REVIEW OF AWARDS UNDER THE SPANISH LAW

CONFERENCE HELD ON
THE 8TH JUNE 2001
ORGANIZED BY THE
EUROPEAN COURT OF ARBITRATION

A review of awards, within the arbitration stage, does not exist under Spanish legislation. There is a review, only on formal questions governed by the "Audiencias" (High Courts, or superior Courts, immediately before, for most matters, to the Supreme Court), and an extraordinary procedure, available for any final decision.

The Spanish Arbitration Law offers no issues, within the arbitration procedure, to review an arbitration award, out of the formal annulment procedure before the High Court. This annulment procedure is implemented with article 45 of the Arbitration Law, which establishes only 54 reasons for annulment:
· the arbitration clause is null,
· the appointment of the arbitrators and the following of the procedure have been undertaken without the formalities and principles of the Law,
· out of term for providing the award,
· the arbitrators have stated on aspects not submitted at their decisions, or on aspects that cannot be submitted to arbitration,
· the award is contrary to public order.

A lot of annulment proceedings have been introduced to try to discuss the substance of the award, through public order, but the jurisprudence has never admitted this intention. And there is a lot of it. As it is not the Supreme Court the body that deals with this matter, we have not a sole jurisprudence on what the reaction of the courts is, in front of the different cases, but we have a jurisprudence of the different High Courts based on the same opinion on the matter.

There is no doubt, after the decisions of the different High Courts, that the review of awards cannot be applied in any case regarding the substance of the award, "because - say most of the decisions - the review of the substance would annul the objectives of the arbitration principles. These criteria have constantly influenced the jurisprudence, to avoid that, using the formal review of the Audiences, the parties could come back into the debate already solved with the award of the arbitrators.

As you can see, it is not only a question of current law but also a question of principles. Let us come into the law, to see the structure of the law and the reasons of the principles:

As stated, the Spanish Arbitration Law offers no issues to review an arbitration award, apart from the formal annulment procedure before the High Court. Even if the law establishes an absolutely free and informal procedure, the intention to submit disagreements to one ore more arbitrators (art. 5) cannot be understood as a possibility of several subsequent awards, because all references to the arbitration procedure refer to the decision of the arbitrator or arbitrators.

Once the arbitrators have been appointed, the arbitration procedure begins. Those are, then, the only ones appointed to produce a valid award.

What could we do to avoid those rules, to provide an award of a reviewing possibility?
It is certainly difficult. We should strongly refer to art. 21.2. which says the development of the arbitration procedure will be governed by the consent of the parties or the rules of the Corporations or Associations appointed to manage the arbitration or, if not, by agreement of the arbitrators.

After reading this article, one could think that every modality is possible; but in fact, we see some important problems in appointing arbitrators that provide an award, who will no longer arbitrators, (in the sense of the Spanish law) and the award provided will no longer be an award (in the sense of the Spanish law) as the rules for their respective effectiveness will not be longer applicable to these arbitrators and this award, if there is to be a new arbitrator or several new arbitrators to provide a new award, as review of the previous one, and now these last ones will have to be the object of application of the law provisions for effectiveness. As you can imagine, if the Spanish law does not allow expressly the review of an award, the invalidation of a first award to provide a second one is not available.

With a lot of imagination, we could try to transform a mere appraisal or opinion of an expert, on an award of an arbitrator, if none of the parties involved, objects to the appraisal or opinion, after a certain number of days. If any of the parties objects to the said appraisal or opinion of the expert, this expert will remain a first expert, without any effectiveness of his appraisal or opinion. Therefore, the former appointed person or persons, (not to review) to solve the conflict with the help of an appraisal or opinion given by an expert, will be the authentic arbitrators to provide an authentic and effective award.

However, I would not recommend anyone to write an arbitration clause with these provisions, because it is, in my opinion, a clear "détour de Loi", and if the award is not agreeable for the other party, he would apply to the High Court for annulment. And, mainly if the review system has come about, some strong arguments could be asserted to annul the final award.

As nobody is ready to bet with the affairs of his clients, we have no qualified opinion about this original formula.

The said strong arguments arise from the principles of the Spanish arbitration law. However, the principles managed by the Law and its spirit, seem to be focused on those mentioned in art. 21, that is, the rights of being heard, of confrontation and equality between the parties. Most of the annulments of awards obtained from the High Courts are based on these principles when they are infringed by errors in procedendo, as they fit, of course, into the concept of public order of the 5th cause of annulment foreseen in art. 21.

