Spain: Arbitration Law Reform In Relation With Insolvency Act

Madrid’s Regional Court (Section 8), in a matter, 379/2010, dated September 20th, heard a motion to annul, filed by CONSTRUCCIONES IGMA 2000 S.L. (Appellant), against an award condemning it jointly with its sole administrator to pay 661.604,82 € to PROYECTOS TECNICOS TECNOLOGICOS S.L. (Appellee).


CONSTRUCCIONES IGMA based its motion to annul on:


(i)  non validity of the arbitration agreement in light of Appellant’s declaration of insolvency, according to article 41.1 of Arbitration Law 60/20031 (‘‘LA’’) (which provides the grounds for annulment), in conjunction with article 52 of the Insolvency Act 22/20032 (“IA”), which states as follows:


1. Arbitration agreements signed by the debtor while the insolvency proceedings are pending will become inoperative, subject to international treaties.


2. Arbitration proceedings in course at the moment of a declaration of insolvency will continue until a final award, subject to the application of the rules contained in points 2 and 3 of the previous article.


(ii)  failure to properly notify Appellant of the procedures followed during the arbitration as required by art. 41.1 of the LA.


(iii)  failure of Appellee to follow the agreed procedure for the appointment of the arbitrator established in the Agreement as required by art. 41.1.


(iv)  the award is contrary to public policy.



A modification contained in the reform of Arbitration Law 60/20031 (the “Reform”) relating to article 52.1 of the Insolvency Act 22/20032 foresees that the declaration of insolvency, in and of itself, does not affect mediation nor arbitration agreements, entered into by the debtor.  The Reform, as relates to insolvency proceedings, brings into focus important inconsistencies which must be resolved either by the legislator or through an interpretation by the courts.


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