In 2003, Spain promulgated a new arbitration law 60/2003, (the “Act”) that encapsulated many of the modern concepts of international arbitration. The law adopted the UNCITRAL Model Law of 1985, and advanced Spain to a position whereby it is now a favourable environment for the practice of international arbitration.
Of course, the practice of arbitration is always dependent on the adherence by the local judiciary to principles embodied in the arbitration law, and the modern practice of international arbitration. The modern practice of international arbitration essentially means that the courts should ideally observe a minimal yet efficient degree of intervention in arbitral proceedings, and once an award is rendered, the courts should display a clear and consistent understanding of the law concerning the recognition and enforcement of arbitral awards (and the interpretation of the New York Convention 1958).
This has been the challenge for most countries, in terms of being able to say they are truly arbitration-friendly. The statute book can say what it likes, but if it is not backed up by the conduct of state courts, it is worthless. In recognition of this, the international arbitration communities of numerous countries have made concerted efforts to involve the judiciary in any reform, and Spain is no different. Those efforts were realised in Spain when a new state court specialising in arbitration was established in Madrid, Spain (“Court of First Instance N° 101”). This was enacted by virtue of the Agreement of the General Council of the Judiciary, on 25 November 2010 (published in BOE No.310 of 22 December 2010). Previously, in Barcelona –the other principal centre of arbitration in Spain– a specific Section of the Court of Appeal had been granted exclusive competence in relation to actions setting aside arbitral awards rendered in the municipality of Barcelona.
The Spanish court system is divided according to Judicial Districts, which cover one or more municipalities. Each Judicial District is served by a Court of First Instance which covers civil matters. For most major international arbitrations, the two principal seats of arbitration in Spain are Madrid and Barcelona. As between the two, the majority of Spain-based arbitrations will have Madrid as their seat, and accordingly, in issues concerning, for example, applications for interim measures, applications for assistance with the taking of evidence, and the recognition and enforcement of awards, the Madrid courts may be seized.
The newly created court is competent for all arbitration matters that previously fell under the jurisdiction of the First Instance Courts of Madrid. Thus, while the Act transferred the competence of arbitrations matters from the Supreme Court to the Court of First Instance, this new development sees a specialised Court of First Instance being established.
This development is good news for Spain (and more particularly Madrid) in terms of moving towards a dedicated sitting judiciary whose attention can be focused on international arbitration (although the court does have competence to deal with non-arbitration matters as well). Subject to the quality of decisions of the new Court, this will also hopefully raise the bar for other arbitration-friendly jurisdictions.
Article 8 of the Act specifies the circumstances in which the Court of First Instance would have had competence before this recent change. This was derived from the seat of arbitration. If the seat of arbitration had not yet been determined, then jurisdiction would reside with the Court of First Instance at the domicile or habitual place of residence of any of the respondents, and failing that, of the claimant, or failing that, at the selection of the claimant.
The new Court of First Instance N° 101 will have specific competence in relation to the assistance and supervision of arbitration regarding the following areas (article 8 of the Act):
- Judicial requests for the appointment of arbitrators (article 15 of the Act);
- Judicial assistance for the taking of evidence in support of arbitral proceedings (article 33 of the Act);
- Orders of provisional or interim relief in support of arbitration (article 8(3) of the Act); and
- The recognition and enforcement of arbitral awards (article 44 of the Act).
Notably, an application to set aside an arbitral award does not fall within the competence of the Court of First Instance N° 101, and remains within the competence of the Provincial Court of Appeal. This may seem surprising to those who have read BOE No.310 of 22 December 2010, since that agreement expressly indicates that setting aside the award would seemingly fall within the competence of the Court of First Instance N° 101. However, Spain’s Organic Law which stipulates that such an application falls exclusively within the jurisdiction of the Provincial Court of Appeal cannot be trumped by the Agreement of the General Council of the Judiciary. Therefore, its appearance in BOE No.310 of 22 December 2010 is an error. This has been confirmed by the judge who will preside in the Court of First Instance N° 101, Judge Begoña Pérez Sanz.
It is most welcome that a dedicated judiciary can develop Spanish jurisprudence with a sense of ownership and hopefully, a non-hostile attitude to the role international arbitration plays in the domestic and international legal order.
The only exception to the competence of the Court of First Instance N° 101 is that certain subject matter competencies remain with the Commercial Courts. For example, intellectual property disputes, unfair competition matters, transport and some corporate disputes, even if raised in the context of an arbitration, will remain within the jurisdiction of the Commercial Courts. This is unfortunate and rather unsatisfactory. If the Court of First Instance N° 101 is designed to achieve consistency in the treatment of international arbitration, it undermines its own raison d’être if there is such an exception simply predicated on the subject matter of the dispute.
Conclusion
It remains to be seen whether this anomalous competence of the Commercial Courts will be removed during the passage of the new Arbitration Act which is currently before the Spanish Parliament. In the meantime, however, this development is extremely positive for the development of international arbitration in Spain.
Christian Leathley and Ignacio Diez-Picazo
Christian Leathley is Of Counsel at the law firm Herbert Smith (London) and a specialist in international arbitration. He is English and New York qualified and a former graduate of NYU School of Law (LL.M in International Legal Studies).
Ignacio Diez-Picazo is Partner at Herbert Smith (Madrid) and Chaired Professor of Procedural Law at the Faculty of Law of the University Complutense of Madrid.