Arbitration and Mandatory Mediation

Compulsory attendance as a defendant to a “Mandatory Mediation” hearing, pursuant to Act No 24,573, does not imply consenting to a judicial procedure to resolve the conflict nor does it imply a waiver to the arbitral jurisdiction. This was decided by Division “C” of the National Commercial Court of Appeals of the City of Buenos Aires in the case “Atuel Fideicomisos S.A. vs. Fondo Solidario para Empleados de Asociación Civil on summary proceedings”. Act No 24,573 imposes this mediation as a necessary requirement for filing all judicial proceedings except those expressly excluded by this Act.

This decision, which is inspired in the provisions of sections 874 and 913 of the Civil Code, is an important precedent which contributes towards ending the discussion that takes place when, as a consequence of the request made by one of the parties to the arbitral clause, the other party attends a Mandatory Mediation hearing. The requesting party would later argue that, since the procedure provided in section 1 of Act No 24,573 triggers the initiation of the Mandatory Mediation proceeding which is a step prior to the filing of all law suits (except those expressly excluded by Act No 24,573), the arbitral jurisdiction should be considered waived.

To avoid this argument, the requested party (the defendant) wishing to uphold the arbitral jurisdiction would request, either the inclusion in the mediation minute of a reservation of rights and/or a annotation stating its intention of not waiving the arbitration procedure, or declare that until attending the hearing they were not aware of the nature of the claim and therefore, did not know if the disputed matter was included or not in situations covered by the arbitral clause. However, all this conspires to some extent with the confidentiality of this type of mediation, so mediators tend to resist these inclusions in the minutes.

The above mentioned judicial case, which takes into account and refers to the opinion of the Court of Appeals Prosecutor, rejects the plaintiff’s assertion that the defendant had waived the arbitral jurisdiction by attending a Mandatory Mediation hearing and accepts the lack of jurisdiction defense filed by the defendant. Therefore, the dispute must be decided by the arbitrator agreed upon by the parties, in this case the Arbitral Court of the Buenos Aires Stock Exchange.