Introducción

La Ley Brasileña de Arbitraje (la “Ley”)[1] no distingue entre arbitrajes domésticos e internacionales. Sin embargo, sí prevé mecanismos distintos para que las partes persigan o resistan la ejecución de laudos arbitrales, dependiendo de si estos son considerados domésticos o extranjeros.

El 24 de Mayo del 2011, la Corte Superior de Justicia de Brasil (Superior Tribunal de Justiça) (la “Corte”), el más alto tribunal infra-constitucional del país, dictó un importante fallo relacionado con la distinción entre laudos arbitrales domésticos y extranjeros (el “Fallo”).[2]

En virtud de la Ley, los laudos arbitrales domésticos equivalen a sentencias judiciales dictadas por los tribunales brasileños (artículo 31 de la Ley). Si bien están potencialmente sujetos a un proceso de anulación en los tribunales locales, los laudos arbitrales domésticos constituyen res judicata. Adicionalmente, los laudos arbitrales domésticos son inmediatamente ejecutables ante los tribunales brasileños. En otras palabras, los tribunales locales no necesitan confirmar los laudos arbitrales domésticos para que estos sean ejecutados y tampoco pueden revisar las cuestiones de fondo de un laudo.

A la vez, los laudos arbitrales extranjeros, es decir, “laudos arbitrales dictados fuera del territorio brasileño” (artículo 34, párrafo único, de la Ley), no podrán ejecutarse en Brasil sino hasta después de que sean homologados por la Corte, según el artículo 105, I, i de la constitución brasileña, el artículo 35 de la Ley y los artículos 483-484 del Código de Procedimiento Civil de Brasil.[3] Dicho procedimiento, denominado de “homologación” de laudos arbitrales extranjeros, es consistente con la Convención de Nueva York del 1958 sobre el Reconocimiento y la Ejecución de las Sentencias Arbitrales Extranjeras (“Convención de Nueva York”), ratificada por Brasil en el año 2002.[4]

Si se cumplen los requisitos correspondientes, la Corte dicta una sentencia reconociendo el laudo arbitral extranjero, otorgándole por lo tanto carácter de res judicata en el territorio brasileño y autorizando su ejecución ante los tribunales brasileños del mismo modo que los laudos arbitrales domésticos y los fallos judiciales locales.[5] Como sucede respecto a los laudos arbitrales domésticos, las consideraciones sobre cuestiones de fondo de los laudos arbitrales extranjeros tampoco podrán ser sometidas a revisión judicial, sea en la etapa de homologación por la Corte o en el momento de su ejecución en los tribunales inferiores.

En conclusión, aunque los laudos arbitrales domésticos estén sujetos a anulación, constituyen cosa juzgada y podrán ejecutarse en Brasil inmediatamente después de su dictado, mientras que los laudos arbitrales extranjeros no podrán anularse en Brasil, pero dependerán de la homologación de la Corte para constituir res judicata y poder ser ejecutados en Brasil.

La Ley establece que la homologación de laudos arbitrales extranjeros será conducida de acuerdo a los tratados internacionales vigentes en Brasil o, en su ausencia, estrictamente en conformidad con la propia Ley (artículo 34, caput). Los artículos 37-39 de la Ley gobiernan dicho proceso y reproducen el contenido de los artículos IV y V de la Convención de Nueva York.

Es importante notar que la Ley, promulgada anteriormente a la ratificación de la Convención de Nueva York por Brasil, eliminó formalmente el requisito de doble exequátur prevalente por mucho tiempo en la jurisprudencia anterior de los tribunales brasileños (artículo 35 de la Ley).

Finalmente, vale mencionar que a pesar de que Brasil es signatario de la Convención de Nueva York desde el año 2002, los fallos del STJ relacionados a laudos arbitrales extranjeros tradicionalmente hacen referencia exclusivamente a la Ley y/o a la Resolución 9.[6]

I.            El Laudo Arbitral y los Tribunales Brasileños

A.        El Laudo Arbitral

El Fallo aquí analizado se deriva de un laudo arbitral en favor de Nuovo Pignone SPA, dictado por un árbitro único en el contexto de una disputa comercial contra Maritima Petroleo e Engenharia Ltda. y Petromec Inc. El arbitraje fue administrado por la Corte Internacional de Arbitraje de la Cámara de Comercio Internacional (“CCI”) de acuerdo a su reglamento y conducido en portugués. El laudo fue dictado en Rio de Janeiro, Brasil, aplicándose al fondo de la disputa las leyes brasileñas.

B.        La Sentencia de Primera Instancia

Nuovo Pignone inició la ejecución del laudo arbitral ante los tribunales competentes de primera instancia de Rio de Janeiro, los cuales reconocieron su jurisdicción y autorizaron el embargo de los bienes de las demandadas. Petromec Inc. presentó luego una apelación a la Corte de Apelaciones del Estado de Rio de Janeiro (la “Corte de Apelaciones de Rio”).

C.        La Decisión de la Corte de Apelaciones de Rio de Janeiro

Sorprendentemente, la Corte de Apelaciones de Rio revirtió la sentencia de primera instancia.[7] Por mayoría, decidió que el laudo arbitral fue dictado por un “organismo de arbitraje extranjero”, la CCI.

Malinterpretando la elección de las partes de un arbitraje administrado por la CCI y aparentemente mezclando los conceptos de “institución administradora” y “tribunal arbitral”, la Corte de Apelaciones de Rio llegó a la conclusión de que, al elegir “el Tribunal Arbitral Internacional de la Cámara de Comercio Internacional, el cual tiene su sede en París, para resolver su disputa, buscaron una decisión extranjera”. Asimismo, “a pesar de su nacionalidad brasileña, el árbitro único, representaba y estaba administrativamente vinculado a una institución arbitral extranjera, cuyas reglas siguió”.

En vista de ello, la Corte de Apelaciones de Rio determinó que dicho laudo arbitral debería considerarse extranjero, rechazando la demanda ejecutoria en la ausencia de la homologación del STJ.

D.        El Fallo Dictado por el STJ

Alegando el incumplimiento de la Ley y del Código de Procedimiento Civil de Brasil, Nuovo Pignone presentó una apelación ante el STJ, la más alta corte infra-constitucional del país. El tema presentado ante la Corte fue si un laudo arbitral dictado en Rio de Janeiro, por un arbitro único de nacionalidad brasileña, tras un arbitraje conducido en portugués y regido por las leyes brasileñas, pero administrado por una institución con sede fuera de Brasil (i.e. la CCI, en París), debe considerarse domestico o extranjero.

El STJ revirtió, por unanimidad, la decisión de la Corte de Apelaciones de Rio y confirmó la sentencia judicial de primera instancia. Notando que, en el marco del sistema establecido por el articulo 1 de la Convención de Nueva York cada Estado signatario tiene la discreción para definir sus propias reglas relativas a la nacionalidad de los laudos arbitrales, la Corte concluyó que el lugar en que se dicta el laudo arbitral se presenta como el único criterio adoptado por la Ley, independientemente del hecho de que el laudo pueda tratar de temas de comercio internacional, involucre a diversos sistemas jurídicos o sea administrado por una institución extranjera de acuerdo con sus reglas.

La Corte además subrayó que, si bien el hecho que las partes eligieron un árbitro brasileño para decidir la disputa, la aplicación de las leyes brasileñas al fondo y el portugués como el idioma aplicable al procedimiento no afecta la nacionalidad del laudo, esos factores sirven como indicación de su deseo de obtener un laudo doméstico.

En consecuencia de lo anterior, el STJ revirtió la decisión de la Corte de Apelaciones de Rio y confirmó que los laudos arbitrales dictados en Brasil se consideran domésticos y, por tanto, directamente ejecutables ante los tribunales locales competentes, independientemente de otros elementos relacionados con el arbitraje.

II.        Análisis Critico

A.        Aspectos Positivos

Teniendo en cuenta que el artículo 34, párrafo único, de la Ley claramente establece que los laudos arbitrales dictados fuera de Brasil deberán considerarse extranjeros, la conclusión final del STJ no puede ser considerada innovadora.

Sin embargo, su relevancia no puede ser menospreciada, ya que una decisión en sentido contrario hubiera afectado negativamente la reputación de Brasil como jurisdicción favorable al arbitraje: si la Corte hubiera concluido que otros elementos además del lugar de dictado del laudo podrían afectar su nacionalidad, es probable que una gran cantidad de pedidos de anulación fueran presentados a los tribunales brasileños, con el propósito de impedir que laudos arbitrales dictados en Brasil pero administrados por instituciones con sede en el exterior (o involucrando a otros “elementos extranjeros”) fueran ejecutados sin su previa homologación por la Corte.

La administración del arbitraje por la CCI desde su sede en París fue el único “elemento extranjero” que supuestamente afectaba la nacionalidad del laudo arbitral invocado en la defensa presentada por la demandada y posteriormente reconocido por la Corte de Apelaciones de Rio. Sin embargo, en obiter dicta el STJ expandió el alcance de su Fallo y aclaró que ningún otro factor que el lugar en que se haya dictado el laudo arbitral afecta la definición de su nacionalidad  (sea la ley aplicable al fondo de la controversia, el idioma del procedimiento o la nacionalidad de los árbitros).

También merece destacar la referencia expresa a la Convención de Nueva York hecha por el STJ en su Fallo, en contraste con su tradición anterior de aplicarla de forma indirecta, a través de la Ley y de la Resolución 9. Sin embargo, quizás dicho avance haya ocurrido demasiado tarde, como veremos enseguida.

B.        Aspectos Negativos y Posible Controversia

(i)         El Razonamiento Controversial

Sin lugar a dudas, la Corte tomó la decisión correcta. Sin embargo, aparentemente el STJ lo hizo (quizás, sin intención) por medio de una interpretación de conceptos basados en la Convención de Nueva York – contenidos en la Ley[8] y en el Decreto que la promulgó en Brasil[9] – que contradicen la practica internacional y posiblemente crearán indeseadas controversias en casos similares.

La Corte indicó que en la mayoría de las jurisdicciones extranjeras la nacionalidad de laudos arbitrales es determinada en referencia al país elegido libremente por las partes o por los árbitros como la sede legal del arbitraje (la cual, opinó la Corte, no tiene relación con y tampoco es afectada por el lugar en donde el laudo es dictado o el sitio en donde ocurren los procedimientos).[10] En cambio, el STJ sostuvo en su fundamentación que, contrariamente a la experiencia del derecho comparado, la Ley establece un sistema territorial/geográfico (ius solis), en el que el único criterio relevante es el lugar donde el laudo arbitral sea dictado.[11]

La cuestión que inevitablemente se presenta, por lo tanto, es la siguiente: ¿cree el STJ que el lugar en el cual el laudo es dictado es algo distinto que la sede del arbitraje?

Desafortunadamente, la Corte aparentemente considera que, según la ley brasileña, el lugar en donde el laudo arbitral es dictado y la sede del arbitraje no serían necesariamente un único e idéntico sitio. El Fallo parece sugerir que el primer elemento – el lugar en que sea dictado el laudo, que, según el artículo 34, párrafo único, de la Ley determina la nacionalidad del laudo y, consecuentemente, los mecanismos apropiados para que las partes persigan o resistan su ejecución – corresponde al lugar en el que el laudo es físicamente dictado (i.e. firmado) por los árbitros, como resultado de lo que el STJ llama criterio territorial/geográfico (ius solis) que subyace el enfoque brasileño.

(ii)        La Posible Incertidumbre Resultante del Razonamiento Adoptado por el STJ

En el presente caso, el lugar en donde el árbitro único dictó físicamente el laudo arbitral coincidió con la sede del arbitraje elegida por las partes, es decir, la ciudad de Rio de Janeiro. Sin embargo, habrá casos en que dicha coincidencia no ocurrirá.

Aunque en dicta, el razonamiento utilizado por el STJ para alcanzar una conclusión correcta puede permitir que se presenten controversias cuando un árbitro o todo el tribunal firmen el laudo arbitral en un sitio distinto de la sede del arbitraje escogida por las partes. Probablemente porque esa circunstancia no se hizo presente en el caso, el STJ no llegó a analizarla ni a discutir las implicancias de su Fallo.

Si en el futuro el STJ aplica el argumento en que parece apoyarse para justificar su Fallo, sería sencillo obtener resultados inapropiados: la ejecución de un laudo arbitral resultante de un arbitraje con sede en São Paulo dependería de la homologación del STJ si un arbitro único danés lo hubiera dictado en su país, pero un laudo arbitral resultante de un arbitraje con sede en Copenhague no necesitaría la homologación del STJ para ejecutarse en Brasil si hubiera sido dictado en Rio en consecuencia del encuentro casual, para una conferencia en esa ciudad, de los árbitros que componen el tribunal arbitral competente para adjudicar la disputa.

A pesar de su jurisprudencia ampliamente satisfactoria en temas de arbitraje y de los aspectos positivos del Fallo mencionados con anterioridad, es imposible evitar una critica respetuosa a la indicación aparente de la Corte en cuanto a que el lugar en que los laudos arbitrales sean físicamente dictados es el criterio decisivo para la definición de su nacionalidad, ante el sistema establecido por la Convención de Nueva York

(iii)       El Razonamiento Apropiado

Aunque en el presente caso se alcanzaría un resultado idéntico ya que el árbitro firmó el laudo arbitral en la sede del arbitraje, proponemos que el razonamiento adoptado por el STJ en el Fallo entra en conflicto con una interpretación teleológica más amplia sugerida por los redactores de la Convención de Nueva York (que contiene expresiones similares como “las sentencias arbitrales dictadas en el territorio de un Estado”, “del país en que se haya dictado la sentencia”, “del país en que, o conforme a cuya Ley, ha sido dictada esa sentencia”) y confirmada por una gran mayoría de cortes extranjeras.

La mejor doctrina sostiene que el lugar, estado, país o territorio (para mencionar algunas expresiones frecuentemente utilizadas para designar el mismo concepto) en el que un laudo arbitral es dictado es la sede legal del arbitraje, escogida por las partes (en el convenio arbitral o documento posterior) o, en la ausencia de previsión en ese sentido, determinada por los árbitros (o la institución administradora).

La sede legal del arbitraje determina la nacionalidad del laudo arbitral, sin que importe el sitio en donde las audiencias ocurran o que el laudo sea físicamente dictado por los árbitros. La sede del arbitraje esencialmente radica el procedimiento en un sistema legal, cuya ley arbitral y tribunales judiciales adquieren roles importantes.

Aunque la Convención no defina expresamente el significado del concepto de “país en que se haya dictado la sentencia en que el laudo arbitral sea dictado”, eminentes académicos y abogados en ejercicio de la profesión y una inmensa mayoría de cortes judiciales (incluso las de Estados Unidos, Inglaterra, Francia, Alemania, Italia y Japón) comparten la interpretación propuesta en el presente estudio.[12] Importantes leyes de arbitraje (como la Ley de Arbitraje Inglesa del 1996 y la Ley Suiza de Derecho Internacional Privado), la Ley Modelo del CNUDMI (en sus versiones de 1976, artículo 20(1) y 31(3), y de 2010, artículo 18)[13] y los reglamentos de las principales instituciones arbitrales (incluyendo, por ejemplo, el artículo 31(3) del reglamento de la CCI versión 2012) también siguen dicha interpretación.[14]

Irónicamente descrita como “territorial”, esa interpretación no esta basada en conceptos geográficos, sino en ficciones legales (i.e. sede, lugar, local, territorio, Estado o país del arbitraje).[15] La interpretación de la Convención de Nueva York por el International Council for Commercial Arbitration (popularmente conocido como ICCA, por su acrónimo en inglés) es particularmente clara: “The vast majority of Contracting States considers that an award is made at the seat of the arbitration. The seat of the arbitration is chosen by the parties or alternatively, by the arbitral institution or the arbitral tribunal. It is a legal, not a physical, geographical concept. Hearings, deliberations and signature of the award and other parts of the arbitral process may take place elsewhere.”^[16]

Asimismo, Gary Born se expresa en igual sentido: “The correct view is that an award is “made” in the place that the parties have contractually-selected (or, absent agreement, that an arbitral institution or competent national court has selected pursuant to the parties’ delegation) as the seat of the arbitration. …Under this approach, the place where an award is “made” is not affected by the physical location where the award is signed or by the holding of hearings in particular places for convenience. Rather, the only relevant consideration is where the parties have agreed upon as the place or seat of the arbitration.”^[17]

(iv)       Una Explicación Posible para el Razonamiento del STJ

Una posible explicación para el razonamiento del Fallo del STJ podría estar en la traducción al portugués de los instrumentos sobre los cuales el Decreto 4.311 del 2002 (el “Decreto”) y el artículo 34, párrafo único, de la Ley se basaron: la Convención de Nueva York y la Ley Española de Arbitraje del 1988 (la “Ley Española”).

El Decreto internalizó la Convención de Nueva York en Brasil y contiene una traducción de su texto al portugués. A su vez, el artículo 34, párrafo único, de la Ley como es sabido se inspiró en el artículo I, 1 de la Convención de Nueva York[18] y en el artículo 56 (2) de la Ley Española. [19]

Teniendo la versión oficial en inglés de la Convención de Nueva York como referencia, la expresión cuya traducción se torna controvertida en el presente caso es “to make [an award]” (en el artículo I, 1, primera parte). En portugués, la Ley y el Decreto emplearon el termino “proferido” para expresar ese concepto. Las versiones oficiales en francés y en castellano optaron por “rendues” and “dictadas”, respectivamente. Finalmente, la Ley Española utilizó la expresión “proferidas”.

Para un autor, la elección en Brasil de la expresión “proferido”, la cual claramente proviene de la Ley Española del 1988, encontrada en la Ley y en el Decreto, sería semánticamente más restrictiva que otras palabras con las que pudiera haber sido traducida. Ese autor sostiene, por tanto, que difícilmente la palabra utilizada por el Decreto y la Ley podría compatibilizarse con el concepto amplio internacionalmente asociado a la sede del arbitraje.[20]

Sin embargo, otro autor aclara que una interpretación estrictamente gramatical del término utilizado en los textos legales brasileños aplicables conduciría a inconsistencias y a resultados inaceptables. Así, teniendo en mente el rol atribuido a la ley de la sede del arbitraje sobre los procedimientos, dicho autor sugiere que “el lugar en que sea dictado el laudo arbitral” (y expresiones similares utilizadas para designar la misma idea) representan conceptos puramente legales (no físicos), relacionados con la ley que rige el procedimiento (usualmente, la ley de la sede del arbitraje).[21]

(v)        Válvulas de Escape para Posibles Imprecisiones en la Traducción

Podría decirse que la cortes brasileñas están bajo la obligación de darle aplicación a los textos legales vigentes en Brasil tal como existen y están redactados, lo que incluiría las traducciones posiblemente imprecisas contenidas en la Ley y en el Decreto. Sin embargo, es necesario tener en cuenta que el STJ dispone de cierta discreción en la interpretación de dichos artículos cuyo significado no está inmune a cuestionamientos.

