International Arbitration 2023

Last Updated August 24, 2023

Spain

Law and Practice

Authors



Cases & Lacambra is an international client-focused law firm strongly committed to offering the best and most comprehensive advice on business law. The firm, with offices in Europe and America, has a proven track record in complex transactions involving the financial sector, special situations, financial markets regulations, cross-border disputes, and transactions with specific tax-related considerations. The firm focuses on providing bespoke solutions to its clients, which include financial institutions, investment services companies, investment funds, insurance companies, energy sector companies, family offices, business conglomerates and high net worth individuals. The firm’s teams are not only highly qualified but also possess a wide range of experience across numerous sectors, always upholding a standard of excellence with a keen focus on cross-border matters. Cases & Lacambra’s litigation and arbitration team works together with its clients, be they financial entities, multinational or national companies, and individuals, with the aim of avoiding potential disputes. In this respect, the firm gives legal advice on regulatory compliance as a method of preventing possible conflicts. If a dispute cannot be avoided, the firm represents clients in all kinds of judicial and arbitration proceedings. The litigation and arbitration team at Cases & Lacambra consists of lawyers distinguished by their high level of specialisation and chosen from top-tier law schools, enabling the firm to achieve excellent outcomes for its clients in complex and critical matters.

In Spain, arbitration is the dispute resolution procedure of choice. Indeed, arbitral awards are automatically enforceable before ordinary courts (Article 517.2.2 of the Spanish Procedural Law, Act 1/2000, of 7 January 2000).

However, some domestic parties are still reluctant to use arbitration to resolve their disputes, although the prevalence of arbitration has increased because judicial proceedings are too slow in some parts of Spain.

With respect to international arbitration proceedings, Article 3 of the Spanish Arbitration Act 60/2003 of 23 December 2003 (SAA) states that arbitration proceedings shall be considered international when any of the following circumstances apply:

  • at the time of the conclusion of the arbitration agreement, the parties have their domiciles in different countries;
  • the place of arbitration, determined in or pursuant to the arbitration agreement, the place of performance of a substantial part of the obligations in dispute or the place with which the dispute is most closely connected, is outside the state in which the parties have their domiciles; or
  • the legal relationship in dispute is connected to international trade interests.

Therefore, under Spanish law, arbitration proceedings will be considered international only in those cases.

Between 2021 and 2023, international arbitration has increased exponentially in fields that require higher levels of expertise.

This is the case for the construction and energy industries, in which it is quite common for the contracting parties to agree to submit their disputes to international arbitration due to the specific expertise required for the resolution of those kinds of proceedings.

Moreover, because of the COVID-19 pandemic, litigation has increased considerably during 2021–22 in the construction and energy industries. It is difficult to identify any industries that have experienced decreased international arbitration activity.

In Spain, the most frequently used international arbitration court is the Court of Arbitration of the International Chamber of Commerce (ICC).

Moreover, until 2020 there were four arbitral institutions in Spain used for international arbitration:

  • the Madrid Court of Arbitration (Corte de Arbitraje de Madrid);
  • the Civil and Commercial Court of Arbitration (Corte Civil y Mercantil de Arbitraje – CIMA);
  • the Spanish Court of Arbitration (Corte Española de Arbitraje); and
  • the Arbitration Court of Barcelona (Tribunal Arbitral de Barcelona).

However, on 1 January 2020, the Madrid International Arbitration Center (Centro Internacional de Arbitraje de Madrid – CIAM) began its activity.

CIAM was created following an agreement reached between the Madrid Court of Arbitration, CIMA and the Spanish Court of Arbitration to promote international arbitration in Spain.

In Spain, there are no specific national courts to hear disputes related to international arbitrations and/or domestic arbitrations.

However, there are some national courts that have specific powers regarding international arbitration.

For instance, the courts of first instance (Juzgados de Primera Instancia) are entitled to recognise and enforce international arbitration awards per Article 8.6 of the SAA, while the high courts of justice (Tribunales Superiores de Justicia) have jurisdiction to hear appeals for the annulment of awards.

In Spain, the governing law on arbitration is the SAA, which includes both domestic and international arbitration.

This law draws heavily on the United Nations Commission on International Trade Law of 21 June 1985 (the UNCITRAL Model Law). Key similarities include the requirements for a valid agreement to submit to arbitration and the adoption of interim measures in arbitration proceedings.

However, it should be noted that, in addition to the SAA, Spanish law also incorporates the provisions relating to international arbitration established in treaties ratified by Spain or contained in national laws with special provisions on arbitration.

The main differences between the SAA and the UNCITRAL Model Law include:

  • in accordance with Section 9.6 of the SAA, in international arbitrations, the arbitration agreement will be valid and the dispute shall be arbitrable if it meets the requirements stated by the law chosen by the parties to govern the arbitration agreement, by the law governing the merits of the case or by  Spanish law; and
  • in accordance with Article 15 of the SAA, unless otherwise agreed by the parties, in arbitrations that are not to be decided in equity, when the arbitration is to be decided by a sole arbitrator, the arbitrator shall be an attorney.

The Spanish arbitration legislation has not been modified in recent years.

According to Article 9.1 of the SAA, to be valid under Spanish law, an arbitration agreement has to express the parties’ willingness to submit to arbitration all or some disputes that may arise from their legal relationship. In this sense, the Spanish law follows Article 7 of the UNCITRAL.

