The Supreme Court of Justice provides arbitration with a legal framework

In re: “Cacchione, Ricardo C. c. Urbaser Argentina S.A.”, a recently published[1] ruling pronounced on June 24, 2006, the Argentine Supreme Court of Justice (“SCJ”) reaffirmed the legal value of arbitral agreements, by confirming the validity of waivers to challenge arbitral awards, agreed on by the parties that have freely chosen arbitral jurisdiction. This occurred when the SCJ declared inadmissible a challenge to the denial of an extraordinary appeal brought directly against an arbitral award, under the stipulations of section 760 of the Argentine Civil and Commercial Procedural Code[2] and section 14 of Law No 48.[3]

Thus, the SCJ has once again followed the correct path by adhering to the current trend in modern arbitration laws, under which limits to judicial control must be imposed so as not to reduce the effectiveness of arbitration as a means of dispute resolution chosen by the parties.

In this respect, it is useful to mention that there are different degrees of judicial review capable of being exercised, both during the arbitral proceedings and once the arbitral award is rendered.

Judicial intervention during the arbitral proceedings is currently exceptional in that it is clearly limited due to an obvious trend in most modern arbitration laws in favor of the supremacy and respect of the parties’ will, and therefore, of the group of regulations agreed on or chosen by them (in the case under analysis, Buenos Aires Stock Exchange Rules of Arbitration).

The other point at which judicial control may be exercised is after the award is rendered. Such control is expressed through the enactment of legal recourses i.e. recognizing in national arbitration laws the possibility of challenging in the courts an international award rendered by the arbitral tribunal. The exceptional trend mentioned above –chosen by the SCJ–, is based, as clearly indicated by the prestigious French author Philippe Fouchard, on the solid conviction that the subject matter of these controversies pertains to arbitrators and that the judge is not to rule on the correctness or error of matters decided between the parties in the specific business relationship that caused the dispute.[4]

In fact, this trend, under which the ability of courts to control the correctness or merits of arbitral awards is removed or limited, is expressed in different modern arbitration laws in the following ways:

(i)           by denying a challenge before a court in the case of international arbitral awards, except where otherwise agreed;[5]

(ii)          by limiting the court’s review exclusively to the request to set aside the award;[6]

(iii)          by allowing the challenged arbitral award to be presented to the arbitral tribunal for its amendment or clarification, so that the causes for setting aside can be removed and the validity of the award preserved;[7] or

(iv)          by accepting the validity of the parties’ waivers of challenge to awards:[8] precisely the criterion adopted in the Cacchione case.[9]

In fact, the waiver of a challenge to the award[10] may take two paths: express or tacit. The waiver will be express when such a statement is specifically included in the arbitration clause or in the arbitration agreement. On the other hand, the waiver will be tacit when the parties, within the context of the parties’ autonomy of will, adopt the rules of one of the main international arbitration institutions containing such provisions.[11] The basis of such provisions is that the parties, when subscribing to the arbitration agreement (whether through the arbitration clause or compromise), have wanted the arbitral procedure to reach the final decision, and not, once the award is rendered, to have to go through judicial review.

Finally, and with respect to the extraordinary appeal filed and overruled in the case under analysis, it should be mentioned that, according to well known case law, the extraordinary appeal only proceeds against the sentence of the higher court with jurisdiction over the case. Accordingly, the SCJ has affirmed:

“Section 14 of Law 48 is not applicable to arbitral awards when arbitral jurisdiction has been freely agreed between the parties, since arbitral jurisdiction excludes the judicial review that culminates with the Court’s control, and it does not admit any appeals other than those indicated in the respective procedural laws, through which relief against damages arising from the award should be pursued”.[12].