The new Spanish Arbitration Act 60/2003 (hereinafter “the Act”) was officially published in the Official Gazette of the Spanish State (Boletín Oficial del Estado) on 26 December 2003, and came into force on 26 March 2004. The reform responds to demands from international commercial parties choosing arbitration to resolve disputes.

Recent years have seen a notable expansion of domestic and international arbitration in Spain. With the Act, the Spanish legislator makes a firm commitment to fostering domestic arbitration and making Spain a centre for international arbitration, in particular between Spanish-speaking parties.

The Act is based on the UNCITRAL Model Law.

Below are some of the key features of the new Act:

• the Act opts for unitary regulation of domestic arbitration and international arbitration;
• the Act is governed by non-formalistic criteria;
• the Act provides that the arbitration will be an arbitration in law (as opposed to an arbitration in equity) in the absence of an express agreement between the parties as to the type of arbitration; and
• the parties are free to decide the number of arbitrators, although it must be an uneven number.

Before the 2003 Act came into force, Spanish arbitration law was scattered over the Arbitration Acts 1953 and 1988.

On 7 December 1988, the Official State Gazette published Law 36/1988, of 5 December, concerning arbitration. This legislative text closed a long period of unsuccessful attempts to modify the Arbitration Act of 22 December 1953. That Act was the product of such a specific set of political and economic circumstances that it was out of place in a democratic legal system.

The Act of 1953 was inspired by political principles radically different from those of a democratic country. At that time, lawmakers viewed arbitration unfavourably, as it was the judicial monopoly of the State to decide conflicts. From an economic standpoint, 1953 was a period of autocracy and foreign isolation, thus there was little or no activity within Spain with respect to international arbitration. The 1988 Arbitration Act was not intended to be a limitation on arbitration, but rather a regulatory channel for promoting both domestic and international arbitration.

The events leading to the 1988 Arbitration Act can be summarised in the following steps. In 1975, Spain ratified the European Convention on International Commercial Arbitration, and in 1977 it ratified the New York Convention. At this time, the idea began to take hold in Spanish legal doctrine that, due to the publication of these international treaties concerning international commercial arbitration, their provisions had become rules of domestic law, thus as binding as the provisions of the 1953 Arbitration Act. Therefore, ratification of these conventions had introduced a double and differentiated legal framework for domestic arbitration (1953 Arbitration Act) and for international arbitration (provisions contained in the international treaties ratified by Spain).

Scope of application
The Act applies to any arbitration where the place of arbitration is in Spanish territory, whether of domestic or international character.

Certain provisions of the Act apply even if the place of the arbitration is outside Spain. These include:

• Article 8, Paragraphs 3, 4 and 6: competent courts for assistance and supervision of arbitration;
• Article 9 (except Paragraph 2): form and content of the arbitral agreement;
• Article 11: arbitration agreement and substantive claim before a court;
• Article 23: power of the arbitrators to order interim measures;
• Title VIII: the enforcement of awards; and
• Title IX: the recognition (“exequatur”) of foreign awards.

The Act is of supplementary application to any arbitration proceedings provided for in other legislation.

Employment arbitration is excluded from the scope of the Act.

Transitional provisions
The Act applies to all arbitration agreements unless the respondent received the request to submit a dispute to arbitration or the arbitral proceedings were been initiated before the Act came into force. Nevertheless, the provisions of the Act still apply in respect of the arbitration agreement and its effect.

Otherwise, the provisions of the Act relating to applications to set aside and revision apply to awards made after the entry into force of the Act.

Formal requirements
Article 9.3 stipulates that the arbitration agreement must be made in writing, in a document signed by the parties or in an exchange of letters, telegrams or any other means of telecommunications that provides a record of the agreement. This requirement is satisfied when the arbitration agreement appears and is accessible for its subsequent consultation in an electronic, optical or any other format.