Therefore, the key aspect to be considered in an arbitration agreement is to clearly state the intention of the parties to submit their dispute to arbitration.

In addition, an arbitration agreement must be made in writing and signed by both parties or exchanged in communications between the parties which provide a record of the agreement (Article 9.3, SAA).

On the other hand, in international arbitrations, the SAA expressly provides that the arbitration agreement will be valid if it meets the requirements stated by the law chosen by the parties to govern the arbitration agreement, by the law governing the merits of the case or by Spanish law (Article 9.6, SAA).

Under Spanish law, the matters that cannot be submitted to arbitration are matters excluded from the free disposition of the parties. These would be considered non-arbitrable matters (Article 2.1, SAA). Moreover, Article 1.4 of the SAA excludes labour disputes from the scope of the law and, in addition, there are matters excluded from arbitration for reasons of public order, such as disputes related to personal capacity or filiation.

Regarding the determination of the law applicable to the arbitration agreement, the main rule is the freedom of choice of the parties. In international arbitration, if there is no choice, Article 9.6 of the SAA provides that the arbitration agreement will be valid if it meets the requirements stated by the law governing the merits of the case or by Spanish law.

The Spanish courts follow this rule and do not intervene in those cases in which they lack jurisdiction unless expressly provided for by the SAA, as set forth in Article 7 of the SAA.

In this regard, in cases where there is an arbitration agreement, the national courts will refrain from hearing the dispute and will accept the decision of the parties to submit to arbitration.

Likewise, if there is an arbitration agreement between the parties, the opposing party may also allege the lack of jurisdiction of the court through a motion for lack of jurisdiction.

If the contract in which the submission to arbitration clause is contained is invalid, the arbitration clause will not be affected by the invalidity. The arbitration clause is considered a separate legal stipulation from the main contract regardless of whether it is set as a clause within the contract itself or as a separate contract.

In this sense, the principle of competence-competence is expressly recognised in Article 22 of the SAA. This principle states that arbitrators are empowered to decide on their own jurisdiction, including any plea related to the existence or validity of the arbitration agreement, or any other pleas, the acceptance of which would prevent the consideration of the merits of the case.

According to Article 15 of the SAA:

  • in arbitrations of law, the only limit set to the parties’ autonomy is that at least one of the arbitrators must be an attorney;
  • on the other hand, there is no such limitation in equity arbitrations, and there is no requirement that an arbitrator be an attorney, not even in cases in which it is solved by a sole arbitrator.

In addition, it should be noted that the arbitrators cannot be legal entities, and there is no maximum limit to the number of arbitrators as long as they are odd-numbered.

The parties are free to agree on a procedure to appoint the arbitrator(s), but, if the arbitrator(s) cannot be appointed under that procedure, any party may apply to the competent court to appoint the arbitrators or, as appropriate, to adopt the necessary measures.

For those cases, Article 15 of the SAA establishes the following procedure to appoint the arbitrator(s):

  • In an arbitration with a sole arbitrator, they will be appointed by the competent judicial court at the request of any of the parties.
  • In an arbitration with three arbitrators, the parties will appoint one arbitrator each, and these two arbitrators will appoint the third arbitrator, who will be the chairperson of the arbitral tribunal. If a party fails to appoint the arbitrator within 30 days of the latest acceptance, the appointment will be made by the competent judicial court at the request of any of the parties.
  • Where more than one claimant or respondent is involved, the claimants will appoint one arbitrator and the respondents will appoint another. If claimants or respondents cannot agree on the appointment, all arbitrators will be appointed by the competent judicial court at the request of any of the parties.

If the arbitration is administered by an arbitration institution, the latter will apply its own rules for appointing arbitrators.

As stated in Article 8.1 of the SAA, the Spanish courts will intervene in the selection of the arbitrators when it has not been possible to appoint the arbitrator(s) by the method stipulated by the parties, in the following cases:

  • when the arbitration should be overseen by a single arbitrator and the arbitrator could not be determined in accordance with the stipulations agreed by the parties;
  • when the arbitration should be overseen by three arbitrators but one of the parties has not selected the corresponding arbitrator within a period of 30 days; or
  • when there are several plaintiffs or defendants and they do not reach an agreement on appointing an arbitrator.

The SAA is flexible in relation to the procedure for challenging arbitrators. It allows the parties to agree on the challenge procedure they deem most appropriate.

However, in the absence of an agreement, the party challenging an arbitrator shall state the reasons for the challenge within 15 days of becoming aware of the acceptance or of any circumstances that may give rise to justifiable doubts as to the arbitrator’s impartiality or independence.

Unless the challenged arbitrator withdraws from their position or the other party accepts the challenge, it shall be for the arbitrators to decide on the challenge.

The grounds on which the arbitrators may be challenged must be based on whether there are circumstances giving rise to justifiable doubts as to their impartiality or independence, or as to whether they possess the qualifications agreed upon by the parties.

The arbitrator must be impartial and independent. To avoid being challenged, they must remain independent and impartial throughout the arbitration (Article 17.1, SAA).

Despite the fact that no definitions of independence and impartiality are established in Spanish law, they usually consist of maintaining the absence of any personal, professional or commercial relationship with the parties, and should an arbitrator have any impediment that prevents them from meeting these requirements, they must disclose this information at the time of their appointment and without delay.

In this regard, we must point out that the Spanish Arbitration Club approved the Code of Best Practice, which includes recommendations regarding the arbitrators’ standards of independence.

