How is arbitrability defined in Spain?

Arbitrability consists of the possibility for individuals and entities to submit their disputes to arbitration and is based on freedom and party autonomy as higher values of the legal system. At the same time, arbitrability defines which disputes may be subject to arbitration and which must necessarily be resolved by the courts, as they fall outside the parties' autonomy to submit them to arbitration. The fact that an arbitration award rules on matters that are not subject to arbitration is one of the specific grounds for its nullity.

The Spanish legal framework governing arbitration is primarily structured around Act 60/2003 of 23 December, on Arbitration (“Arbitration Act”), as amended by Act 11/2011 of 20 May (“Act 11/2011”). This Act is inspired by the UNCITRAL Model Law on International Commercial Arbitration.

The Spanish legislator chose to define the arbitrability of disputes, that is, the possibility of submitting a particular matter to arbitration, according to an essentially objective criterion. Thus, Article 2.1 of the Arbitration Act provides that: “disputes concerning matters that are freely disposable in law may be submitted to arbitration”.

With regard to the notion of “free disposal”, the Explanatory Memorandum to the Arbitration Act itself states that the arbitrability of a dispute coincides with the availability of its subject matter to the parties. Consequently, a priori, all matters in respect of which the parties may freely dispose are arbitrable. This reflects the legislator’s intention to avoid closed or merely illustrative lists of matters excluded from arbitration, opting instead for a broad general formula based on the availability of the right in dispute.

Sensu contrario, matters whose disposal falls outside the scope of control of their holders, whether it was because they might affect public order, or because of any other circumstances that might prevent its free disposal, would not be capable of arbitration.

The legislative decision to define restrictions on arbitrability through an open-ended clause avoids excessively rigid or restrictive interpretations. This favours a case-by-case analysis allowing determination, in light of the specific circumstances of each dispute, of whether the requirement of availability is satisfied or whether, on the contrary, the presence of key values of the legal system – such as public order, among others – prevents the parties from validly disposing of the matter in question.

Ultimately, using traditional terminology, arbitration is intended to resolve disputes arising – or which may potentially arise – from a particular legal relationship, provided that they concern subjects that are freely disposable under the law.

The Constitutional Court has reinforced this approach by stating that: “Arbitration extends only as far as freedom itself, which is its foundation and driving force. Accordingly, issues over which the interested parties have no power of disposition remain outside its scope.”

The notion of free disposal is closely linked to the parties’ ability to reach a settlement. In this regard, Article 1809 of the Civil Code defines a settlement as a contract whereby the parties put an end to existing litigation, or prevent future litigation, through reciprocal concessions.

This close relationship between settlement and arbitration gives rise to a generally accepted rule: “If the parties may validly settle on a particular matter, that matter will, in principle, be subjetct to arbitration.” The disposability of the right, therefore, becomes the fundamental criterion delimiting arbitrability.

This arbitrability regime applicable to domestic arbitration also extends to international arbitration. In this regard, Article 2.2 of the Arbitration Act expressly provides that countries and entities dependent upon them may not invoke the prerogatives of their own legal systems in order to evade obligations arising from an arbitration agreement.

The Explanatory Memorandum to the Arbitration Act states that the purpose of this provision is to ensure that public entities, regarding arbitrability and the validity of arbitration agreements, are treated in the same way as any private party.

Alongside the objective boundaries of arbitrability, there are also subjective limits linked to the scope of the arbitration agreement, since the aforementioned principle of freedom and party autonomy as the foundation of arbitration also means that, without such a declaration of intent to submit to arbitration, individuals and entities cannot be subjected to an arbitration agreement.

As a general rule, an arbitration agreement is only binding between those who have signed it, in accordance with the principle of relativity of contracts. Consequently, it is not directly possible to affect the legal position of third parties who are strangers to the agreement, nor to compel them to submit to arbitration concerning disputes arising from legal relationships to which they did not consent.

This limitation translates, in particular, into the impossibility of resolving through arbitration disputes in which the substantive rights or interests of non-signatory third parties constitute the direct subject matter of the proceedings. The requirement of consent therefore operates as an essential guarantee of the effectiveness and legitimacy of arbitration.

However, both Spanish case law and legal scholarship have recognised certain exceptions to this principle. These include the application of the doctrine of piercing the corporate veil, a certain extension of arbitration agreements within groups of companies, or the binding effect upon third parties who, although not formal signatories to the agreement, have participated decisively and continuously in the underlying legal relationship, thereby demonstrating an unequivocal intention to be bound by the arbitration mechanism.