En consecuencia, en el razonamiento del Fallo la Corte debería haber recurrido a otras técnicas interpretativas disponibles y más apropiadas para la tarea que se le presentaba, como, por ejemplo, las interpretaciones teleológicas y históricas, o a la experiencia comparada, por citar algunas. Si lo hubiera hecho, la Corte hubiera llegado a la conclusión inevitable de que el lugar, sitio, Estado, país o territorio en que se hace el laudo arbitral sólo puede corresponder a la sede del arbitraje, según la determinación de las partes en el convenio arbitral u otro documento posterior.

No hay un orden de jerarquía entre los cinco idiomas oficiales en los que se hizo la Convención de Nueva York y se podría argumentar que, según el lector, hay diferencias sutiles respecto al concepto y alcance de ciertos términos. De hecho, incluso en el mismo idioma – el español – dos expresiones distintas fueron utilizadas para expresar conceptos idénticos en instrumentos legales distintos: la versión española de la Convención hace referencia a laudos arbitrales “dictados”, mientras que en la Ley Española los laudos arbitrales son “proferidos”. Eso no hace más que confirmar la necesidad de una interpretación y aplicación autónomas y a-nacionales del texto de la Convención.

En otras palabras, aunque la interpretación del STJ pudiera justificarse a partir de una lectura gramaticalmente estricta de las normas legales relevantes, no encuentra amparo en la interpretación uniforme que demanda la Convención de Nueva York. Es más, dicha interpretación abre el camino para inconsistencias e incertidumbre en los casos en que no se firme el laudo arbitral en la sede legal del arbitraje.

Una tradición más consistente en la aplicación directa de la Convención podría, por lo tanto, haber evitado el razonamiento imperfecto adoptado por la Corte y seguramente le hubiera permitido hacer buen uso de la relevante experiencia internacional, sin que tuviera que abdicar de su poder soberano de decisión.

No es casualidad que el artículo 34 de la Ley haya establecido la prevalencia de los tratados sobre las leyes internas en el reconocimiento y ejecución de laudos arbitrales extranjeros y que los redactores de la Convención de Nueva York vislumbraran la interpretación y aplicación uniforme de sus disposiciones.[22]

En conclusión, parece irresistible recurrir a la enseñanza de Gary Born, según la cual no se puede vincular la aplicación de los artículos V(1)(e) y VI de la Convención a definiciones locales del “lugar en que sea dictado el laudo arbitral”. Permitirlo implicaría sujetar el sistema creado por la Convención de Nueva York al riesgo inadmisible de que los pedidos de anulación de laudos arbitrales no se concentren en un único foro y pudieran ser adjudicadas de manera arbitraria por cualquier Estado contratante que desease hacerlo.[23]

III.       Conclusión

El STJ decidió en su Fallo que la nacionalidad de los laudos arbitrales – su carácter de domésticos o extranjeros – depende exclusivamente del lugar en donde hayan sido dictados, siendo irrelevante la presencia de elementos extranjeros para su caracterización.

La Corte parece proveer seguridad jurídica al aclarar de manera definitiva que la administración de arbitrajes por instituciones extranjeras (como la CCI) de acuerdo a sus reglas no afecta la nacionalidad de los laudos arbitrales. El Fallo, por lo tanto, refuerza la percepción positiva de la que gozan las cortes brasileñas en temas de arbitraje y, principalmente, evita la probable desestabilización del arbitraje en el país que resultaría de una decisión en sentido contrario.

Sin embargo, el STJ parece haber alcanzado la decisión correcta al menos en parte a través de un razonamiento que no encuentra apoyo en la experiencia internacional predominante. En la medida que los árbitros firmen el laudo arbitral en la sede del arbitraje, no habrán dudas sobre la nacionalidad del laudo. No obstante, bajo el razonamiento del Fallo, el resultado nos parecería insatisfactorio – o, a lo mejor, desnecesariamente incierto – cuando exista una discrepancia entre el lugar en que los árbitros dictaron físicamente el laudo (al firmarlo) y la sede del arbitraje escogida por las partes.

Teniendo en cuenta que lo anterior podría dar lugar a controversias graves, el STJ debería pasar a recurrir sistemáticamente y de forma directa al texto de la Convención de Nueva York en sus decisiones. Al hacerlo, debería igualmente utilizar una interpretación de sus artículos que refleje la uniformidad buscada – y, hasta cierto punto, satisfactoriamente alcanzada – por sus redactores.

Aclarar que el lugar en donde son dictados los laudos arbitrales será la sede legal del arbitraje sería un buen primer paso. De momento, sería recomendable que las partes contratantes hagan referencia expresa a la sede legal del arbitraje en su convenio arbitral (u otro documento posterior) y que los árbitros indiquen expresamente que dictaron el laudo en el lugar indicado como tal por las partes litigantes.

Daniel Aun

Candidato a LL.M. en International Business Regulation, Litigation & Arbitration, New York University School of Law, en donde es Vice-Presidente de la Asociación de Arbitraje Internacional. Anteriormente formó parte del equipo de arbitraje internacional de L.O. Baptista Advogados en São Paulo, fue profesor asistente de Derecho Internacional en la Pontificia Universidad Católica de São Paulo e hizo una pasantía en la Corte Permanente de Arbitraje de La Haya. El autor puede ser contactado en la dirección daniel.aun@nyu.edu.

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[1] Ley 9.307 del 1996.

[2] Superior Tribunal de Justicia, Recurso Especial No 1.231.554/RJ (2011/0006426-8), Ministra Nancy Andrighi.

[3] El Código de Procedimiento Civil de Brasil (el “CPC”) establece de modo amplio que las decisiones dictadas por tribunales extranjeros (las cuales se considera que incluyen decisiones judiciales y laudos arbitrales) serán reconocidas (y posteriormente ejecutadas, si sea el caso) si son homologadas por el STJ. Más específicamente, la Ley determina que el reconocimiento y la ejecución de laudos arbitrales extranjeros en Brasil está sujeta exclusivamente a la homologación de la Suprema Corte (aunque la Ley no haya sido posteriormente revisada, la promulgación de la Enmienda Constitucional 45/2004 modificó la competencia interna para adjudicar dichos pedidos homologatorios y se la atribuyó al STJ, en los términos del el artículo 105, I, i de la Constitución de Brasil) (Carlos Alberto Carmona, Arbitragem e Processo, Atlas, 2009, pp. 445 y 449). El CPC está actualmente en revisión en el Congreso Brasileño, por lo que el proceso de homologación podría sufrir cambios.

[4] La Convención de Nueva York fue internalizada en Brasil por medio del Decreto 4.311 del 23 de Julio del 2002, que contiene una traducción de su texto al portugués. Aunque no represente una versión oficial de la Convención, dicha traducción y los artículos relacionados de la Ley redactados de modo similar constituyen los textos legales aplicados por los tribunales brasileños en los casos que estén bajo su alcance. Como demostraremos en seguida, la traducción al portugués de expresiones provenientes de la Convención de Nueva York podría dar lugar a controversias.

[5] Sin embargo, es importante aclarar que, en el marco legal brasileño, los tribunales provinciales tienen competencia sobre las solicitudes de ejecución de laudos arbitrales domésticos, mientras que los tribunales federales tienen competencia para resolver solicitudes de ejecución de laudos arbitrales extranjeros. La principal diferencia entre dichos procesos probablemente radique en el tiempo necesario para su resolución.

[6] La Resolución 9 forma parte del estatuto interno del STJ e incorpora aspectos relevantes de la Ley y de la Convención. Además, aborda ciertos temas que exceden el alcance de la Ley y de la Convención, tales como la concesión de remedios provisionales en las etapas de reconocimiento y ejecución de laudos arbitrales extranjeros.

^[7] Tribunal de Justicia del Estado de Rio de Janeiro, Décima Segunda Cámara Civil, Agravo de Instrumento No 0062827-33.2009.8.19.0000, de fecha 23 de Febrero de 2010.

^[8] Ley Brasileña de Arbitraje, artículo 34, párrafo único: “Considera-se sentença arbitral estrangeira a que tenha sido proferida fora do território nacional.”.

^[9] Decreto 4.311/2002, artículo I, 1, primera parte: “A presente Convenção aplicar-se-á ao reconhecimento e à execução de sentenças arbitrais estrangeiras proferidas no território de um Estado que não o Estado em que se tencione o reconhecimento e a execução de tais sentenças, oriundas de divergências entre pessoas, sejam elas físicas ou jurídicas.”.

^[10] Fallo, p. 5: “No direito comparado a “formula” mais consagrada for a que identifica a nacionalidade da sentença arbitral segundo o país eleito como sede da arbitragem.”.

^[11] Fallo, pp. 6-7: “No ordenamento jurídico brasileiro, por sua vez, a adoção como elemento de conexão do ‘lugar onde foi proferida a sentença arbitral’ não suscita maiores dúvidas… optou-se por uma definição mais simples e objetiva, ‘baseando-se apenas e tão somente no local onde o laudo sera proferido’… Por conseguinte, apesar das criticas sofridas, (…) não ha dúvidas que o ordenamento jurídico pátrio adotou o sistema territorialista…. O legislador pátrio, portanto, ao eleger o critério geográfico, do local onde for proferida a sentença (ius solis), desconsiderou qualquer outro elemento.”.

[12] Gary B. Born, International Commercial Arbitration, 2009, pp. 2368-2369.

[13] Born, op. cit., p. 2369

[14] “…Beyond these provisions of national law and institutional rules, the better reading of the New York Convention is that it contains an international definition of where an award is “made,” which would prohibit Contracting States from adopting alternative definitions (and thereby affecting the scope of the arbitral awards subject to the Convention). That is, the Convention should be interpreted as contemplating uniform international standards defining where an award is “made” (to wit, in the contractual arbitral seat), which Contracting States are required to implement. The foregoing conclusion is consistent with the text of Article V(1)(e), which adopts an internationally-applicable formula (referring to the place where an award is “made”).” (Born, op. cit., pp. 2373-2374)

[15] “Thus, somewhat ironically, given what is described as the “territorial” applicability of national arbitration legislation only to arbitrations seated on local territory, the arbitral seat is itself defined entirely by reference to the parties’ agreement, and not as a purely geographic or territorial location (i.e., the place of the arbitral hearings). …Thus, the parties and the tribunal can proceed through an entire arbitration without ever setting foot in or otherwise engaging with the arbitral seat in any way – while being subject to the “territorial” arbitration legislation of the arbitral seat.” (Born, op. cit., p. 1249)

[16] ICCA’s Guide to the Interpretation of the 1958 New York Convention, p. 21.

[17] Born, op. cit., p. 2372.

[18] Convención de Nueva York, artículo I, 1, primera parte: “La presente Convención se aplicara al reconocimiento y la ejecución de las sentencias arbitrales dictadas en el territorio de un Estado distinto de aquel en que se pide el reconocimiento y la ejecución de dichas sentencias, y que tengan su origen en diferencias entre personas naturales o jurídicas.”.

[19] Ley 36/1988 (Ley Española de Arbitraje), artículo 56 (2): “Se entiende por laudo arbitral extranjero el que no haya sido pronunciado en España”.

[20] El autor argumenta que el verbo “proferir” estaría comúnmente asociado al acto único llevado a cabo por el adjudicador en que declara oralmente o comunica por escrito a las partes de su decisión. Mientras tanto “fazer” o “realizar” teóricamente alcanzarían una secuencia más amplia de actos llevados a cabo por el adjudicador (como audiencias y reuniones), finalizando con el dictamen del laudo arbitral (José Augusto Fontoura Costa, Sobre Corvos e Ornitorrincos: Arbitragem Estrangeira e Internacional no Direito Brasileiro, Revista Brasileira de Arbitragem, n. 28, 2011, pp. 68-69).

[21] Carlos A. da S. Lobo, A Definição de Sentença Arbitral Estrangeira, Revista de Arbitragem e Medicação, v. 9, 2009, pp. 62-69. El STJ hizo referencia a otra parte de ese estudio en su Fallo, pero no parece haber llegado a la conclusión aquí presentada.

[22] “The terms must be understood taking into account the context and the purpose of the Convention. Therefore, courts should not interpret the terms of the New York Convention by reference to domestic law. The terms of the Convention should have the same meaning wherever in the world they are applied. This helps to ensure the uniform application of the Convention in all the Contracting States.” (ICCA’s Guide, pp. 13-14). Académicos brasileños también reconocen las desventajas de aplicar la Convención de Nueva York indirectamente “…the survey of domestic precedents also shows that, in many ways, Brazil has not profited from adopting a mainly insular standpoint when enforcing foreign arbitral awards. Specifically, the interpretation given so far to standards and rules that are highly linked to the international practices…lack connection to the global knowledge accumulated around the New York Convention. …The problems faced abroad are analogous to those presented in the domestic setting. In that sense, the Brazilian practice would benefit significantly from broadening its legal interpretation to encompass the entire body of principles, policies, case law, debates, research and commentaries that encircle the New York Convention. …they would bridge the gap between the domestic reasoning and the argumentative repertory, methods of legal inquiry and set of legal materials employed in that Convention’s interpretation worldwide. In so doing, Brazilian case law would share the learning and achievements accumulated in fifty years of the New York Convention’s history, as well as join the international community in the ongoing development of this treaty.” André A. C. Abbud, Fifty Years in Five? The Brazilian Approach to the New York Convention, 2008, pp. 35-36.

[23] Born, op. cit., p. 2374.

This is to announce the March 2012 session of the Arbitration Forum of the Center for Transnational Litigation and Commercial Law, entitled “The non-enforcement of arbitral awards: A BIT (of a) problem with human rights and damage calculation” which will take place on Monday, March 26th, 2012, from 6.15 p.m. to 8.00 p.m., in the Lester Pollack Colloquium Room, Furman Hall 900 (245 Sullivan Street, New York, NY 10012).

It is a great pleasure to be able to announce that on the occasion of this session, which is co-hosted by the New York/Washington D.C. Chapter of the Spanish Arbitration Club, Dr. Stefan Kröll will give a talk on “International commercial arbitration awards as “investment” under BITs” and that Mr. José Alberro will speak on “Estimating damages when BITs are used to enforce commercial arbitration awards”. Mr. Brian King and Grant Hanessian agreed to act as commentators.

Dr. Stefan Kröll is one of the leading German experts on arbitration and a national correspondent for Germany to UNCITRAL for arbitration and international commercial law. He sits regularly as an arbitrator in national and international cases (ICC, DIS, VIAC, ad-hoc) and is member of the board of editors of several peer reviewed journals. Dr. Kröll is a Visiting Lecturer at the Bucerius Law School and Visiting Reader at the School of International Arbitration at CCLS (Queen Mary, University of London). He has published widely in the field of international commercial arbitration and commercial law, including the books “Comparative International Commercial Arbitration” (co-authored with Lew/Mistelis), “Arbitration in Germany – The Model Law in Practice” (co-edited with Böckstiegel/Nacimiento) and “Conflict of Laws in International Arbitration” (co-edited with Ferrari). Recently, he has been retained by UNCITRAL as one of the three experts to prepare the Digest on the UNCITRAL Model Law on International Commercial Arbitration.

Dr. Jose Alberro, who holds a Ph.D. in Economics from the University of Chicago, has taught as tenured full professor economics at universities in the United States, Mexico and the United Kingdom for 15 years. Dr. Alberro’s expertise focuses on applied economic and financial modeling; he has consulting experience across a wide variety of industries, with particular depth in the areas of energy, oil, petrochemicals, consumer goods, and network industries (telecommunications, natural gas, electricity). His expertise not only led him to give expert testimony in commercial and investor state arbitrations on damage valuation, most recently in The Hague, in the context of a multi-billion dollar case resulting from the confiscation of hydrocarbon assets, but also to his appointment as arbitrator in ICSID proceedings. Dr. Alberro, who is a member of the AAA’s National Roster of Arbitrators, he has published extensively in academic journals; one of his publications was cited in the 1995 Nobel Prize in Economics Lecture.

Brian King is a partner in the international arbitration group at Freshfields Bruckhaus Deringer.  Prior to returning to New York in 2007, he headed the arbitration group in the firm’s Amsterdam office for seven years.  Mr. King’s practice centers on acting as counsel or arbitrator in investment treaty and international commercial disputes. He has represented both investors and States, as well as some of the largest European and U.S. corporations.  A 1990 graduate of the NYU Law School, Mr. King regularly speaks and publishes on arbitration-related topics.

Grant Hanessian is Co-Chair of Baker & McKenzie’s International Arbitration Practice Group and Chair of the Litigation/Dispute Resolution Department of the firm’s New York office.  A graduate of NYU Law School, Mr. Hanessian has more than 25 years experience acting as counsel or arbitrator in international commercial and investment treaty arbitrations.  Mr. Hanessian is a member of the Commission on Arbitration of the International Chamber of Commerce and the ICC Task Force on Arbitration Involving States or State Entities and has published extensively on international arbitration topics.

Please note that all discussions taking place during the Forum are subject to the Chatham House Rule.

Since space is limited, those interested are kindly asked to R.S.V.P. by March 22^nd (by sending an email to Prof. Franco Ferrari at franco.ferrari@nyu.edu). On-site registration will not be available.