As set out in Article 2.1 of the SAA, only disputes on matters of free disposal according to law can be the subject of arbitration procedures.

In this sense, matters for which arbitration is not freely accessible to the parties include the following:

  • personal capacity, filiation, marriage and minors (Article 751, Spanish Civil Procedural Law);
  • rights for which a waiver may be contrary to the public interest (Article 6.2, Spanish Civil Code); and
  • labour matters (Article 1.4, SAA).

In accordance with Article 22 of the SAA, the arbitrators appointed in an arbitration procedure are fully empowered to decide on their own jurisdiction (the competence-competence principle). This includes the power to decide if the arbitration agreement exists or if it is valid.

A court may address issues of jurisdiction of an arbitral tribunal if a party files a claim with the court despite the fact that the parties have agreed on an arbitration clause. In this case, the defendant could file a motion for lack of jurisdiction invoking the existence of the arbitration agreement and could request the court to refrain from ruling on the matter. All of this is settled in accordance with Article 11.1 of the SAA and Article 63 of the Spanish Civil Procedure Law.

If the existence of the arbitration agreement can be clearly proved, the Spanish courts will refrain from intervening in the procedure.

The SAA does not establish the option for Spanish courts to review negative decisions on jurisdiction by arbitral tribunals, although jurisdiction may be reviewed by means of an action for annulment of the award (Article 41, SAA).

The parties can only challenge the jurisdiction of an arbitral tribunal before the courts when an award has been issued (interim or final), since Article 22 of the SAA grants exclusive jurisdiction to the arbitrators to decide on their own jurisdiction.

Therefore, the decision of the arbitrators on their own jurisdiction can only be challenged through the exercise of an action for annulment of the award, without prejudice to the fact that the parties could allege before the arbitral tribunal its lack of jurisdiction in their first writ of allegations.

The Spanish courts will analyse the specific jurisdiction of the arbitral tribunal through a deferential review.

In the event that a party files a claim when it should have initiated arbitration proceedings due to the existence of an arbitration agreement, the court should act in accordance with the arbitration agreement unless it considers it to be invalid.

It should also be noted that the parties may modify the submission made to arbitration by tacitly submitting the dispute to the courts. Thus, if a claim has been filed with a court despite the fact that the parties have agreed on an arbitration clause and the opposing party replies to the claim without objecting to the jurisdiction of the tribunal within ten days, it will be understood that the parties have agreed to submit their dispute to the jurisdiction of that court.

Spanish law does not recognise the capacity of arbitral tribunals to uphold jurisdiction over persons or entities that are not parties to the arbitration agreement.

However, there are certain cases in which it has been accepted that arbitration agreements may affect non-signatory parties if they have a close and strong relationship with the signatories or play a relevant role in the execution of the contract submitted to arbitration.

Article 23 of the SAA establishes that arbitrators may, at the request of a party, adopt the precautionary measures that they deem necessary in relation to the object of the proceedings. In such cases, arbitrators may require the claimant to furnish sufficient security.

The SAA does not detail any specific interim measures and, therefore, arbitrators commonly apply by analogy some of the measures listed in Article 727 of the Spanish Procedural Law (Act 1/2000, of 7 January 2000), such as preventive seizure of goods, judicial intervention or administration of productive goods, goods depository, etc.

The competence to adopt precautionary measures in the framework of arbitration procedures vests in the arbitrators themselves. However, to achieve effective compliance, the collaboration of the courts is often necessary.

Moreover, it is worth mentioning that the national courts can grant interim measures in aid of international arbitration in accordance with Article 722 (first paragraph) of the Spanish Procedural Law (Act 1/200, of 7 January 2000), which regulates interim measures in arbitration proceedings and foreign litigation. This provision determines that whoever can prove to be a party to an arbitration agreement may seek injunctions from the court prior to or during the arbitration proceedings.

According to Article 722 of the Spanish Procedural Law, whoever can prove to be a party to any judicial or arbitration proceedings being conducted in a foreign country can request interim measures in Spain, except in the cases where the main matter at issue should lie solely within the competence of Spanish courts.

Although the SAA does not regulate the use of emergency arbitrators, the Madrid International Arbitration Center’s Arbitration Rules include a specific procedure for the request of urgent interim measures by any of the parties. By means of this procedure, the parties have the ability to obtain provisional protection of their rights and interests when a situation arises that does not allow them to wait for the establishment of the arbitral tribunal (Articles 58-67, CIAM’s Arbitration Rules).

In this sense, the decision of the emergency arbitrators will be binding for the parties and will cease to be binding if the court terminates the request for emergency arbitration or if the request for arbitration has not been filed within the established time limit, among other reasons.

In this regard, the arbitrators of the main proceedings will have the ability to modify, suspend or revoke the decision of the emergency arbitrator, provided that one of the parties requests it.

When interim relief is requested in an arbitration procedure, the arbitrators can, in accordance with Article 23 of the SAA, require the requesting party to pay a bond to ensure that they can repay the damages that the requested measure could potentially cause to the other party.

In Spain, the principle of party autonomy, regulated in Article 25.1 of the SAA, governs the arbitration procedure.

Therefore, the only mandatory rule that governs the arbitration procedure is respect for due process rights (ie, the right to be heard and the equal treatment and contradiction of the parties).

As mentioned in 7.1. Governing Rules, the principle of party autonomy will govern the arbitration procedure, respecting the principles of due process and equal treatment in all cases.