Article 9.1 clarifies that the arbitration agreement, which may be in the form of a clause in a contract or in the form of a separate agreement, shall express the will of the parties to submit all or some disputes to arbitration that have arisen or which may arise between them in respect of a determined legal relationship, whether contractual or non-contractual. Article 9.2 states that if the arbitration agreement is included in a standard form agreement, its validity and its interpretation shall be governed by the rules applicable to these contracts.

According to Article 9.4, the arbitration agreement appearing in a document to which the parties have expressly referred in any of the forms specified in Article 9.3 shall be deemed incorporated into the contract. Article 9.5 also clarifies that there is an arbitration agreement when, in an exchange of Statements of Claim and Defence, the existence of an arbitration agreement is alleged by one party and not denied by the other.

Effects
The arbitration agreement obliges the parties to comply with the agreement and prevents the courts from hearing disputes submitted to arbitration, provided that an interested party raises an objection to jurisdiction.

The constitution of the arbitral tribunal
Pursuant to Article 12 of the Act, the parties are free to determine the number of arbitrators, provided that there is an uneven number. In the absence of any agreement between the parties, only one arbitrator shall be appointed.

According to Article 13, all natural people in full possession of their civil rights may act as an arbitrator, provided that they are not restricted by the legislation applicable to them in the exercise of their profession. Unless otherwise agreed by the parties, no person shall be prevented by reason of their nationality from acting as an arbitrator.

The parties are able to freely agree on the procedure for the appointment of the arbitrators, provided that there is no violation of the principle of equal treatment. If it is not possible to appoint the arbitrators by the procedure agreed upon by the parties, any of them may apply to the competent court for the nomination of the arbitrators or, if appropriate, the adoption of the necessary measures for this purpose. In this case, the court shall only refuse the request filed when it considers that the existence of an arbitration agreement is not established.

Unless the parties have otherwise agreed, each arbitrator, within 15 days from communication of the nomination, should communicate his acceptance to whoever nominated him. If an acceptance is not communicated within the period established, the arbitrator is deemed not to have accepted his nomination.

The challenge of arbitrators
Pursuant to Article 17.3, an arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed to by the parties. A party may only challenge an arbitrator appointed by him, or in whose appointment he has participated, if he becomes aware of the reasons after the appointment has been made.

The parties are free to agree on a procedure for challenging an arbitrator. If a party challenges in accordance with the agreed procedure, the challenging party may in due course rely upon the challenge in applying to set aside the award.

According to Article 19, an arbitrator’s mandate terminates if he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay, if he withdraws from his office, or if the parties agree to the termination. If there is no agreement of the parties on the termination of the mandate and there is no agreed procedure to overcome such disagreement, the following rules shall apply:

• the application for termination shall take the form of oral proceedings before the court. This application may be joined with the request for the nomination of arbitrators, as set out in Article 15, in case the application for termination is granted; and
• in an arbitration with more than one arbitrator, this question shall first be decided by the remaining arbitrators. If they are unable to reach a decision, the procedure set out in the previous subparagraph shall apply.

The withdrawal of an arbitrator from his office or the agreement by one party to his termination does not imply acceptance of the validity of any grounds referred to in these provisions.

The appointment of substitute arbitrators
Article 20 provides that, irrespective of the reason for the appointment of a new arbitrator, he shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. Once the substitute arbitrator is appointed, the arbitrators, after hearing the parties, shall decide if it is appropriate to repeat any prior proceedings.

Responsibility of the arbitrators
Article 21 provides that acceptance obliges the arbitrators and, where applicable, the arbitral institution to comply faithfully with their responsibility. If they do not do so, by reason of bad faith, recklessness or fraud, they will be liable for the damage and losses they cause. Where the arbitration is entrusted to an arbitral institution, the injured party shall have a direct action against the institution, regardless of any actions for compensation available against the arbitrators.

Provision of funds
Unless otherwise agreed, both the arbitrators and the arbitral institution may require from the parties the provision of funds that they consider necessary to meet the fees and expenses of the arbitrators and those that may be incurred in the administration of the arbitration. Should the parties fail to provide the funds, the arbitrators may suspend or terminate the arbitral proceedings. If one of the parties has not made its provision within the time fixed, the arbitrators, before deciding to terminate or suspend the proceedings, shall inform the remaining parties so that they may provide the funds within a further period fixed by the arbitrators, should they wish to do so.

