ARTICLE

Enforcement of an arbitral decision subject to nullity

The Commercial Court of Appeals confirmed the lower court decision that dismissed the defense filed by the defendant at the judicial enforcement procedure of an arbitral award, even when a judicial set aside claim has been lodged.

December 22, 2005

In re: “Compagnie Belge de la West LB SA (ex Beal SA) c/ HSBC Bank Argentina S.A. s/Ejecutivo”[1] the plaintiff requested the enforcement of the arbitral award issued by the Tribunal General de Arbitraje de la Bolsa de Comercio de Buenos Aires on December 14, 2004 which had been duly notified and defaulted by the defendant.

The defendant opposed several defenses allowed by the Code of Civil and Commercial Procedure. Among them the defendant filed the Lis Alibi Pendens defense, connected with case “HSBC Bank Argentina SA c/ Compagnie Belge de la West LB SA (ex BEAL S.A.) s /laudo arbitral”. In such case HSBC Bank Argentina S.A. had requested the nullity of the arbitral award and, based on such request, a stay of the proceedings leading to the enforcement of the award.

The lower court dismissed the defenses raised by the defendant within the enforcement procedure, and the file was sent to the Court of Appeals to resolve the appeal filed by the defendant.

On October 31, 2005 the Court of Appeals confirmed the lower court’s decision. The Court of Appeals found that the mere existence of a nullity action cannot suspend the effects of the arbitral award, inasmuch as it would grant suspensive effects to a judicial action that is not an appeal according to the Code[2].

The Court of Appeals also emphasized that nullities only result from the judgment[3] that declares them, and therefore the litigation procedure such as the judicial request to set aside cannot -per se- suspend the effects of an arbitral award.

Furthermore, the Court of Appeals remarked that the defendant had already asked a suspension of the effects of the award as an interim measure when requesting the nullity of the award and that the Judge had dismissed this request (please see “Novelties in arbitration, point 2”, published in Marval News # 40, June 30, 2005).

This decision confirms the trend in favor of arbitration, acknowledging the immediate enforceability of an arbitral award even if a judicial claim to set aside such award has been filed.

[1] Decision published in www.eldial.com (December 5, 2005).

[2] On the matter, article 771 of the Code of Civil and Commercial Procedure establishes: “The award ex aequo et bono may not be appealed, but if it had been pronounced out of term or pronounced over points that were not included, the parties will be able to demand their nullity within five days of notified. Once demanded, the judge will notify the demand to the other party for five days. Expired the term, notification answered or not, the judge will solve about the validity or nullity of the award, with no appeal”.

[3] Article 1047, the Civil Code: “The absolute nullity can and must be declared by the judge, even without the petition of a party, when it is apparent. It may be pleaded by all persons having an interest in so doing, except by the person who drafted the act, knowing or being required to know the defect which invalidated it. His testimony may also be requested by the government attorney, in the interest of good morals or the law. Absolute nullity may not be confirmed".

This insight is a brief comment on legal news in Argentina; it does not purport to be an exhaustive analysis or to provide legal advice.