THE AUTHORS:<\/strong> There have been interesting developments in the field of arbitration in the Kingdom of Spain (\u201c<\/span>Spain<\/span><\/b>\u201d) in 2022. From a commercial arbitration perspective, we detail herewith recent court decisions addressing arbitral matters of the utmost importance, as well as the latest developments in the <\/span>Prestige<\/span><\/i> dispute affecting Spain.\u00a0<\/span><\/p>\n\n\n\n This year has also been highly significant in terms of investment arbitration: new developments affecting treaty cases against Spain are on the table, along with Spain\u2019s announcement to withdraw from the <\/span>Energy Charter Treaty (\u201c<\/span>ECT<\/span><\/b>\u201d)<\/span><\/a>.\u00a0<\/span><\/p>\n\n\n\n The Spanish Constitutional Court (\u201c<\/span>SCC<\/span><\/b>\u201d) issued a major judgment regarding the effects of criminal proceedings and investigations parallel to arbitration proceedings. In the <\/span>judgment of 4 April 2022<\/span><\/a>, the SCC upheld a constitutional appeal, filed against the <\/span>judgment of the High Court of Madrid of 4 October 2019<\/span><\/a>. The key points of this decision were the following:<\/span> <\/span><\/p>\n\n\n\n Additionally, there have been a substantial number of new court resolutions regarding domestic and international proceedings within the regional High Courts of Justice in Spain, such as the <\/span>judgment of the High Court of Catalonia of 31 January 2022<\/span><\/a>. This decision clarified that the scope of an award-annulment court\u2019s judgment can be partial, in the sense that courts are able to partially annul awards in cases where the claimant has addressed several fully separable claims.<\/span> <\/span><\/p>\n\n\n\n Moreover, the <\/span>judgment of the High Court of the Basque Country of 21 February 2022<\/span><\/a> confirmed that annulment claims are not a sort of appeal in law, and thus courts are not tasked with verifying that the decisions taken by arbitrators are in accordance with the law, rather only that they respect the essence of the Spanish constitutional system. <\/span> <\/span><\/p>\n\n\n\n The judgments of the HCJM dated <\/span>2 November<\/span><\/a> and <\/span>13 July 2022<\/span><\/a> are also notable, as they reinforce the role of Spain as a safe arbitral venue. In both cases the HCJM concludes that annulment actions cannot serve to review the application of substantive law, and thus, as indicated by the HCJM in the second case cited, annulment actions against awards are not a \u201c<\/span>second instance in which facts and law can be reviewed, nor a mechanism to control the proper application of the case law<\/span><\/i>\u201d.\u00a0<\/span><\/p>\n\n\n\n In June 2022, the Court of Justice of the European Union (\u201c<\/span>CJEU<\/span><\/b>\u201d) issued an arbitration-relevant <\/span>decision in case C-700\/20<\/span><\/a> within the <\/span>Prestige<\/span><\/i> saga. This decision arises from the request for a preliminary ruling from the High Court of Justice of England and Wales (\u201c<\/span>HCJEW<\/span><\/b>\u201d), which was dealing with the recognition of a decision issued by the Spanish Supreme Court (\u201c<\/span>SSC<\/span><\/b>\u201d) in proceedings involving the insurer of the <\/span>Prestige<\/span><\/i> (\u201c<\/span>Insurer<\/span><\/b>\u201d) and Spain.<\/span> <\/span><\/p>\n\n\n\n In 2003, Spain brought civil claims in its territory against the Insurer. In 2012, while waiting for a decision, the Insurer commenced arbitration proceedings in the UK seeking declarations that (i) Spain, in accordance with the arbitration clause included in the insurance contract, would pursue its claims through arbitration; and (ii) given the existence of a <\/span>pay to be paid<\/span><\/i> clause, the Insurer could not be liable. In 2013, <\/span>the arbitral tribunal concluded that the claims for damages brought by Spain before the Spanish courts should have been referred to arbitration in London<\/span><\/a>. Subsequently, <\/span>a judgment by the HCJEW<\/span><\/a> was entered in the terms of the arbitration award<\/span> (\u201c<\/span>HCJEW Judgment<\/span><\/b>\u201d).<\/span> <\/span><\/p>\n\n\n\n In 2018, after numerous provisional decisions and appeals, the SSC issued a <\/span>final judgment against the Insurer<\/span><\/a> (the \u201c<\/span>Spanish Decision<\/span><\/b>\u201d). Consequently, Spain requested its recognition before the HCJEW. The HCJEW\u2019s corresponding order was appealed by the Insurer on the grounds that (i) the Spanish Decision was irreconcilable (in the sense of Article 34(3) of Regulation 44\/2001) with the HCJEW Judgment; and (ii) in any event, following Article 34(1) of Regulation 44\/2001, the recognition would be contrary to public policy in accordance with the principle of <\/span>res judicata.<\/span><\/i> <\/span><\/p>\n\n\n\n In this context, the HCJEW raised the issue before the CJEU, asking whether: (i) a judgment entered in the terms of an arbitration award qualifies as a <\/span>judgment<\/span><\/i> within the meaning of Article 34(3) of Regulation 44\/2001; (ii) a judgment not qualifying as such may be relied on to prevent recognition; and (iii) if it is permissible to rely on Article 34(1) of Regulation 44\/2001 regarding <\/span>res judicata<\/span><\/i> effects to refuse recognition.