Competence to rule on jurisdiction
Article 22 of the Act stipulates that arbitrators may rule on their own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement or any other objection, the acceptance of which would prevent the arbitrators from entering into the merits of the dispute. For this purpose, an arbitration agreement which forms part of a contract shall be treated as severable from the other terms of the contract. A decision by the arbitrators that the contract is null and void shall not invalidate the arbitration agreement.

Any objection referred to in the previous paragraph must be raised no later than the submission of the Statement of Defence, and the fact that a party has appointed or participated in the appointment of the arbitrators shall not preclude that party from raising such an objection. The objection that the arbitrators are exceeding the scope of their jurisdiction shall be made as soon as the matter alleged to be beyond the scope of their jurisdiction is raised during the arbitral proceedings.

Power to order interim measures
In accordance with Article 23, unless otherwise agreed by the parties, the arbitrators may, at the request of any party, order such interim measures as they consider necessary in respect of the subject of the dispute. The arbitrators may require appropriate security from the applicant.

The provisions relating to the setting aside and enforcement of awards apply to the arbitral decisions in respect of interim measures, regardless of the form of those measures.

Commencement of arbitration
Unless otherwise agreed by the parties, Article 27 provides that the arbitral proceedings commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.

General procedural principles
According to Article 24, the parties shall be treated with equality and each party shall be given the opportunity to fully present his case. Also, the arbitrators, the parties and the arbitral institutions, if applicable, are obliged to maintain the confidentiality of information coming to their knowledge in the course of the arbitral proceedings.

Article 25 states that the parties may freely agree on the procedure to be followed by the arbitrators in the conduct of the proceedings. Failing such agreement, the arbitrators may, subject to the provisions of this Act, conduct the arbitration in such manner as they consider appropriate. The powers conferred upon the arbitrators include the power to determine the admissibility, relevance and usefulness of any evidence, the manner of taking evidence, including on the arbitrators´ own motion, and its weight.

Place and language of arbitration
Pursuant to Article 26, the parties are free to agree on the place of arbitration. If there is no agreement, the place of arbitration shall be determined by the arbitrators, having regard to the circumstances of the case and the convenience of the parties. Notwithstanding the provisions of the previous paragraph, the arbitrators may, after consulting the parties, meet at any place they consider appropriate for hearing witnesses, experts or the parties, or to inspect objects, documents or persons. The arbitrators may deliberate at any place they consider appropriate.

In respect of the language of the arbitration, Article 28 states that the parties are free to agree on the language to be used in the arbitration. Failing such agreement, the arbitrators shall determine the language, having regard to the circumstances of the case.

Oral hearings and written proceedings
Unless otherwise agreed by the parties, the arbitrators shall decide whether to hold oral hearings for the presentation of oral argument, the taking of evidence and the submission of conclusions, or whether the proceedings shall be conducted solely in writing. Unless the parties have agreed that no hearings shall be held, the arbitrators shall hold hearings at an appropriate stage of the proceedings, if so requested by a party.

Court assistance in taking evidence
The arbitrators, or any party with their approval, may request from the competent court assistance in taking evidence, in accordance with the applicable Spanish rules on the taking of evidence. This assistance may comprise of the taking of evidence before the competent court, or the adoption by the competent court of specific measures necessary in order that the evidence may be taken before the arbitrators. If it is so requested, the court shall take evidence under its exclusive supervision. However, the court shall limit itself to ordering only those measures necessary. In both cases, the court shall deliver to the applicant a certified copy of the proceedings to use in the arbitral proceedings.

Rules applicable to substance of dispute
According to Article 34.1, the arbitrators shall decide in equity only if the parties have expressly authorised them to do so.