Franco Ferrari

A pesar de que los procedimientos arbitrales comerciales son confidenciales, los casos más importantes raramente son secretos; informaciones relativas a estos procedimientos son desveladas por acciones judiciales paralelas, informaciones relativas a títulos, valores, comunicados de abogados, empresas involucradas en el caso o prensa económica especializada. Por consiguiente, los procedimientos arbitrales más importantes son conocidos, analizados e incluso clasificados por orden de importancia. Según el Arbitration Scorecard de la American Lawyer magazine de Julio de 2011, uno de los diez mayores arbitrajes del período 2010-11 ha sido el laudo arbitral de la diputa entre la empresa argelina Sonatrach y la española Gas Natural Fenosa. Este arbitraje de la CCI en Ginebra ha sido,con 2.1 billones de dólares,uno de los mas importantes de los últimos años. Esta decisión no ha sido ni cumplida ni ejecutada porque el laudo ha sido desafiado con una negociación entre las partes. Evitar el cumplimiento de un laudo arbitral con una negociación entre las partes implicadas no es una excepción en arbitraje internacional. Esta técnica aporta nuevas oportunidades a las empresas para encontrar soluciones a sus conflictos, desarrollar nuevas oportunidades y  alianzas y mantener las relaciones comerciales entre ellas.

Este arbitraje fue consecuencia de una disputa entre Sonatrach y Gas Natural relativa al precio y volumen de gas natural. Sonatrach, proveedor de un 25% del gas del mercado español gracias al gaseoducto del norte de África, inició un procedimiento arbitral en 2007 cuando Gas Natural rechazó pagar precios más altos como consecuencia de la revisión del precio acordado inicialmente. Esta disputa fue resuelta en un primer momento con un arbitraje CCI en Ginebra donde Gas Natural fue representada por Freshfields y Sonatrach lo fue por Bredin Prat. La corte decidió, en 2010, autorizar a Sonatrach a aumentar el precio del gas, distribuido en España desde 2007 vía el gaseoducto que aporta gas a Europa a través del Magreb.

Consecuentemente, el tribunal arbitral confirmó el derecho de la compañía argelina a revisar los precios de gas. Así pues, Gas Natural fue condenada a pagar la diferencia entre el antiguo y el nuevo precio por todo el gas recibido durante este período. El laudo, muy adverso para Gas Natural, conllevó dos importantes consecuencias: la primera, un aumento de 30% del precio de gas entre 2007 and 2009; esta cantidad fue estimada por Gas Natural alrededor de 1,5 billones de dólares, y la otra consecuencia fue la modificación de la base de precios en el futuro. Este segundo punto nunca fue cuantificado por la compañía.

La estrategia del comité ejecutivo de Gas Natural fue de ganar tiempo para encontrar un nuevo acuerdo, puesto que incluso si la decisión arbitral era final y definitiva, una negociación entre las partes es siempre posible en arbitraje comercial internacional. Para ganar tiempo, la empresa española inicio una acción de anulación del laudo en septiembre de 2010 y obtuvo medidas preventivas por un tribunal suizo. Simultáneamente, la empresa española trató de analizar el coste del cumplimiento del laudo y desarrollar una mejor relación con el nuevo equipo directivo de la compañía argelina a partir de discretas negociaciones.

Un año después del laudo, en Agosto 2011, un comunicado de prensa de la empresa española informaba que : “Gas Natural Fenosa integra como accionista a la compañía Argelina,Sonatrach,  después de la ampliación de capital” Además, en el mismo comunicado la empresa española señalaba que las partes aceptaban renunciar a cualquier recurso pendiente entre ellas, lo que representaba la anulación del laudo arbitral. Así pues, Sonatrach entró a participar en Gas Natural Fenosa después que el comité ejecutivo de la española aprobase la ampliación de capital. Sonatrach pagaría €514m por el  3,85 por ciento del holding, lo que suponía 38,183,600 de las nuevas acciones.

Este acuerdo representa un cambio de rumbo para las relaciones entre las dos compañías, las cuales tienen fuertes relaciones comerciales e intereses en común pero también numerosas disputas en los últimos años.

Además, la reciente adquisición de una parte del capital por Sonatrach, ha subrayado la intensificación del negocio y los vínculos entre las compañías de hidrocarburos. Portugal ha visto un incremento de inversión de Angola en los últimos años con la presencia de empresas como Galp and Millenium BCP y tal vez más en los próximos meses. Pero el acuerdo de Sonatrach en España es el primero en España. Argelia, miembro de la organización de países exportadores de petróleo, tiene una capacidad de producción de 1.4 millones barriles al día de petróleo y exporta alrededor de 60 billones de metros cúbicos cada año.

Esta negociación de un laudo arbitral no es una excepción en la resolución de conflictos comerciales internacionales. Un estudio de 2008 de Price Waterhouse Coopers muestra la importancia de los acuerdos posteriores al laudo arbitral. Este estudio confirma que  un 40% de las compañías negocian el laudo arbitral frente el 30% que dicen no negociar la decisión arbitral. Este estudio también muestra que la nacionalidad de la compañía tiene una cierta influencia en la negociación o no post arbitral, pues las empresas sudamericanas, japonesas y de UK raramente negocian. Sin embargo, las suizas, mejicanas y americanas estan más abiertas a  negociar el laudo.

Negociar un acuerdo arbitral significa llegar a un acuerdo entre las partes implicadas en un proceso arbitral después de que el tribunal haya dictado el laudo, el cual es final y definitivo y no permite generalmente ni recurso ni apelación. Este acuerdo post arbitral puede modificar o ajustar el laudo, cambiar los términos de su performance por ejemplo con uno nuevo y de menos importante monto pero con un pago mas rápido. En muchas ocasiones, estos acuerdos son beneficiosos para ambas partes.

La parte beneficiada por un laudo favorable puede presionar a la otra parte para retomar una nueva relación comercial o para la abstención de la actividad  comercial. Si esta presión no funciona la parte ganadora siempre puede solicitar la ejecución del laudo arbitral, como si se tratara de una decisión judicial, si el país es signatario de la Convención de Nueva York de 1958.

La parte perdedora puede cumplir el laudo, usarlo como base de una negociación o tratar de anularlo en base de una de las razones previstas en dicha Convención de Nueva York. Sin embargo, las bases para solicitar la anulación de una decisión internacional arbitral, previstas en los artículos 5 y 7 de la Convención de Nueva York son pocos y muy estrictos. La forma más exitosa de anular un laudo arbitral es por razones procesales. Esto sucede cuando un árbitro no decide o decide mas allá de lo previsto y solicitado por las partes.

Así pues, en varias ocasiones, para la parte que pierde puede ser mas interesante substituir la cantidad de dinero por una prestación especifica, o un pago aplazado en el tiempo. Para la parte ganadora, renegociar el laudo puede ser más interesante que perder tiempo y dinero en abogados para solicitar su ejecución. Además, la negociación del laudo puede dar a las partes nuevas formas de colaboración para nuevos negocios y mantener así la relación de trabajo que pudo existir en el pasado.

La decisión arbitral, tiene incluso un precio de Mercado, y puede ser considerado como un titulo de crédito e incluso ser vendido a terceras partes. Algunas compañías prefieren vender el laudo arbitral a algunas empresas o a fondos especializados en el cobro de decisiones arbitrales. En otros casos el laudo es vendido con el conjunto de la sociedad. Estos casos confirman el interesante debate en la comunidad internacional del arbitraje, especialmente en arbitrajes implicando inversiones estatales, sobre el sentido de vender un laudo arbitral. Estos son algunos ejemplos en los que los laudos son vendidos con 50% o 75% del monto del laudo.

Esencialmente, las razones para obtener un acuerdo después de una decisión arbitral son las mismas que pueden motivar a las partes a obtenerlo antes del procedimiento arbitral, pero es más fácil con el peso de un laudo arbitral que pueda servir de punto de referencia para la negociación entre las partes. La ejecución de la decisión arbitral puede tener algunas consecuencias negativas para la parte perdedora, para la relación entre compañías, la reputación de estas empresas y por esta razón a veces es más interesante negociar un acuerdo y no ejecutar la decisión arbitral. Básicamente, las empresas deciden negociar los laudos arbitrales para ganar tiempo y dinero. Incluso si la ejecución de la decisión es posible, como hemos visto, gracias a la Convención de Nueva York de 1958, en algunas situaciones, las empresas prefieren salvar tiempo y dinero y mas allá de estos dos aspectos, las empresas desean mantener relaciones de trabajo y colaboración.

Además, la negociación puede ser parcial y afectar tan solo una parte del laudo, ya que es posible ejecutar parcialmente un laudo bajo los principios previstos en la Convención de Nueva York

Así pues, la resolución de un conflicto posteriormente a la decisión arbitral es una practica común adoptada por las compañías implicadas en procedimientos arbitrales. En la fase post-arbitral, la voluntad de acuerdo es generada por varios factores como hemos podido analizar previamente. Mas allá de los beneficios clásicos de los procedimiento arbitrales; rapidez, confidencialidad y libertad para elegir a un árbitro neutral y competente, podemos añadir la posibilidad de negociar el laudo arbitral entre las partes implicadas. El caso Sonatrcah v Gas Natural Fenosa, muestra este considerable ventaja del arbitraje: la posible negociación del laudo con el fin de encontrar nuevas soluciones para resolver conflictos y desarrollar así, incluso, nuevas cooperaciones y nuevos proyectos comerciales.

Eduard Beltran is LLM candidate in the program of International Business Regulation, Litigation and Arbitration at New York University School of Law, attorney at law member of the Barcelona Bar and former deputy head of the international cooperation office of the French ministry of justice, responsible for the legal cooperation between Europe and Latin America.

Although international commercial arbitration procedures are confidential, the biggest cases are rarely secret; they are disclosed by domestic court actions, securities disclosures, lawyers, companies involved in the case and trade press. Therefore, the biggest international arbitration procedures and awards are known, analyzed and even ranked. According to Arbitration Scorecard of American Lawyer magazine of July 2011, one of the ten biggest arbitral awards of the period 2010-11 has been the arbitral award rendered in the dispute between the Algerian state-controlled company Sonatrach and the Spanish Gas Natural Fenosa. This ICC arbitration seated in Geneva has been with 2.1 billion dollars award one of the most important of the last years. This decision has not been complied or enforced because the award has been challenged by a negotiation between the parties. Challenging an arbitral award by negotiation is not an exception in international arbitration and brings new opportunities to the companies to settle a dispute increasing new ties and finding new alliances between them.

This arbitration follows a dispute between Sonatrach and Gas Natural relating to the price and volumes of natural gas supplies. Sonatrach, which provides a quarter of gas to the Spanish market through its North African pipeline, began arbitration in 2007 when Gas Natural refused to pay higher prices. This dispute was settled the first time through an ICC arbitration in Geneva where Gas Natural Fenosa was represented by Freshfields and Sonatrach was represented by Bredin Prat. The court ruled in August 2010 that it recognized the right of Sonatrach to boost the price of gas supplied to Spain since 2007 through the Maghreb Europe pipeline, which crosses Morocco and extends into Spain and Portugal.

Consequently, the arbitral tribunal confirmed the Algerian company’s right to revise its price formula. Gas Natural was ordered to pay the difference between the old and the new rates for all the gas received under both contracts in the relevant periods. The award, extremely adverse for the Spanish company, had two main consequences: the first , an increase of 30% of gas supplies between 2007 and 2009; this quantity was measured with an estimation by Gas natural around 1,5 billion USD, and the other consequence was the modification of the base to fix supplies in the future. The company never quantified this second point.

The strategy of the board of Gas Natural was to gain time to find a new settlement because, even if the award was full and final, a negotiation between parties is always possible in commercial arbitration. To win time the Spanish company started an action for annulment of the arbitral award in Switzerland justice in September 2010 and obtained precautionary measures by the Swiss tribunal. Simultaneously, the Spanish company tried to analyze the cost of comply the award and tried to develop a new relationship with the new board of the Algerian company by discrete discussions.

One year after the award, in August 2011, a press release of the Spanish company stated: “Gas Natural Fenosa adds the Algerian state-owned energy company, Sonatrach, as shareholder following the capital increases”. Furthermore, in this press release, the Spanish company informed that parties accepted to give up every pending case and so this represented the annulment of the award. Thus, Sonatrach has taken a stake in Gas Natural Fenosa after the Spanish company’s Board approved a capital expansion. Sonatrach will pay €514m for a 3,85 percent holding, which represents 38,183,600 new stock.

This deal represents a reversal in relations between these two companies, which have strong commercial ties and common interests but also a series of disputes in recent years.

Moreover, the recent acquisition of a stake in leading Spanish utility by Algerian state-owned energy company Sonatrach, has underlined the intensification of business transactions and links between companies in gas and oil. Portugal may have seen an influx of Angolan investment in the last few years with sizeable shareholding in companies like Galp and Millennium BCP and maybe more in the next months. But the deal of Sonatrach in Spain is the first in Spain. Algeria, a member of the Organization of Petroleum Exporting Countries, has a production capacity of 1.4 million barrels a day of oil and exports about 60 billion cubic meters of gas a year.

This negotiation of an arbitral award is not an exception in dispute resolutions in international business transactions. A study of 2008 by Price Waterhouse Coopers shows the importance of settlement after an arbitral award. This study confirms that 40% of the companies negotiate the arbitral award against 30% who said that they do not negotiate the award. The study also shows that the nationality of the companies counts and so South American, Japanese and UK corporations rarely negotiate the award. However, Swiss, Mexican and US companies are more used to negotiate the award.

Settlement post arbitral award is referred to as an agreement reached by the parties after the tribunal has rendered the award, which is often full and final. This settlement post arbitral can modify or adjust the award, changing the terms of its performance for example by a new, less important amount but with a prompter payment. In many situations this kind of settlement is convenient for both parties.

The winning party can often use the arbitral award to put pressure on the losing party, whether through explicit or implicit threats of commercial reprisal or noncooperation, or through the threat of adverse publicity. If such pressure fails, the winning party may have to seek execution by court proceedings on the bank accounts or other assets of the losing party. If the award has been deposited or registered, it may then be enforced as though it were a judgment of the court, if the country of the arbitration is member of the New York Convention.

A losing party can comply with the award, use it as a basis for negotiating a settlement, or may challenge the award. However, the basis for challenge, stated in articles 5 to 7 of the New York Convention, are few indeed. The principal successfully way to challenge an arbitration award deal is for procedural issues. Challenges on procedural issues may be made, for example, where the arbitrator failed to decide an issue submitted by the parties, failed to allow a continuance of the hearing even though good cause was shown, or considered and decided issues beyond the scope of the agreement or submission by the parties.

Thus, in several situations, for the losing party it could be more interesting to substitute damages for a specific performance or to pay a substantial amount over a period of time. For the winning party, renegotiating the award could be more interesting than spending time and lawyer’s fees for the enforcement. Moreover the negotiation of the award and a new settlement could allow parties to find new ways of collaboration for a new business and keep the working relations after the dispute.

The arbitral award has a market value, in the sense that it could be considered as credit title and even been sold to third parties. Some corporations revealed that they prefer to sell the arbitral award to some companies or funds specialize in recovering the damages covered by the arbitral award. In other cases the award is sold with the whole business. These cases confirm the interesting debate in the international arbitration community, especially in investment arbitration against states, to have the sense to sell the award to another company, fund, or law firm specialized in the enforcement. These are some examples where the award is sold with a 50% or 75% of the amount of the award.

Actually, the reasons to get a settlement after an arbitral award are the same as before but it is easier after the award because the award gives a reference point of negotiation, an “anchor point”. The enforcement could have some negative consequences for the losing party or the relation between the companies; the reputations and sometimes is more interesting negotiate a specific performance more than money, and the fees of the lawyer for the enforcement. Basically, companies decide to negotiate the award to save time and money. Even if the enforcement is possible, as we know by the New York Convention of 1958, in some situations companies prefer to save time, money and moreover keep the working relations with the other company by a discrete negotiation.

Moreover, the negotiation can be partial and touch just a part of the award, because it is always possible to enforce partially an award under the New York Convention.

Hence, settlement post arbitral award is a common practice adopted by companies involved in an arbitration procedure. At the post award stage, the settlement is generated by various factors, including time and cost efficiencies and the will to maintain a working relationship with the other company. To all the known classical advantages of international arbitration: speed, cost, confidentiality and freedom to choose a neutral and competent arbitrator, we can add the negotiation of the award between the parties after the award is released. The case Sonatrach v. Gas Natural Fenosa shows this advantage of the arbitration: the possible negotiation of the award and the possibility to reach new solutions in order to settle the conflict and develop new projects, new transactions and more business.

Eduard Beltran is LLM candidate in the program of International Business Regulation, Litigation and Arbitration at New York University School of Law, attorney at law member of the Barcelona Bar and former deputy head of the international cooperation office of the French ministry of justice, responsible for the legal cooperation between Europe and Latin America.

The editors of the Transnational Notes blog are happy to announce that some blog entries will now be  posted in a foreign language as well.

La comunidad empresarial en el Ecuador ha generado ciertas preocupaciones en relación a la recientemente promulgada Ley Orgánica de Regulación y Control del Poder de Mercado. Algunas de sus más temibles preocupaciones se basan en los excesivos poderes que la Superintendencia de Regulación y Control del Poder de Mercado tendrá una vez que se establezca. Esta Ley fue promulgada con el propósito, como fue pensado por mucho países en desarrollo cuando promulgaron sus propias leyes de competencia, que esta Ley contribuirá al crecimiento económico. El principal objetivo de la Ley es controlar y sancionar a los agentes económicos que afecten o puedan afectar a la competencia, tratando de equiparar el mercado para nuevos emprendedores. Desde un punto de vista teórico, puede ser visto como algo positivo para el bienestar de los competidores y los consumidores pero existen muchas preocupaciones que la aplicación de dicha Ley se verá sujeta a presiones políticas.

Desde el 2007, cuando Rafael Correa, de tendencia izquierdista, asumió su primera presidencia, el gobierno anuncio su deseo en redactar una Ley de Competencia. Correa estaba consternado que el Ecuador era una de los pocos países en América del Sur sin una Ley de Competencia. El interés del Presidente en tener una regulación sobre la competencia, le llevó a emitir el Decreto Ejecutivo 1614 en marzo 2009, con el propósito de hacer la Decisión 608 de la Comunidad Andina directamente aplicable y ejecutable dentro del territorio Ecuatoriano. Este Decreto Ejecutivo tuvo validez hasta que la Asamblea Nacional promulgó la Ley Orgánica de Regulación y Control del Poder de Mercado. El Decreto Ejecutivo 1614 creo la Subsecretaría de Competencia que se encontraba bajo el control del Ministerio de Industrias y Productividad. El objetivo principal de esta Subsecretaría era estimular y proteger la competencia, promoviendo la capacitación y la investigación en temas relacionado con la competencia.