<\/span> <\/span><\/p>\n\n\n\n In its decision, the CJEU reasoned that a judgment dictated in the terms of an arbitration award can be regarded as a <\/span>judgment <\/span><\/i>within the meaning of Article 34(3) of Regulation 44\/2001. However, it also stated that \u201c<\/span>the position is different where the award in the terms of which that judgment was entered was made in circumstances which would not have permitted the adoption, in compliance with the provisions and fundamental objectives of <\/span><\/i>[the Regulation 44\/2001]<\/span>, of a judicial decision falling within the scope of that regulation\u201d<\/span><\/i> (para. 54). <\/span> <\/span><\/p>\n\n\n\n In the case at hand, the CJEU notes that the content of the arbitration award \u201c<\/span>could not have been the subject of a judicial decision falling within the scope of Regulation No 44\/2001 without infringing two fundamental rules of that regulation concerning, first, the relative effect of an arbitration clause included in an insurance contract and, secondly, lis pendens<\/span><\/i>\u201d (para. 59). Therefore, it concluded that the HCJEW judgment cannot prevent recognition of the Spanish Decision.<\/span> <\/span><\/p>\n\n\n\n Finally, the CJEU stated that the force of <\/span>res judicata<\/span><\/i> is already covered by Articles 34(3) and (4) of Regulation 44\/2001, thereby excluding recourse to the public-policy exception (Article 34(1)).\u00a0<\/span><\/p>\n\n\n\n For yet another year, the Spanish overview on investment arbitration is marked by the conflict between intra-EU investment arbitration and the doctrine established by the CJEU in the <\/span>Achmea<\/span><\/i><\/a> and <\/span>Komstroy<\/span><\/i><\/a> cases.<\/span> <\/span><\/p>\n\n\n\n In <\/span>Achmea<\/span><\/i>, the CJEU declared that arbitration clauses contained in intra-EU Bilateral Investment Treaties (\u201c<\/span>BITs<\/span><\/b>\u201d) are not compatible with EU law, since an arbitral tribunal cannot be considered equal to a court of a Member State. Furthermore, the <\/span>Komstroy<\/span><\/i> ruling extended this reasoning to intra-EU arbitrations under the ECT. <\/span> <\/span><\/p>\n\n\n\n Following <\/span>Achmea <\/span><\/i>and <\/span>Komstroy<\/span><\/i>, a new chapter of the intra-EU investment arbitration dispute took place in 2022, as the Spanish Government announced its intention to withdraw from the ECT. The reasoning behind this decision is that the ECT is not in line with the Spanish Government\u2019s climate objectives. The proposed reform of the ECT would be insufficient, according to the Spanish Government, an opinion shared by other countries and international organisations. <\/span> <\/span><\/p>\n\n\n\n Exiting the ECT may have important consequences for the investor-state dispute settlement system. In this regard, Spain has already faced more than 60 investor claims through the procedure established by the ECT. Nonetheless, it should be noted that the ECT contains a so-called <\/span>sunset clause<\/span><\/i>, according to which States would be subject to arbitration for 20 years from the date of withdrawal. It is not yet clear how this clause will operate. <\/span> <\/span><\/p>\n\n\n\n On another note, the <\/span>Achmea<\/span><\/i> doctrine continues to spark debate in Spain. On 16 June 2022, an arbitral tribunal \u2013constituted under the Stockholm Chamber of Commerce\u2013 <\/span>ruled in favour of Spain<\/span><\/a> and decided that it did not have competence to hear the case of an investor claiming \u20ac74 million (the \u201c<\/span>Green Power<\/span><\/i><\/b>\u201d case). The <\/span>Green Power <\/span><\/i>case marks the first time that an investment arbitral tribunal has upheld a State\u2019s intra-EU objection to deny its own jurisdiction.<\/span> <\/span><\/p>\n\n\n\n In order to support its decision, the arbitral tribunal described EU law as a <\/span>lex superior<\/span><\/i> that overrides EU Member States\u2019 obligations under treaties, including the ECT. Although it is too early to understand how far-reaching this award will be in subsequent cases, for the time being, it seems that no other tribunal has followed this rationale.<\/span> <\/span><\/p>\n\n\n\n
Javier Garc\u00eda Urbano<\/strong>, associate at P\u00e9rez-Llorca<\/a><\/strong><\/span>
Juan Manuel Ram\u00edrez<\/strong>, Ph.D. candidate in Commercial Law at University Charles III of Madrid
V\u00edctor Javier Lana<\/strong> is a Ph.D. candidate in International Law at the University of Navarre<\/span><\/p>\n\n\n\n
\n\n\n\nCourt Decisions in Spain Concerning Arbitration in 2022<\/strong><\/span><\/b>\u00a0<\/span><\/h2>\n\n\n\n
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Commercial Arbitration Cases Involving Spain<\/strong><\/span><\/b>\u00a0<\/span><\/h2>\n\n\n\n
Recent Developments in Spain Regarding Investment Treaty Arbitration<\/span><\/strong><\/b>\u00a0<\/strong><\/span><\/h2>\n\n\n\n