Arbitration. Reorganization proceedings and forum conveniens. Contingent verification of claims

Pursuant to a resolution which is not final yet, Commercial Court No 26 of the City of Buenos Aires admitted the arguments of Marval, O'Farrell & Mairal and decided to reject a motion to extend forum conveniens for a reorganization proceeding in regard to an international arbitration which is still pending. The Court ruled that the arbitration should continue regardless of the reorganization proceedings started in Argentina (“Tower Records S.A. in re: Reorganization Proceedings / Interlocutory Judgment on Contract Continuance”, in www.diariojudicial.com, edition of September 8, 2003).

The motion filed by the entity subject to reorganization proceedings was disallowed on the basis of two concurring arguments, namely,

(i) that, although forum conveniens jurisdiction is exercised on all the property lawsuits relevant to the person subject to reorganization proceedings, it is solely applicable within the boundaries of the Argentine territory and, therefore, it neither reaches nor may be extended to an arbitration tribunal constituted in a foreign country;

(ii) that, beyond any peculiar traits of arbitrations conducted abroad, should any conflict of jurisdiction arise between a judicial court hearing reorganization proceedings and an arbitration tribunal, the latter’s jurisdiction shall be admitted pursuant to case law established by Argentina’s Supreme Court of Justice.

The Commercial Court quoted two judicial precedents issued by the Supreme Court, where it had been clearly stated that forum conveniens shall not be applicable to pending arbitration proceedings whenever a debtor is subject to any reorganization proceedings (“SA Energomachexport v/ Establecimientos Mirón SAIC”, CSJN, “Fallos” 319:1287), or liquidation proceedings if the arbitration tribunal has already been constituted (“La Nación SA v/ La Razón Editorial EFICyASA”, CSJN, “Fallos” 311:2227).

The last of the above-mentioned rulings meant a dramatic change in case law previously sustained by the Supreme Court, and publication thereof was enhanced with a comment by Dr. Ernesto O’Farrell (La Ley, 1989-B-476). The new stance taken by the Supreme Court has been rapidly adopted by courts of original jurisdiction; in directo opposition to previous interpretation of the law which used to enable an individual subject to reorganization proceedings to circumvent an agreed arbitral jurisdiction.

In similar instances to the case in question, creditors must verify, as a contingent claim, any right which the arbitration award may ultimately admitt for their benefit, so as to prevent that any subsequent verification of claims be regarded as untimely late and creditors be forced to pay legal costs.