Strong Support for the Autonomy of the Arbitration Agreement by Argentine Case Law
On March 1, 2011, Division I of the Federal Court of Appeals in Civil and Commercial Matters, by majority, reversed the decision that had dismissed the action to necessarily obtain the conclusion of the arbitration agreement, also called action for the establishment of the arbitral tribunal (CPC, Section. 742).[1]
In October 2005, the parties had agreed to resolve their differences by domestic arbitration ad-hoc in contracts of chartering of tugs and had chosen Buenos Aires as seat of arbitration. The arbitration clause was drafted with broad scope as to the matters subject to the jurisdiction of the arbitrators.
When the defendant notified the plaintiff of its decision to terminate the agreement, the plaintiff attempted to initiate arbitration, but faced with the reluctance of the defendant, filed a lawsuit for the establishment of the arbitral tribunal. Although the difference between the parties was arbitrable, the judge conditioned the admissibility of the action until a final judicial decision related to the question of the validity of the agreements had been rendered.
However, the decision was overturned by the Court of Appeals on the basis of the principle of autonomy of the arbitration agreement. This principle is essential in arbitration and is based on the need to ensure the effectiveness of the arbitration agreement and avoid a party evading the arbitration agreement by simply invoking that the agreement is void.[2]
To explain the principle of autonomy, the Court of Appeals held that the arbitral clause constitutes an independent contract within a contract and that the fate of the latter, even if its nullity, absence or termination are invoked, does not necessarily involve the invalidity of the arbitral clause while there is no evidence that consent to arbitration is flawed, an issue that in this case is beyond the scope of the conflict.
As the parties have not agreed on an institutional arbitral rules that contemplate that principle,[3] the Court of Appeals said the following when it rendered its decision:
The Argentine law applicable to domestic or national arbitration expressly does not contain a provision that refers to the principle of autonomy of the arbitration clause. This shows the antiquity of the rules contained in Book VI of the Civil and Commercial Procedural Code and the inadequacy of its content to respond satisfactorily to the needs of national trade and, of course, to those of international trade. This decision must not be considered a confrontation with the legislature but a way to integrate a gap in regulation, along the lines of case law, the Argentine authors and the concept of domestic commercial arbitration in the latest draft legislation dated March 2010. "
The draft bill mentioned by the Court that treats domestic and international arbitration is based on the UNCITRAL Model Law that in its Article 16 establishes such principle:[4]
Article 16- Competence of arbitral tribunal to rule on its jurisdiction. (1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
Moreover, to integrate the gap left by the legislature -despite the efforts of the arbitration local community to incorporate the model law to Argentine law since 2002 – Division I held that this principle, which is incorporated into the Agreement on Arbitration International Trade of Mercosur,[5] also governed purely domestic arbitration as accepted by the most prestigious national authors and had already been recognized long ago by our case law.[6]
While these efforts by the Argentine judiciary are praiseworthy, these uncertainties on criteria as essential to the principle of autonomy of the arbitration agreement[7] will only be dispelled once Argentina has its own arbitration law as has occurred jn Brazil.[8]
"One of the advantages of arbitration is respect for the principle of autonomy of the arbitration clause, which contributed to its widespread use, both domestically and internationally. This principle became a reality only in Brazilian Law with the arrival of Article 8 of the Arbitration Act”.[9][1] Federal Court of Appeals in Civil and Commercial Matters, Division I, “Smit International Argentina SA Cars v. Puerto Mariel SA” MJ-JU-M-66292-AR/MJJ66292.
[2] Cardenas Mejia, Juan Pablo, The principle of autonomy of the arbitration agreement, the Arbitration Agreement, Editorial Legis, p. 86. The Anglo-Saxon authors and case law refer to this quality of the arbitration clause as "severability" or "separability".
[3] For illustration, see that the following Rules explicitly enshrine this principle: ICC International Court Rules (Art. 6.4), UNCITRAL Arbitration Rules (Art 21.2), London Court of International Arbitration Rules (Art. 23.1), American Arbitration Association Rules for international arbitration (Art. 15.2), Inter-American Commission on International Commercial Arbitration Rules (ICCA) (Art. 21.2) and WIPO Rules (Art. 36 b).
[4] Draft Bill No. 0014-D-2010, Article 12, Parliamentary process 002 (March 2, 2010). Note that on March 1, 2011, legislators Maria Paula Bertol, Federico Pinedo and Julian Martin Obiglio (PRO), Patricia Bullrich (Civic Coalition) and Gustavo Ferrari (Federal Peronism) filed a new project (No. 0009-D-11) also based on the UNCITRAL Model Law but only to international arbitration. It is clarified that the presentation of the last one did not leave without effect the previous Draft Bill 014-D-2010.
[5] This Agreement has been approved by Law 25,223 and incorporated into Argentine law (Art. 31 and 75, paragraph 22 of the Constitution). We clarify that the New York Convention of 1958, also cited by the Court, does not expressly stipulate the principle of autonomy even when such Convention is not contrary to this principle.
[6] See CSJ, 128:402, December 19, 1918, Franke O v. Buenos Aires Province, and Commercial Court of Appeals, Division E, September 26, 1989, Welbers SA v. Gesellschaft für Anlagenbau Extraktionenstechnick, LL 1989-E-302.
[7] The Court of Appeals decision was rendered by majority (Drs. Francisco de las Carreras and Maria Susana Najurieta) and with the dissent from Dr. Martin Farrell Diego.
[8] By Law 9307, Brazil incorporated the UNCITRAL Model Law in 1996, which regulates both domestic and international commercial arbitration (single system).
[9] Baptista, Luiz Olavo, Commercial and International Arbitration, Lex Magister, p. 113. Extract from a Nadia de Araujo´s commentary to a judicial decision rendered by the Court of Appeals of Santa Catarina that implemented the principle and argued that given the existence of the arbitration clause, it was not possible to have a prior analysis of the issue relating to the nullity of the contract by the Judiciary (Araujo, Nadia, The autonomy of the arbitral clause in Brazilian case law, Revista Brasileira de Arbitragem. São Paulo, n ° 27, p. 265 -286, out. / dez 2010).The Article 8 of Law 9307 says: The arbitration clause is autonomous in relation to the contract which it belongs, so that the invalidity of this will not lead to the invalidity of the arbitration clause. Sole paragraph. The arbitrator will decide, ex officio or upon request of a party, issues of existence, validity and enforceability of the arbitration agreement and the contract containing the arbitration clause of the arbitration agreement.
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