THE AUTHORS:
Martín Cammarata, Senior Associate in Marval O’Farrell Mairal
Sol Isuani Caturegli , Junior Associate in Marval O’Farrell Mairal
Nicolas Szlajen, Junior Associate in Marval O’Farrell Mairal
There were important developments in 2022 that continue to position Argentina as an attractive arbitral seat. Among the various updates, we have chosen to analyze three important court decisions that have been favorable to both local and international arbitration. We will analyze i) a case related to the request before the judicial courts for setting aside a domestic award based on the violation of public policy (Tinogasta Solar c/ cía. administradora del mercado mayorista eléctrico hereafter “Tinogasta”), ii) a second case related to the appealability of an arbitral award under the UNCITRAL Rules (Fiambala Solar S.A. c/ Compañía Administradora del Mercado Mayorista Electrico S.A. s/ recurso de queja (OEX) hereafter “Fiambalá”), and iii) a third one related to the validity of the arbitration clause in adhesion contracts (Soluciones Integrales S.R.L c/ Ternium Argentina S.A s/ordinario hereafter “Soluciones Integrales”).
Tinogasta
In May 2017, Tinogasta, a company specialized in the production of electric energy, entered into a renewable electricity supply contract with Compañía Administradora del Mercado Mayorista Eléctrico S.A. (CAMMESA), a company in charge of operating the wholesale electricity market, pursuant to which:
- Tinogasta had to build and operate a solar farm and sell exclusively to CAMMESA all the energy generated therein; and
- CAMMESA committed to purchase all the energy generated by the solar farm for a term of 20 years.
The contract provided for penalties if Tinogasta failed to timely obtain a commercial authorization for the solar farm and included an arbitration clause pursuant to which the parties submitted any dispute that could arise to arbitration “under the terms of the Arbitration Rules of the United Nations Commission on International Trade Law”.
After a 205-day delay in obtaining the commercial authorization, CAMMESA imposed a fine on Tinogasta for a total of USD 4,268,100, and Tinogasta filed a request for arbitration to claim:
- The annulment of the fine or, alternatively, its reduction; and
- An economic restructuring of the contract.
Once the arbitral tribunal was constituted, the parties agreed that “any award would be final, binding, and unappealable, with no possibility of judicial review of the merits”, except for the appeal for the set aside in accordance with the applicable procedural law. The arbitral tribunal rejected the claim filed by Tinogasta, except for the request to reduce the fine, which was set in USD 3,747,600.
Tinogasta filed an application to partially set aside the award before the Buenos Aires Commercial Court of Appeals claiming that the arbitral tribunal had validated “a situation of abuse of law that is contrary to public policy” when analyzing the fine reduction. The Court of Appeals considered that whether the award violates public policy or not is not a ground to set aside as contemplated in the applicable procedural rules. However, the Court of Appels acknowledged that such ground has been accepted by the Argentine Supreme Court of Justice. Hence, the Court of Appeals established that the power to reduce fines was closely connected to public order and, therefore, the application to set aside the award was admissible.
The Court later considered that the admissibility of an application to set aside based on the fact that an arbitral award contravenes public policy “must be understood as a kind of marked exception, which can only be found in extreme cases; and a minimalist criterion must prevail, according to which invalidity appears only in the face of a serious and apparent error of the award in the application of the public policy rule […], and cannot be declared invalid for a simple formal or abstract violation, nor for a misapplication of the public policy rule”. This being said, the Court of Appeals decided that the requirements had not been met, and therefore dismissed the application to set aside filed by Tinogasta.
Fiambalá
In October 2021, Fiambalá, a company in the energy sector, filed a motion for direct appeal before the Buenos Aires Commercial Court of Appeals against a decision of an arbitral tribunal that had denied its motion for appeal against the award that it had rendered. This award had established the termination of the arbitral proceedings due to its abandonment by the claimant Fiambalá, imposing the costs on the company and ordered it to pay them to the respondent.