En Agosto 30 del 20111, Rafael Correa presentó a la Asamblea Nacional una propuesta de Ley con el carácter de “económico urgente”. Esta propuesta de Ley era la Ley Orgánica de Regulación y Control del Poder de Mercado. La Asamblea Nacional tuvo 30 días para aprobarla, modificarla o rechazarla. En Septiembre 29, la Ley fue aprobada con modificaciones mínimas en temas relacionados con la competencia pero con mejoras substanciales en relación a derechos ciudadanos reconocidos por la Constitución. Es posible que muchas de las preocupaciones expresadas por políticos de la oposición y organizaciones económicas con respecto a la propuesta de Ley, fueran porque el texto se prestaba para ciertas dudas acerca de las intenciones verdaderas. Después de la aprobación en la Asamblea Nacional, Correa aprobó la Ley casi inmediatamente y expresó que con esto se termina el escepticismo del “mito sobre la competencia” refiriéndose que de acuerdo al texto de la Ley, todo lo que se argumentó en contra por lo políticos de la oposición y las organización económicas, fueron falsas. El ex Secretario General de la SENPLADES, la cual fue la entidad encargada de redactar la propuesta de Ley, dijo que la Ley sancionará el abuso del poder mercado que, entre otras cosas, esta causando que la inversiones directas extranjeras no entren al país. El también mencionó el hecho que el Ecuador es un país altamente concentrado. De acuerdo al CENSO económico del 2010, 90% del mercado económico esta en manos del 1% de los agentes de mercado.

Basado en declaraciones hechas por miembros del Poder Ejecutivo en relación al objeto de esta Ley, pareciera que esta Ley es perfecta y como cualquier otra Ley de Competencia solo regulará y controlará la competencia en beneficio del consumidor y la libre competencia. Entonces ¿porque muchas personas están preocupadas por la aplicación de esta reciente Ley? ¿Es que tienen temor de lo que el gobierno puede hacer con los poderes otorgados por esta Ley? Talvez, después de hacer un breve análisis de algunos de sus artículos, cualquiera puede hacer sus propias conclusiones, teniendo en cuenta la realidad política y económica del Ecuador.

El preámbulo de la Ley menciona que de acuerdo a la Constitución del Ecuador, es una obligación principal del Estado, el promover la competencia, con el propósito de proveer igual acceso al “buen vivir”. También se menciona que de acuerdo a la Constitución del Ecuador, es un deber del Estado, el asegurar un comercio justo como un medio de acceso a productos y servicios de calidad, promoviendo la reducción de distorsiones con los intermediarios de productos.

De lo expresado en el párrafo superior, puede ser interesante si la Ley produce esos efectos, pero todo dependerá como la nueva agencia de competencia, que es una Superintendencia con los poderes para controlar y regular la competencia, aplica la Ley. Los factores principales sobre los cuales la Ley Orgánica de Regulación y Control del Poder de Mercado se basa son: Abuso de poder de mercado por cualquier agente económico; sancionar los carteles, control sobre las adquisiciones y en la habilidad del Poder Ejecutivo para proponer restricciones a la competencia.

La Ley provee la creación de una Superintendencia para remplazar a la Subsecretaria que fue creada por el Decreto Ejecutivo 1614. Esta Superintendencia tendrá la autoridad de controlar, investigar e imponer sanciones en hechos relacionados a la competencia. Un aspecto positivo incluido por la Asamblea Nacional es que la Superintendencia estará bajo el control de la Función de Transparencia y Control Social. Esto sigue una característica internacional de tener una agencia de competencia separada del Gobierno. Por otro lado, el Ejecutivo presentará la lista de candidatos de donde los miembros de la Función de Transparencia y Control Social tendrán que seleccionar a uno para que actúe como Superintendente. Es la esperanza de todo ecuatoriano que esta person sea instruida en temas de competencia y especialmente que sea una persona honesta y seria que no se deje influenciar por el Gobierno.

Después de todo, los poderes de la Superintendencia y la aplicación de la Ley dependerán de él. La Ley también provee la creación de una Junta de Regulación que estará encargada de promulgar la regulación relacionada a la competencia. La Junta de Regulación estará conformada por Ministros de áreas relacionadas, aunque durante los cortos 30 días de debate en la Asamblea Nacional, hubo una propuesta que se debería incluir a académicos y profesionales, así como también a representantes del Gobierno.

Puesto que esta es la Ley de competencia es la más reciente en el mundo, también se incluye ciertas figuras novedosas como una política de “indulgencia” para un agente económico involucrado en un cartel. Este podrá beneficiarse de esta medida, si es que cuenta y esta dispuesto a contribuir con evidencia de la conducta anticompetitiva a la Superintendencia, antes que una investigación sobre determinada conducta haya empezado.

Otro aspecto que puede ser considerado como una medida novedosa, es que esta Ley también incluye una obligación de notificación a la Superintendencia antes de realizarse una adquisición de una compañía o un negocio. Esta notificación tiene que ser realizada en caso que la adquisición cumpla ciertas condiciones específicas. Sobre esta notificación existe un Silencio Administrativo Positivo, con respecto a la decisión que la Superintendencia tiene que emitir. Esto quiere decir que la Superintendencia tiene 30 días para responder, si es que no lo hace, se considera una aprobación.

Con respecto a las sanciones, la Superintendencia puede imponer multas a los agentes económicos por conductas anticompetitivas. Estas multas pueden variar dentro de una escala desde un 8% sobre el volumen del negocio total de la empresa por infracciones categorizadas como leves, hasta un 10% por infracciones graves y hasta un 12% por infracciones muy graves. Si la Superintendencia no puede determinar el volumen del negocio total, la multa puede ser un valor entre los 13,200.00 dólares americanos hasta más de 10 millones dependiendo de las infracciones. (No hay límite). Si la infracción es categorizada como muy grave, una multa de 132,000.00 dólares americanos puede ser impuesta en los representantes legales y en cualquier otra persona que haya sido parte de la junta de directores que haya votado a favor de la decisión por la cual se genero la medida anticompetitiva. Es importante mencionar que no hay sanciones penales por medidas anticompetitivas.

Finalmente, basado en el interés publico como el desarrollo de sectores estratégicos, el suministro de servicios públicos y para estimular la economía popular, el Presidente Ecuatoriano puede emitir Decretos Ejecutivos contradiciendo el propósito de lo que se establece en esta Ley, limitando la competencia y estableciendo precios. Estas ordenes son temporales y sujetas al consejo del Superintendente, quien solo puede recomendar su suspensión, pero la ultima decisión permanece en el Presidente. Esto otorga a Correa poderes extensos para restringir la competencia especialmente con respecto a las empresas estatales.

Revisando algunas de las leyes (Ej.: Código de la Producción y la Ley de Economía Popular y Solidaria) promulgadas en los anos pasados, existe una tendencia para promover la producción interna y fortalecer el mercado interno (al menos esto es lo que la Subsecretaria de Planificación y Desarrollo opinan). Con la promulgación de esta Ley de Competencia puede parecer que Rafael Correa esta planeando la mejor manera de abrir el Ecuador al mercado libre. En sus primeros años como Presidente, paró todas las negociaciones con los Estados Unidos y con la Unión Europea sobre Tratados de Libre Comercio. Antes de eso, cuando fue Ministro de Economía en la presidencia anterior a la de él, denuncio abusos realizados por el Banco Mundial y el Fondo Monetario Internacional, causando una reducción de préstamos para Ecuador. Desde que ha estado en el poder, Ecuador afortunadamente ha gozado de precios altos de petróleo, y ha obtenido prestamos financieros de China que han balanceado la necesidad de préstamos de esas dos instituciones antes mencionadas.

Capaz, y esta es mi esperanza, Correa esta planeando en estimular la producción interna, fortalecer los mercados internos y regular la competencia con la intención de abrir las fronteras al libre comercio. Al parecer, la idea es estar seguro que cuando esto suceda, los negocios ecuatorianos sean competitivos y existan leyes claras protegiendo y permitiendo inversiones. Pero una Ley o un grupo de leyes por su cuenta nunca serán suficientes. Lo que inversores y empresarios desean es un sentido de seguridad donde las reglas del juego sean favorables y la certeza de que ellas no cambiarán de una mañana a la otra.

Sobre todo, la Ley Orgánica de Regulación y Control del Poder de Mercado puede ser efectiva en cuestiones de competencia, nivelando el terreno, eliminando barreras de entrada y acabando con abusos de poder de mercado, permitiendo que empresas nacionales e internacionales entren el mercado ecuatoriano con justas y claras regulaciones que creen mayor competencia por el beneficio de todos los consumidores. Pero todos los aspectos positivos que se espera, dependerán de la aplicación de la Ley en las manos especializadas de la Superintendencia que tendrá que confrontar influencias políticas. En un país en desarrollo, como el Ecuador, donde la corrupción es un problema muy grande, donde casi no hay oposición política y los medios de comunicación se sienten amenazados por la posibilidad de acciones judiciales, seguramente en la mente de todos los ecuatorianos puede haber una preocupación que esta Ley será otro mecanismo para aplicar presión a cualquier que se oponga al régimen. Pero como ecuatoriano, quiero pensar que el tiempo ha terminado, y es momento de abrirnos al mercado libre y a inversores efectivos que incentiven la economía posicionando al Ecuador en un estándar económico y social más alto.

Agustin Acosta Cardenas is a LL.M. candidate in the program of International Business Regulation, Litigation and Arbitration at New York University School of Law, and a former lawyer of the Unit of International Affairs and Arbitration of Attorney General’s Office of the Republic of Ecuador, responsible for alleged claims based on investment contracts and Bilateral Investment Treaties.

The business community in Ecuador[1] has raised several concerns in relation to the recent enacted Regulation and Control of Market Power Statute[2]. Some of their most fearful concerns lie in the excessive power the Superintendence of Regulation and Control of Market Power will have once it is established[3].  This Statute was enacted with the purpose, as thought by many developing countries when enacting their own antitrust statutes that it will contribute to an economic growth. The main objective of the Statute is to control and sanction economic agents that affect or may affect competition, trying to level the playing field for new entrepreneurs.  From a theoretical point of view, it could be seen as positive for the welfare of competitors and consumers but there are huge concerns that its enforcement will be subject to political pressure[4].

Since 2007, when the leftist Rafael Correa assumed his first presidency, the government announced its desire on drafting a competition Statute[5]. Correa was distressed that Ecuador was one of the few countries in South America without an antitrust law[6]. The President’s interest in having competition regulation led him to issue the Executive Order 1614 in March 2009, with the purpose of making Decision 608 of the Andean Community directly applicable and enforceable within Ecuador’s territory. This Executive Order was valid until the National Assembly finally promulgated the Regulation and Control of Market Power Statute[7]. The Executive Order 1614, created an Undersecretary of Competition that was under the control of the Ministry of Industries and Productivity. The objective of this entity was to stimulate and protect competition, promoting capacitation and investigation in competition matters.[8]

On August 30, 2011, Rafael Correa presented to the National Assembly a proposed Statute with an “urgent economic status”[9]. This proposed draft Statute was the Regulation and Control of Market Power Law[10]. The National Assembly had 30 days to approve, modify or reject it.[11] On September 29, the Statute was approved with minor modifications in relation to competition matters but with substantial improvements in relation to citizens’ rights recognized by the Constitution. It is possible that many of the concerns expressed by the political opposition and economic organizations with regard to the proposed Statute were because the text gave rise to serious doubts about its true intentions[12]. After the approval in the National Assembly, Correa signed it into law almost immediately and later said that this ends the skepticism of “the myth of competition”[13] meaning that according to the words of the Statute everything that was argued by the political opposition and economic organizations were false.  The former Secretary-General of the SENPLADES[14], which was the entity in charge of drafting the proposal, said that the Statute will sanction the abuse of market power that, inter alia, is causing direct foreign investment not to enter the country[15].  He also addressed the fact that Ecuador is a highly concentrated country. According to the 2010 economic census, 90% of the economic market is in hands of 1% of economic agents.[16]

Based on declarations made by officials of the Executive Branch in relation to the purpose of this Statute, it would seem that this Statute is perfect and as any other competition Statute it will only regulate and control competition matters to the benefit of consumers and free competition. So why are many people worried about the enforcement of this recent Statute [17]? Is it that they are scared of what the government can do with the powers granted by this Statute? Maybe, after doing a brief analysis of some of its provision, anyone can make their own conclusions, having in mind the political and economic reality of Ecuador.

The preamble of the Statute mentions that according to Ecuador’s Constitution it is a primary obligation of the State to promote competition, with the purpose of providing equitable access to “good living” (buen vivir)[18]. It is also said that according to Ecuador’s Constitution it is a duty of the State to ensure fair trade as a means of access to goods and quality services, promoting the reduction of distortions in the intermediation of products[19].

From what is mentioned in the paragraph above, it would be interesting if the Statute produce those effects, but it all will depend how the new competition agency, which is a Superintendence with the power to control and regulate competition, enforces the Statute. The key principles in which the Statute focus are the following: Abuse of market power[20] by any economic agent; sanctioning of cartels; controlling mergers, and finally on the ability of the Executive Power to propose restrictions to competition.

The Statute provides for the creation of a Superintendence to replace the Undersecretary that was created under the Executive Order 1614. This Superintendence will have the authority to control, investigate and impose sanction in matters related to competition.  One positive aspect included by the National Assembly is that the Superintendence will be under the Control of the Transparency and Social Control Power[21]. This follows the international features of having a competition agency separated from the Government. On the other hand, the Executive will submit a list of candidates from where the members of Transparency and Social Control Power have to appoint one to act as the Superintendent.  It is in the hope of every Ecuadorian that this person is qualified in competition matters and especially that he or she is an honest and serious person who will not be influenced by the Government.

After all, the powers[22] of the Superintendence and the enforcement of the Estatute will depend on him. The Statute also provides for the creation of the Board of Regulation that will be in charge of promulgating regulations in relation to competition. The Board of Regulation will be formed by Ministers from related areas, although during the short 30 days of debate in the National Assembly, there was a proposal that they should include academics and professionals as well as government officials.

Since this is the newest competition statute worldwide, it also includes certain innovative features such as a leniency policy for an economic agent involved in a cartel. An economic agent can benefit from this policy, if he or she tells and is willing to contribute with evidence of the anticompetitive conduct to the Superintendence, before an investigation of the alleged conduct starts.

Another aspect that could be considered conforming to these innovative features is that this Statute also includes a mandatory pre-mergers notification to the Superintendence. This notification has to be made if the effects of the merger meet certain specified conditions. There is Positive Administrative Silence, with regards to the decision that the Superintendence has to render, meaning that the Superintendence has 30 days to respond, and if it does not, it will be considered as an approval.

As for sanctions, the Superintendence could impose fines to economic agents for anticompetitive conducts. These fines range within a scale of up to 8% of year turnover for offenses categorized as minor offenses, up to 10% for serious offenses and up to 12% for very serious offenses. If the Superintendence is not able to determine a year turnover, then the fine amount can be a sum between $13.200.00 U.S. dollars to more than $10 million depending of the offenses (there is no limit). If offenses are categorized as very serious, a fine of $132.000.00 U.S. dollars could be imposed on the legal representatives and on anyone who was part of the Board of Directors and voted in favor of the decision that generated the anticompetitive conduct. It is important to mention that there are no criminal penalties for anticompetitive conducts.

Finally, based on public interest like development of strategic sectors, to supply public services and to stimulate popular economy, the Ecuadorian President can issue an Executive Order contradicting the purpose of what is stated in this Statute, limiting competition and establishing prices. These orders are temporary and subject to the advice of the Superintendence, which can only recommend their suspension, but the last call remains on the President. This gives Correa extensive powers to restrict competition especially with regard to the State’s own enterprises.

Reviewing some of the laws (i.e. Code of Production and the Statute of Popular and Solidarity Economy)[23] enacted in the last years, there is a trend to promote internal production and strengthen the internal market (at least that is what the Under Secretariat of Planning and Development believes[24]).  With the promulgation of this competition Statute it may be seen that Rafael Correa is planning the best way to open Ecuador to free market. In his first years as president he put an end to all negotiation with the United States and with the European Union on free trade agreements. Before that, when he was Minister of Economy in the presidency before his term, he denounced abuses made by the World Bank and the International Monetary Fund, causing a reduction of loans to Ecuador. Since he has been in power, Ecuador has fortunately enjoyed high oil prices, and has obtained loan agreements from China that balanced the need of external loans from these two entities.

Perhaps, and this is my hope, Correa is planning on stimulating internal production, strengthening the internal market, and regulating competition with the intention to open borders to free trade.  It seems the idea is to make sure that when this happens, Ecuadorian businesses will be competitive and there will be clear Statutes protecting and allowing investments. But a Statute or groups of Statutes for themselves will never be enough. What investors and businessmen want is a sense of security where the rules of the game are favorable and the certainty that they will not change from one morning to the other.

Overall, the Regulation and Control of Market Power Law can be effective regarding competition matters, leveling the ground, eliminating entry barriers and ending abuse of market power, allowing national and international corporations to enter the Ecuadorian market with fair and clear regulations that create more competition for the benefit of all consumers. But all the positive aspects that are expected will depend on its application at the hands of a specialized Superintendence that will have to confront political influences. In a developing country, such as Ecuador, where corruption is a huge problem, where there is almost no political opposition, and media companies feel threatened because of the possibility of judicial actions, certainly in the mind of many Ecuadorians there could be a concern that this Statute will be another method to apply pressure to anyone who opposes the regime. But as an Ecuadorian I want to think that time has come to an end and that it is the moment to open to free trade and effective investors who will incentive the economy positioning Ecuador in a higher economic and social standard.

Agustin Acosta Cardenas is a LL.M. candidate in the program of International Business Regulation, Litigation and Arbitration at New York University School of Law, and a former lawyer of the Unit of International Affairs and Arbitration of Attorney General’s Office of the Republic of Ecuador, responsible for alleged claims based on investment contracts and Bilateral Investment Treaties.

