Supreme Court of Justice rules on Monitor and Radio Centro arbitration dispute - International Law Office

International Law Office

Arbitration - Mexico

Supreme Court of Justice rules on Monitor and Radio Centro arbitration dispute

November 11 2010

Facts
Supreme Court decision
Comment


The arbitration involving Grupo Radio Centro SA de CV and Monitor - Mr José Gutiérrez Vivó and Infored - is one of the most significant alternative dispute resolution (ADR) cases in Mexico's history.

The parties have pursued a widely publicised legal dispute since the arbitral award in question was issued, more than six years ago. Recently, the First Chamber of the Supreme Court resolved not to grant an amparo(1) claim that would have annulled the arbitral award.

Facts

In 1998 Radio Centro and Monitor entered into a service agreement whereby the latter was responsible for producing news, other programmes and special events that were broadcast on Radio Centro's radio stations.(2)

Previous rulings
In 2002 Monitor filed an arbitration claim with the International Chamber of Commerce (ICC), seeking termination of the agreement and payment of damages. The arbitral tribunal declared the agreement to be terminated and ordered Radio Centro to pay damages.

Radio Centro sought the annulment of the arbitral award before a civil judge. In November 2004 the judge annulled the award, arguing that the arbitrators had not certified that they were experts in accounting and broadcasting matters (which had been a condition of the arbitration clause in their contract).

In 2005 Monitor filed an amparo claim against the civil judge's ruling. This was granted and the arbitral award was declared legally valid.

Radio Centro subsequently sought a review of the amparo resolution before a circuit court, which upheld the civil judge's declaration of annulment of the arbitral award.

Monitor appealed the circuit court's decision to the Supreme Court of Justice.

Issues
Radio Centro argued that the arbitrators who had been appointed to hear the dispute were not experts in the subject matter of the arbitration, which was a stipulation of the arbitration clause. However, Monitor argued that Radio Centro could not demonstrate that the arbitrators were not experts in the subject matter, and maintained that the arbitrators had been appointed by the parties pursuant to the arbitration clause.

Radio Centro argued that that the arbitrator whom it had appointed did not have the necessary expertise. Monitor observed that Radio Centro had not complained of the arbitrator's lack of expertise until the arbitral award - which was unfavourable to Radio Centro - had been issued against it.

Radio Centro argued that Monitor had modified its arguments once it knew Radio Centro's defence arguments. However, Monitor stated that the parties had agreed that the arbitration would be conducted according to the ICC Rules, and that such rules allow the presentation of new arguments (which is common arbitration practice).

Supreme Court decision

In September 2010 the First Chamber of the Supreme Court of Justice ruled on the amparo review.(3) It held that arbitration cannot take place unless the parties have agreed to settle their disputes before an arbitral tribunal.

Two complementary points must be taken into account with regard to an arbitral award. First, the arbitral tribunal appointed by the parties must have valid and acknowledged jurisdiction. Second, the state's courts must lack jurisdiction by virtue of the parties' express agreement to settle the dispute by arbitration.

The court also identified another main principle of arbitration: the rules established by the parties prevail and local legislation applies only to issues not covered by the arbitral rules or the parties' agreement.

The court emphasised that the voluntary nature of arbitration and an agreement between parties to bring disputes before an arbitral tribunal show that such parties intend to exclude the judicial power of the state.

The court found Radio Centro's arguments to be unfounded. Among other things, it stated that:

  • arbitration is a power or capacity conferred by applicable legislation on private parties to allow them to settle their disputes without the involvement of state bodies;
  • the enforcement of justice is not reserved to state judges and courts, as the law provides for ADR mechanisms in certain circumstances; and
  • the Constitution empowers the legislature to introduce procedures for the resolution of conflicts relating to commercial matters. Thus, when a private party binds itself under arbitration rules, it accepts the rules and procedures as established by law.

Therefore, the court decided not to grant the amparo order and declared the arbitral award to be valid.

Comment

The arbitration and the subsequent judicial process have clarified that not all of Mexico's judicial bodies have the same knowledge or apply the same criteria with respect to arbitration.

Nevertheless, the case provided an opportunity for the Supreme Court of Justice to conduct a thorough inquiry into the status and nature of arbitration. It has confirmed that ADR mechanisms not only coexist with the judicial power of the state, but are also equally legitimate.

For further information on this topic please contact Luis Alberto Aziz Checa or Rebeca Sanchez Perez at SAI Abogados by telephone (+5255 59 85 6618), fax (+5255 59 85 6628) or email (laa@sai.com.mx or rsp@sai.com.mx).

Endnotes

(1) A form of judicial review.

(2) See Ortega and Esparza, "El Caso Monitor/Radio Centro y el arbitraje en México", Business Style/Business Report, Volume III, Issue 13, 2006.

(3) File 2160/2009.


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