Spanish national law does not contain a list of arbitrators’ duties and powers. However, they include the following.

  • Duties:
    1. they must act in a fair and impartial manner, treating both parties equally;
    2. their performance has to fall within the established legal or contractual framework; and
    3. they must keep the procedure confidential.
  • Powers:
    1. the power to decide on their own competence; and
    2. the power to adopt interim reliefs.

It should be pointed out that the Spanish Arbitration Club has approved the Code of Best Practice, which includes recommendations regarding the arbitrators’ duties.

The SAA does not include legal provisions that provide for particular qualifications or other requirements for legal representatives, beyond requiring that the representative has sufficient powers to act as such.

As regards the collection and submission of evidence at the pleading stage and at the hearing in the Spanish jurisdiction, it should be noted that the parties are free to choose the applicable rules of evidence, subject to the requirements adopted by the arbitration institution where the arbitration takes place.

Thus, as for the existence of specific rules applicable to the different types of evidence, the arbitrator may order the disclosure of documents and the appearance of witnesses. They may even request the assistance of the competent court in the submission of evidence, in accordance with Article 33 of the SAA.

In this regard, with respect to the possibility of one party to disclose documents to the other party or the arbitrator, it should be noted that the parties may fix the rules and scope of disclosure by mutual agreement, which must be approved by the arbitrator.

According to the SAA, the parties and the arbitrator will have full freedom and flexibility in the evidence phase. Thus, as long as the principles of equality and contradiction are complied with, there is no difference between international arbitration and national proceedings.

In this regard, if the arbitration is administered by an arbitral institution, the rules of evidence could be those established by that particular institution.

On the other hand, if the arbitration is an ad hoc arbitration and the parties have not agreed on the rules of evidence, the arbitrators shall determine how it is to be regulated, provided that the principle of equal treatment is granted.

According to Article 33 of the SAA, the assistance of the courts in the collection or submission of evidence may be requested whenever necessary.

It is the first instance court of the place of arbitration or of the place where the assistance is requested that will assist the parties or the arbitrators in the taking of evidence. Such assistance may consist of the collection or submission of evidence by the court itself or the adoption of specific measures to enable the collection or submission of certain evidence.

Article 24.2 of the SAA expressly establishes that the arbitrators, the parties, and the arbitral institutions must respect the confidentiality of the information and documentation provided for in the arbitration proceedings.

The principle of confidentiality affects both the information and documentation related to the merits of the case, as well as the documentation and evidence related to the arbitration proceedings.

The legal requirements for an arbitral award to be valid and enforceable in Spain are set forth in Article 37 of the SAA. They can be summarised as follows:

  • the time limit for rendering the award is six months from the filing of the statement of defence or from the expiration of the time limit for filing it, unless otherwise agreed;
  • the award must be made in writing and signed by the arbitrators;
  • the award must include a statement of the reasons on which the decision is based, unless it is rendered by termination by mutual agreement of the parties;
  • the award must contain a specific decision on the costs of the arbitration; and
  • the award must be expressly notified to the parties, in the manner and within the period agreed by the parties or, failing this, by delivery of a signed copy of the award to each party.

The six-month period for delivery of the award, unless otherwise agreed, may be extended in a duly justified manner by the arbitrators for a period not exceeding two months.

As to the types of remedies that an arbitral tribunal may award, arbitrators can award both declaratory relief and monetary compensation.

At the same time, arbitrators have the possibility of ordering the specific performance of a contract by one of the parties or the pursuit of a certain action.

However, as regards the existing limits on such remedies, it is necessary to specify that punitive damages do not exist in Spain and, consequently, it could be understood that they are contrary to public policy.

Pursuant to Article 37.6 of the SAA, the arbitrators’ award on the costs of the arbitration shall include the following:

  • the fees and expenses of the arbitrator and, if applicable, the fees and expenses of the defence and of the representatives of the parties;
  • the cost of the services rendered by the arbitration institution; and
  • all other expenses incurred within the arbitration proceedings.

Also, the payment of legal interest concerning the principal sum awarded is generally imposed.

Unless otherwise agreed by the parties, the arbitrators shall decide on the distribution of the costs generated by the arbitration proceedings. Thus, the arbitrators can decide whether to distribute the costs depending on the costs incurred by each party, or whether one party should compensate the other for the costs incurred.

According to Article 41 of the SAA, an award may be set aside if any of the following circumstances is proved:

  • if the arbitration agreement does not exist or is invalid;
  • if it has not been possible to give proper notice of the appointment of an arbitrator or of the arbitral proceedings, or if a party has not been able to assert its rights;
  • if the arbitrators have ruled on matters not submitted to their decision;
  • if the appointment of the arbitrators or the arbitration proceedings have not been in accordance with the agreement of the parties, unless such agreement would be contrary to a mandatory rule of the SAA, or, in the absence of such agreement, if they have not been in accordance with the SAA;
  • if the arbitrators have ruled on matters not subject to arbitration; or
  • if the award is contrary to public policy.

The party requesting the award to be declared null and void must file a claim with the high court of justice of the Autonomous Community in which the award has been rendered.

Generally, the application for annulment of the award may be filed within a maximum period of two months from the date of receipt of the award by the applicant party. However, when one party (or both) applies for rectification, clarification or supplementation of the award, the time limit will begin from the date of receipt of the decision on the application by the applicant party or from the date of expiration of the time limit for deciding on the application.

