Impact of judicial control over the award on the success of international arbitration

The most controversial type of judicial intervention among all those existing in international arbitration is the control by competent courts over a decision adopted by arbitrators. Not without good reason, when in cases involving examining whether or not an award must be set aside, very different outcomes will be achieved depending on whether the courts of the country in charge of conducting that judicial review are inclined to take a broad and expansive approach to their review task, or, by contrast, regard the setting-aside process as an exceptional procedure allowing a limited and restricted scope for review. In the first case, the chances of the international award being set aside are greater, so the arbitrators’ decision will be more exposed to being held unenforceable, rendering useless all efforts and costs incurred in the arbitration proceeding which, if overturned, which will not have served to provide a final answer to the dispute.

For that reason, the approach taken by the courts when it comes to dealing with a review of international awards takes becomes a very important issue to take into account to avoid unpleasant surprises. The fact of the matter is that, although an international award is intended to be permanent, normally it is subject to some form of review by the courts of the country where it is rendered, and therefore careful attention needs to be paid to the rules on challenging the arbitration award, because a greater or lesser degree of judicial control may ultimately determine the success of the arbitration proceeding in the country concerned. Accordingly, alongside an examination of the classic issues that usually focus attention, consideration needs to be given before the commencement of any arbitration proceeding[1] to an element that could ultimately prove essential but is not always given sufficient attention, namely the position of the courts that could be called upon to hear a potential challenge of the international award.

To analyze this issue properly, it is crucial to take time to look, essentially, into the two factors described below.

The first is the need to become familiar with the procedure in each country for their judicial authorities to be able to review the work carried out by the arbitrators, together with any peculiar characteristics that may exist in the way it is defined. An important aim of this process therefore is to gain an understanding of key elements of the challenge procedure, such as: (a) the scope of the examination that courts are allowed to make of the arbitration decision; (b) whether the parties are allowed to agree on the grounds for setting aside an award via so-called “expanding clauses”; c) whether a waiver in advance of the right to challenge the international award is allowed[2]; (d) whether the set of grounds for challenging the award allow re-examination of the substance of the decision or essentially concern exceptional procedural matters; (e) whether the parties may agree on a review to a greater or lesser degree as occurs, with their own peculiar characteristics, in countries such as the UK, France, Italy or Peru[3].

The second factor is any interpretation that has been provided of what “public policy” must mean for the purposes of setting aside the award. Not without good reason because almost all systems allow their courts to render an international award invalid if it is found that the decision made to resolve the dispute infringes the concept of public policy. However, because it is very hard to define what that means, the best option would be to examine previous court decisions rendered in the country concerned to gauge the real impact of the ground for setting aside an award. It worth noting in relating to this issue that the Constitutional Court in a judgment of June 15, 2020 held that decisions rendered by Madrid High Court were in breach of the fundamental right to judicial protection because the Chamber allowed a “broadening of the definition” of public policy, in a case in which both parties requested dismissal of the challenge procedure and on its own motion decreed that the challenge procedure should continue due to considering that public policy was affected.

To clarify the two factors described above and, therefore, to suitably assess the impact of judicial control over the award on the success of international and domestic arbitration in Spain, Colección Garrigues has published a work in Spanish on the subject of setting aside the award on the ground of infringement of public policy (“La anulación del laudo por infracción del orden público”). The work analyzes, among other subjects, action to set aside the award, an instrument defined in the Spanish Arbitration Law as a mechanism for challenging awards; and in particular the impact of public policy on the setting aside of arbitral decisions, in relation to which a complete list is provided of the substantive and procedural infringements that have been used to set aside awards rendered in Spain. This provides legal practitioners with precise information as to whether or not a given irregularity is contrary to the slippery concept of “public policy” according to the case law crafted by the Spanish courts. Alongside this, the work analyzes other items of interest, such as the option to waive in advance the right to challenge an award in Spain; the technical factors to be considered when bringing action to set aside an award; the interpretation differences among the various Spanish high courts over the interpretation of public policy or, lastly, proposals for amendment of the law to mitigate the adverse effect that judicial control may have on the success of domestic arbitration proceedings.