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[1] Roberto Aspiazu, Executive director of the Ecuadorian Business Committee. “La ley antimonopolio amplia la fijación oficial de precios”, published on “El comercio”, November 4, 2011.

[2] Regulation and Control of Market Power Law. Official Registry Supplement No. 555 published on October 13, 2011. Approved by the National Assembly on September 29, 2011. There were 67 votes in favor, 23 against it and 33 abstentions.

[3] Roberto Aspiazu. Above note 1

[4] Miguel Carmigniani. “Ley Antimonopolio III”, published on “El Comercio”, October 27, 2011.

[5] The economist, The Americas view. “An uncompetitive competition law”, published on October 21, 2011. http://www.economist.com/node/21533281

[6] Ibid.

[7] Official Registry No. 558 published on March 27, 2009. Executive Order No. 1614 issued on March 14, 2009.

[8] Ministry of Industries and Productivity. Web page:

http://www.mipro.gob.ec/index.php?option=com_content&view=article&id=1361&Itemid=202

[9] Constitution of the Republic of Ecuador. Official Registry No. 449 published on October 20, 2008. Article 140. “The President may send to the National Assembly bills qualified as urgent in economic matters. The Assembly will approve, modify or deny them within a maximum period of thirty days from receipt…

If within the prescribed period the Assembly does not approve, modify or deny the project rated as urgent in economic matters, the President of the Republic can promulgate it with an Executive Order…”

[10] National Assembly. Document No. T-634-SNJ-11-1104 http://www.asambleanacional.gov.ec/tramite-de-las-leyes.html

[11] Constitution of the Republic of Ecuador. Above note 9.

[12] This chart explains some changes made to protect constitutional rights of citizens.

Proposed text	Final text of the Law
The Superintendence can: “Request and require any person to display any information or any documents, including books and records, receipts, invoices, agreements, messages, faxes, personal agendas, handwritten notes, business correspondence and magnetic records including, in this case, programs or whatever means necessary for reading; as well as requesting information regarding the organization, business, shareholders, and structure formation or economic operators.”… “Make inspections, with or without notice, in any establishments, premises or property of natural persons or legal persons and examine books, records, documents, faxes, personal agendas, handwritten notes, business correspondence and goods, being able to check the development of processes and take a statement of the people who are in those places.	The Superintendence can: Article 49. “Demand that it be submitted for consideration, books and records, accounting vouchers, correspondence, records or magnetic computers including their means of reading, and any other documents relating to the conduct under investigation or  the activities inspected, without being able to claim reserve of any nature.”… “Make inspections, with or without prior notification to establishments, of natural or legal persons and examine the books, records, and any other document relating to the investigated conduct, business correspondence and property, being able to check the development of processes productive and voluntary statements may  be taken. When the place where the inspection is the domicile of a natural person a judicial authorization shall be required under the terms of this law.”
“Since there are appropriate legal remedies for the administrative actions determined by the Superintendent, they may not be subject to a protective action (constitutional amparo).”	Article 52. “A protective action proceeds over all administrative acts of the Superintendent…”

[13]The economist. Above note 5.

[14] National Secretary of Planning and Development (SENPLADES).

[15] Rene Ramirez, interview given to “El Comercio”. “La economia concentrada espanta al inversor”. Published on July 22, 2011.

[16] To have an overview of Ecuador’s market, (i.e. 61% of sales of dairy products are in 5 of 136 enterprises; 61% of sales of textiles are in 9 of 1493 enterprises; 71% of sales of milling products are in 5 of 135 enterprises; 81% of sales of non-alcoholic beverages are in 1 of 155 enterprises and 76% of sales of soaps and detergents are in 2 of 88 enterprises.) “Pulso Politico” in TC television on August 28, 2011. http://www.youtube.com/watch?v=5IVg7WlkdZg&feature=related

[17] Roberto Aspiazu. Above, note 1 and 3.

[18] This is a constitutional principle stated in the second chapter of the Constitution under the title Rights of Good Living. According to the government plan the “Good Living is based on a vision that surpasses the narrow confines of quantitative economicism and challenges the notion of material, mechanic and endless accumulation of goods. Instead the new paradigm promotes an inclusive, sustainable, and democratic economic strategy; one that incorporates actors historically excluded from the capitalist, market-driven logic of accumulation and redistribution.” http://plan2009.senplades.gob.ec/es/web/en/presentation.

[19] Constitution of the Republic of Ecuador. Official Registry No. 449 published on October 20, 2008. Articles 283-284, 335-336.

[20] Abuse of market power is considered as abuse of dominance according to what is stated in article 8 of the law. The law does not sanction having market power, it only sanctions abuse of market power that affects competition.

[21] One of the five Powers of the State (Executive Power, Judicial Power, Legislative Power, Electoral Power and the Transparency and Social Control Power). Constitution of the Republic of Ecuador. Official Registry No. 449 published on October 20, 2008. Articles 204-210.

[22] Regulation and Control of Market Power Law. Above note 2. Article 38 enumerates 31 possible powers but the last one establishes “all other powers stated in the law”. From 93 articles almost half of them give certain powers to the Superintendence. (i.e. Articles 38-41, 46-64, 73-93)

[23] Code of Production. Official Registry No. 351 published on December 29, 2010. Law of Popular and Solidary Economy. Official Registry No. 444 published on May 10, 2011.

[24] Diego Martinez, opinion given in a discussion panel at “Pulso Politico” in TC television on August 28, 2011. http://www.youtube.com/watch?v=5IVg7WlkdZg&feature=related

This is to announce the February 2012 session of the Arbitration Forum of the Center for Transnational Litigation and Commercial Law, entitled “Multi-party Arbitration:  From Paris to New York,” which will take place on Monday, February 27th, 2012, from 6.15 p.m. to 8.00 p.m., in the Lester Pollack Colloquium Room, Furman Hall 900 (245 Sullivan Street, New York, NY 10012).

It is a great pleasure to be able to announce that on the occasion of this session, which is co-hosted by the New York/Washington D.C. Chapter of the Spanish Arbitration Club, Professor Bernardo M. Cremades will give a talk on “Multi-party Arbitration under the New ICC Rules” and Mr. Joseph E. Neuhaus will speak about “Class Arbitration in the U.S. in the wake of Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp. and AT&T Mobility LLC v. Concepcion.” Professors George A. Bermann and Loukas Mistelis will act as commentators for both presentations.

Professor Bernardo M. Cremades is the founding and managing partner of the law firm B. Cremades & Associates. Mr. Cremades acts as a highly respected arbitrator in both domestic and international disputes, including commercial and investment protection arbitration. He is also a lauded Professor at Madrid University and is devoted to training the next generation of lawyers in the field of arbitration. Mr. Cremades has served as Co-Chair of the International Financial and Secured Transactions Committee of the American Bar Association and as Co-Chair of the Arbitration and ADR Committee of the International Bar Association, as well as President of the Global Center for Dispute Resolution and as Vice President of the London Court of Arbitration. He is author of a number of books and publications related to international arbitration.

Mr. Joseph E. Neuhaus has been a partner at Sullivan & Cromwell LLP since 1992. His practice is focused on international commercial litigation in both arbitral and court settings, with particular emphasis on Latin American matters. Mr. Neuhaus, who is coordinator of Sullivan & Cromwell LLP’s arbitration practice, has served as counsel and arbitrator in many arbitral proceedings, including ad hoc proceedings and arbitrations administered by the International Chamber of Commerce and the American Arbitration Association. He is also the author of numerous publications in the field of international arbitration and he is currently serving as one of the two private-sector advisers to the United States’ delegation to the UNCITRAL Working Group on Arbitration.

Professor George A. Bermann is the Walter Gelhorn Professor of Law, the Jean Monnet Professor of European Union Law, and the Director of the European Legal Studies Center at Columbia Law School, as well as a Visiting Professor of the Institut des Sciences Politiques (Sciences Po) in Paris, France. He is also the Chief Reporter of American Legal Institute’s Restatement of the Law of International Commercial Arbitration, the former President of the American Society of Comparative Law, the past editor-in-chief of the American Journal of Comparative Law and the current President of the International Academy of Comparative Law.

Professor Loukas Mistelis, LLB, MLE, Dr Iuris, MCIArb, Advocate, is the Clive Schmitthoff Professor of Transnational Commercial Law and Arbitration, as well as the Director of the School of International Arbitration, at the Centre for Commercial Law Studies of Queen Mary University of London. Professor Mistelis, who acts regularly as arbitrator or expert in international commercial and investment disputes, is the author of twelve books and more than 55 articles. He is also a member of the editorial boards of Arbitration International, Journal of International Dispute Settlement and Global Arbitration Review. In addition, he serves as general editor of the World Arbitration Reporter.

Please note that all discussions taking place during the Forum are subject to the Chatham House Rule.

Space is limited and thus those interested are kindly asked to R.S.V.P. by February 20th, 2012. On-site registration will not be available.

In an Opinion rendered on 8 September  2011 (for the text of the opinion click here: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62010CC0384:EN:HTML), CJEU Advocate General Trstenjak cited a paper by Franco Ferrari, Professor of law and Director of the Center for Transnational Litigation and Commercial Law at NYU School of Law, when dealing with the  relationship between the Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) and 1980 Rome Convention on the law applicable to contractual obligations, which the former replaced to some extent. As for said relationship, the Advocate General stated that “[t]he changes [introduced by the Regulation] were intended to modernise certain provisions of the Convention and give them a clearer or more precise wording with a view, ultimately, to enhancing legal certainty but without introducing new elements which would substantially change the existing legal position”. When doing so, it cited to the paper by Professor Ferrari, entitled From Rome to Rome via Brussels: remarks on the law applicable to contractual obligations absent of a choice by the parties, published in  Rabels Zeitschrift für ausländisches und internationales Privatrecht 751 (2009).

Professor Franco Ferrari, Director of the Center for Transnational Litigation and Commercial Law, has just published the second edition of his book entitled “Contracts for the International Sales of Goods”. This book provides an examination of the United Nations Convention on Contracts for the International Sale of Goods (CISG). Extensively referenced, the volume focuses on three issues, which, due to particular attention from courts and arbitral tribunals, are considered “typical” of CISG related disputes. These include the exact determination of the CISG’s sphere of application; both the non-conformity of delivered goods and the notice of non-conformity; and the determination of the rate of interest on sums in arrears. The  analysis helps readers understand the broader context in which these issues are embedded, and ultimately illustrates how the CISG is interpreted and applied in different jurisdictions.

The Latin maxim iura novit curia means that the court knows the law. Civil law systems have interpreted this maxim as the authority of the court to base its decisions on legal theories that have not been advanced by the parties. Common law systems generally reject the maxim, favoring a more limited role for court in the adversarial search for the truth.

Because arbitration differs from both civil law litigation and common law litigation, the application of iura novit curia in the arbitration context gives rise to unique problems. These problems arise because the parties’ choice of law does not resolve the question of the applicability of the principle in the arbitration context. The arbitrator is, therefore, left with the difficult question of whether or not and more importantly to what extent to apply the principle to a case at hand.

To highlight the difficulties confronting arbitrators in the application of iura novit curia, I wish to focus on the interplay of the principle with two particular aspects of arbitration: party autonomy, and uniformity in the application of choice of law. I chose these two aspects because they highlight effectively the conflicting considerations that arbitrators must balance in deciding to how to use their discretion in the application of iura novit curia in the arbitration context.

The Parties’ Choice of Law Is Not Dispositive

The issue of whether and to what extent iura novit curia should be applied in the arbitration context is not settled by the parties’ underlying choice of law. This is due to two main reasons.

First, national law rules of procedure are do not apply in the arbitration context. Indeed, most arbitral tribunals follow predetermined rules of procedure, which, if selected by the parties to the contract, trump national procedural rules. As the United States Supreme Court recently reaffirmed in Preston v. Ferrer, 552 U.S. 346 (2008), the procedural law of the jurisdiction selected in a choice of law provision will not displace the procedural rules incorporated in an arbitration clause.  Thus, to the extent that iura novit curia is a procedural rule, the parties’ choice of law does not settle the question of its applicability in the arbitration context.

For this reason, some arbitral institutions have attempted to set default rules on exactly this issue. Article 22(1)(c) of the London Court of International Arbitration, for example, states, “Unless the parties at anytime agree otherwise in writing … the Arbitral Tribunal shall have the power … of its own motion … to conduct such enquiries as may appear to the Arbitral Tribunal to be necessary or expedient, including whether and to what extent the Arbitral Tribunal should itself take the initiative in identifying the issues and ascertaining the relevant facts and the law(s) or rules of law applicable to the arbitration, the merits of the parties’ dispute and the Arbitration Agreement.”[i] Most arbitral tribunals, including the International Court of Arbitration (ICC), however, have not yet developed default rules regarding the applicability of the iura novit curia principle.

Second, arbitration has a different statutory mandate than litigation. The English Arbitration Act of 1966, for example, states that an arbitral tribunal “shall” decide a dispute “in accordance with the law chosen by the parties” or “such other considerations as are agreed by them or determined by the tribunal.”[ii] Thus, to the extent that iura novit curia is not a purely procedural rule, there is still a question as to how much the parties should be able to vary the mandate of arbitrators by contract.

Party Autonomy Counsels Against Use of Iura Novit Curia in Arbitration

Arbitration clauses have now become commonplace in commercial agreements. Indeed, they have become so prevalent that some have infamously called “midnight clauses,” because negotiators leave them until the end, and then, late at night or early in the morning, simply use boilerplate arbitration language.[iii] Although no empirical data has been compiled on the frequency of arbitration provisions in international commercial contracts, an often-cited estimate is that “ninety percent” of all international commercial contracts contain arbitration clauses.[iv]

An important point to remember, however, is that arbitration is formed and governed by the agreement of the parties. Without an agreement among the relevant commercial parties, no arbitral panel has jurisdiction over a dispute that may arise between those parties. It has thus been said that party autonomy is the “core concept” of arbitration.[v]

This is the first important aspect of arbitration that makes the application of iura novit curia difficult. If parties to an arbitration proceeding, the existence of which is based entirely on the exercise of autonomy by those parties, do not present a particular legal claim to the arbitral panel, why should the panel do so on its own accord?

In fact, much of the attractiveness of arbitration lies in the autonomy of the parties to exercise control over the choice of law and procedure to be applied in potential future disputes. It is entirely plausible that a proactive and robust use of iura novit curia in arbitral proceeding may deter some commercial parties from agreeing to submit future disputes to arbitration. Party autonomy, as a core concept of arbitration, thus counsels against a robust application of the principle of iura novit curia in arbitral proceedings.

Uniformity in Application of Choice of Law Counsels In Favor of Use of Iura Novit Curia in Arbitration

Another important aspect of arbitration, however, is uniformity in the application of the parties’ choice of law. This is especially important when the parties have chosen a body of law that aspires towards uniformity: for example, an international convention, such as the United Nations Convention on Contracts for the International Sale of Goods (“CISG”). Developed by the United Nations Commission on International Trade Law (UNCITRAL), the CISG is a treaty offering a uniform international sales law that has been ratified by 77 countries as of 2010. Article 7(1) of the CISG states that in interpreting the CISG, “regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.” Commentators have interpreted this requirement to mean that courts and arbitral tribunals must construe the provisions of the CISG in a uniform manner and not against the background of their own domestic law, as difficult as that may be.[vi] But what if, in an arbitral proceeding, neither party introduces a legal theory that is required for the Convention’s uniform application?

Consider the following simple example. Article 84(1) of the CISG states, “If the seller is bound to refund the price, he must also pay interest on it, from the date on which the price was paid.” Suppose a case is brought before an arbitral panel, such as the ICC. Neither party disputes the ICC’s jurisdiction or that the CISG governs the case at hand. The seller claims that, although he must refund the price, he does not owe any interest on it. The buyer claims that he is entitled to both a price refund and interest, though not from the day on which the price was paid, but from the earlier date of the underlying contract. Neither legal theory is consistent with the express letter of Article 84(1); in fact, both legal theories contradict the express terms of the Article. What is the arbitral panel to do in this situation?

One can make a strong argument that the arbitral panel is under a duty to follow the CISG’s unambiguous text¾the choice of law of the parties anyway¾and its states purpose, to provide a uniform law governing commercial contracts. This example is admittedly simple, but one can easily think of more complicated situations. For example, what if both parties’ theories are consistent with the CISG’s text, but contradict earlier holdings by national courts and arbitral tribunals dealing with the same substantive issue? If uniformity was the ultimate goal, as some commentators have suggested, then the arbitral panel should apply a robust version of the iura novit curia principle. This, however, substantially undermines the parties’ autonomy, essentially rendering their choice of law autonomy devoid of much meaning.

What Is an Arbitrator to Do?

The issues raised above highlight just some of the difficulties associated with the application of iura novit curia to the arbitration context. These theoretical issues are compounded by the practical difficulties inherent in international commercial arbitration. For example, ICC statistics record that, in 2009 alone, 91 different laws or systems were applied in 817 cases.[vii] Applying iura novit curia requires intimate knowledge of the body of law to be applied. Do we really expect the ICC arbitrators to research and become experts in 91 different bodies of law in order to effectively administer the principle in arbitration proceedings?

Arbitral panels face further problems caused by the conflicting views of national courts on this issue. In the 2008 case Wefren Austria GmbH v. Polar Electro Europe B.V., the Supreme Court of Finland denied the respondent’s claim that its right to be heard was violated by the tribunal’s award of compensation for the termination of the commercial agreement between the parties, an issue that was never argued. The Court upheld the tribunal’s application of iura novit curia and found that the tribunal was not bound by the legal positions raised by the parties.

But awards have been set aside by other courts in similar circumstances. In a 2007 case OAO Northern Shipping Company v. Remolcaderos de Marin SL, the High Court of England and Wales annulled a tribunal award because of the tribunal’s improper reliance on iura novit curia. In OAO, the counsel for buyers had proceeded on the assumption that a specific point was no longer in issue, and therefore did not need to be addressed. The tribunal, without inviting submissions on the issue, went on to use it as an “essential building block” for its conclusion. The Court found this to be “a serious irregularity” causing “substantial injustice” to the buyers, therefore setting aside the award.