The annulment action will be substantiated through the channels of the verbal proceedings, but with the following particularities:

  • the claim must contain the documents supporting the claim, the arbitration agreement and the award, and, if applicable, it shall contain a proposal for the measure that is of interest to the plaintiff; and
  • the time limit for replying to the appeal by the opposing party shall be 20 days and must contain the means of proof for the measure that is of interest to them.

The SAA does not regulate the possibility of excluding or expanding the scope of appeal of the awards since, in the Spanish legal system, there is no second instance in arbitration matters. Instead, there is the possibility of filing an action for annulment on the grounds set out in the law, which in no case affects the merits of the case.

Thus, the voluntary submission of the parties to arbitration has the consequence that the possibilities for appealing the decision arising from the proceedings are limited.

In this regard, it should be noted that the exclusion by the parties of the action for annulment of the award is not allowed under Spanish law.

The standard of judicial review is deferential, since the Courts cannot review the merits of the dispute resolved by the arbitrator.

According to Article 41 of the SAA, an award may be set aside if any of the following circumstances is proved:

  • if the arbitration agreement does not exist or is invalid;
  • if it has not been possible to give proper notice of the appointment of an arbitrator or of the arbitral proceedings, or if a party has not been able to assert its rights;
  • if the arbitrators have ruled on matters not submitted for their decision;
  • if the appointment of the arbitrators or the arbitration proceedings have not been in accordance with the agreement of the parties, unless such agreement would be contrary to a mandatory rule of the SAA, or, in the absence of such an agreement, if they have not been in accordance with the SAA;
  • if the arbitrators have ruled on matters not subject to arbitration; or
  • if the award is contrary to public policy.

As can be seen, the law does not recognise the possibility of applying for the annulment of an award on the grounds that the rules applicable to the merits of the case have been violated.

In July 1977, Spain enforced the Convention on the Recognition and Enforcement of Arbitral Awards, as adopted in New York in June 1958, which is the instrument that generally governs the enforcement of international awards in Spain.

This is established in Article 46 of the SAA. However, it also mentioned that the aforementioned New York Convention will be applicable in the absence of international conventions that are more favourable.

In Spain, the procedure and rules for the enforcement of an award depend on whether the award to be enforced is national or international.

If the award is national, the party seeking to enforce the award simply has to apply for enforcement before the court of first instance of the place in which the award was rendered.

On the other hand, if the award is international, the general rule is that a party must apply for its recognition before the court of justice of the domicile of the party against whom the award is to be enforced, or in the place where the award should produce its effects.

Once it is recognised, enforcement may be sought before the court of first instance of the domicile of the person against whom the award is to be enforced, or where it should produce its effects.

The international relevance of annulment decisions made by the courts in the country in which arbitration took place is controversial. In general, if an award is annulled in the state of origin, it will not be subject to recognition in another state, since, if it is not valid in its state of origin, it cannot be valid in any other jurisdiction.

In any case, denying a foreign award because it has been annulled by a foreign court decision means giving effect, indirectly, to the award in Spain.

In conclusion, there is a wide margin of manoeuvre for Spanish courts not to deny the exequatur of foreign arbitral awards that have been annulled on grounds contrary to Spanish public policy.

On the other hand, if the appeal for annulment of the foreign award is still pending, the Spanish exequatur court may postpone the decision on the enforcement of the award.

Regarding the possibility for a state or state entity to successfully raise a defence of state or sovereign immunity in the enforcement stage, Article 2.2 of the SAA prevents the possibility of a state to oppose the prerogatives of its own law to breach the obligations contained in an arbitration agreement.

Therefore, in 2015, Spain passed Act 16/2015, on State Immunity, which covers the content of the UN Convention on State Immunity (UNCSI) of 2004. In this regard, according to Article 16 of the UNCSI, there is an exception to jurisdictional immunity when there is an arbitration agreement relating to a commercial transaction between the state and a private individual from a different state.

Thus, Article 17 of the UNCSI provides for the immunity of the state from enforcement measures, as it allows enforcement proceedings against assets located in Spain and used for purposes other than official non-commercial ones. In turn, enforcement will be possible when there is a tacit or explicit consent of the state by means of an international agreement, a written contract or a declaration within a judicial proceeding.

The case law of the Spanish courts in relation to the exequatur of foreign awards respects the autonomy of the will of the parties to submit their dispute to arbitration and, consequently, interprets the principle of public policy in a restrictive manner.

Occasionally, there are some decisions that cause some controversy as to the scope and extent of the concept of public policy, but generally the exceptionality of its nature is recognised.

In Spain, the only dedicated regulation pertaining to class-action arbitration is the Royal Decree 231/2008, of 15 February 2008, which regulates the consumer arbitration system.

In general, class action in arbitration is neither ruled out nor adequately covered by current legislation. However, due to the specific characteristics of class actions, it is difficult to carry out an arbitration procedure without specific regulation of these procedures.

In this sense, in class actions brought before the ordinary courts, Spanish law requires, for example, the publicity of the actions in order for the plaintiffs to join the proceeding and request their individual compensation.

Regarding class actions before courts, the bill on representative actions for the protection of the collective interests of consumers is pending approval by the Spanish Parliament. This bill transposes the Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC.

The Arbitration Law does not include ethical codes binding arbitrators and lawyers. Thus, the only requirements are independence and impartiality. However, it is true that arbitrators and lawyers admitted to the bar are obliged to comply with the professional code and the ethical rules applicable to lawyers.

