort to the courts in order to seek preliminary remedies before or during the arbitration proceedings; and
- there was real uncertainty as to the powers of arbitrators themselves to grant interim relief; and even if they were allowed to grant interim relief.
The Arbitration Law 2003 resolved both issues whit clear and rational provisions. In essence, three provisions deal which interim relief in the Arbitration Law 2003:
- articles 11.3 and 8.3 govern judicial interim relief (relief granted by the judge); and
- articles 23 governs arbitral interim relief (relief granted by arbitrators).
The preamble to the law summarises the relationships between boot types of remedies: the law “does not abrogate or restrict” the ability of the parties ‘to seek preliminary remedies from the judicial authority” “the powers of arbitrators and courts over preliminary remedies are alternative and concurrent”, without prejudice to he principle of good faith.
Judicial interim relief
The arbitrators lacks the power to order compliance with preliminary remedies. For that, he or she needs the assistance of a court of law. In this respect, preliminary remedies fall within the scope of the assistance of judicial bodies to arbitration putting in the same category as court intervention related to the establishment of the arbitration tribunal, requests for annulment, and recognition and enforcement of arbitration awards (these powers are all limited in number, with a well-chosen methodological approach, in the same provision of the Arbitration Law 2003, article 8).
Article 11.3 states that:
The arbitration agreement shall not prevent either of the parties from seeking, prior to the start of arbitration proceedings, or during such proceedings, preliminary remedies from a court, nor shall it prevent the court from granting such remedies.
In the event of interim remedies granted ante causam, in order for these to be maintained it suffices, as a general rule, “that the party seeking the measure carries out all activities leading to impulse the arbitral proceedings”, according to the wording of article 730.3 of the Civil Procedure Law.
The arbitrator lacks the power to order compliance with preliminary remedies.
As regards the lifting of remedies already granted, the Arbitration Law 2003 is silent. We must understand that the existence of an award, or any other enforceable decision whereby the arbitration proceedings are brought to an end, must -inevitably- lead to lifting the preliminary remedies granted, which must be converted into definitive enforcement measures. Thus, if the award is in favour of the respondent, there is no longer a decision whose effectiveness needs to be ensured, and if the award is in favour of the claimant, this party must seek its enforcement.
Likewise, the law is silent on the possibility of the court’s modifying a preliminary measure that has been adopted. Therefore, general procedural rules must apply: in other words, if fresh circumstances arise, not considered at the time the measure was granted, the measure may indeed be modified by the issuing court. On the other hand, whether the arbitrators can modify the measure adopted by the courts remains uncertain.
As regards jurisdiction and venue, the competence judge is the judge of first instance of the place in Spain where the award is to be enforced (the seat of the arbitration), or failing this (so, if the seat is outside Spain), the place where the remedies are to be implemented.
As for the procedure:
Once the petition for the interim measure is filed, the court may decide to either grant the measure directly, or summon the parties to a hearing.
- If the court allows the measure requested, the petitioner must grant a bond sufficient to cover any damages that the interim measure may cause to the respondent. This decision is subject to appeal, although this will not prevent the measure from being enforced. In the event of ex parte measures (or inaudita parte, to use Spanish legal terminology), after the measure is granted the respondent will be given a term to oppose it. Both parties will then be called to a hearing to defend their positions. The court will then decide whether to confirm or revoke the measure.
The court may allow the respondent to replace the interim measure for alternative security.
What type of interim measures can Spanish courts grant?
There is no closed and comprehensive list: Spanish courts may allow any kind of interim measures considered useful to ensure the enforcement of the future award, in the widest possible terms. Notwithstanding this, the Civil Procedure Law provides examples of interim measures commonly adopted:
Provisional attachment. This measure is particularly suited to secure the enforcement of awards ordering payment of money, rental payments or interests.
Court control or administration to secure profitable properties. This measure is appropriate when, for instance, there is a risk that the defendant might attempt to manage the property so as to decrease its profitability. Court control means that the respondent will need to obtain authorisation from the court appointed controller to perform acts of administration. Meanwhile, in “court administration” a court-appointed administrator replaces the respondent in the management of the property.
- The deposit of movable property -if, for example, the petitioner is requesting the delivery of such movable property.
- An inventory of the defendant’s assets.
- Provisional registration of the notice of arbitration at the land registry and other public registries. Should this measure be adopted, the acquisition by a third party of the property implicated in the proceedings will be affected by the arbitration’s result.
- A stay of resolutions adopted by either the general shareholders’ meeting of a company or its board of directors: this measure can be requested by petitioners representing at least 1 per cent (for listed companies) or 5 per cent (for non-listed companies) of the company’s share capital.
With the entry into force of these provisions, the legislator completes the line of reform initiated with the Civil Procedure Law 2000, finally allowing access to the courts to ensure the effectiveness of the arbitration award in the same terms as would be applied to ensure the effectiveness of a judgment.
