After-effects of the Cartellone decision upon the judicial control of arbitral awards

On August 8, 2007, Division D of the Commercial Court of Appeals, presided over by judges Vasallo, Dieuzeide and Heredia, declared inadmissible an appeal against the denial by the Arbitral Tribunal of an application for setting aside the arbitral award and a motion for appeal.[1]

On the one hand, the appellant’s legal grounds were that:

i)             by sending copies of the recourses to the other party and giving it the opportunity to answer them, prior to the decision over their admissibility, this presupposed their admission and not their denial, which meant a violation of due process;

ii)            the award should be set aside due to the fact that it contained decisions on points beyond the scope of the submissions and the terms of reference, and exceeding the jurisdiction due to the non-application of the agreed law governing the case and by challenging the presumption of legitimacy of certain administrative acts; and

iii)            the waiver to the motion for appeals agreed upon did not apply:

a.  to questions related to the application of emergency legislation subsequent to the signing of the arbitration clause, and/or

b.  when the award violates mandatory provisions of Argentine public policy, is unconstitutional, illegal or arbitrary, according to the Cartellone decision.[2] The appellant expounded a series of arguments to consider the award unreasonable or arbitrary.

On the other hand, in declaring inadmissible the appeal against the denial of the application for setting aside the arbitral award the Court of Appeals held that:

i)             there was no violation of due process since the provisions of section 758 of the Argentine Civil and Commercial Procedural Code (ACCPC) does not stipulate when is the procedural time for the arbitral tribunal to decide on the admissibility of the appeals filed against the award, nor does the sending of copies to the other party of those appeals constitute a tacit admission of them;

ii)             the action for setting aside was not lawful since none of the grounds detailed in section 760 of the ACCPC was applicable, affirming that the Arbitral Tribunal had dealt with the issue by selecting the norms that it considered applicable under the proven facts of the case, had made a specific and positive decision in rejecting the allegedly applicable law invoked by the later appellant and had only decided upon the litigious issues contained in the terms of reference;

iii)            the waiver of appeals was applicable to issues related to the application of laws subsequent to the entering into of the arbitration agreement since controversies should be analyzed under the law in force at the time they originate or are resolved (Civil Code, section 3);

iv)           even though the waiver of appeals did not mean a waiver of asserting public policy, the raising of it in the appeal was an abstract and generic consideration, since the claim concerning a fundamental right of constitutional rank (as the guarantee of contradictory regularity would be) had not been made in a clear and indubitable way, nor had there been proved any juridical interest in the declaration of that claim or any lack of confirmation by the appellant of the act that violated it, to which was added the fact that the guarantee of double instance does not apply in constitutional ranking civil trials nor is it comparable to access to jurisdiction; and

v)            even though the doctrine of arbitrariness is a proper matter to raise in relation to the recourse of an appeal which has been waived, all the reasons given by the appellant as grounds for arbitrariness of the award were inadmissible, according to the detailed analysis rebutting each of those reasons which was given in the decision.

In the present case, the parties had waived all kinds of recourse which could be validly waived (ICC Rules, section 28.6) and agreed that the award made would be considered final and binding. Therefore, when the claimant requested, first, the revision of the award by the Arbitral Tribunal of the subject matter and the law applied and, afterwards, given the denial by the Arbitral Tribunal, an appeal against that denial to the Commercial Court of Appeals on the grounds of the Cartellone case, the extent of judicial authority that the appellant claimed over the award exceeded what had been agreed upon (ACCPC, section 758).[3]

Considering what had been agreed upon, that double instance does not constitute a constitutional requisite of the defense in trial and that it can be waived according to section 872 of the Civil Code, the judicial control requested by the appellant should have been limited to the grounds for the setting aside of sections 760 and 761 invoked and a restrictive interpretation of the supposed violation of public policy, considered as a ground for setting aside according to the Model Law (section 34, 2, b, ii) - the law which is used as a reference by the Argentine jurisprudence in arbitration matters. 

Conscious of those limits, and despite the juridical severity the sentence shows - applied to deny the appeal, clearly distinguished from the application for setting aside and, therefore, its inadmissibility -, Division D of the Commercial Court of Appeals did not fail to comment on the academic aspects of the Cartellone case, and in further justifying the denial of the appeal, rebutted each of the grounds on which the complainant based its appeal, adopting in this way the guidelines of judicial control established in the cited case.

Internationally, there is a strong and pacific tendency to give greater priority to the final and binding character of an award than to judicial revision, which is limited to exceptional grounds and restricted interpretation. Argentine jurisprudence has also adopted this approach since it is the essence of arbitration, which would be weakened if, after the award is rendered, revision through further judicial control were allowed.

However, after the failure of juridical security constituted by the broad revision of the award in the Cartellone decision, through impairing its final and binding character, and despite the subsequent efforts to restrict the scope of judicial control over the arbitral awards,[4] we envisage some unpredictability in the direction of the case law that will be finally adopted in Argentina in this matter. Such uncertainty that would be unfavorable to arbitration, with the negative juridical and economic consequences it would bring.