For now, at least, there seems to be no convergence on the application of iura novit curia in the arbitration context. A further difficulty is that it may be costly or premature for the parties to address their issue in their arbitration agreements. As noted earlier, most arbitration clauses are boilerplate and parties may not prefer to expend additional time and cost negotiating over the application of iura novit curia. Moreover, the appropriate scope of the principle’s application may depend on the specific issues in dispute or the qualification of arbitrators, and their expertise in the choice of law of the parties.

Perhaps a better solution is for arbitral institutions to follow the lead of LCIA and address this issue in their default rules of procedure. This approach will, at least, create certainty of expectations for the parties at the outset. Parties may then choose whether or not to opt out of the default rule under the particular circumstances of their case and depending on their level of trust in the tribunal.

Until then, this old Latin maxim of law will continue to cause headaches for practitioners and arbitrators alike.

Ali Assareh

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[i] See also the China International Economic and Trade Arbitration Commission (CIETAC) Arbitration Rules, Articles 29(3) and 27; the Singapore International Arbitration Centre (SIAC), Article 24(d).

[ii] English Arbitration Act of 1996, Article 46(1).

[iii] Don Peters, Can We Talk? Overcoming Barriers to Mediating Private Transborder Commercial Disputes in the Americas, 41 Vand. J. Transnat’l L. 1251, 1301 (2008) (discussing “midnight clauses”); see also Kathy A. Bryan & Helena Tavares Erickson, Business Arbitration Can and Should be Improved in the United States, 14 Disp. Resol. Mag. 20, 21 (2008) (“There are more arbitration horror stories resulting from poor drafting than from any other single aspect of the process.”).

[iv] See, e.g., Brandon Hasbrouck, If it Looks Like a Duck: Private International Arbitral Bodies are Adjudicatory Tribunals Under 28 U.S.C. § 1782(a), 67 Wash. & Lee L. Rev. 1659, 1660–61 (2010); Christopher R. Drahozal, Commercial Norms, Commercial Cods, and International Commercial Arbitration, 33 Vand. J. Transnat’l L. 79, 94 (2000).

[v] Okuma Kazutake, Arbitration and Party Autonomy, 38 Seinan L. Rev. 1, 2(2005).

[vi] Franco Ferrari, The CISG’s Interpretative Goals, Interpretative Method and General Principles in Courts

[vii] ICC Bulletin, Volume 21(1) 2010, at 12.

Professor Linda Silberman has been elected as a Member of the Advisory Council of the Revista Espanol Derecho International (Spain).  She has also been selected to be an Associate Member of the Centre for Private International Law at the University of Aberdeen (Scotland).

The Supreme Court of Germany cited a paper by Franco Ferrari, professor of law, in a decision concerning the law applicable to liability for medical malpractice in a case involving a lawsuit brought by a German patient against a Swiss doctor. Professor Ferrari, who is also the Director of the Law School’s Center for Transnational Litigation and Commercial Law, is an expert on European conflict of laws.

The Court was faced with deciding whether the law applicable to the lawsuit brought by the German patient against the Swiss doctor was subject to the laws of Germany (where the plaintiff had its place of business) or those of Switzerland (where the defendant had its place of business). The German Supreme Court resorted to its conflict of laws rules, which have since been replaced by the Regulation (EC) No 593/2008 of the European  Parliament and of the Council of 17 June 2008 on the law applicable to contractual (so-called Rome I Regulation), to get to the application of Swiss law as the law that was most closely connected to the contract. In writing its 19 July 2011 opinion (http://lexetius.com/2011,4531), the German Supreme Court relied on a paper by Ferrari asserting that for the purpose of identifying the law applicable to a doctor-patient relationship, one would have to look at the law of the doctor, as the doctor is the party effecting the performance that is characteristic to the doctor-patient relationship and, thus, the party whose law is most closely connected to that kind of contractual relationship.

Linda Silberman, Martin Lipton Professor of Law, testified before the House Judiciary Committee’s Subcommittee on Courts, Commercial and Administrative Law on November 15 as that body wa sconsidering federal legislation on a national standard for recognizing and enforcing foreign judgments in the U.S. She brought the specialized knowledge gleaned from serving as co-reporter, along with Herbert and Rose Rubin Professor of International Law Emeritus Andreas Lowenfeld, of an American Law Institute project that developed a proposal for such a federal statute.

“I think the need for federal legislation is more important now than ever before,” said Silberman, who previously appeared before the subcommittee in February 2009 to discuss the issue of libel tourism. “A comprehensive federal statute will have an impact in two areas. First, it will provide a federal uniform standard for recognition and enforcement of foreign judgments in the United States. And second, it has the potential to enhance recognition and enforcement of U.S. judgments in other countries.”

Pointing to the disparities among individual states’ laws, Silberman said, “Only a federal statue can ultimately achieve the maximum level of uniformity.” She added: “In the absence of uniformity, the judgment creditor in an enforcement proceeding or the judgment debtor in a declaratory judgment proceeding for non-enforcement can forum-shop for a state law favorable to its position.”

Ultimately, Silberman argued, broader issues than even interstate legal confusion were in play: “Questions about the quality and fairness of a foreign judicial system would seem to easily fall within foreign relations concerns of the United States, and so there should be uniform federal criteria…. Recognition and enforcement of foreign judgments, as well as non-recognition and non-enforcement, is and ought to be a matter of national concern. We are in an age of globalization and international commerce, and the relevant standards and criteria should be in the hands of the federal government.”

Silberman is currently part of an advisory group to the State Department helping to prepare federal legislation to implement the Hague Choice of Court Convention, which pertains to choice of court agreements between parties in international civil and commercial cases. She also participated in a November 28 forum organized by the Law School’s Center on Transnational Litigation and Commercial Law, of which she is co-director, as well as in symposia at the University of South Carolina School of Law and Brooklyn Law School earlier in the fall.

How are non-Member States of the European Union, such as the United States, affected by Europe’s law on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters – a group of instruments which one can call the ‘Brussels-Lugano regime’? Developments in Brussels may be about to bring about significant changes, as part of a package of measures now being considered to update this regime. The other significant development in those proposals, from a non-European perspective, relates to arbitration.

The external dimension

Since before it was signed in 1968, the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, and its associated instruments, have prompted adverse comment for their inward-looking nature. The Brussels-Lugano regime, now largely based on Council Regulation (EC) 44/2001 (the ‘Brussels I Regulation’), provides mandatory and uniform jurisdictional rules for 32 jurisdictions spread across 30 European countries (the 27 member states of the European Union plus, under the Lugano Convention, three EFTA states – Switzerland, Norway and Iceland).

But it very largely ignores the rest of the world. With just three exceptions, it governs jurisdiction only against defendants domiciled in the member states, providing a framework of rules governing the jurisdiction of the courts of the member state to entertain civil or commercial proceedings. (For these purposes, ‘domicile’ is a much more liberal concept than the rather narrow common law concept of domicile). What it does in this regard, and what it leaves undone, are both significant.

First, what it leaves undone. Article 4(1) of the Brussels I Regulation says,

“If the defendant is not domiciled in a Member State, the jurisdiction of the courts of each Member State shall, subject to Articles 22 and 23, be determined by the law of that Member State.”

Article 22 contains rules conferring exclusive jurisdiction on the courts of member states with which, by reason of their particular subject-matter, the proceedings are considered to have a particularly close relationship. Thus, proceedings concerned with rights in rem in immovable property in a member state, or the constitutions of companies incorporated in a member state, or public registers, or patents, or the execution of judgments are all assigned exclusively to the member state in question, irrespective of where the defendant is domiciled.

Article 23 confers jurisdiction –exclusively so unless the contrary is agreed – on the courts of member states which the parties have chosen in a forum selection agreement. There are a number of conditions for the efficacy of such an agreement, one of which is that either party must be domiciled in a member state. So a plaintiff who is domiciled in a member state and who has such an agreement with a defendant who is non-European domiciliary can still rely on Article 23 both to confer jurisdiction on the chosen court, provided it is within a member state, and to derogate from the jurisdiction of an otherwise competent court.

The only other exception is of marginal interest: Article 9(2) deems a non-European insurer to be domiciled where its European branch is domiciled.

With those three exceptions, when it comes to non-European defendants, national law rules the day, including the widely varying and sometimes exorbitant rules which the national laws contain. Some of these are mentioned in Annex I to the Brussels I Regulation. In Germany, for example, Article 23 of the Zivilprozessordnung (ZPO, the Code of Civil Procedure) provides for jurisdiction based on the presence of property, irrespective of whether the dispute has any connection with that property. In France, Articles 14 and 15 of the Civil Code notoriously provide a forum for any dispute brought by or against a person of French nationality. In England, jurisdiction may be founded on the service of the claim on a person during their presence in England, even if it is only transitory (although in this case the exorbitance of the rule is tempered by the doctrine of forum non conveniens).

As against persons domiciled in member states, these and other rules of national law are excluded by Article 3(1), which says that persons domiciled in a member state may be sued in the courts of another member state only by virtue of the rules set out in the Regulation. And it is now clear, following the decision of the European Court of Justice in Owusu (case C-281/02, [2005] ECR I-1383) that not only ‘may’ they be sued in the courts of the member states but, if they are to be sued at all, they must be sued there. In other words, proceedings properly brought under the jurisdictional rules of the Brussels-Lugano regime cannot be stayed under national law powers for jurisdictional reasons, either in favour of the courts of another member state which might also be competent under the regime or in favour of the courts of a non-member state.

Which brings us to what the regime Brussels-Lugano leaves undone. What it does not do is to provide exceptions to take account of the external dimension. The three areas which have long been recognized as giving rise to problems are (1) where there is a close connection with a third state, the paradigm case being one concerning title to land in that third state; (2) where there is a valid forum selection agreement giving exclusive jurisdiction to the courts of a third state; and (3) where there are prior proceedings on foot in the third state between the same parties and involving the same cause of action as later proceedings commenced in a member state. In any of those cases, proceedings commenced in a member state under the Brussels-Lugano regime will  not be stayed or dismissed in favour of the third state (or at least they should not be – there is anecdotal evidence suggesting that, at least in the case of forum selection clauses, the clause is sometimes given effect and the Brussels-Lugano regime ignored).

The proposal

The European Union has an unusual legislative process. Legislative proposals are made, and can only be made, by the European Commission. But they are adopted, and can only be adopted, by the Council (which represents the governments of the member states and which has a system of qualified majority voting) and, in a fairly recent development, by the European Parliament, which is directly elected. Both the Council and the Parliament have to give their approval.  As it was mandate to do by the Brussels I Regulation, the Commission has carried out a review of the working of the Brussels I Regulation and in December 2010 put forward a proposal for its revision  or ‘recast’  (COM(2010) 748/3).

It is by no means clear that this proposal will pass into law in its present form, not least because the European Parliament is taking a close interest in the matter and has made a number of criticisms, as behind the scenes, no doubt, have the member states. Nevertheless, the Commission is in a powerful position and will be keen to press for some at least of its proposals.

The Regulation in the international legal order

Among the proposals is the repeal of Article 4, removing the power of member states to apply their own laws to defendants domiciled in non-member states, and the removal of the ‘domiciled in a member state’ qualification in most of the Regulation’s jurisdictional rules. This would have the effect that the jurisdiction of the courts of member states over persons domiciled anywhere in the world would then be subject to the Brussels I Regulation. At present, for example, English courts will assume jurisdiction over a contract case where the contract is governed by English law – a common state of affairs in international sale or transport contracts, for example. But if the proposal were adopted, they would no longer be able to do so. Admittedly, if England was the place of performance of the obligation in question, they would then be able to assume jurisdiction on that basis under Article 5(1) of the Regulation, but that is a power which, albeit on slightly different terms, they have already. It seems very likely, especially in the shipping field, that if the proposal is adopted in this form it would result in a significant loss to Europe of dispute-resolution business from around the world. It is probably for this sort of reason that the European Parliament has expressed concern that the repeal of Article 4 should not occur without a lot more detailed analysis and consultation.

An exception to the generalised extension of the Regulation’s jurisdictional rules to defendants domiciled in non-member states is provided by Article 6(1). That provision enables a defendant domiciled in a member state to be sued as a co-defendant in the courts for the place where any of the other defendants is domiciled; but it is not proposed to extend this rule to found jurisdiction against defendants domiciled in non-member states.

One deficiency of the present system is addressed by the proposal, although curiously two more are not.  What the proposal contains is a welcome provision, in Article 34, designed to deal with the problem which may occur when proceedings in relation to the same cause of action and between the same parties are pending before the courts of a third state at a time when a court in a member state is seised.  As we saw, at present the latter court has no power to stay its proceedings, notwithstanding the parallel proceedings in the third state.  Under the proposed revision, the court seised in the member state would have a discretion to stay its proceedings if certain conditions are satisfied, including that,

‘it may be expected that the court in the third State will, within a reasonable time, render a judgment that will be capable of recognition and, where applicable, enforcement in that Member State; and the court is satisfied that it is necessary for the proper administration of justice to do so.’

These conditions are both, to a common lawyer, gratifyingly discretionary and mark something of a shift towards a flexible realism and away from a dogmatic adherence to legal certainty. The court would have power to lift the stay at any time and the stay would not prejudice the plaintiff’s position on limitation. This proposal has been generally welcomed and it seems likely that it will be adopted, whatever the fate of Article 4.

What the Commission’s proposal does not contain, however, is either a provision dealing with cases involving a close connections with a third state of a kind which, within the European Union, would give rise to exclusive jurisdiction under Article 22, or a provision enabling effect to be given to choice of court agreements in favour of third states. The case for the former is less clear cut, but the case for the former is very strong.

As regards the latter, an argument which Commission officials have been advancing in public for this omission is that such agreements will soon be dealt with by the Hague Convention on Choice of Court Agreements of 30 June 2005, and that if the Brussels I Regulation were to contain a more favourable rule, then third states would have a reduced incentive to ratify the Convention.  Ratification by the EU and by other states around the world is doubtless a desirable objective, but it is not a sufficient reason to exclude a provision from the recast Brussels I Regulation on this question. It is far from certain when, if ever, this Convention will come into force at all, let alone as between the EU and enough states around the world to make any other rule of marginal significance. So far only Mexico has ratified the 2005 Convention, and its eventual effectiveness is likely to depend to a great extent on whether the United States SA ratifies it. But this question is bogged down in a constitutional dispute within the USA on whether its implementation falls within the exclusive competence of the Federal government, or also of the individual states. Even if it does come into effect, it will exclude significant numbers of international contracts and, for a significant period at least, many countries.

The case for legislation on forum selection agreements in favour of third states is now generally agreed, and perhaps the simplest way of doing it would be to adopt wholesale the terms of the 2005 Hague Convention, which could if necessary be done by reference, even in circumstances where that convention itself does not apply. It would, however, be sensible to extend the subject-matter scope of the rule to the subject-matter scope of the Brussels I Regulation, so that the difficulties which the current rules present are not perpetuated for cases which fall outside the subject-matter scope of the Hague Convention, but within the Brussels I Regulation.

Arbitration

The Brussels-Lugano regime expressly excludes arbitration from its scope: Article 1(2)(d). It is clear that for most purposes the law which governs arbitrations is unaffected by the Brussels-Lugano regime. It does not apply to the recognition and enforcement of arbitration awards as such, nor to court judgments which incorporate such awards. Equally, proceedings which form part of the arbitral process – such as the appointment of an arbitrator, setting aside an award or ruling on points of law in the course of the arbitral proceedings – fall outside the regime. But the scope of the exclusion is unclear at the margins and the effectiveness of arbitration as a parallel system of dispute resolution has been potentially compromised by the famous West Tankers decision of the European Court of Justice (case C-187/07, [2009] ECR I-663). The Commission’s proposal contains a provision designed to overcome this difficulty, although whether it does actually do so is less clear.

The critical questions are (1) the extent to which court proceedings which aim to protect or give effect to arbitration agreements and arbitration proceedings are excluded from the regime; and (2) the effect of a dispute involving an incidental or preliminary question relating to arbitration. Both questions are affected by the decision in West Tankers.

West Tankers

In brief, the case involved a jetty in Italy owned by Erg Petroli SpA which was damaged in a collision with a tanker owned by West Tankers Inc. There was a contract between Erg and West Tankers which included a London arbitration clause. Erg was paid by its insurers for the damage up to the policy limits and then made a claim against West Tankers in a London arbitration for the excess. Meanwhile, the insurers, in exercise of their subrogation rights, brought proceedings against West Tankers in Italy. West Tankers disputed the jurisdiction of the Italian court and also sought and obtained from the English courts an anti-suit injunction to restrain the insurers from pursuing the Italian proceedings, arguing that these were covered by the arbitration clause. The question of whether that was permissible under the Brussels I Regulation was referred by the House of Lords to the European Court.

In deciding that that was not permissible, the European Court affirmed two principles. First, it decided that despite even if the London proceedings were their being outside the scope of the Regulation, it could nevertheless have a collateral effect on them if those proceedings would have the consequence of undermining the effectiveness of the regime, “namely preventing the attainment of the objectives of unification of the rules of conflict of jurisdiction in civil and commercial matters and the free movement of decisions in those matters” (para. 24).  This is an example of the ‘principle of effectiveness’ in European law.

Secondly, therefore, it went on to consider whether the Italian proceedings themselves fell within or outside the subject-matter scope of the Regulation. The critical question for these purposes was whether the fact that the dispute was subject to an arbitration agreement (which was assumed for the purposes of the argument) took what was otherwise a straightforward civil or commercial dispute outside the Regulation’s scope. It concluded that it did not: a dispute that fell within the Regulation was not removed from it by reason of a preliminary or incidental issue relating to the validity of an arbitration agreement. It was for the Italian court to rule on its own jurisdiction, even if that involved ruling on the validity or applicability of the London arbitration clause, without interference by the London anti-suit injunction.

As a footnote, what happened next was that the London arbitration proceeded and was extended to include a counterclaim by West Tankers against Erg and the insurers for a declaration that it was under no liability. Although Erg participated the insurers did not and the arbitrators made an award in West Tankers’ favour against the insurers. West Tankers then applied for and obtained an order that that award be registered as a judgment of the English court. The English court held ([2011] EWHC 829 (Comm)) that although such an order would not normally be made in respect of a declaratory award, where, as in this case, the successful party’s objective was to establish the primacy of its award over any inconsistent judgment, an order would be made because that would make a positive contribution to obtaining the material benefit of the award. That order was appealed, the appeal was heard on 22 November and judgment is awaited. Meanwhile, the Italian proceedings are stayed.

