Asymetrical arbitration clauses banned in Spain?
By Duarte G Henriques
Asymmetrical or unilateral clauses are a very peculiar feature in arbitration, which has generated a heated debated across the globe. Those are the kind of arbitration clauses which grants one party the right to select either arbitration or litigation as a means to resolve disputes arising from the underlying agreement, yet denies that right to choose to the other party.
A common unilateral arbitration clause would be the following:
‘All disputes, claims, controversies, and disagreements relating to or arising out of this Agreement, or the subject matter of this Agreement, shall be finally resolved by arbitration in accordance with [add institutional arbitration rules]. Notwithstanding the foregoing, [Party A] shall be free at its sole option to seek judicial or non-judicial relief (…).'(1)
These kinds of clauses are banned in some jurisdictions (for example, in Russia), yet accepted in others (US).
In Spain, the landscape is not clear. Indeed, while Calvin A. Hamilton and Luis Capiel remarked upon two similar cases involving asymmetrical arbitration clauses on disputes between attorneys and their clients , the fact is that the Spanish courts did not analyse the validity of the clause from the Spanish Bar Association’s model agreement, which stated:
In case of disagreement with the invoice amount, the client may choose to bring proceedings before the courts or to challenge the invoice before the Board of Governors of the [xyz] Bar Association, thus submitting to its arbitral decision, which the attorney hereby accepts as binding and agrees to observe and comply with its resolution.
Both decisions relied on the specific circumstances of the cases, but in both cases the assessment did not got to the heart of the matter: in the first case(2) the court found that the attorney was not compelled to resort to arbitration and in the second case(3) it was found that the client had the right to refer the dispute to arbitration, thus assuming but not asserting the validity of the clause.
In any event, we can find in Spanish law a particular provision amounting to an asymmetrical obligation to arbitrate. Art. 76 (e) of Law 50/1980, of October 8 (Insurance Contract Act) states that:
“The insured shall have the right to submit to arbitration any difference that may arise between the insured and the insurer on the insurance contract.
The appointment of arbitrators may not be made before the dispute arises. ” (free translation)
However, the Constitutional Court of Spain was called to decide whether this legal provision complied with the fundamental laws of Spain. The Constitutional Court decided that this was not the case and, therefore, declared art. 76(e) of the Insurance Contract Act to be “unconstitutional and null”.
In doing so, the Court considered that “the obligation to resort to arbitration such as that provided for in article 76 e) of the Insurance Contract Act violates the right to effective judicial protection guaranteed in Article 24 of the Spanish Constitution, since it prevents access to the jurisdiction of the courts and tribunals that, in the absence of the concurrent will of the parties in dispute, are the only ones that are constitutionally entrusted with the function of judging and enforcing the decision (Article 117 CE). The precept has eliminated for one of the parties of the contract the possibility to access the jurisdictional bodies, since it fixes an alternative route exclusive of the jurisdictional one, whose implementation depends solely on the will of one of the parties.” The Constitutional Court invoked a previous decision that considered that “the first note of the right to guardianship consists of the free power of the plaintiff to initiate the proceedings and subject the defendant to the effects of the same. The same legal protection must have the consent of the opposing party to exercise before a judicial body a claim against it. Therefore, it is contrary to the Constitution that the Insurance Contract Act removes or dispenses with the will of one of the parties to submit the dispute to arbitration, denying the possibility at any time to request judicial protection.”
This decision(4), albeit conspicuously related to a legal provision-and not to a contractual provision-nevertheless shows an express refusal of any asymmetrical arbitration clause. It remains to be seen whether its considerations on the arbitration system itself show a mistrust of the judicial system towards the arbitration setting altogether.
To read more on the topic, see my article: “Asymmetrical arbitration clauses under the Portuguese Law” – Young Arbitration Review, October 2013, on-line edition (www.yar.com.pt), available HERE
(1) Gary Born, International Arbitration and Forum Selection Agreements: Drafting and Enforcing – 3rd Edition, WoltersKluwer, p. 121, 2013.
(2) Sentencia de la Audiencia Provincial de Madrid (Sección 19ª) nº 534/2005 de 25 de noviembre de 2005.
(3) Auto de la Audiencia Provincial del Madrid (Sección 12ª) nº 340/2010 de 25 de mayo de 2010.
(4) The original of the Spanish Constitutional Court can be found here: https://tc.vlex.es/vid/principio-exclusividad-jurisdiccional-derecho-702363437?_ga=2.150444406.1390390002.1518624886-1129799528.1518624886