January 15 2009
A recent decision of the Federal Court of Appeals on Administrative Matters highlights the importance of the seat of arbitration and the value of arbitral agreements.
On July 17 2008 Division IV of the Federal Court of Appeals on Administrative Matters found jurisdiction to decide on whether the International Court of Arbitration of the International Chamber of Commerce had ruled properly on the respondent‘s challenge against the arbitrator in National Grid Transco plc UK v Argentine Republic UNC, pending before the International Centre for Settlement of Investment Disputes under the United Nations Commission on International Trade Law arbitration rules.(1)
The appeal for annulment of the award was filed in June 2007, when the international court declared the challenge and subsequent request for replacement inadmissible. The Argentine government also requested an injunction to suspend the arbitration proceedings - an interim measure that was ordered on July 3 2007.
Because Washington DC was the seat of the arbitration, the court did not have jurisdiction to rule on that interim measure and Argentine procedural law was not applicable. Therefore, the arbitral proceedings continued despite the judicial order.
The fact that Washington DC was previously selected as the seat of arbitration means that it is likely that neither the new court-appointed judicial order of suspension (under threat of economic sanctions) nor the court decision finding jurisdiction to rule on the request for annulment of the award will affect the course of the arbitral proceedings.
Any recourse filed by parties during proceedings or after an award shall be submitted to the procedural law and jurisdiction of the place of arbitration.
Parties to arbitration may challenge awards within the legal framework decided in the arbitral clause or agreement, particularly when those challenges involve public interests. However, it is curious that in this case the Argentine government has agreed jurisdiction deferral to Washington DC judges when selecting the seat of arbitration, while it has also filed an appeal for setting aside the interlocutory award in Buenos Aires.
The case emphasizes the importance of the seat of arbitration, since its selection determines the procedural law and jurisdiction. Parties involved in arbitration proceedings should ensure they have a complete understanding of the jurisdiction, scope and value of arbitral agreements and the consequences of non-fulfilment of their obligations.
For further information on this topic please contact Alberto DQ Molinario or María Laura Velazco at Marval O'Farrell & Mairal by telephone (+54 11 4310 0100) or by fax (+54 11 4310 0200) or by email (firstname.lastname@example.org or email@example.com). The Marval O'Farrell & Mairal website can be accessed at www.marval.com.ar.
(1) 72/CCO Procuración del Tesoro v Cámara de Comercio Internacional (DECI 15-XII-05) July 17 2008 published in IJ Editores, November 28 2008.
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María Laura Velazco