Spanish practitioners are also aware of the guidelines accepted by the International Bar Association and the Spanish Arbitration Club, which include ethical rules.

Arbitration and national laws do not regulate third-party funding. However, there is also no regulation applicable to arbitration or civil procedure that prevents third-party funding.

Regarding class actions filed before courts, the aforementioned Directive (EU) 2020/1828 regulates third-party funding and the draft of the Spanish Law on this matter also foresees third-party funding.

The use of third-party funders in arbitration is commonly accepted. However, the lack of regulation causes some doubts, for example, regarding the costs to be imposed in the award.

The SAA does not regulate the possibility for an arbitral tribunal or court in Spain to consolidate several separate arbitration proceedings.

However, the fact that this aspect is not regulated does not mean that it is prohibited, since it will depend on the procedural rules agreed upon by the parties, in accordance with Article 26 of the SAA.

In this sense, the Madrid International Arbitration Centre provides for the consolidation of several arbitration proceedings (Article 19, CIAM Arbitration Rules).

In conclusion, the agreement of the parties and the internal regulations of the arbitration institution in which the arbitration is being administered must be followed.

It must be taken into account that the scope of the award must be limited to the parties who entered into the arbitration agreement and who participated in the arbitration process. An award does not have effects on third parties who were not able to exercise their right of defence within the arbitration process itself.

When the effects of the award are intended to be extended to third parties who did not participate in the arbitration, they must challenge the award through constitutional channels, as long as there is a direct impact and they affect their constitutional rights.

However, there are certain cases in which it has been admitted that arbitration agreements may affect non-signatories if they have a close and strong relationship with the signatories or play a relevant role in the execution of the contract submitted to arbitration.

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Broseta Abogados is a full-service law firm established in 1975 with more than 300 professionals. The firm is featured among leading law firms in Spain, and also has a consolidated geographical presence in Portugal and Switzerland. Broseta covers all business-related fields of law. Key practice areas are disputes resolution, corporate, tax advice, public law, labour, and insolvency. The firm has extensive experience in litigation and arbitration proceedings concerning joint ventures, post-M&A matters, international sales contracts, real estate issues, among others. The firm’s main clients, both national and international, come from industries such as banking, private equity, insurance, transport or health care. Broseta puts the firm’s team of partners at the head of all its projects. Its lawyers, with an average of 30 years of experience, are accessible, proactive and involved in every decision relevant to the client. The firm promotes transformation as the basis for growth, and rejects static and standarised solutions.

Spain has steadily risen to prominence on the international arbitration stage, aiming to distinguish itself as the go-to jurisdiction for Spanish-speaking arbitrations. The pivotal change can be traced back to the post-2020 constitutional doctrine that delineated the scope of judicial oversight over arbitral awards. This doctrine has unquestionably strengthened its standing within the global arbitration arena.

Past decisions, particularly by the Madrid High Court of Justice, in 2015 and 2016, created ripples of discontent within the arbitration community. These rulings, viewed by many as overly intrusive, exerted an unwarranted degree of control over arbitral awards by the Spanish judiciary. Such rulings not only cast shadows of doubt over Spain’s arbitration system but also eroded trust in its institutions. In response, numerous economic stakeholders, seeking greater assurance, either turned back to the traditional judicial system or explored alternative international arbitration venues.

However, these concerns have largely been resolved by the latest rulings of the Constitutional Court (Tribunal Constitucional or TC), the highest guarantor of fundamental rights in Spain, the most important of which are STC 46/20, of 15 June 2020, STC 17/21, of 15 February 2021, SSTC 55/21 and 65/21, of 15 March 2021, STC 79/22, of 27 July 2022, and STC 50/22, of 4 April 2022. All of these rulings establish that court reviews of arbitral awards for potential contradictions with public order should not involve a reevaluation of the core issues under arbitration, thereby sidelining the arbitrator’s role in resolving the dispute. Instead, the rulings should be limited to assessing the legality of the arbitration agreement, the arbitrability of the matter and the procedural regularity of the arbitration proceedings.

Recent Rulings of the Constitutional Court in Arbitration Matters

Ruling STC 46/20 of 15 June 2020

The Constitutional Court, in ruling STC 46/20 of 15 June 2020, took decisive steps to dispel lingering uncertainties surrounding arbitration in Spain, setting a precedent that further rulings would echo. This pivotal ruling restored Spain’s reputation as a trusted and appealing venue for arbitration. Central to this ruling was a case wherein the High Court of Justice of Madrid (Tribunal Superior de Justicia de Madrid or TSJ Madrid) denied parties the ability to proceed with annulment due to a potential breach of public order. Notably, as the annulment proceedings were underway, the parties reached a settlement agreement to resolve the dispute and subsequently requested the termination of the proceedings as they were no longer relevant. However, TSJ Madrid, invoking potential public order implications, not only insisted that the case proceed but also declared the award null and voice and proceeded to judge the merits of the case.