When the arbitration is international, the arbitrators have to decide the dispute in accordance with the rules of law chosen by the parties. Any designation of the law or legal system of a given State shall be construed, unless otherwise stated, as referring to the substantive law of that State and not to its conflict of laws rules. Failing any designation by the parties, the arbitrators shall apply the law that they consider appropriate.

In all cases, the arbitrators shall decide in accordance with the terms of the contract and shall take the applicable usages into account.

Award by agreement of the parties
If, during arbitral proceedings, the parties wholly or partially settle the dispute, the arbitrators shall terminate the proceedings in respect of the points agreed and, if requested by both parties and not objected to by the arbitrators, record the settlement in the form of an arbitral award on agreed terms.

Time, form, content and notification of the award
Unless otherwise agreed by the parties, the arbitrators shall decide the dispute in a single award or in as many partial awards as they deem necessary.

The arbitrators must decide the dispute within six months of the date of submission of the Statement of Defence or the expiry of the submission deadline. Unless otherwise agreed by the parties, this period of time may be extended by the arbitrators, for a period not exceeding two months, by means of a reasoned decision.

The expiry of the period to issue the final award without the issue of the final award shall mean the termination of the arbitral proceedings and the termination of the office of the arbitrators. Nevertheless, this shall not affect the efficacy of the agreement, without prejudice to any liability the arbitrators may have incurred. Accordingly, if a party wished to pursue its claim further, it would be required to commence new arbitration proceedings.

The award shall be made in writing and shall be signed by the arbitrators, who may add any dissenting opinions. Where there is more than one arbitrator, the signatures of the majority of members of the arbitral panel or that of its presiding arbitrator alone shall suffice, provided that the reason for any omitted signature is stated.

The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given.

The arbitrators shall notify the award to the parties in the form and time agreed by the parties or, failing such agreement, by means of the delivery to each party of a copy signed by the arbitrators.

Costs
Subject to the agreement of the parties, the arbitrators shall decide in the award on the costs of the arbitration. This will include the fees and expenses of the arbitrators and, where applicable, the fees and expenses of counsel or representatives of the parties, the cost of the services provided by the institution administering the arbitration, and other expenses of the arbitral proceedings.

Termination of the proceedings
The arbitral proceedings and the mandate of the arbitrators terminate with the final award.

The arbitrators shall also issue an order for the termination of the arbitral proceedings when:

• the claimant withdraws his claims, unless the respondent objects thereto and the arbitrators recognise a legitimate interest on his part in obtaining a final settlement of the dispute;
• the parties agree on the termination of the proceedings; or
• the arbitrators find that the continuation of the proceedings has for any other reason become unnecessary or impossible.

Correction, clarification and the issue of a supplement to the award
According to Article 39, within ten days of receipt of the award, unless another period of time has been agreed upon by the parties, any party, with notice to the other party, may request the arbitrators:

• to correct in the award any errors in computation, any clerical or typographical errors or any errors of similar nature;
• to clarify a point or a specific part of the award; and
• to supplement the award as to claims presented in the arbitral proceedings and not resolved in the award.

In this sense, the Act avoids the reference in Article 33 of the UNCITRAL Model Law to an “additional award” to address omissions. The practical difference is that a successful application under Article 33.3 of the UNCITRAL Model Law results in two separate awards (the original award and the additional award), while the procedure contemplated by the Spanish Arbitration Act may result in a single (though supplemented) award.

After hearing the other parties, the arbitrators shall decide on applications for the correction of errors and for clarification within ten days, and for the issue of a supplement to the award within 20 days.

Within ten days of the date of the award, of their own motion, the arbitrators may correct any typographical errors or errors of a similar nature.

When the arbitration is international, the terms of ten and 20 days shall be extended to one and two months respectively.

The jurisdiction of the courts
The Arbitration Act follows the scheme of the UNCITRAL Model Law in this regard. According to Article 7, in matters governed by the Act, no court shall intervene except where so provided in the Act.