The proposal

The difficulty with the West Tankers decision is that it removed from the London courts the ability to rule on the validity of the London arbitration agreement. It is this difficulty which the Commission’s proposal seeks to address. The way in which it seeks to do so is by providing an exception to the general exclusion of ‘arbitration’ in Article 1(2)(d) of the Regulation. The exception is in a new Article 29(4), which would require a court whose jurisdiction is contested on the basis of an arbitration agreement to stay its proceedings once the arbitral tribunal, or the courts of the member state of the seat of the arbitration, have been seised of proceedings to determine the existence, validity or effects of the arbitration agreement, even if that is merely an incidental question in those proceedings.

It remains to be seen whether this proposal, if adopted, will have its intended effect, the main difficulty being that the original court whose jurisdiction is challenged will have to decide as a threshold matter whether its jurisdiction is actually contested on the basis of an arbitration agreement. It is not hard to imagine that frivolous recourse may be had by recalcitrant defendants to alleged arbitration agreements as a delaying tactic. But abuse of that kind aside, it seems that a proposal along these lines is probably the best that can be achieved in keeping courts away from disputes that really ought to be decided by arbitration. (Other concerns about the proposal, such as its application to insurance disputes, or its potential effect on the competences of member states, are beyond the scope of this paper).

Other proposals

In addition to the proposals relating to the Regulation’s external dimension and to arbitration, the Commission’s proposal contains a number of other matters.

Perhaps of greatest interest to non-Europeans is the inclusion of  two proposed new fora of last resort, for cases in which no court of a member states has jurisdiction under the Regulation’s other rules. Under the first of these – a type of forum arresti – a member state’s courts would have jurisdiction if the defendant’s property was located in that state its value was not disproportionate to the value of the claim and the dispute had a sufficient connection with that member state (Article 25 of the draft). Under the second, which is subsidiary to the first, the courts of a member state with which a dispute is sufficiently connected could accept jurisdiction if the right to a fair trial or the right to access to justice so required, particularly if proceedings could not reasonably be brought or conducted in a third state with which the dispute was closely connected, or if a third state judgment would not be afforded recognition and enforcement in that state, thus counteracting the claimant’s rights – a forum necessitates – (Article 26 of the draft).

Other proposals in the draft recast of the Regulation include

• the abolition of exequatur in respect of judgments from other member states – a proposal which is exciting controversy because of public policy concerns;
• proposals to ameliorate the rigidity of the lis pendens priority rule, including a proposal to give priority to the putatively chosen courts to determine the effects of a forum selection clause,
• provisions to increase communications between courts to aid the co-ordination of interim measures with substantive proceedings and other detailed proposals relating to interim measures,
• a proposal to give priority over cases involving rights in rem in movable property to the courts of the situs, and
• a strange proposal affirming the priority of workers’ rights to engage in collective action to protect their rights.

Conclusion

It remains to be seen how much of the Commission’s proposal survives the inter-institutional wrangling which is already under way, and what amendments are finally adopted. With some amendment, it seems likely that much of it will find its way into the law, although a big question-mark still hangs over the extension of the Brussels I Regulation to cover claims against persons domiciled outside the European Union.

Alexander Layton

Queen’s Counsel (barrister) in practice at 20 Essex Street, London. Visiting fellow at NYU School of Law’s Center for Transnational Litigation and Commercial Law. Expert adviser to the Legal Affairs Committee of the European Parliament on the proposed reform of the Brussels I Regulation. Immediate past chairman of trustees, British Institute of International and Comparative Law.

This is to announce the November session of the Forum of the Center for Transnational Litigation and Commercial Law, which will take place on November 28th, 2011, from 6.15-8.00 pm., in Lester Pollack Colloquium Room, Furman Hall 900, 245 Sullivan Street, New York, NY 10012.

It is a great pleasure to be able to announce that Prof. Bo Rutledge has accepted the invitation to give a talk on the topic “International Civil Litigation in US courts in the last five years” that Mr. Alexander Layton and Professor Linda Silberman have agreed to act as commentators.

Professor Rutledge is a Professor of Law at the University of Georgia School of Law.  His research interests include international litigation, international arbitration and the United States Supreme Court.  He is the author of several books and book chapters which have been published by Yale University Press, Cambridge University Press, Oxford University Press and others.  His articles have appeared in a diverse array of journals including the University of Chicago Law Review, the Vanderbilt Law Review and the Journal of International Arbitration.  Professor Rutledge has filed more than twenty briefs and petitions in the United States Supreme Court and lower courts on topics such as arbitration, international litigation and criminal law.  Respected by his peers abroad, he also has lectured at a diverse array of institutions including Oxford University, Cambridge University, the London School of Economics, Stockholm University, the University of Mainz and the University of Oslo, among others.  This will be his first public lecture at New York University.

Mr. Alexander Layton is an English Queen’s Counsel (barrister) and a specialist in private international law, practicing from 20 Essex Street chambers in London. He has acted in a number of important cases in this field, including representing the United Kingdom government before the European Court of Justice in the well-known West Tankers case on anti-suit injunctions in support of international arbitration. He is the co-author of European Civil Practice, which has become a standard work on the European regime for  jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, and this year acted as an expert assisting the European Parliament with its legislative work on a revision of the Brussels I Regulation on this topic. He is also the author of various other papers and book chapters on private international law issues. He has recently completed a six-year term as the chair of trustees of the British Institute of International and Comparative law, where he has been instrumental in establishing the Bingham Centre for the Rule of Law. He is also a past-chairman of the British-German Jurists’ Association and of the Bar European Group.

Professor Linda J. Silberman is the Martin Lipton Professor of Law at New York University and Co-Director of the Center. She is a leading figure in the United States in private international law and transnational litigation, and her academic and scholarly interests range from numerous areas of commercial law to personal and family matters. At NYU Professor Silberman teaches a range of courses, including Civil Procedure, Comparative Procedure, Conflict of Laws, International Litigation/Arbitration and International Commercial Arbitration.  She is co-author of an important Civil Procedure casebook (now in its 3rd edition) and of a recent book on Comparative Civil Procedure.  She was the co-Reporter for the American Law Institute Project–Recognition and Enforcement of Foreign Judgments: Analysis and Proposed Federal Statute, and an adviser to two other American Law Institute projects: Intellectual Property: Principles Governing Jurisdiction, Choice of Law and Judgments in Transnational Disputes and the Restatement Third on International Commercial Arbitration. Professor Silberman is also a Member of the State Department’s Advisory Committee on Private International Law and has been a member of numerous U.S. State Department delegations to the Hague Conference. Professor Silberman combines her scholarship and academic work with other roles, such as special referee, expert witness and consultant in a number of important cases. Her work was cited by the Supreme Court of the United States in two recent Supreme Court decisions.

Please note that all discussions taking place during the Forum are subject to the Chatham House Rule.

As only limited space will be available, those interested are kindly asked to rsvp by November 20th by writing to transnational@nyu.edu.

Introduction

The 1958 New York Convention for the recognition and enforcement of arbitral awards is frequently celebrated for what it has achieved in terms of facilitation of international trade and harmonization of arbitration law and practice.  It is somehow interesting that such a successful international instrument contains no description about the subject matters the recognition and circulation of which it is intended to facilitate.  During the negotiation of the Convention, several attempts were made with a view to providing some kind of definition. However, fears of unnecessary qualification and the wish to secure the broadest possible application resulted in any such attempts being eventually abandoned.

It must be underlined that the New York Convention is not the only major instrument dealing with arbitration lacking any such definition. The UNCITRAL Model Law, for example, refrains from describing what constitutes an arbitral award even though the adoption of a definition was considered and discussed throughout its negotiation and drafting.

What are the decisions falling within the scope of the New York Convention? The analysis that we are highlighting here is not connected to the issue of whether an award is a foreign one or should be considered as such pursuant to Article I of the Convention. The issue here is two-fold and is concerned with (a) the definition of what is arbitration (for the purpose of identifying the means of dispute resolution that may produce a decision enforceable under the Convention) and, having settled that, (b) the orders issued in an arbitration that can be validly enforced under the Convention.

The alternativity test and the finality test

There seems to be general agreement that the Convention is only intended to cover dispute resolution processes which can be regarded as a truly definitive alternative to the jurisdiction of domestic courts and whose awards have the same legal force as a court judgment. This apparently easy path of analysis may be quite complicated to follow in practice. Not least because the terminology employed in practice can be confusing at times. However, it must be remembered in this last respect that, as leading commentators and court decisions have explained, the identification of the actual nature of a means of dispute resolution is not affected by the name or title employed to describe it.

The identification of what is arbitration for the purpose of applying the Convention is only the first part of the two-fold analysis. Indeed, not all orders rendered in arbitration are covered by the Convention. As is well known, arbitral tribunals employ a great variety of orders to direct the development of the arbitral process. It is clear that directions issued by a tribunal to allocate tasks and deadlines in the proceedings are unlikely to qualify as awards covered by the Convention. However, in some cases, tribunals’ orders can give rise to a considerable amount of uncertainty as to their actual nature and therefore as to their enforceability under the Convention. It is advocated that only orders which finally settle one or more of the issues which have validly come within the jurisdiction of the arbitral tribunal should qualify for recognition and enforcement under the Convention. Such awards are not necessarily those that exhaust the tribunal’s mandate. The awards that should qualify for recognition and enforcement under the Convention are all the awards which finally adjudicate one or more of the several differences which have been submitted to the jurisdiction of an arbitral tribunal. The word final implies that once the issue has been adjudicated it would be no longer possible, not even if the tribunal wished, to reopen the issue.

Applying the tests: interpretation

Two clear examples of borderlines situations that may or may not follow within the scope of application of the Convention are described below. Before doing so, however, it may be appropriate clarifying what standard of interpretation should be applied with a view to establishing whether those two instances should follow within the scope of the Convention.

It has been discussed whether the analysis aimed at establishing the nature of both a given dispute resolution process and the decisions taken therewith should be carried out with reference to the relevant domestic law(s) or whether an analysis centered on the international nature as well as the harmonization goals of the Convention should be preferred. More precisely, on one hand, it has been argued that the nature of a dispute resolution process should be identified and assessed with reference to the provisions of the law which creates and regulates such process. This law may clarify, for example, either expressly or implicitly, whether the process undertaken by the parties should be considered as a true alternative to the jurisdiction of national courts and therefore whether such process is capable of producing decisions which may be enforced abroad under the Convention. On the other hand, other authors believe that the analysis should be carried out with predominant focus on the scope and purpose of the Convention rather than the provisions of the relevant domestic law. [1] This latter point of view is certainly appealing and does not seem to be inconsistent with the approach advocated in a considerable number of cases, according to which the Convention should be interpreted and enforced having in mind its ‘international’ character. The solution to this question is perhaps found in between the two mentioned views. It seems possible to agree with the opinion that the Convention, as an international legal instrument, should be interpreted having in mind its peculiar nature and scope in accordance with the rules for the interpretation of international conventions provided by the 1969 Vienna Convention on the Law of Treaties. This view, however, should not automatically rule out any reference to the relevant domestic law(s). It is here suggested that – in assessing the nature of a dispute resolution process and the nature of orders issued therewith – domestic courts should form an independent view on the nature of both the process and the relevant award, irrespective of the definitions or categorizations employed in the jurisdictions where the award was made. The domestic courts may, however, also look at the provisions of the relevant domestic law and use them as ‘facts’. Such facts would obviously provide a strong indication as to the actual nature of the means of dispute resolution under analysis. However, they should bear neither binding force nor a definitive answer to the problem.

Adjudication

The recent development of ADR has brought about sophisticated forms of dispute resolution that both from a linguistic and a substantive point of view seem to be germane to genuine arbitration. As we have seen above, where the ADR process does not make its outcome final and binding upon the parties, similarly to court judgments, then the Convention should not be applied.

However, some forms of dispute resolution – which at first sight should be outside the scope of application of the Convention – depending on the circumstances, may, in principle, fall within its scope. This is the case, for example, of adjudication in the United Kingdom. In 1996 a new means of dispute resolution called adjudication was introduced in the United Kingdom through the Housing Grants, Construction and Regeneration Act (the ‘Act’). Adjudication is aimed at providing a fast mechanism for settling on an interim basis disputes arising out of construction contracts. The Act requires the decisions of adjudicators to be enforced pending the final determination of disputes by arbitration or litigation, depending on the choice made by the parties in the relevant contract. Therefore, the adjudicator’s decisions are immediately binding and domestic courts would assist with their enforcement until the dispute is finally settled before the chosen forum. However, it is not clear whether adjudication decisions should be enforced abroad under the Convention. Many would, on first reaction, say no. However, certain provisions of the Act may tip the balance towards the opposite answer. Section 108(3) of the Act provides that ‘the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement’. It follows that the decisions of adjudicators are only temporarily binding and cannot therefore be regarded as final decisions on the dispute between the parties. Indeed, adjudication is not a genuine alternative to litigation as any proceedings commenced after adjudication are not an appeal to the decision taken by the adjudicator but completely autonomous and fresh proceedings in which the decision of the adjudicator would carry no weight.

There are however circumstances in the presence of which the nature of the decision of the adjudicator is not as clear-cut. Indeed, the Act provides the parties with the option to agree that the decision of the adjudicator would finally settle the dispute. It seems at least possible to argue that, in such circumstances, the agreement of the parties might have the effect of transforming adjudication into some form of arbitration, the outcome of which could be enforced abroad under the Convention. The fact that adjudication is a much less procedurally-structured process than arbitration should not be enough, at least on its own, to dismiss the view favoring the enforceability of adjudications abroad. While it is true that adjudication can be regarded as a bare bones process in which the parties are not always able to make their case as fully as they desire, it is also true that the principle of party autonomy allows the parties to structure their dispute resolution mechanism as they please, provided that the relevant mechanism is carried out and puts the parties on an equal footing.

Consent Awards

Not infrequently, parties are fortunate enough to settle their differences at the outset of or during arbitration proceedings. The options available to the parties in such circumstances are to either formalize their agreement in a contract and terminate the arbitral proceedings or, where the lex arbitri and the relevant arbitration rules so permit,  to have their settlement agreement embodied by the arbitral tribunal in an award. The arbitral award which is the result of this option is often referred to as a ‘consent’ award.

The majority of arbitration laws and arbitration rules expressly permit consent awards. Article 30 of the UNCITRAL Model Law, for example, states that: “If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms. An award on agreed terms shall be made in accordance with the provisions of article 31 and shall state that it is an award. Such an award has the same status and effect as any other award on the merits of the case.”

The main reason for agreeing to a consent award is that the parties may, where necessary, benefit from the application of the Convention. It is not clear, however, whether the application of the Convention to consent awards should be taken for granted. Even though – as we have seen above – the wording used in the Model Law (‘Such an award has the same status and effect as any other award on the merits of the case’) provides for a strong indication as to the nature of consent awards and therefore as to their enforceability under the Convention, it has been observed that consent awards lack the fundamental characteristics of arbitral awards and therefore should be outside the scope of the Convention.

The main three arguments against the enforcement of consent awards under the Convention are the following:

(a) the activity carried out by the arbitral tribunal with consent award is totally deprived of any

jurisdictional character and content. As there is no actual judicial activity there cannot be a genuine arbitral award;

(b) in order for an arbitral tribunal to exist and carry out its duties there must be an actual dispute between the parties.  According to this argument, as soon as the parties enter into a settlement agreement the tribunal should be considered as functus officio;

c) the consent award may serve a purpose the in inconsistent with mandatory provisions of law or be altogether illegal.

The arguments are certainly fascinating but, perhaps, not entirely convincing. With regard to argument (a) it is possible to observe that judicial activity can be carried out in many different ways and in accordance with many different rules. The role of arbitrators, as well as that of court judges, is to preside over a process aimed at resolving a dispute. Whether the dispute is settled through a decision of the tribunal or an agreement of the parties should not make much difference. Furthermore, it should also be considered that, while the role of arbitral tribunals may be limited by the agreement of the parties to settle their dispute, arbitral tribunals retain powers of a fundamental importance. Indeed, tribunals are under no obligation to sanction the agreement if the agreement is illegal or aimed at circumventing the application of public policy provisions.

Argument (b) is somewhat formalistic and in any event unconvincing. As we have seen above, the fact that parties enter into settlement agreements during arbitral proceedings does not automatically deprive arbitral tribunals of their judicial authority. Arbitral tribunals are indeed required to perform further judicial activity before they can be considered functus officio.

If one were to espouse such formalistic method of analysis, then, it would be possible to observe, by the same token, that arbitral tribunals become functus officio only after a final award has been issued or where the proceedings are formally declared closed. Until that moment tribunals are still in function.

Finally, and with the same formalistic approach, it would be possible to argue that the settlement agreement may be implicitly entered into on condition that it is going to be validly incorporated into an award. As the settlement agreement implies the participation of the tribunal in the settlement process, the signing of the settlement agreement by the parties cannot by itself have the effect of making the arbitral tribunal functus officio.

Argument (c) does not seem to pose any insuperable problem. Legality and general compliance with public policy of the award would be in any event scrutinised ex officio by the court of the territory where enforcement is sought under Article V(2) of the Convention. This would be the case irrespective of whether the arbitral tribunal had an opportunity to ascertain the legality of the subject matter of the dispute or it has ignored the issue altogether.

Conclusion

The combined application of the two above-mentioned tests should help identify the decisions which fall within the scope of the Convention. Admittedly the two tests are not infallible. The ever developing practice of alternative dispute resolution may indeed create hybrid means of dispute resolution which could be difficult to classify.

Any analysis as to the applicability of the Convention should be carried out bearing in mind the Convention’s scope and purpose as well as the rules of interpretation provided under international law. It is advocated that no predominant role should be given in such task to the relevant provisions of domestic law. Such provisions should certainly be taken into account but should rather be used as facts which, as such, may provide for a non-binding indication as to the nature of the means of dispute resolution and the decisions under analysis.

Domenico Di Pietro

Lecturer, International Arbitration, University or Rome, “Roma Tre” and Fellow, Center for Transnational Litigation and Commercial Law, New York University School of Law. The present paper is a reviewed, edited and abridged version, for student discussion purposes, of the author’s article “What Constitutes an Arbitral Award Under the New York Convention?” in Enforcement of Arbitration Agreements and International Arbitral Awards – The New York Convention in Practice, (E. Gaillard and D. Di Pietro eds., 2008).