Faced with this situation, the Constitutional Court emphasised three fundamental principles concerning arbitration that appeared to have been disregarded by the TSJ Madrid:

  • Arbitration rests upon the valid autonomy of the parties’ will, where they willingly and voluntarily waive their right to seek effective judicial protection at a certain point, opting instead to be bound by the decision of a third party outside the traditional court system to resolve their dispute.
  • The arbitration award can only be challenged on formal grounds (Articles 40 et seq. of the Law on Arbitration 60/2003 of 23 December 2003  (hereinafter “LA”), thus excluding a judicial review of the merits.
  • As regards an arbitral award being potentially contrary to public order, established as a cause for annulment in Article 41.1 f) LA, as well as a cause for refusal of recognition of foreign awards in Article V (2)(b) of the 1958 New York Convention, ratified by Spain, the Constitutional Court has specified that public order includes the fundamental rights and freedoms guaranteed by the Constitution, as well as other essential principles that remain non-negotiable due to constitutional requirements or the application of internationally accepted principles.

Furthermore, the Constitutional Court emphasised the well-established legal principle of differentiating between two types of public order:

  • material public order, which comprises public, private, political, moral and economic legal principles, which are deemed indispensable for safeguarding societal equilibrium for any specific community and time; and
  • procedural public order, comprising the collection of formalities and essential principles within our procedural legal system necessary for its proper functioning.

Aware of the ambiguity of the term, the Constitutional Court expressly rejected that it could be used as “a mere pretext for the judicial body to re-examine the matters debated in the arbitration proceedings, undermining the arbitration institution and ultimately violating the autonomy of the will of the parties”.

Ultimately, the Constitutional Court determined that the TSJ Madrid’s decision had violated the plaintiffs’ right to effective judicial protection. This conclusion arose from the litigants being prevented from withdrawing from the proceedings, due to a distorted interpretation of the notion of public order as a cause for annulment of the arbitration award. Its importance also lies in the fact that it was a unanimous judgment of the six judges who made up the first chamber of the Constitutional Court, each of whom specialises in distinct branches of law. This led to the judgment being applauded by the national and international arbitration community as it was considered a clear reflection of a common consensus on arbitration in Spain, which, moreover, once again placed the parties at the epicentre of the arbitration ecosystem and reminded the courts of the existing limits on the jurisdictional control of awards.

In subsequent years, a series of landmark judgments were issued, each building upon the foundation laid by the aforementioned ruling. These subsequent decisions further contributed to delineating and refining the foundations of the arbitration system.

Ruling STC 17/21 of 15 February 2021

This judgment also garnered significant attention. It not only revisited the questions of the earlier ruling but also probed the obligation to provide clear reasoning for the awards. Key determinations from this judgment are outlined below.

An annulment action based on the violation of public procedural order focuses on analysing procedural errors during arbitration, referring to compliance with fundamental guarantees, such as, for example, the right of defence, equality, bilaterality, contradiction and evidence, or when the award lacks clear reasoning, is inconsistent, violates mandatory legal norms or violates a prior final decision. In other words, annulment can only concern errors in proceeding.

Such a constricted view of annulment implies that courts cannot overstep their boundaries to assume the arbitrator’s role in interpreting the law. Nor is the court a second instance reviewing the facts and law applied in the award, or a mechanism for controlling the correct application of case law. Consequently, if the arbitral decision cannot be described as arbitrary, illogical, absurd or irrational, it cannot be declared null and void on the basis of the notion of public order.

The ruling clarifies that when in previous decisions it has defined arbitration as having “judicial equivalence”, this means that both judicial and arbitral avenues yield definitive resolutions to disputes, both bearing the finality of res judicata. Nonetheless, this does not imply an absolute congruence between court judgments and arbitral awards from a constitutional perspective.

Regarding the obligation to provide a rationale (or statement of reasons), its essence diverges in judicial verdicts and arbitral awards. For the former, this obligation springs from the inherent right to effective judicial protection enshrined in Article 24 of the Spanish Constitution (Constitución Española or CE). In contrast, for arbitral awards, this requirement stems solely from the statutory framework (Article 37.4 LA). As such, it is clear that the legislature could potentially waive this obligation for arbitral decisions if deemed necessary.

However, this does not detract from the fact that similar criteria must be applied when assessing the reasoning of both types of decisions. Consequently, the Constitutional Court affirms that only an award that is unreasonable, arbitrary or evidently flawed can be faulted for a breach of reasoning under Article 37.4 LA, but not Article 24 CE.

However, in this assessment, it should be borne in mind that the legal regulation only requires the award to contain a statement of the grounds on which the decision is based, but not that the reasoning must be convincing or sufficient, or that it must necessarily extend to certain points. The legal provision does not imply that an arbitrator should analyse in the award all the evidence and arguments of the parties, but only that the decision’s rationale be stated, irrespective of its correctness in the eyes of the adjudicating judge.

In the context of arbitration in equity, the requirement for a detailed rationale is less stringent. However, it remains crucial for the award to articulate the underlying justifications (not necessarily of a legal nature), to provide insight into the arbitrator’s choice between the opposing positions of the litigants. Even a concise explanation is deemed necessary to understand the basis for the decision. The ruling underscores the sole discretion of the arbitral tribunal to choose the decision that it considers to be fairest and most equitable, taking into account all the circumstances of the case, even if such a solution is incompatible with the one that would result from the application of the rules of substantive law.

Ruling STC 65/21 of 15 March 2021

The ruling clarifies that those who freely, expressly and voluntarily submit to arbitration as the method of resolving their dispute opt out of the safeguards enshrined in Article 24 CE – ie, the rules governing judicial proceedings, and opt instead for the rules laid down in the Arbitration Act.

