Lack of jurisdiction of arbitrators to declare the unconstitutionality of emergency laws - Annulment of an arbitral award due to the absence of signature of one of the arbitrators

1.     Lack of jurisdiction of arbitrators to declare the unconstitutionality of emergency laws

On last December 23, 2004, the Court of Appeals on Civil and Commercial Matters of San Isidro, Province of Buenos Aires (the “Court”) rendered a final decision in case "Peyras, Hernán Matías v. Nordelta Constructora SA", where it was discussed, among other issues, the jurisdiction of arbitrators to declare the unconstitutionality of the public order regulations enacted as a consequence of the situation of public emergency declared by Law No 25,561.

The defendant appealed the lower court’s decision that dismissed the defence of lack of venue. The Court found that, although the general principle is that any matter in dispute can be submitted to arbitration (except for issues that by law cannot be settled), this general principle must be construed in accordance with what the parties understood, anticipated or could understand at the moment of agreeing the substitution of the normal jurisdiction of the state judges [the arbitration agreement] (general principle that arises from Section 1198 of the Civil Code).

In this understanding the Court found that the emergency declared as of December 2001 could not be foreseen by the parties at the time of the execution of the contract, and therefore it was not included in the arbitration clause. Therefore, the arbitration agreement did not include the arbitrability of the constitutionality or unconstitutionality of the devaluation regime and pesoefication of debts created with the enforcement of Law No 25,561.

In addition, the Court found that the parties having waived the possibility of filing any appeal against the arbitral award, thus prevented the Argentine Supreme Court from acting as the last interpreter of the Argentine Constitution in matters such as an economic emergency.

The Court decided to confirm the challenged decision, thus rejecting the defence of incompetent jurisdiction opposed by the defendant.

2.     Annulment of an arbitral award due to the absence of signature of one of the three arbitrators

In another case, the National Commercial Court of Appeals resolved, on December 14, 2004, the appeal filed by the defendant in re “Banco de la Provincia de Buenos Aires v. Orfila, Dora del Carmen s. sumario”, confirming the annulment of an arbitral award rendered by the Tribunal Arbitral de Consumo (a permantent arbitration panel for controversies arising from relations between consumers and producers or manufacturers). The judicial decision was based on the absence of the signature of one of the members of the arbitration panel.

Banco de la Provincia de Buenos Aires filed a claim before the local courts requesting the annulment of an arbitral award rendered by the Tribunal Arbitral de Consumo (created by Decree No 276/98), alleging that it had considered and decided matters that had been previously subject to final judicial decisions.

The lower court’s decision admitted the claim and declared the nullity of the arbitral award, considering that the Arbitration Tribunal had acted based on two credits that had been previously subject to final judicial decisions. For this reason, the lower court concluded that the arbitral tribunal lacked of jurisdiction in relation with the case.

The defendant filed an appeal against this decision, stating that the lower court exceeded the limits of the judicial competent jurisdiction to set aside arbitral awards, according to Section 771 of the Argentine Civil and Commercial Procedural Code.

The Commercial Court of Appeals confirmed the challenged decision. However, in order to so the Court of Appeals ex officio considered that the nullity of the arbitral award should be declared due to the absence of the signature of one of the three arbitrators, since that signature should be considered as an essential formal requisite, the absence of which rendered the arbitral award inexistent (in accordance with sections 988, 975, 1001/1004 and 1012 of the Argentine Civil Code, Decree No 276/98 and Section 59 of Law Nº 24,240).