Judicial appointment of arbitrators
The First Instance Court at the seat of the arbitration shall have jurisdiction in respect of the judicial appointment of arbitrators; if the seat has not yet been determined, then jurisdiction shall reside with the First Instance Court at the domicile or habitual place of residence of any of the respondents; if none of the respondents have their domicile or habitual place of residence in Spain, the courts of the domicile or habitual place of residence of the claimant shall have jurisdiction, and if the claimant’s domicile or habitual place of residence is not in Spain, then the First Instance Court shall be any of the claimant´s choice.

Interim protective measures
The First Instance Court at the place where any award has to be enforced shall have jurisdiction in respect of interim measures and, in default of such court, at the place where the measures have to be implemented, in accordance with Article 724 of the Civil Procedure Act.

Judicial assistance in the taking of evidence
The First Instance Court at the seat of the arbitration, or that of the place where the assistance is required, has jurisdiction in respect of judicial assistance in the taking of evidence.

The enforcement of the award
The First Instance Court at the place where the award was issued shall have jurisdiction to enforce the award, in accordance with Article 545.2 of the Civil Procedure Act and, where applicable, Article 958 of the Civil Procedure Act of 1881.

The application to set aside and revision of the award
Pursuant to Articles 40 and 41 of the Act, an arbitral award may be set aside only if the party making the application alleges and proves:

• that the arbitration agreement does not exist or is not valid;
• that he was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;
• that the arbitrators have decided questions not submitted in their decision;
• that the appointment of the arbitrators or the arbitral procedure was not in accordance with the provisions of the Act nor with the agreement of the parties, unless such agreement was in conflict with a provision of the Act from which the parties can not derogate;
• that the arbitrators have decided questions not capable of settlement by arbitration; or
• that the award is in conflict with public policy.

According to Article 8.5, the Provincial Court of Appeal at the place where the award has been made shall have jurisdiction in an application to set aside an award.

An application for setting aside shall be made within two months of the date on which the party making that application had received the award or, if a request for correction, clarification or to supplement the award has been made, the date on which the party making that application had received the decision on the request, or the date on which the term for making that decision expired.

Pursuant to Article 42, the application to set aside an award shall follow the procedure for oral proceedings.

The Statement of Claim shall be accompanied by documentation proving the arbitral agreement and the award, and if applicable shall contain a proposal of the evidence upon which the applicant intends to rely.

There is no appeal from a judgment in respect of an application to set aside.

Res judicata and revision of final awards
The final award has the effect of res judicata and shall only be subject to an application for revision in accordance with the procedure established in the Civil Procedure Act for final judgments.

Enforcement of awards
Pursuant to Article 45, an award is enforceable even though an application to set aside has been made. Nevertheless, in that event the party against whom enforcement is sought may apply to the competent court for the suspension of enforcement, provided that he offers security for the amount awarded, plus the damages and losses that might arise from the delay in the enforcement of the award.

The suspension shall be lifted and the enforcement continue when the court is satisfied that the application to set aside has been disallowed, without prejudice to the right of the party seeking enforcement to demand, if applicable, indemnification for the damages and losses caused by the delay in the enforcement, by means of the procedure set out in Article 712 and subsequent Articles of the Civil Procedure Act.

The enforcement shall be revoked when the court is satisfied that the application to set aside has been allowed.

Recognition of foreign awards
The recognition of foreign awards (any award which has been issued outside Spanish territory) is governed by the New York Convention (without prejudice to the provisions of other, more favourable, international conventions) and take place in accordance with the procedure set out in the civil procedure rules for judgments issued by foreign courts.

In conclusion, the characteristics of the Act mean a qualitative step forward in the Spanish regulation of arbitration, which undoubtedly encourage its greater use.

The Act has made Spain an attractive centre of arbitration. The quality of Spain´s legal services and its traditional hospitality are now joined by modern legislation which protects and promotes arbitration as a means of resolving civil and commercial disputes, at both the national and international level.

CMS Albiñana & Suárez de Lezo, S.L.P.
Calle Génova, 27
28004 Madrid, Spain


Juan Ignacio Fernández Aguado
T +34 91 451 92 91
F +34 91 442 97 35
E juanignacio.fernandez@cms-asl.com