It adds that the statement of reasons for arbitral awards has no impact on public order. Indeed, since arbitration is based on the autonomy of the will and the freedom of individuals (Articles 1 and 10 CE), the duty to state reasons for the award does not form part of the public order required in Article 24 CE for judicial decisions. Instead, it adheres to a distinct criterion aligned with Article 10 CE. The primary responsibility for defining this criterion lies with the parties engaged in the arbitration. Just as they decide on the arbitration rules, the number of arbitrators, the nature of the arbitration, and evidentiary guidelines, they should also reach a consensus on the necessity and scope of reasoning in the award, as outlined in Article 37.4 LA.

This means that courts are limited to verifying the existence of a statement of reasons in an arbitration award, and cannot examine its suitability, sufficiency or adequacy. Unless the parties explicitly agree on specific requirements or content for the statement, its adequacy, scope, or sufficiency cannot be deduced from the will of the parties (Article 10 CE).

Ruling STC 79/22 of 27 June 2022

In this recent ruling, the Constitutional Court clarified that when it mentions that annulment should be limited to errors in proceeding, it essentially means the judiciary cannot engage in discussions regarding the evidence presented during the arbitration process, its evidentiary value, or its credibility. Similarly, the choice of the applicable legal rule, its interpretation, and the alignment of established facts with it, exclusively lie with the arbitration panel appointed by the parties. This authority stems from the parties’ autonomy of will, thus barring regular court interventions.

Consequently, the Constitutional Court has established a robust defence of arbitration, safeguarding the legal certainty parties expect and simultaneously curbing undue judicial interference in arbitration decisions. This stance undeniably bolsters Spain’s attractiveness as a reliable arbitration hub. These decisions convey a clear message to business entities: they can have confidence in the arbitration process, with annulment being a rare outcome, reserved for instances where mandatory rules or procedural guarantees are breached.

Recent judgments in annulment actions have incorporated the latest constitutional doctrine.

A reasonable amount of time has passed since the first of the Constitutional Court’s rulings referred to above, and we are now in a position to analyse the impact that the previous case law has had on the various applications for annulment that have been processed since then.

Enough time has passed since the initial Constitutional Court ruling, enabling us to gauge its influence on subsequent annulment applications. It is clear that this doctrine has firmly rooted itself in our legal system, offering reassurance to the arbitration community. This solid foundation promotes arbitration in Spain as a trusted dispute resolution mechanism.

For instance, the TSJ Madrid, which had previously deviated the most from the Arbitration Law’s correct application, has recently issued judgments that clearly align with the constitutional doctrine. Such a shift positions Madrid competitively with leading hubs like Paris, London, and Singapore.

After the Constitutional Court’s last ruling, STC 79/22 of 27 June 2022, which overturned the TSJ Madrid decision and sent it back for review, the TSJ Madrid, in its judgment 22/2023 of 18 May 2022, acknowledged that its role was limited to ascertaining the existence of a statement of reasons in the award. Given that the Constitutional Court determined the arbitration tribunal had validly reasoned why criminal preliminary ruling conditions were not met, and saw this as neither irrational nor arbitrary, the TSJ Madrid eventually declined the annulment request, though one judge dissented.

With regard to the assessment of evidence, the TSJ Madrid was unequivocal in its judgment 38/2021 of 8 June 2021. Drawing on recent Constitutional Court rulings, it held that within the context of an arbitration award annulment, the court should not be expected to undertake a specific evaluation of the evidence. When errors in evidence assessment are invoked, a thorough, detailed critique of the arbitration’s evidentiary evaluation is essential. This critique should spotlight any blatant arbitrariness in the arbitrator’s reasoning. For a judicial review, the claimant must demonstrate a clear logical inconsistency or an overly subjective interpretation of the evidence, which would warrant the desired annulment on account of being wholly indefensible.

In its judgments 32/20 of 15 December 2020, 1/2021 of 19 January 2021, and 5/22 of 3 March 2022, the TSJ Madrid acknowledged a shift in its doctrine as a result of the latest constitutional case law. It had earlier maintained that parties were denied the judicial procedure for arbitral award annulments, implying they had no authority to accept the annulment claim. This was rooted in the understanding that an award’s annulment, like a judgment’s, required the court to verify the presence of valid annulment grounds. However, based on ruling STC 46/20, the TSJ Madrid revised its doctrine, acknowledging the parties’ agency in the annulment procedure and affirming the defendant’s unobstructed right to accept the claim.

Beyond the Community of Madrid, other high courts across Spain have fully endorsed the aforementioned constitutional criterion and consistently reference it in their judgments. Some example rulings are Basque Country STJ 4/23 of 25 April 2023, STJ of Catalonia 23/23 of 17 April 2023, or STJ of Valencia 14/2021 of 29 November 2021.

Conclusion

Spain has successfully addressed certain inconsistencies within the judicial system, and now possesses a jurisprudential doctrine on arbitration that reinforces and advocates limited judicial intervention in arbitral proceedings. As a result, Spain is poised to become a more popular hub for both domestic and international arbitration.

In addition to the doctrine explored in this article, Spain has an Arbitration Law, inspired by the UNCITRAL Model Law, which is therefore highly competitive with other international arbitral hubs. The presence of reputable arbitration courts guarantees the appointment of specialised and impartial arbitrators, as well as the correct handling of proceedings. Further, Spain has been actively fostering ties with Latin American countries to promote Spanish-language arbitration. With these developments, it is anticipated that Spain will emerge as a prominent player in the field of arbitration in the coming years.

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