Arbitral interim relief
The arbitrator knows the merits of a case and is therefore undoubtedly best suited to assess the suitability and timeliness of the assurance provided by preliminary remedies. Furthermore, it is a general principle of interim proceedings -deriving from their ancillary nature- that whoever hears the case must also hear its ancillary proceedings (excluding appeals).
Hence we have a second category of preliminary remedies -those granted by the arbitrators. And these are provided in article 23 of the Arbitration Law 2003, the first paragraph of which provides that “except as otherwise agreed by the parties, the arbitrators may, at the request of either party, grant the preliminary remedies they deem necessary which respect to the subject matter of the litigation. Arbitrators may request the applicant to post sufficient bond’. This provision places the powers of arbitrators on an equal standing which those of the courts — and perhaps puts them in an even stronger position, because in court proceedings it is presumed that the applicant will post a bond, whereas in arbitration no presumption operates.
Thanks to the second paragraph of this provision — “arbitration decisions on preliminary remedies, irrespective of the form in which they are issued, shall be subject to the provisions on annulment and compulsory enforcement of awards” arbitrators’ decisions on preliminary remedies are directly enforceable, on a par which final awards (and, for that matter, which judicial decisions since the entry into force of the new Civil Procedure Law).
Of course, an arbitration tribunal that orders a measure expects it to be obeyed in good faith without delay. When its decision is ignored, the tribunal can use official reminders as a means of achieving enforcement. lf the decision remains uncomplied with, the tribunal is empowered to factor that failure in when it takes its final decision, particularly on quantum. An arbitration tribunal could also issue an enforceable penalty order for failing to comply with an order.
Likewise, it is possible for a party affected by this type of immediately enforceable interlocutory awards to seek annulment — but only on the highly limited grounds provided in article 41 of the Law. These grounds are quite similar to chose of the uncitral Model Law, and some of them are not suited to revoking a decision on interim measures.
Interim relief and international arbitration
Regarding arbitration with international aspects, the law makes the following distinction.
On the one hand, it allows some of its provisions to apply to arbitration proceedings taking place outside Spain — which we’ll term “foreign arbitrations”. On the other hand, it contains certain provisions intended to adapt its contents to arbitrations taking place in Spain that are of an international nature (as defined in the law) —“international arbitrations”.
Interim relief in arbitrations outside Spain
The provisions on preliminary remedies applicable to arbitrations occurring within the domestic territory also apply to those occurring abroad — in other words, parties to arbitration proceedings located anywhere in the world can resort to Spanish courts for interim relief if they require. With measures granted by the arbitrators, however, an enforcement order (exequatur) must be obtained before they become enforceable in Spain. Consequently, when the arbitration is being handled abroad, the party may choose between the two following possibilities:
They can seek interim relief from the arbitrators, and subsequently have the interim award enforced in Spain. Such enforcement may be obtained through the New York Convention, although this is still somewhat uncertain.
- They can seek interim relief directly from the competent Spanish courts (which are at the disposal of the parties to grant interim relief in arbitration proceedings anywhere in the world).This avoids exequatur proceedings — and, as stated in the Arbitration Law, would not amount to a tacit waiver of arbitration, nor a tacit submission to the jurisdiction of Spanish courts.
Which of these options should be preferred
— arbitral or judicial relief? Each has its pros and cons:
- State courts are permanent, unlike arbitration tribunals, which need to be set up. Furthermore, courts can enforce the measure directly under their exclusive powers of coercion. Courts may also address measures against third parties, whereas arbitral measures can only affect the parties to the arbitration. Finally, arbitrators are probably even more reluctant than courts to grant ex parte interim measures.
- Arbitrators are acquainted whit the merits of the case and therefore in a better position to issue the most appropriate decision. Besides, arbitrators are generally more flexible than courts in their approach to the most appropriate type of measure to be adopted. Finally arbitrators are probably more inclined to draw negative inferences from the party non complying with one of their orders than with an order issued by a state court.
Interim relief in international arbitrations in Spain
The Arbitration Law 2003 adopts a unitary system: it is equally applicable to domestic and international (as defined therein) arbitrations.
“International arbitrations” are subject to only minor adjustments to the provisions contained in the law.
In fact, no significant peculiarities affect preliminary remedies in international arbitration. Nonetheless, article 39.5 of the new Law provides for different treatment in domestic and international arbitrations. Indeed, from the date of the award, in domestic arbitrations, there is a term of 10 days to correct mistakes (at the arbitrators own initiative, or at the request of either party) and to request corrections, and 20 days to request supplements to the award. These terms — 10 and 20 days — extend to one and two months respectively, in the case of international arbitration. This distinction is probably unnecessary nowadays, and indeed is perhaps counterproductive, causing insecurity during the two-month delay before an interim award becomes final.
The changes the Arbitration Law 2003 made to interim relief have been of great significance. It has clarified the powers of arbitrators to grant preliminary remedies and established when the parties can resort to the courts to ensure the final award is effective.
Furthermore, it is possible to seek interim relief even when the arbitration proceedings take place abroad, either directly from the arbitrator or through Spanish courts.
In short, the law represents a huge leap forward in the regulation of interim relief in support of arbitration proceedings.