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[1] See Emmanuel Gaillard and John Savage (eds.), Fouchard Gaillard Goldman on International Commercial Arbitration 735–80, Kluwer (1999) 7 Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation 49, Kluwer (1981); Gino Lörcher, ‘Enforceability of Agreed Awards in Foreign Jurisdictions’, 17(3) Arb. Int’l 275, 280 (2001).

As mentioned in a recent post, the existence of Regulation 261/2004 opens space for multiple forum shopping strategies, especially in flights connecting an EU airport and a non-EU airport belonging to a signatory State to the Montreal Convention. A paradigmatic case would be the regular flights between the US and the EU, considering the number of daily flights connecting both regions.

In accordance to its Article 1, EU Regulation 261/2004 will apply to all flights departing from an EU airport as well as all flights departing from a third country to an EU airport, provided that the air carrier is an EU Community carrier.

Moral and emotional distress damages are some of the most relevant aspects to consider when filing a claim based on the delay or cancellation of a flight.

Often times, the importance of moral damages, in both financial and emotional terms, will be at least as important as recovering the price of the flight ticket. Therefore, it will be strategically important to know in advance whether in a particular jurisdiction (either in the EU or not) claims for moral damages are allowed at all, or if only the material losses (price of the ticket, lodging, damaged luggage) can be claimed.

U.S. courts usually interpret the Montreal Convention¾since EU Regulation 261/2004 is not likely to be applicable¾to exclude non-physical injuries, since such injuries were not covered under the Warsaw Convention, which preceded the Montreal Convention[1]. Consequently, what is not allowed by the Montreal Convention is not available at all[2]. Therefore, as one court has held, only economic loss or physical injury damages are recoverable[3].

Also in Bassam v. American Airlines, 287 Fed. App’x 309 (5th Cir. 2008), the Fifth Circuit concluded that “purely emotional injuries are not available under the Montreal Convention”[4], allowing little room for doubt.

Conversely, the ECJ explicitly admitted moral damages in the EU in its decision C-63/09, Click Air Case. However, the decision did not clarify either the burden of proof requested from the party alleging the damage or the applicable law deciding the existence of moral damages. As a consequence, the ECJ failed to set a reliable uniform interpretation in the EU.

In a recent decision handed down on 13 October 2011, the ECJ clarified that “further compensation” in Article 12 of Regulation 261/2004 is to be read to allow passengers compensation for the entirety of the material and non-material damages they suffered due to the failure of the air carrier to fulfill its contractual obligations.

However, this decision links compensation for moral damages to the conditions and within the limitations provided for by the Montreal Convention or by national law. Since the Montreal Convention does not specify any of these conditions, resort will have to be made to the domestic laws of the EU countries.

This is where the confusion remains, because depending on which EU countries have concurrent jurisdiction, moral damages will be appreciated or not, and if so, under a variable burden for the passenger.

In Spain, for instance, compensation for moral harassment can generally be claimed because the case law of the Supreme Court has established that partial breaches of contract can give rise to moral damages in accordance to Articles 1089, 1091 and 1101 of the Civil Code (judgments dated 22 May 1995 and 19 October 1996). In the particular subject matter of flights, the Supreme Court has declared in a famous decision of 31 May 2000 that, although moral damages may arise from delayed flights, this must not be confused with the usual stress and tension caused by the delay. However, some lower courts have established that moral damages are warranted even in cases where the only issue was that no special assistance was provided at the airport. Other decisions compare the situations of stress created by flight delays and cancellations to set up an iuris et de iure presumption: If delay is the cause of stress leading to moral damages, cancellation, which is more severe than delay, should always be enough for moral damages.

The Italian Supreme Court, by contrast, allows (in judgment no. 26972 dated 11November 2008)for moral damages but, unlike Spanish courts that require a very low burden of proof, requires substantial proof.

If Italian lower courts are consistent with their Supreme Court, parties seeking to obtain moral damages with a possibility to choose between both fora should logically opt for Spanish courts, where the onus probandi is less strict.

A number of similar situations may appear within other countries in the EU, and lawyers should carefully analyze where to sue. It is clear, however, that after the ECJ decision in case C-83/2010, litigants would assume less risks if, having the possibility to sue before U.S. and EU courts, they opt for the latter.

Manuel Gimenez Rasero is an attorney at Areilza abogados and was Rafael del Pino Scholar at the New York University School of Law (LL.M.’11).

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[1] Nature of cause of action under Warsaw and Montreal Conventions; convention remedy as exclusive”, in 8A Am. Jur. 2d Aviation § 149

[2] In 8A Am. Jur. 2d Aviation § 149: El Al Israel Airlines, Ltd. v. Tsui Yuan Tseng, 525 U.S. 155, 119 S. Ct. 662, 142 L. Ed. 2d 576 (1999); Mbaba v. Societe Air France, 457 F.3d 496 (5th Cir. 2006), cert. denied, 127 S. Ct. 959, 166 L. Ed. 2d 706 (U.S. 2007); Carey v. United Airlines, 255 F.3d 1044 (9th Cir. 2001); Marotte v. American Airlines, Inc., 296 F.3d 1255 (11th Cir. 2002); Auster v. Ghana Airways Ltd., 514 F.3d 44 (D.C. Cir. 2008); In re Air Crash at Lexington, KY, August 27, 2006, 501 F. Supp. 2d 902 (E.D. Ky. 2007); Bernardi v. Apple Vacations, 236 F. Supp. 2d 465 (E.D. Pa. 2002).

[3] Daniel, 59 F. Supp.2d at 992-94 (citing Eastern Airlines, Inc. v. Floyd, 499 U.S. 530 (1991)).

[4] Bassam v. American Airlines, 287 Fed. App’x 309 (5th Cir. 2008) at 14

When uniform laws are enacted, one usual criticism is that the absence of a jurisdictional body to interpret them gives place to contradictory applications and inconsistent decisions. One explanation for this contradiction is the lack of binding force of domestic court decisions of different countries when they apply uniform laws[1]. The “nationalistic” interpretation of uniform law would certainly be “contrary to the goals intended to be achieved by the elaboration of a uniform law,” as affirmed by Franco Ferrari[2].

Most of the time, it follows that consistency can only be “attained if the interpreter in interpreting the provisions has regard to the practice of the other Contracting States.”[3] There is sometimes a more ambitious possibility when there is an international interpretative court entitled to issue binding decisions on a particular uniform law.  That is the case with the Court of Justice of the European Union (“ECJ”), the binding interpretative body of European Union law. However, this has proven to be untrue at least in the case of liability of air carriers for the delay or cancellation of flights, where the ECJ has not contributed to a more homogenous interpretation of uniform law. Conversely, it has increased the number of conflictive court decisions inside and outside the EU.

There are two uniform laws in the EU regarding air carrier liability whose interpretation falls to the ECJ: Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights; and the Convention for the Unification of Certain Rules for International Carriage by Air signed in Montreal, 28 May 1999 (the “Convention” or the “Montreal Convention”)[4], part of EU Law, by Council Decision 2001/539/EC of 5 April 2001 (OJ 2001 L 194, p. 38).

The two statutes should not give rise to a conflict or create contradictory application. The Montreal Convention is exclusively concerned with delays, whereas Regulation 261/2004 does not create any compensation rights in cases of flight delays[5], but isapplicable only to cases of denial of boarding (Article 4), and cancellation of flights (Article 5), creating the right of a lump sum payment for an amount determined under Article 7. On the other hand, the Montreal Convention sets in Article 19 its applicability in cases of flight delays, with a liability cap of SDR 4,150 as stated in Article 22.

The autonomous concept of delay can be inferred from Regulation 261/2004. As stated in ECJ Joined Cases C-402/07 and C-432/07 Christopher Sturgeon and Others v Condor Flugdienst GmbH and Stefan Böck and Cornelia Lepuschitz v Air France SA (“Sturgeon”): There is a delay in the case where none of the elements of the trip but the times of departure and arrival are altered. If the number of the flights changes or new boarding passes are issued, we therefore face a cancellation.

As defined, delays and cancellation not only have different spheres of application, but also give rise to different liabilities.  The Regulation constitutes neither an instrument to determine the amount of the damage nor a cap on the compensation, if any. The payment under the Regulation is aimed to be simply a lump sum, or “flat rate compensation”, as defined by the ECJ in Case C-204/08 Peter Rehder v. Air Baltic Corp.

The Montreal Convention established that any liabilities that arose under its application would be limited to a maximum of SDR 4,150 (Article 22). The content of the compensation it creates is thus very clear: compensation in the case of flight delays only if the plaintiff proves the damages suffered, limited to the Article 22 cap.

However, the ECJ affirmed in the Sturgeon case that it is in accordance with the high level of protection of consumers governing the EU to equate long delays (Article 6) with cancellation (Article 4) and denial of boarding (Article 5). The ECJ not only re-wrote the Regulation, granting the lump sum payment of Article 7 to flight delays, but also created a conflict in the application of uniform laws that did not exist before: The ECJ does not mention Article 29 of the Montreal Convention[6], nor does it clarify how this Article is affected. The ECJ based its decision on Case C-344/04 International Air Transport Association v. Department for Transport [2006] (“IATA”)[7]. However, in that case, the ECJ just affirmed the validity of Regulation 261/2004 and recognized the powers of the Commission to legislate on EU flight passengers, irrespective of the Montreal Convention. The IATA decision never discussed the lump sum payment defined in Article 7. Neither the IATA decision nor the Regulation itself allowed the ECJ to reach the conclusion of the Sturgeon decision.

Prior to the Sturgeon case, the Montreal Convention was the right instrument to obtain compensation in case of flight delays, and the Regulation was the right instrument to obtain compensation in case of flight cancellations or denials of boarding. Now, both norms are in conflict.

The inconsistency created by the ECJ in the Sturgeon case may have multiple consequences.

In principle, compensation is excluded in cases of extraordinary circumstances: Article 5(3) of Regulation 261/2004 and Article 19 of the Montreal Convention so establish.

The concept of extraordinary circumstances is to be interpreted strictly when Regulation 261/2004 is concerned, as clarified by the ECJ in case C-549/07 Friederike Wallentin-Hermann v. Alitalia [2008] (“Alitalia”). The ECJ affirmed that political instability or meteorological conditions incompatible with the operation of the flight are relevant only if they create an unexpected risk, but are not directly an exemption. For instance, a technical problem in an aircraft would be “extraordinary” only if it comes out from an event that is not normal to the activity of the aircraft. This has multiple technological implications and makes the air carrier responsible for assuming all regular checks to avoid these inconveniences. This is acceptable in the context of a lump sum payment, and in cases of flight cancellation or denial of boarding, but seems clearly burdensome in cases of delays. After Sturgeon, this distinction is no longer possible .

Furthermore, the value of Article 19 of the Montreal Convention, which excludes liability in case of delay if the carrier proves that it and its servants and agents took all measures that could reasonably be required to avoid the damage, or that it was impossible for it or them to take such measures, is partially derogated without justification. If we accepted the argument of the ECJ that Regulation 261/2004 intervenes at an earlier stage than the Convention, exclusion of liability under the Regulation would amount to an exclusion of the more burdensome liability under the Montreal Convention. This is unpersuasive: First, because the nature of both amounts is different; second, because the text of both clauses is also different.

Unlike affirmations by some commentators[8], this is not necessarily the last word. In 9 December 9 2010 (case no. Xa ZR 80/10)[9], the BGH filed a question before the ECJ regarding the position of the Regulation with respect to its application to delays.

However, even if these particular situations are eventually clarified by the ECJ, they will shed only a small amount of light into a sky full of clouds. The ECJ has proven unable to give reliable orientation to domestic courts and litigants and the binding character of its decisions only makes the situation more inconsistent because it inoculates an element of incoherence into the European judicial system. It can be argued that the European Union should consider establishing a system of informal inter-court communication that would operate at a lower level of coordination¾less ambitious but certainly more useful, given the deep differences between European courts at this moment of the European integration.

Manuel Gimenez Rasero is an attorney at Areilza abogados and was Rafael del Pino Scholar at the New York University School of Law (LL.M. ’11).

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[1] For this conclusion in case law, see Tribunale di Padova (Italy), 25 February 2004, available at: http://cisgw3.law.pace.edu/cases/040225i3.html; Last Checked: 9 May 2011.

[2] See Franco Ferrari, Uniform Interpretation of the 1980 Uniform Sales Law, 24 Ga. J. Int’l & Comp. L. 183, 198 (1994).

[3] Id.

[4]Available at http://www.jus.uio.no/lm/air.carriage.unification.convention.montreal.1999/

[5] Delayed flights (Article 6) just give rise to some “assistance obligations” under Article 9.

[6] Article 29, Basis of claims.

In the carriage of passengers, baggage and cargo, any action for damages, however founded, whether under this Convention or in contract or in tort or otherwise, can only be brought subject to the conditions and such limits of liability as are set out in this Convention without prejudice to the question as to who are the persons who have the right to bring suit and what are their respective rights.

[7] For an overview of the decision, see the summary of important judgments at:  http://ec.europa.eu/dgs/legal_service/arrets/04c344_en.pdf (last checked, 29 April 2011) or the full text of the decision at:

[8] Christiane Leffers, The Difference Between Cancellation and Long Delay under Regulation 261/2004: This is a commentary on the judgment of the European Court of Justice dated 19 November 2009 (Sturgeon v Condor Flugdienst GmbH and Böck & Lepuschitz v Air France SA, joined cases C-402/07 and C-432/07)” Travel Law Quaterly, 2010, available at: http://www.avocado-law.com/fileadmin/avocado-law.de/downloads/Difference_Cancellation_Delay_261_2004.pdf (Last checked 9 May 2011)

[9] Id.

In its recent decision of 20 September 2011, 4A_103/2011, the Federal Supreme Court of Switzerland had to determine whether a panel consisting of three arbitrators of the Court of Arbitration for Sport (CAS) in Lausanne, Switzerland, had rightly decided that an arbitration clause contained in a licensing agreement also encompassed disputes arising out of sales agreements entered into by the same parties.

The facts of the case are straightforward. On January 1, 2006 a manufacturer of sports equipment and a boxing association entered into a licensing agreement which, inter alia, entitled the manufacturer to produce and commercialize boxing equipment carrying the label of the boxing association against payment of royalties. The arbitration clause contained in the licensing agreement read as follows:

“Should a disagreement over the interpretation of any terms of this Agreement arise, the Parties agree to submit the dispute to the Court of Arbitration for Sport, Lausanne, Switzerland, whose decision shall be final and binding on both Parties. While the pending question is being arbitrated, the remainder of this Agreement shall remain in effect.”

Subsequent to the execution of the licensing agreement the parties concluded several sales agreements according to which the manufacturer furnished the boxing association with boxing equipment produced under the licensing agreement.

In 2007, the boxing association claimed that the licensing agreement had expired on 31 December 2006. As a result, the manufacturer initiated arbitration proceedings before the Court of Arbitration for Sport (CAS). In turn, the boxing association objected to the jurisdiction of the CAS by submitting that the phrase “disagreement over the interpretation of any terms of this Agreement” contained in the arbitration clause of the licensing agreement merely referred to the licensing agreement rather than to the sales agreements. The CAS panel rejected this argument and assumed jurisdiction over the case by construing the arbitration agreement to encompass disputes connected with the licensing agreement.

On 4 February 2011, the boxing association challenged the issued CAS award before the Federal Supreme Court of Switzerland including for lack of jurisdiction of the arbitral tribunal (article 190(2)(b) of the Swiss Private International Law Act).

After observing that the existence of an arbitration agreement shall not be assumed off-handedly, the Federal Supreme Court of Switzerland – confirming prior case law on this issue (e.g. BGE 116 Ia 56; BGE 129 III 675) – stated that once there is no doubt about the parties’ consent to subject to arbitration the scope of the arbitration agreement is to be interpreted extensively.

The court then turned towards the issue of construction of the arbitration clause. Again confirming existing case law on the point, the court observed that the phrase “any dispute related to the interpretation of this Agreement” was not restrictive in any way and particularly included (i) disputes relating to the existence, validity and termination of contractual relationships originating from the contract containing the arbitration clause in question, as well as (ii) questions which were merely indirectly connected to the dispute submitted to arbitration. The court further held that, as a rule, the scope of an arbitration agreement contained in a contract could encompass additional contracts and annexes as long as the latter did not contain specific clauses providing for other dispute resolution mechanisms.

Albeit noting that the wording of the arbitration clause in question suggested that only the licensing agreement was subject to arbitration, the Federal Supreme Court of Switzerland concluded that such narrow interpretation of the arbitration clause would not account for the specific circumstances of the case at hand. The circumstances that militated for a broader interpretation were the following: First, the bylaws of the boxing association provided that any disputes shall be arbitrated before the CAS. Although these bylaws were not applicable in the present case, the court nevertheless found that the boxing association was acting inconsistently. Second, the court was not able to detect any objective reason why the dispute at hand should be resolved by a state court. Third and finally, the Swiss Federal Supreme Court found decisive that the parties had come to an understanding that exceeded the licensing agreement in itself and that was closely related to the subsequent sales agreements.

On all these grounds, the Federal Supreme Court of Switzerland held that the CAS tribunal had rightly asserted jurisdiction over the case at hand, and dismissed the challenge to the CAS award.

This recent decision is important in that it confirms the Swiss Federal Supreme Court’s practice to interpret the scope of an arbitration clause extensively once the parties’ intent to arbitrate is established. The reason why the court rather restrictively approaches the issue of consent to arbitrate is that an arbitration clause has far-reaching consequences insofar it ousts the jurisdiction of the state courts – at least as long as any one of the parties invokes the arbitration clause (see e.g. BGE 129 III 675). The Swiss Federal Supreme Court’s broad construction of the scope of the arbitration clause in the case at hand is not only a manifestation of the strong pro-arbitration policy underpinning the SPILA but also helps ensuring judicial economy and efficiency.

Simone Stebler graduated summa cum laude from the University of Fribourg School of Law and holds an LL.M. in International Business Regulation, Litigation & Arbitration from NYU (Arthur T. Vanderbilt Scholar). She is admitted to practice in Switzerland.