This article was featured in Jus Mundi‘s 2024 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 AUTHORS:
Inés Infante, Counsel of the Madrid Court of Arbitration (CAM)
Alejandro Montanero, Associate at Hogan Lovells
Javier Sánchez Villegas, Associate at Pérez-Llorca
Introduction
Arbitration in the Kingdom of Spain has seen significant developments in 2024:
- As in previous years, 2024 has been marked by new developments in investment arbitrations brought by foreign investors against Spain (and the enforcement and annulment proceedings that follow these investment arbitrations).
- On the commercial side, Madrid has strengthened its position as an international arbitral seat with the issuance of a ruling by the Constitutional Court limiting the review powers of the competent courts in annulment proceedings.
- In addition, some arbitration institutions in Spain have introduced significant regulatory reforms aimed at modernizing and enhancing efficiency in their dispute resolution practices.
Spain’s Withdrawal of the ECT and the Investment Treaty Arbitrations Saga
The Energy Charter Treaty (1994) (“ECT”) and its Protocol, signed in December 1994, aimed to promote international investment in the energy sector. The ECT and its Protocol entered into force in Spain on 16 April 1998, allowing investors to bring international arbitration proceedings against host States for breaches of the ECT.
The Court of Justice of the European Union (“CJEU”) ruled that investor-state arbitration clauses in intra-EU Bilateral Investment Treaties (“BITs”) are incompatible with EU law (Achmea v. Slovakia and Komstroy v. Moldavia judgments).
This resulted in an intense debate regarding the validity of the arbitral clause in the ECT, which resulted in the withdrawal of many States from the ECT, including Spain, on 16 May 2024. Spain’s withdrawal from the treaty will take effect on 17 April 2025, one year after its official notification to the Secretary of Portugal, acting in its capacity as Depository of the ECT (cf. article 47.2 of the ECT).
In June 2024, the EU gave written notification to the Depository of the withdrawal from the ECT. The day before, 27 EU Member states, along with the EU, signed a declaration on the legal consequences of the Komstroy judgement and a common understanding on the non-applicability of article 26 of the ECT as a basis for intra-EU arbitration proceedings.
Spain’s withdrawal does not retroactively affect ongoing arbitration proceedings, which will continue. In addition to that, the ECT’s ‘sunset clause’ will ensure that investments made before the withdrawal date remain protected for 20 years. Thus, new foreign investments previously protected under the ECT made after the withdrawal will not be covered.
Spain has faced numerous claims under the ECT, mainly related to changes in its renewable energy subsidy regime.
- Arbitral Tribunals and Spain’s Intra-EU Objections. Some arbitral tribunals have upheld Spain’s challenges to the jurisdiction under the argument of the primacy of EU law over the ECT. The first arbitral panel to have upheld an intra-EU objection was the one constituted for the case Green Power and SCE v. Spain, in a unanimous Stockholm Chamber of Commerce Arbitration Institute (“SCC“) Award issued on 16 June 2022. The panel dismissed the claim brought by Danish investors and upheld the primacy of EU Law. In addition, The Kingdom of Spain has recently prevailed in two investment arbitrations. On 11 October 2024, the awards issued in International Centre for Settlement of Investment Disputes (ICISD) cases:
In both cases, the arbitral tribunals declared the lack of jurisdiction to hear intra-EU claims arising from the ECT under the principle of primacy of EU Law.
- National Courts Uphold Enforcement of ECT Awards. For its part, the local courts of Switzerland, USA, UK and Australia are denying requests for annulment of awards and issuing enforcement decisions.
- Switzerland: On 3 April 3 2024, a Judgement of the Swiss Federal Court 4A_244/2023 refused to apply the Komstroy decision. The Swiss Court dismissed a challenge against the Final Award issued in EDF v. Spain. The Swiss Court considered that there was no reason to assume that Spain’s consent to arbitrate under the ECT did not cover its dispute with EDF, stating that it was “not convinced” by the Komstroy judgment that the investor-State arbitration clause of the ECT does not apply to intra-EU investment disputes. It further stated that the CJEU’s judgment was made solely to preserve EU law and did not take into account international law and international rules on treaty interpretation. The Swiss Court also found that the CJEU’s judgment was not binding on Switzerland, as it is not a member of the EU.
- United Kingdom: On 22 October 2024, the Court of Appeal of England and Wales issued a judgment in the case Infrastructure Services (Antin) v. Spain. Whilst the UK’s State Immunity Act 1978 does apply to ICSID enforcement proceedings, there is an applicable exception to State immunity – a State may waive its immunity by a “prior written agreement” found in Art. 54 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965) (“ICSID Convention”) and therefore may not oppose the registration of ICSID awards against them on the grounds of state immunity.
- United States: In the same vein, the D.C. Circuit heard together the appeals in the enforcement proceedings brought by NextEra v. Spain . The D.C. Circuit issued a ruling on 16 August 2024 which held that the District Courts had jurisdiction to confirm and enforce intra-EU awards. The Court ruled that its role in assessing the validity of the arbitration agreement underlying an ICSID award is ‘exceptionally limited’. However, when it comes to non-ICSID cases as Blasket, the New York Convention provides broader arguments to review the validity of the underlying arbitration agreement. As reported in the press, the Spanish government plans to file an appeal before the U.S. Supreme Court to stop the seizure of Spanish assets. However, on 27 January 2025, two US Courts refused to stay enforcement pending a Supreme Court ruling (See the decisions in Antin v. Spain and Cube Infrastructure v. Spain).
The Constitutional Court’s Approach to Judicial Review of Arbitral Awards
As of 2020, the Spanish Constitutional Court (“CC”) has reiterated its doctrine on the permissible scope of review in the setting aside of arbitral awards by local courts. These judgments reinforce the limited scope of review and strengthen Madrid as a reliable seat for international arbitration.
