ARTICLE

Conflict of jurisdiction in arbitration

The Argentine Commercial Court of Appeals confirmed a Lower Court’s decision granting an interim measure in favour of the claimant in an international arbitration, which had not yet been initiated, even though the contract between the parties was subject to foreign law.

March 29, 2006

On September 22, 2005, Room D of the Argentine Commercial Court of Appeals[1] confirmed a Lower Court’s decision granting an interim measure in favour of the plaintiff, thus rejecting the defendant's appeal.[2]

The claimant filed a request before a Lower Court on Commercial Matters requesting the Court to order the defendant to refrain from carrying out any commercial activity implying the production, marketing, sale or distribution of a certain medical product within Argentina until the arbitral award was rendered in the respective arbitral procedure which would be initiated within the 10-day term stated by local procedural Law.[3] The arbitral process would be ruled to the ICC Arbitration Rules.

The Lower Court admitted the claimant’s request partially and consequently rendered a preliminary measure similar to the one requested. The decision was appealed by the defendant, based on:

(i) the lack of jurisdiction of the local judge to construe the scope or validity of a contractual clause subject to American Law; and

(ii) the lack of danger in the delay due to the defendant’s solvency.

The Court of Appeals found that even though the contract between the parties was subject to the Law of the State of Illinois, USA[4], the jurisdiction -or aptitude to apply such Law to the particular case- was not recognized to the local judge by the substantive law applicable to the contract but by Arbitration Rules chosen by the parties[5] and additionally by Section 2 of the New York Convention[6] in the sense that local judges should give effect to arbitration clauses.

Consequently, the Argentine Commercial Court of Appeals rejected the defendant’s appeal and confirmed the interim measure.

It is to be noted that in its brief decision the Court of Appeals ratified its position not only with respect to the validity of arbitration but also in relation to the validity of the choice of the substantive law applicable to international contracts[7] , and the election of the competent forum to resolve disputes.

On the other hand, it emphasizes the recognition of the independence of local judges that are requested to render interim measures if the specific Arbitration Rules do not establish the exclusive competence of the Arbitration Tribunal to order interim measures.

[1] CNCom, Room D, 09/22/2005, “Searle Ltd. c/ Roemmers S.A.I.C.F.”, LL 22/12/2005, page 7.

[2] Though this decision could also be commented from an antitrust point of view, in this case we will refer to the arbitration topics of the case.

[3] Article 207 of the National Civil and Commercial Procedural Code states: “automatic expiration of the preliminary measures ordered and carried out before the commencement of the process will occur if, being an exigible obligation, the complaint is not filed within 10 days of the day when the measure is carried out”.

[4] According to Section 25 of the contract between the parties.

[5] Section 23.2 of the Rules of Arbitration of the International Cut of Arbitration of the International Chamber of Commerce states that: “Before the file is transmitted to Arbitral Tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application of a party to a judicial authority for such measures or for the implementation of any such measures ordered by an Arbitral Tribunal shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant powers reserved to the Arbitral Tribunal. Any such application and any measures taken by the judicial authority must be notified without delay to the Secretariat. The Secretariat shall inform the Arbitral Tribunal thereof.”

[6] Convention celebrated on the 8/26/1958, ratified by Law 23.619.

[7] It is understood by international contracts those in which (i) the parties are domiciled in different countries, (ii) its place of celebration is in a country different of the party’s nationality, or (iii) its effects are produced in countries different of the party’s nationality or in more than one specific country.

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.