This article was featured in Jus Mundi‘s 2023 Arbitration Year in Review, in collaboration with VYAPs, a yearly collection of articles from jurisdictions all around the globe updating you on arbitration-related developments from the previous year.
THE AUTHOR:
Andrea Aguirre, Associate at Beccar Varela
The recognition and enforcement of arbitral awards are issues that concern both individuals and States all over the world. In this article, we have chosen two judicial decisions rendered by the Argentine courts in 2023 regarding the enforcement of arbitration awards that we hope will help the reader better understand Argentine legal practice.
We will analyze:
- a case involving an alleged violation of public policy stemming from how the payment of the Award was established (Banco Seguros del Estado de la República del Uruguay c/ Instituto de Reaseguros s/ exequatur, hereafter “Banco de Seguros”), and
- a second case related to a request for enforcement of an Award against the Republic of Argentina (Consorcio de Aguas Bilbao Bizkaia Bilbao Bizkaia Ur Partzuergoa y otro c/ EN-M Hacienda s/ proceso de ejecución, hereafter “Consorcio de Aguas”).
Banco de Seguros
In October 1975, the Insurance Bank of the State of the Republic of Uruguay (“BSEU”), an insurance company based in Uruguay, and the National Institute of Reassurance of Argentina (“INDER”), a former entity of the Ministry of Economy of Argentina, entered into a retrocession agreement. According to the agreement, BSEU, a reassurance agent, agreed to transfer to INDER part of the risks undertaken with foreign insurance companies, and INDER undertook to cover such risks by the disbursement on the condition that BSEU met certain conditions.
This agreement was subject to further interpretation in an arbitral award later in 1995, which helped to set the conditions for BSEU to obtain the agreed payments.
Nevertheless, since BSEU and INDER disagreed regarding the extent of their obligations, they decided to sign an arbitration agreement on July 3rd, 2006. Accordingly, the arbitral tribunal -seated in Montevideo, Uruguay, was to decide:
- Whether INDER was obligated to pay the outstanding amounts in BSEU’s technical and financial accounts, and
- If INDER was responsible for the damages caused by the non-compliance of certain undertaken obligations.
On February 27, 2015, the arbitral tribunal rendered an Award in which INDER was ordered to pay USD 5,277,779.81 to BSEU for breaching the agreement, with an annual interest rate of 6% commencing on the date of service of the notice of the complaint (“Award”).
INDER filed an application to set aside the Award before the Montevideo Civil Court of Appeals, which was rejected on December 22nd, 2015.
In 2017, BSEU sought the enforcement of the Award before the Argentine Federal Courts. The Ministry of Economy of Argentina objected to the enforcement of the Award, claiming that the arbitral tribunal had violated the defendant’s right of defense. The Ministry of Economy further argued that the enforcement of the Award would violate Argentine public policy related to legislation regarding economic emergencies that applied to the agreement (Law No. 23.982 and Law No. 25.344).
In May 2022, the Ministry of Economy appealed the first instance decision that had ordered the enforcement of the Award. On April 5th, 2023, Chamber III of the Federal Court of Appeals in Civil and Commercial Matters overturned the enforcement decision.
To this extent, the Court of Appeals considered that it was not entitled to examine the Ministry of Economy’s grievances regarding the alleged violation of its right of defense since it had already filed an application to set aside the Award before the Montevideo Civil Court of Appeals.
Indeed, the Court of Appeals stressed that the competent court had already examined any violation that could have taken place in the arbitration proceedings. As the Award had become final, it was not subject to review in an enforcement proceeding.
Then, the Court of Appeals reviewed the compatibility of the Award with Argentine public policy. After examining the local emergency legislation invoked by the petitioner, the Court of Appeals rejected the enforcement of the Award based on the following conclusions:
- Argentine restructuring of the foreign debt was a measure adopted by the Argentine Government to help overcome the economic, administrative, financial, and foreign exchange emergency of 2001 declared by Law No. 25.561;
- Public policy provisions covered the sums claimed by BSEU and could not be enforced against the Republic of Argentina since they matured during the emergency period and the legal cause was prior to such period (i.e., the Award rendered in 1995). A contrary finding would establish a sort of privilege in favor of INDER that would prejudice domestic and international creditors;
- The conversion of the Award for BSEU’s execution in compliance with the Argentine debt consolidation regime does not correspond in an exequatur.
