What is the regime of challenges to arbitral awards in arbitrations seated in Spain?
Final awards: no appeal and res judicata effect
Under Spanish law, arbitral awards have res judicata effect (Article 43 of the Arbitration Act) and are not subject to appeal. There is no second instance and no judicial review of the decisions rendered in arbitration. The only recourse available is an action to set aside the award, which is not equivalent to a second instance (appeal), as it does not allow a review of the assessment of the evidence, the interpretation of the parties’ contractual or corporate agreements in dispute, or, as a general rule, the correctness of the arbitrator(s)’ application of the law to the merits.
A defining feature of arbitration is the limited intervention of the courts, reflecting respect for the parties’ autonomy. By entering into an arbitration agreement, the parties have decided to remove the resolution of their disputes from the ordinary courts and to submit their determination to arbitrators, thereby excluding judicial adjudication.
It is, however, possible to request from the arbitral tribunal itself: the correction of any calculation, copying, typographical or similar error; clarification of a point or a specific part of the award; completion of the award in respect of claims submitted but not decided; or rectification of a partial excess of jurisdiction where the tribunal has ruled on issues not submitted to it or on matters not capable of settlement by arbitration (Article 39 of the Arbitration Act).
The set-aside action
Although awards are not appealable, they may be challenged by means of an action to set aside (Articles 40 to 43 of the Arbitration Act). The purpose of this action is not to review the merits of the award, but to seek a declaration that the award is totally or partially null and void. It is an extraordinary remedy of a rescissory nature.
An award may be set aside only on specific, exhaustive grounds, which are not open to extension and are interpreted restrictively; they must be pleaded and proved. In essence: (a) the arbitration agreement does not exist or is invalid; (b) denial of due process or defective notice in the appointment of the arbitrator or in the proceedings; (c) the tribunal ruled on matters not submitted to it; (d) the appointment of the arbitrators or the arbitral procedure did not comply with the parties’ agreement; (e) the award decided on matters that are not arbitrable; and (f) the award is contrary to public policy, the last of which is the most commonly invoked due to its broader scope.
These grounds reflect those set out in Article 34(2) of the UNCITRAL Model Law on International Commercial Arbitration (1985, as amended in 2006), which in turn follows the list of grounds for refusing recognition and enforcement of foreign awards contained in Article V(2) of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958), published in the Spanish Official Gazette (BOE) of 11 July 1977 (the New York Convention).
An action to set aside may be brought against any type of award, whether partial or final, and also against arbitral decisions concerning interim measures, whatever form they may take (Article 23.2 of the Arbitration Act).
Scope of judicial review
The effect of the court’s decision on the set-aside application is to declare the award partially or wholly invalid; consequently, the court may not alter the outcome of the award by substituting it with the decision the court considers appropriate.
The Spanish Constitutional Court has repeatedly held that the set-aside action must be understood as a form of external control over the validity of the award, which does not permit a review of the merits of the arbitrators’ decision. In particular, it has consistently ruled that it is not permissible to broaden the concept of public policy in order to carry out a merits review by the courts, as that is essentially for arbitrators alone; to do otherwise would exceed the scope of the set-aside action and disregard the parties’ power of disposition (party-driven justice) in the proceedings. This approach is reflected in a number of recent judgments, including 46/2020 of 15 June 2020, 17/2021 of 15 February 2021 and 79/2022 of 27 June 2022.
It has also stressed that none of the grounds for annulment in the Arbitration Act may be interpreted in a way that subverts this limitation, because arbitration’s ultimate purpose — to achieve the prompt out-of-court resolution of a dispute — would inevitably be undermined if the arbitral decision could be reviewed on the merits. The Court has also recalled the case law of the Court of Justice of the European Union that “requirements relating to the effectiveness of the arbitration procedure justify the limited nature of the review of arbitral awards and that an award can be set aside only in exceptional cases” (CJEU, 26 October 2008, Mostaza Claro, C-168/05).
The Constitutional Court has further stated that the duty to give reasons does not have the same nature in judicial decisions — where it is inherent in the right to effective judicial protection — as it does in arbitral decisions, where it is a matter of ordinary legality that may be excluded by the legislature and waived by the parties.
Procedural aspects and no automatic stay
The action must be brought within two months of notification of the award, or, where a correction, clarification or completion has been requested, from notification of the decision on that request, or from the expiry of the time limit for deciding it. It is heard by the High Court of Justice of the autonomous community where the award was rendered. That decision is not subject to a cassation appeal before the Supreme Court, but an amparo appeal may be brought before the Constitutional Court.
The procedure for bringing a set-aside action has been designed to reconcile speed with respect for the parties’ rights of defence. Accordingly, after written pleadings (statement of claim and defence), the matter proceeds under the rules of the oral summary procedure (\"juicio verbal\").
An award, which has res judicata effect, remains enforceable even if a set-aside action has been filed. However, the respondent in enforcement may request a stay, provided it posts security for the amount awarded plus any damage that may arise from the delay in enforcement (Article 45 of the Arbitration Act).
Nor does the arbitration come to a halt as a result of an action to set aside the decision rendered by the arbitral tribunal, before the proceedings are concluded, on its own jurisdiction (Article 22.3 of the Arbitration Act).
Although Spanish law does not expressly address the matter, leading legal scholarship take the view that an “exclusion agreement” is not permissible, i.e. a prior waiver by agreement of the parties of the right to bring a set-aside action.
Review mechanisms provided for in certain arbitral institutions’ rules
Although it has been said that the single-instance principle described above is inherent in arbitration and in its aim of resolving disputes within a short timeframe, it is equally true that some users view the non-appealability of awards negatively, due to the risk that an arbitrator’s error — even a serious one — may become irrevocably entrenched.
In response, some arbitral institutions have recently considered implementing mechanisms that parties may adopt voluntarily, allowing for a form of extraordinary review of the award without submitting it to the courts.
This is the case under the Rules of the Madrid Court of Arbitration (Article 52), which include provisions for an optional challenge, before the Court, to the final award issued in the proceedings. The parties must agree to this option either in the arbitration agreement or expressly in writing at any later time, but in any event before any arbitrator is appointed. If agreed, a Draft Award will be issued, which may be subject to an optional challenge. A request to commence this procedure must be admitted by the Court, which has discretion to refuse it where it is not prima facie compatible with the Rules. The challenge may be based only on:
- a manifest infringement of the substantive rules applicable to the merits of the dispute; or
- a manifest error in the assessment of the facts forming the basis of the decision.
Accordingly, any award issued in arbitral proceedings where an agreement to challenge exists will be a Draft Award, lacking res judicata effect and enforceability, and will not be subject to a set-aside action or enforcement, until that extraordinary challenge process has been completed.
