The Constitutional Court recently annulled a National Court of Justice ruling that had denied a petition to review a sentence issued by the president of the Guayaquil Court on a nullity action against an arbitral award. According to the Constitutional Court, the National Court's decision was unconstitutional because it deprived the plaintiff of his right to appeal the ruling which had been issued to end the dispute on the nullity of the award.
In October 2009 Club Sport Emelec, a national football team, initiated a commercial arbitration against a television station. The plaintiff filed its petition with the arbitration centre of the Guayaquil Chamber of Commerce. The plaintiff sought the payment of money that was allegedly due from the television station according to a contract that the parties had signed in 2005. The arbitration tribunal ruled for the defendant. In May 2012 the president of the football team filed a nullity action against the arbitral award. The president of the Provincial Court of Guayaquil – who, according to the Arbitration and Mediation Law, has original jurisdiction to hear nullity actions against arbitral awards – dismissed the complaint for lack of merit.
The head of the football team lodged an appeal against Guayaquil Court president's decision. However, on July 6 2012 the magistrate refused to grant the appeal on the grounds that arbitral awards are not subject to appeal. The plaintiff filed a cassation recourse against that ruling. The cassation recourse was assigned to the Chamber for Civil and Commercial Matters of the National Court of Justice, the highest tribunal of ordinary justice in Ecuador.
The chamber of the national court dismissed the cassation recourse on the grounds that the nature of the ruling of the president of the Guayaquil Court was not that of a declaratory judgment, since the arbitrators had already settled the substantive controversy.
As the ruling was not a declaratory judgment, the chamber stated that it should not be subject to review through the cassation recourse. In its opinion, the chamber of the national court cited some Constitutional Court decisions that had underlined the finality of arbitration awards.
The president of the football team subsequently filed an extraordinary protection action with the Constitutional Court in order to quash the national court's decision. According to the plaintiff, the Guayaquil Court decision had breached some rights and guarantees established in the Constitution. In particular, the plaintiff said that the magistrate had breached Article 76(7) of the Constitution, which guarantees the right to appeal all judicial decisions, as well as Article 8(h) of the Inter-American Convention of Human Rights, which establishes a similar guarantee.
The Constitutional Court ruled in favour of the plaintiff, finding as follows:
- The right to appeal a legal decision is not an absolute right. The Constitution allows the legislature to establish certain procedural restrictions to this right based on the type of case or the nature of the judicial decision involved.
- Arbitration is one such instance where the Constitution permits the legislature to exclude any appeal of a decision that ends a legal dispute. The reason for this lies in the nature of arbitration itself and the fact that arbitrators in Ecuador are deemed judges of a single and final instance.
- However, in this case the president of the Guayaquil Court erred in dismissing the plaintiff's appeal because the action to annul an arbitral award does not constitute an appeal of the arbitral award itself.
- The action to annul an award does not seek to review the merit of the arbitrator's decision, but rather to challenge the arbitrator's conduct concerning some specific procedural issues. Its role is to guarantee that the arbitrators meet certain standards of due process.
The court vacated the ruling of the national court and ordered the president of the Guayaquil Court to allow the plaintiff's appeal. One of the chambers of the Guayaquil Court should hear the appeal. If after hearing the appeal the chamber rules against the plaintiff, he will be entitled to file a cassation recourse with the national court.
The ruling shows that the disagreement between the national court and the Constitutional Court on the issue of cassation and nullity action has not lessened. It is possible that in the end the national court will modify its interpretation of the law in this matter and accept the position of the Constitutional Court. While this may extend the length of the action to annul an arbitral award, it could also bring about much-needed uniformity in jurisprudence regarding the interpretation of the grounds necessary to annul arbitration awards.
For further information on this topic please contact Hernán Pérez Loose at Coronel & Pérez by telephone (+593 4 2519 900) or email ([email protected]). The Coronel & Pérez website can be accessed at www.coronelyperez.com.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