As noted above, arbitrability finds its principal limitation in the parties’ discretion over the disputed matter. Although this restriction is often particularly significant in areas involving public interests or non-disposable rights, it is not limited to such areas. The practical application of the criterion of free disposal has led to the identification of certain matters which, by their nature or through express legal provision, are excluded from arbitration.

Accordingly, under Spanish law, the principal non-arbitrable matters are as follows:

1. Criminal law, which is non-disposable in nature, since the ius puniendi is reserved exclusively to the State;
2. Matters relating to the civil status and legal capacity of individuals;
3. Family law in the strict sense, where non-disposable matters are at issue, such as special proceedings relating to legal capacity, parentage, marriage or minors. However, the financial consequences arising from divorce or separation may be submitted to arbitration;
4. Certain testamentary matters, based on an interpretation sensu contrario of Article 10 of the Arbitration Act;
5. Certain employment disputes, which fall within the scope of the Labour Courts. It is true, however, that there are arbitrable exceptions provided for in collective agreements;
6. Administrative law matters, reserved to the Contentious-Administrative Courts. Nevertheless, there is an increasing trend towards arbitration in this field in relation to proprietary disputes, among others;
7. Insolvency matters that are reserved exclusively to the insolvency Judge, as provided in Article 52 of the Consolidated Text of the Insolvency Act;
8. Certain tenancy disputes, pursuant to the Urban Leases Act;
9. Consumer arbitration, regulated by Royal Decree 231/2008 of 15 February, constituting a special system under which arbitration clauses in consumer contracts may be declared unfair if they do not refer to the consumer arbitration system, as provided on Article 90.1 of the Revised General Law for the Protection of Consumers and Users.

One area whose arbitrability historically gave rise to significant doctrinal and case-law debate in Spain concerns corporate disputes. At present, Articles 11 bis and 11 ter of the Arbitration Act expressly recognise the possibility of submitting corporate disputes to arbitration, including those relating to the challenge of corporate resolutions, provided certain requirements are met. These include the existence of an express provision for submission to arbitration, the incorporation of the arbitration clause into the company's articles of association, and compliance with certain requirements aimed at ensuring adequate protection of shareholders and transparency of the arbitral mechanism.

The reform had a twofold objective. On the one hand, to reinforce legal certainty surrounding the arbitrability of corporate disputes. On the other hand, to promote the consolidation of statutory arbitration as the ordinary mechanism for resolving corporate disputes, taking advantage of the benefits traditionally associated with this system, including the specialisation of arbitrators, the confidentiality of proceedings and the greater speed with which a final decision may be obtained.

There are two main issues raised by arbitrability under Spanish law: one deriving from its regulatory framework itself, and another linked to the international dimension of arbitration.

First, the delimitation of arbitrability in Spain – as in other legal systems inspired by the UNCITRAL Model Law – is highly case-specific. The legislator has opted for a general clause based on the requirement that the matter be “freely disposable under the law”, rather than establishing an exhaustive list of matters excluded from arbitration. This means that, in each specific case, it is necessary to verify whether the requirement of disposability is in fact satisfied.

The principal consequence of this numerus apertus approach is the existence of areas of uncertainty regarding certain disputes –such as those relating to anti-competitive practices, regulated sectors or consumer relationships– whose arbitrability is not always obvious. However, the most significant manifestation of this uncertainty arises in arbitration awards’ nullity proceedings, where the court may review the arbitrability of the dispute. This can give rise to the undesirable situation in which, after the award has been rendered, the court concludes that the dispute should never have been submitted to arbitration because it was not arbitrable from the outset.

The second issue arises when arbitration involves international elements. In such cases, various legal systems may come into play – the law applicable to the merits of the dispute, the law governing the arbitration agreement, the law of the seat of arbitration, or the law of the State or States where recognition or enforcement of the award is sought, among others – and their criteria regarding arbitrability may differ. Consequently, the same dispute may be considered arbitrable under one legal system and non-arbitrable under another. This raises a question of considerable practical importance: whether it is sufficient for one of the legal systems involved to deny the arbitrability of the dispute in order to prevent the effectiveness of the arbitration agreement or the recognition and enforcement of the award.

Ultimately, arbitrability under Spanish law requires a case-by-case analysis of each dispute and, in international arbitrations, such analysis must be supplemented by consideration of the various potentially applicable legal systems. Keeping both of these circumstances in mind is essential to reduce the uncertainty that such issues may generate in arbitral practice.