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Spanish Court affirms the validity of hybrid arbitration/jurisdiction clauses

23 December 2013
The Madrid Court of Appeal issued a Judgment which upholds the validity under Spanish law of the so-called hybrid clauses, which allocate on the claimant the decision of bringing the dispute either to arbitration or to the judicial courts. This Judgment constitutes the first time that a Spanish higher court affirms unambiguously the validity of such clauses, after years where the requisite of "unequivocal consent to arbitration", contained in the former arbitration law derogated in 2003, put a question mark on these clauses.

The full text of the Judgment, recently released, can be accessed here.

The decision of the Madrid Court of Appeal has been rendered in the context of judicial proceedings in Madrid. The Spanish proceedings had been brought by a Spanish truck dealer against the subsidiary of a Dutch truck manufacturer based on the existence of a dispute on unfair competition and antitrust matters.

The subsidiary of the Dutch company appeared in the proceedings and raised an objection to the jurisdiction of the Spanish court based on the existence of a jurisdictional clause providing that any dispute should be resolved either in arbitration under the Arbitration Rules of the Netherlands Arbitration Institute or by the courts of s'Hertogenbosch, the Netherlands.

The claimant alleged that such dispute resolution clause was invalid both as an arbitration agreement and as a choice-of-court clause, and for this reason, Spanish courts were competent. The invalidity argument was further based on the fact that unfair competition and antitrust matters would be non-arbitrable matters under Spanish law and that in any case the dispute was not a contractual dispute which had to follow the dispute resolution mechanism agreed in the contract.

The first instance court ruled in favor of the Dutch company and refused to accept jurisdiction of the Spanish courts, since the Spanish courts where not among the possible fora provided for in the contract, thus impliedly accepting the validity of such clause. The decision was appealed by the claimant before the Madrid Court of Appeal, which confirmed the decision of the lower court.

The Madrid Court of Appeal concluded that it is an established international practice to combine arbitration clauses with other dispute resolution mechanism (such as mediation or judicial courts) and that there is nothing under Spanish law which deprived of validity the consent to arbitration provided together with consent to other mechanisms of dispute resolution.

The Madrid Court of Appeal also affirmed, in line with previous case law both of the Court of Justice of the European Union (Ecoswiss/Benetton International case, of 1 June 1999; Audi/Skandinavisk Motor case, of 37 September 2006; Brünsteiner Autohaus Hilger/BMW case, of 30 November 2006; and Peter Petschenig/Toyota Frey Austria case, of 26 January 2006) and the Spanish Supreme Court (Judgment of 18 April 1998), that unfair competition and antitrust matters, such as the ones brought by the claimant, are arbitrable.

In a prior decision of 2012, the Barcelona Court of Appeal had taken some steps towards accepting the compatibility of judicial and arbitration dispute resolution mechanism under Spanish law. In that decision, the Barcelona Court of Appeal rejected one ground for setting aside an award consisting on the non-existence of an arbitration agreement. The claimant in the action to set aside the award alleged that the claimant in the arbitration had waived its consent to arbitrate by having previously resorted to criminal and regulatory judicial courts. The Barcelona Court of Appeal highlighted the different nature of the actions pursued before the criminal and regulatory courts and the actions submitted to arbitration. But most importantly, the Barcelona Court of Appeal developed an interesting reasoning according to which consent to arbitration excludes resort to the courts (following the well-known negative effect of the kompetenz–kompetenz principle) but not vice versa. The Barcelona Court of Appeal then concluded that the Spanish law does not provide either that express or tacit submission to the courts constitute a waiver to agreed arbitration. A full review of that decision can be found here.

While the 2012 decision of the Barcelona Court of Appeal seemed to open the door to hybrid clauses, the Madrid Court of Appeal leaves no doubts as to the possibility of agreeing in advance to both arbitration and judicial proceedings, at the claimant's will.

Alejandro Lopez

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