A new decision by an Argentine court ratifies the importance of arbitration

The Court indicated in its decision that: “in relation to the requested suit to set aside (…), and given that the dispositions on setting aside established in the code are of subsidiary application (art. 761, 2^nd paragraph of the ACCNCP), it is necessary to note that it is an requisite of admissibility of the suit to set aside that the party initiating the suit has not consented to the act he is now objecting to. In the present case, even though he was given proper notice, the claimant did not object in due time to the tribunal’s decision to extend the term to render the award. That meant, then, under art. 170 of the ACCNCP, consenting on the extension of the term to render the award, the reason why the recourse now tried under those grounds, that intends, in an elliptical way, to attach the resolution establishing the extension of time to render the award, becomes extemporaneous.”

It is very important to emphasize this Court’s decision, and the grounds on which it is based, since its reasoning is the same as that found in country laws on arbitration, and even in the same arbitration rules of several arbitration centers. What the Court is applying is precisely the theory of one’s own acts, waiver, or estoppel, as it is known in common law countries (in Germany and Switzerland is known as the maxim non concedit venire contra factum proprium, and it is also established in French law as the “principle of consistency”.)

Arbitration should be carried out under the principle of good faith, and in order to strengthen and confirm this concept the estoppel principle has been incorporated to national legislations and rules of arbitration centers in such a way that they establish that if a party does not object in due time that the proceeding is incorrect it will be understood that it has waived its right to object in the future.

As occurs in the case in question, the importance of the waiver to object in the future has a particular relevance when a party intends to present a motion of appeal against an award in a later proceeding before Argentine tribunals. Frequently, in the framework of those recourses a party may try to demonstrate that proceedings before the arbitral tribunal were defective. However, such argument is worthless when the appellant party already had its chance to object during the arbitral procedure.

As mentioned above, this principle has been incorporated to several rules of arbitration centers. The rules of arbitration of the Arbitration Court of the International Chamber of Commerce did so in the changes made to the rules in 1998. Article 33 of these Rules of Arbitration establishes the estoppel or waiver theory:

“Article 22. Waiver. A party which proceeds with the arbitration without raising its objection to a failure to comply with any provisions of these Rules, or of any other rules applicable to the proceedings, any direction given by the Arbitral Tribunal, or any requirement under the arbitration agreement relating to the constitution of the Arbitral Tribunal, or to the conduct of the proceedings, shall be deemed to have waived its right to object.”

This principle is also found in several other rules of arbitration centers, such as the American Arbitration association (“AAA”)[1], the London Court of International Arbitration (“LCIA”)[2], the United Nations Commission on International Trade Law (“UNCITRAL”)[3], and the World Intellectual Property Organization (“WIPO”)[4].

It has also been incorporated to many national laws on arbitration: UNCITRAL’s Model Law on Arbitration, English Arbitration Act of 1996, and national laws of Bolivia, Italy, and Germany, amongst others.[5]

This principle has not only been introduced to national laws and rules of several arbitration centers, but has also been applied in many cases; amongst them, the Court of the Southern District of New York, in the case Hunt v. Mobile Oil Corporation, has said that:

“[A party cannot] wait in ambush and then render wasteful years of effort at an expenditure of millions of dollars. A party cannot remain silent, raising no objection during the arbitration proceedings, and when an award adverse to him has been handed down, complain of the situation of which he had knowledge from the first.” [6]

This same decision has been repeated in numerous later cases, and has taken on such importance that, as a consequence of this decision, international scholars have formulated the principle under the following phrase: “A party may not ‘lie in ambush’ with an objection to await the decision of the tribunal.”[7]

The Court in this case has also made the waiver to recourses by submitting disputes to arbitration. The Court validates arbitral decisions, respecting the agreement between the parties and their voluntary waiver to any recourse that the same have agreed to by submitting their dispute to arbitration. In this way, the Court confirms that it is not within the competence of a national tribunal to go into the arbitral decisions in respect to the subject matter of the dispute:

“At the same time, in respect with arguments exposed in point b), c), d) and e) of the remedy the copy of which is in sheets 19/25 of this file as an essential lack of procedure, it must be said that by intending, in reality, to attack through those means the ‘in iudicando’ matters which the award is supposed to have, such objection exceeds the chosen recursive structure and it is not possible, through the chosen way, to replace the appeal recourse which was voluntary waived.”

This Court’s decision is of great importance since it demonstrates that Argentine tribunals are slowly moving towards international trends on arbitration. Respecting the decisions rendered by international and national arbitral tribunals, granting them the value they have, without attempting to interfere or change what has been decided, or violating international rules of arbitration, or international principles on the matter.

This trend is of the most significance, given that if the Argentine tribunals keep this line of decisions, Buenos Aires may come to be considered as a city seat for arbitrations, which to date has not occurred very frequently, given –mainly– the reticent and negative stand of Argentine Courts towards arbitration shown up to the moment.