In its motion for direct appeal, Fiambalá argued that:
- The parties had not expressly waived the right to appeal, and
- The fact that the parties chose to have the arbitration governed by the UNCITRAL Rules could not be presumed as waiver of the right to appeal. In fact, Fiambalá stated that the UNCITRAL Rules reform in 2010 was aimed to allow appeals unless expressly waived, so that its references to the award as binding and final did not imply waiver of remedies.
The Court of Appeals rejected the motion for direct appeal on the grounds that choosing the UNCITRAL Rules did indeed imply a waiver of the available judicial remedies. The Court of Appeals noted that the fact that the award “shall be final” in the light of Article 34(2) of the UNCITRAL Rules has two connotations. On the one hand, it means that the award is irrevocable, i.e., the arbitral tribunal cannot reconsider it. On the other hand, according to the analysis of the travaux préparatoires, it reaffirms the principle that the arbitral award is final. Moreover, the Court of Appeals stated that the waiver of appeal “may arise not only from an arbitration clause, but also from the rules to which the parties have submitted”.
Soluciones Integrales
In February 2021, the cargo handling company Soluciones Integrales filed a lawsuit against Ternium, dedicated to steel manufacturing, before the Buenos Aires Commercial Court of Appeals. Soluciones Integrales claimed for the collection of unpaid invoices, as well as damages arising from the service contract they had executed. Ternium challenged the jurisdiction of the court since the parties had agreed to an arbitration clause in the contract that granted jurisdiction to the Arbitral Tribunal of the Buenos Aires Stock Exchange to resolve any dispute arising from the agreement.
In October 2021, Soluciones Integrales appealed the first instance decision that had upheld the exception of lack of jurisdiction filed by Ternium on the grounds that the arbitration clause was included in an adhesion contract. Soluciones Integrales based its appeal on Article 1651(d) of the Argentine Civil and Commercial Code (“ACCC”), which stipulates that adhesion contracts are not arbitrable.
In February 2022, the Buenos Aires Commercial Court of Appeals confirmed the first instance judgment. The Court of Appeals reasoned that the purpose of Article 1651(d) of the ACCC is to guarantee the intervention of state courts when there is an imbalance on the negotiation power, legal assistance, and economic power between the parties in an adhesion contract. However, when the adhesion contract is concluded between companies, the provision cannot “circumvent an admitted [arbitration] agreement since the contracting party could not consider itself surprised by its incorporation within the scheme intended to govern it, as is the case with companies”.
Conclusions
These three decisions issued in 2022 reinforce Argentina’s position as seat of arbitration. In Tinogasta, the Court of Appeals’ decision strengthened the exceptional nature of the public policy exception as a ground for the setting aside of an award. In Fiambalá, the Court of Appeals decided that choosing arbitration rules which do not provide for the right to appeal the award amount to a tacit waiver of the right to appeal included in Argentine procedural law. Finally, in Soluciones Integrales, the Court of Appeals held the validity of an arbitration clause within an adhesion contract by defining the scope of the ACCC’s exclusion of adhesion contract as arbitrable.
ABOUT THE AUTHORS:
Martín Cammarata is a Senior Associate in Marval O’Farrell Mairal. He has experience in complex litigations and arbitrations, including commercial contracts, insolvency and bankruptcy and class actions. Martín graduated as a lawyer from the Universidad Nacional del Litoral in 2015, and holds a Master’s degree in business law from the Universidad Nacional de Rosario, Argentina.
Sol Isuani Caturegli is a Junior Associate in Marval O’Farrell Mairal, specializing in litigation and commercial arbitration. Sol was a member of the teams that represented the University of San Andrés in the International Arbitration Competition in its XIII edition and in the Foreign Direct Investment Moot in 2021. In 2022, she has been part of the team of coaches for the Foreign Direct Investment Moot.
Nicolas Szlajen is a Junior Associate in Marval O’Farrell Mairal, specializing in litigation and commercial arbitration. He is a teaching assistant in Public International law at the University of Buenos Aires. Nicolas is a team member of the University of Buenos Aires team for the Willem C. Vis International Commercial Arbitration Moot 2022-2023 and has been part of the team for the Foreign Direct Investment Moot in 2021.