The last of these judgments came almost at the end of 2024. The CC, in Cabify v. Auro, Judgment of 2 December 2024, states that external judicial review of arbitral awards is permissible in cases where rules declared to be of public policy by the CJEU are not applied, without allowing the arbitrators’ decision on the merits to be replaced.
The CC has unanimously granted constitutional protection (“amparo“) to the ride-hailing service provider Auro in its dispute against a 2021 Judgment by the Superior Court of Justice of Madrid (“TSJM”). The TSJM’s Judgment had previously barred Auro from terminating its exclusivity agreement with another ride-hailing company, Cabify.
The dispute arose from an arbitration between Auro and Cabify concerning alleged breaches of contract and unfair competition practices. The arbitration tribunal issued a Final Award that was subsequently partially annulled by the TSJM. Specifically, the TSJM ruled that the arbitration award failed to properly apply Article 101 of the Treaty on the Functioning of the European Union (“TFEU”), which addresses anti-competitive practices and their exceptions. As a result, the TSJM’s decision invalidated the arbitration tribunal’s conclusions, effectively preventing Auro from ending its exclusivity agreement with Cabify.
The CC concluded that the TSJM’s Judgment violated Auro’s fundamental right to effective judicial protection, as guaranteed by Article 24 of the Spanish Constitution. The CC’s analysis centered on two key issues:
- Judicial overreach in the annulment proceedings. The CC determined that the TSJM exceeded its authority by substituting its own legal reasoning for that of the arbitrators. The CC underscored that judicial review of arbitration awards is limited to external oversight and cannot involve a substantive re-evaluation of the arbitrators’ determinations.
- Misapplication of the public policy principle. The TSJM’s annulment of the arbitration award was based on its assertion that the arbitrators had failed to apply Article 101 of the TFEU. However, the CC found this assertion to be incorrect, as the arbitral tribunal had duly considered and applied the relevant provisions of the TFEU. Consequently, the TSJM’s reasoning was deemed flawed and inconsistent with constitutional principles.
Key Regulatory Reforms in Spain’s Arbitration Institutions
The year 2024 has brought important regulatory reforms for arbitration institutions in Spain aimed at addressing the evolving demands of the Spanish arbitration market. Notable changes include reforms enacted by the Madrid International Arbitration Centre- Ibero American Arbitration Center (“CIAM-CIAR”), the Madrid Court of Arbitration (“CAM”), and the National Commission on Markets and Competition (“CNMC”).
New CIAM-CIAR Arbitration Rules (effective from 1 January 2024)
Effective from 1 January 2024, the new CIAM-CIAR Arbitration Rules introduce crucial changes to their regulation developed under the guidance of its renowned Best Practices Commission. The key innovations are:
- Highly expedited procedure. Disputes are resolved in approximately four months, with a sole arbitrator appointed within seven days and streamlined processes such as concurrent handling of the arbitrator appointment phase and the written submissions phase.
- Management of complex disputes. The Rules introduce new provisions for party joinder, case consolidation, procedural succession, and multiple contract claims.
- Correction, clarification, and challenge of awards. Time limits have been reduced to 15 days to request corrections and 30 days to resolve them. Additionally, the regulations establish an optional award challenge procedure.
- Streamlined rules. Preliminary meeting requirements have been eliminated, introducing greater flexibility along with a procedural guide as a reference tool.
- Transparency and sustainability. The rules encourage publishing anonymized awards, promote digitalization, and facilitate virtual hearings.
New CAM Arbitration Rules (effective from 1 January 2025)
On 25 November 2024, the Court´s plenary approved the new CAM Arbitration Rules, which came into force on 1 January 2025. This reform aims to align CAM’s Rules with those of CIAM-CIAR to simplify the experience for users, arbitrators, and case administrators. While the new CAM Rules largely mirror those of CIAM-CIAR, they include adaptations for domestic arbitration. Key changes include:
- Preliminary conflict of interest checks: For the first time, the rules incorporate a default procedure for conflict checks, unless excluded by the parties.
- Early termination of proceedings: Cases may now be dismissed if the arbitration request is not amended.
- Shortened correction or clarification period: The timeframe for requesting corrections or clarifications is reduced to 10 days.
- Highly expedited procedure: This innovative procedure from CIAM-CIAR is also introduced in this regulation for domestic cases.
Adoption of the CNMC Arbitration Rules (effective from 21 June 2024)
The National Commission on Markets and Competition (“CNMC”) is the Spanish authority with promotes and preserves the correct functioning, transparency and effective competition in all markets and productive sectors, as well as provides an efficient regulations in benefit of consumers and companies.
When the CNMC was created in 2013, arbitration functions were assigned to the institution. However, its practice since then has revealed the need to implement specific regulations for this purpose. Consequently, on 21 June 2024, the CNMC approved its Arbitration Rules, designed to efficiently resolve disputes in regulated sectors such as competition law, telecommunications, and energy. Notable features include:
- Specialized Arbitrators: Arbitrators with expertise in CNMC-regulated sectors.
- Efficient Processes: Simpler procedures for cases with values under 100,000 euros.
Through these regulatory changes, Spain´s arbitral institutions ensure that its arbitration practices remain innovative and responsive to the challenges posed by future legal and economic developments.
ABOUT THE AUTHORS
Inés Infante is a counsel of the Madrid Court of Arbitration (CAM) and co-ordinator of MAD VYAP.
Alejandro Montanero is an associate of the International Arbitration practice at Hogan Lovells (Madrid) and co-coordinator of MAD VYAP.
Javier Sánchez Villegas is an associate in the Dispute Resolution practice area at Pérez-Llorca (Madrid) and co-coordinator of MAD VYAP.
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