The Courts ordered the provisional suspension of an arbitral award against the Argentine Government

The Case(1) refers to an agreement for management services entered into between a Secretariat of the Argentine Government(2) (the “Secretariat”) and a joint venture (Unión Transitoria de Empresas(3) - “UTE”) under the United Nations Development Program(4) (the “Agreement”). The Agreement included an arbitration agreement in order to solve possible conflicts, including an express arbitration procedure and the final character of the award that be rendered.

Upon the termination of the Agreement decided by the Secretariat and an unsuccessful period of negotiation between the parties, the arbitration began through the appointment of the arbitrator, who called the parties to a meeting in order to discuss arbitral procedure. In said meeting it was agreed(5) that (i) upon the reply to the arbitration claim, the arbitrator would call the parties to a hearing to assess the evidence offered, pursuant to the provisions of article 360 of the Argentine Civil and Commercial Procedure Code (Código Procesal Civil y Comercial de la Nación, “CPCCN”); (ii) with respect to matters not agreed upon, the Arbitration Rules of the United Nations Commission on International Trade Law(the “Rules”) and the CPCCN, at the arbitrator’s criterion, would have subsidiary application; and (iii) only requests for clarification and for setting aside the award in the cases provided section 760 of the CPCCN would be allowed(6).

Prior to rendering the award, the arbitrator considered that the case should be decided with no further production of evidence(7) (“de puro derecho”) and consequently issued the award allowing the claim of the UTE in part. In view of this decision, the Argentine Government challenged the award pursuing its annulment – on the basis of the existence of an essential failure in the procedure (“falta esencial en el procedimiento”) – and the suspension of its execution on the grounds of the provisions of the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitration Awards (the “New York Convention”).(8)

Chamber II considered that by rendering the award with no further production of evidence (de puro derecho) and omitting to call the hearing of section 360 of the CPCCN, the arbitrator had resolved disregarding the procedure rules agreed by the parties. In addition, the Chamber sustained that there existed no impediment for a subsidiary application of the regulations on precautionary measures set forth in the CPCCN, and therefore considered that said regulations’ requirements to order the provisional suspension of the arbitration award had been met.

With respect to this Provisional Decision and the arguments of the parties, we can outline the following relevant considerations:

    (i) The New York Convention – whose text was invoked to base(9) the request of suspension of the award’s execution – refers to the recognition and execution of arbitration awards and agreements (not to annulment) and its application exclusively depends on the compliance with the requirements set forth in its article I.1; i.e., whether it is the case of a foreign award or not,(10) irrespective of its issuance within the context of an international arbitration or not (matters that are usually wrongfully identified);

    (II) The regulation of the recourses against arbitration awards is mainly governed by what has been agreed by the parties and the corresponding regulations of the seat of arbitration, under which the extent of the resignations agreed by the parties in such sense should be analyzed;

    (III) The autonomy of the parties’ will is not only the source of arbitral jurisdiction but also constitutes an essential mainstay that should be respected by the arbitrators;(11)

    (IV) In order to avoid the so called “pathological” arbitration clauses or the existence of numerous problems during the arbitration or after the issuance of the award, it is always advisable not to agree on any application, not even subsidiary, of the CPCCN rules;

    (V) This precedent constitutes one of the evidences of the standpoint Argentine courts are adopting when one of the parties is the Argentine Government or any of its agencies, and the award does not benefit the same.

(1) In re “Estado Nacional – Procuración del Tesoro c. Tribunal Arbitral – Laudo 28-IV-03”.
(2) The Secretariat of Small and Mid-Sized Companies (Secretaría de la Pequeña y Mediana Empresa).
(3) Propyme Argentina UTE.
(4) And of an IDB loan.
(5) As emphasized in the Provisional Decision.
(6) It should be noted that Section 32 of the Rules provides that the award shall be issued in writing and shall be final, unappealable and mandatory for the parties, who shall undertake to carry it without delay.
(7) As also indicated by the Provisional Decision. This does not refer to the notification of this resolution, although the Government quoted that it had no opportunity to oppose. In the event it had indeed been notified, it should be deemed as a consent, pursuant to the usually accepted arbitration rules and practices (e.g., article 30 of the Rules and article 33 of the Arbitration Rules of the International Court of Arbitration of the International Chamber of Commerce).
(8) Article V.1.e. of the New York Convention refers to the possibility for a competent authority in the country where an award has been rendered, to set it aside or suspend it.
(9) With respect to the competent authority.
(10) Or an arbitration award not deemed as national in the State in which its recognition or execution is requested (New York Convention, article I.1. in fine).
(11) This criterion was reflected in the New York Convention, which implied a great improvement with respect to the provisions of the 1923 Geneva Protocol on Arbitration clauses and the 1927 Geneva Convention on Execution of Foreign Arbitration Awards (the New York Convention in its article V.1.d provides as a cause for refusal of the execution of the award that the composition of the arbitral tribunal or the procedure were not in accordance with what the parties had agreed).