It is important to note that the Court of Appeals determined that the treaties on which BSEU sought the enforcement of the Award, the Montevideo Treaty on International Procedural Law (1940) and the New York Convention on Recognition and Enforcement of Foreign Awards (1958) were not applicable. Instead, the Court of Appeals determined that the Las Leñas Protocol on Cooperation and Jurisdictional Assistance in Civil, Commercial, Labor and Administrative Matters among Mercosur Member States should be applied. A different result could have been achieved if BSEU petitioned the application of Article 23 of the Las Leñas Protocol (which establishes that “if a judgment or arbitration award cannot be fully effective, the competent jurisdictional authority in the requested State may admit its partial effectiveness upon request from an interested party”).
Consorcio de Aguas
In early 2000, Consortium Aguas Bilbao Bizkaia Bilbao Bizkaia Ur Partzuergoa from Spain (“Company”) and the Province of Buenos Aires entered into a concession agreement to provide water and sewage services. Due to the termination of this agreement in the context of the 2001 Argentine economic crisis, in 2007, the Company submitted arbitration proceedings before the International Centre for Settlement of Investment Disputes (“ICSID”). On December 8th, 2016, the arbitral tribunal rendered its Award on the merits of the dispute, rejecting all monetary claims under the Agreement for the Promotion and Reciprocal Protection of Investments between the Kingdom of Spain and the Republic of Argentina. However, the arbitral tribunal decided to order the Republic of Argentina to pay the costs of the jurisdictional stage of the proceedings of USD 1,047,700, plus an annual interest rate of 3% that began to accrue 60 days after the Award was rendered (“Award on Costs”).
The Company sought the enforcement of the Award on Costs before the Buenos Aires Federal Courts for Administrative Matters.
The Company argued for the direct enforceability of the Award pursuant to Section 517 of the National Civil and Commercial Procedural Code, which established that an Award rendered under an international treaty must be enforced in accordance with the terms of that treaty. In this sense, since Articles 53 and 54 of the ICSID Convention (1965) (“Convention”) determine that an Award is, for its enforcement, comparable to a final judgment rendered by a national court without the need to submit it to exequatur, the only requirement for enforcement is the submission of a copy of the Award certified by the ICSID General Secretariat.
The Republic of Argentina objected to the enforcement sought by the Company on the grounds that there is no obligation to comply with the payment until the beneficiary files a petition for the recognition and enforcement of the Award before national courts. In this sense, since Argentina had not formally made an application seeking recognition and enforcement of the ICSID awards, the general provisions applicable to national judgments prevail.
On June 13th, 2023, the First Instance Court ruled, recognizing that ICSID arbitral Awards are equivalent to a final judgment issued by a local court. Therefore, it is not necessary to submit them to the exequatur. The Republic of Argentina did not appeal the judgment, which made it final.
It is worth noting that this is the first proceeding in which the enforcement of an ICSID Award against Argentina was sought –and obtained– before Argentine courts.
Conclusion
These cases arise as a consequence of the economic policy adopted by Argentina more than two decades ago and may still influence awards rendered many years later. This does not undermine the efforts of the lawmakers to provide for a favorable investment environment in the country and compliance with international obligations.
This analysis invites practitioners to consider the historical and economic context of the country to create awareness of the strong utility of the public policy doctrine, which may include regulations of years past and may not be known by many.
ABOUT THE AUTHOR:
Andrea Aguirre is an intermediate Associate at Beccar Varela. She has broad expertise in complex commercial litigation with focus on corporate conflicts as well as in international arbitration advising national and international clients. Andrea obtained her Law degree from the Universidad Católica Argentina (2019) and a Postgraduate Specialization Degree in Civil and Commercial Procedural Law from the Universidad de Buenos Aires (2021). She has also a postgraduate course in Advanced International Arbitration from the Universidad Católica Argentina (2021).
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