Last Monday, 15th of February 2021, the Spanish Constitutional Court released a judgement which is causing a significant impact on the Arbitration sector, since it may put a clear limit, once for good, to the interference and control of the Courts over the Arbitration awards.
The merits of the case which gave rise to this decision are as follows.
It was established on the statues of a family-run business that any inner dispute should be settled by means of an equity Arbitration. When it arose, the members of the business brough the case in front of an Arbitrator, who delivered an award that was subsequently contested in the Superior Court of Justice of Madrid, where it was declared void. At this stage, this Court decision was appealed, and the case was lifted to the Constitutional Court of Spain.
There, Magistrates held that Arbitration and Jurisdiction are two different ways of solving disputes, being the first one a recourse available to the parties through the way of an Arbitration agreement.
Consequently, Courts should not interfere on the merits of the case when it is freely decided by the parties to submit the dispute to Arbitration, except where as provided. The possibility of declaring the award null and void is exclusively applicable when it is considered as an arbitrary, illogical, absurd or unreasonable decision.
Hence, the aim of this statement is to stop the recourse employed by parties on the Arbitration process to ask from Courts to declare null and void the award by reasons of ‘public order’.
On the same way, it was affirmed that the Civil Jurisdiction cannot work as a higher instance for reviewing the rationale of decisions contained in the awards. Its functions are constrained to the control of procedural mistakes related to fundamental guarantees. Thus, evaluation of evidence, merits of the case and applicable Law to the awards are out of the scope of competences of Courts.
It was also declared that as Arbitrators are not considered to appertain to the Civil Jurisdiction, they are by no means bound by Court decisions when the times comes to make their awards, not even by the case law of the Supreme Court. Therefore, Arbitrators should solve the disputes brought in front of them on an ‘ex aequo et bono’ way, that is to say, on the more equitable basis. Thus, it is admitted that there is a real possibility that if the same case was solved by Courts and Arbitrators, it could have different solutions.
Following this decision of the Constitutional Court, Arbitration in Spain might be seen as a more interesting way of solving disputes, being this system more secure and independent from the Jurisdiction, even on the event of an equity Arbitration.