But arbitration cannot be limited to those concepts, as the award is considered by art. 37, if it is not annulled (sole procedure available), res judicata: and the award is the first and unique, with no further review available. As a very clear and brief conclusion, the fact is that the annulment procedure is not available to correct substantial deficiencies of arbitration awards.

The extraordinary procedure ("demanda de revisión" of the 509 and ss. of the Spanish procedural law), only for res judicata (awards as well as judicial verdicts) is only applicable in case of:
· new basic documents for the decision, not available during the procedure,
· documents basing the decision being declared false,
· testimonies basing the decision being declared false, and
· unfair obtaining of the decision, through bribery, violence or scheming.

As you can see, this extraordinary procedure is not available either to correct substantial deficiencies of arbitration awards.

What happens then when there are substantial deficiencies? Are arbitrators considered infallible?
Wouldn't it be much more attractive for the market, to provide a system giving more confidence to the arbitration institution?
Why then, the categorical refusal to the possibility of reviewing substantial deficiencies?

The decision of the High Court of Madrid of 31.10.95, seems to provide a very heavy argument, resuming the intention of the legislator:
We have to keep in mind that we have behind us two persons having taken, for solving their conflicts, the option of avoiding judicial jurisdiction, and preferring to submit the interpretation of the law to persons who do not belong to the judicial power. When the award is produced, the winning party confirms his theories and reasons. It is then not logical that the losing party rejects his former preference, applying for a review by the Courts. Nobody forced him to sign an arbitration clause…
In any case, the parties can always apply for damages, as stated in art. 16, in which could be included the production of an award with clear professional incompetence.

I have some doubts about this last theory, as art. 16 refers to the "fair accomplishment of (the arbitrator) duties": these are not to produce an excelent award but to produce the award, complete, comprehensible, effective and on time. In fact, some theories support that clear incompetence, in the sense of wrong application or interpretation of law, could be a reason for annulment under cause 5th (public order). All decisions refer to violation of fundamental rights, but affecting the procedure. The violation of material fundamental rights (as stated the decision of 26.11.91 from the High Court of Madrid) is such a large formula that it allows the introduction of a lot of challenges to substantive questions, and that is a very serious question, due to the fact that there are no remedies on substance for awards. But some other decisions are assuming the public order as a large concept, and accept that arbitrators cannot infringe mandatory rules, because this infringement of mandatory rules is a question of public order.

However, the reasons of the above mentioned decision are focused on a judicial review of the award. But, what is an arbitration review of the award about?

Under the Spanish principles of arbitration, the review does not, as a concept, fit into the institution of arbitration. And, because of this, the Law of Arbitration does not provide a review on the substance of the awards. The principles of arbitration are based on freedom; freedom to choose the institution, freedom to choose the arbitrators and freedom to choose the procedure. As nothing is compulsory, no reason appears to provide a system to guarantee the excellence of the award, which on the other hand is necessary in judicial jurisdiction, where neither the Judge nor the procedure can be chosen.

To provide a review system of awards would mean the denial of the confidence principle. As the arbitration institution is based on the principle of confidence and rapidity, the review would mean that the arbitrator, freely chosen by the parties, was the wrong person, and if the first arbitrator is the wrong person, why should the review arbitrator be supposed to be the right person? According to these principles, review is nonsense. Review also means a break of the principle of speed.

We could find substantial benefits in a review on arbitration procedures governed by an arbitration institution. In these cases, as already stated, the market would have more confidence in submitting their conflicts to an arbitration institution. As it is not the parties but the institution who normally appoints the arbitrators, it makes more sense that the party disagreeing with the award could apply for review. However this is a problem of confidence in the arbitration institutions that affects the confidence in arbitration itself.

The introduction of a review about the substance of the awards, meaning a second opportunity, would perhaps help to promote arbitration as an alternative way to solve conflicts, but Spanish law does not consider this possibility.

Of course, any award made by a future International Appellate Arbitration Court, if created by international conventions, will be enforceable in Spain, but this possibility will not solve the question for domestic awards.

Juan Núñez

e-mail : info@cour-europe-arbitrage.org
All rights reserved. Copyright C.E.A. 2001