On June 22 2011, in Marina v Tapusa, the Barcelona Court of
Appeals issued a ruling in a case concerning an action to set aside an
arbitral award issued by the Barcelona Court of Arbitration. The
arguments of the annulment action were based on the Spanish Insolvency
Act and the Spanish Civil Procedure Law.
Facts
On July 19 2007 a construction works agreement was signed by Marina Badalona, SA and a temporary joint venture(1) formed by Tiferca, SA and Tableros y Puentes, SA (Tapusa).
According to Marina, the temporary joint venture did not fulfil its construction obligations on time; Marina therefore initiated arbitration proceedings, requesting termination of the contract, despite it already having been partially fulfilled. Marina decided to sue only Tapusa, given that it was jointly and severally liable for all obligations of the contract, and Tiferca was involved in insolvency proceedings at the time. Former Article 52 of the Insolvency Act (which has recently been amended) stated that arbitration agreements in which a debtor which has been declared insolvent shall be without value or effect during insolvency proceedings.
However, Tiferca requested to participate in the arbitration proceedings as an interested party, in accordance with Article 13 of the Civil Procedure Law. After taking this into consideration, Tapusa challenged the arbitral proceedings, arguing that Tiferca's participation was incompatible with former Article 52. Meanwhile, Marina confirmed its interest in suing only Tapusa. The arbitrator finally upheld Marina's position that Tiferca should not participate in the proceedings as an interested party, and pointed out that the fact that one of the temporary joint venture former members was involved in insolvency proceedings would not affect the temporary joint venture`s arbitration agreement, as long as this member (ie, Tiferca) was not party to the arbitration proceedings.
The award of July 6 2010 declared the termination of the contract and partially accepted Tapusa's counterclaim regarding certain amounts owed to the temporary joint venture. Nevertheless, Marina decided to request the annulment of the award and argued that it might not have legal effects, as it did not refer to all of the interested parties involved. Although the award recognised that a certain amount of money was owed to the temporary joint venture because the contract had been partially fulfilled, in the end Marina was declared not to be obliged to pay the temporary joint venture, as it was never party to the procedure.
Marina's reasons for the challenge are that the effects of the award did not extend to the temporary joint venture or its other former member (Tiferca) as a result of the joint and several liability of these types of union. However, the ruling declared that Marina had already recognised this application through its actions, by initiating the arbitration proceedings.
Amendment of Article 52 of the Insolvency Act
Former Article 52 of the Insolvency Act stated that arbitration agreements entered into by a debtor declared insolvent should be without value or effect during insolvency proceedings.
It would appear that Marina sued only Tapusa in order to avoid the application of the aforementioned article (ie, the arbitration agreement would have had no value or effect).
However, Article 52 was amended by Law 11/2011 (amending the Arbitration Law). Since June 10 2011 Article 52 states that the initiation of insolvency proceedings does not in itself affect any mediation or arbitration agreements endorsed by the insolvent party.(2) Therefore, companies involved in insolvency proceedings can be a party to arbitration proceedings.
Consequently, if Marina had initiated the arbitration proceedings after the amendment of the Insolvency Act, it would probably not have excluded Tiferca from the proceedings (logically, if more companies are sued, there is a higher likelihood of recovering the amounts owed).
Joint and several liability of temporary joint venture members
Both Tapusa and Tiferca were part of a temporary joint venture. According to Article 8.e.8 of the Temporary Joint Ventures Law (18/1982), all members of a temporary joint venture are jointly and severally liable regarding third parties.
It appears that Marina sued only Tapusa in order to avoid the application of Article 52. If it had also sued Tiferca, the arbitration agreement would have been without effect and the insolvency court would have been competent to hear the claim.
Moreover, the arbitrators considered that the claim was properly addressed against Tapusa, but they also decided that without Tiferca, Tapusa was not entitled to claim the amount that Marina should have to pay to the temporary joint venture. Only the temporary joint venture could claim for the amount owed.
As a result, despite the fact that the arbitral award declared that a certain amount of money was due to the temporary joint venture, it did not order Marina to pay it.
Barcelona Court of Appeals applied the estoppel appropriately
After the arbitral award had partially accepted Tapusa's counterclaim, Marina filed for annulment of the arbitral award before the Barcelona Court of Appeals.
The Barcelona Court of Appeals considered that Marina could not seek the annulment of the arbitral award by arguing that the arbitral proceeding should have included Tiferca, given that throughout the arbitral proceedings, Marina had challenged Tiferca's joinder.
The Barcelona Court of Appeals considered that Marina could not contradict its own acts. This understanding of the estoppel doctrine in a procedural sense is considered to be correct.
Comment
Although the arbitrators deemed it necessary for Marina to pay a certain amount of money to the temporary joint venture, Marina was not ordered to pay it because the temporary joint venture had not claimed it. Nevertheless, in light of the circumstances, both the ruling of the Barcelona Court of Appeals and the arbitral award were reasonable.
However, if the amendment of Article 52 of the Insolvency Act had been in force, Marina would probably not have excluded Tiferca from the proceedings. All parties could have been joined in one single arbitration, with the result that a single decision would have settled the dispute definitively. Such an amendment to Article 52 is a welcome decision.
For further information on this topic please contact Félix J Montero at PEREZ-LLORCA by telephone (+34 91 436 04 20), fax (+34 91 436 04 30) or email (fmontero@perezllorca.com).
Endnotes
(1) A similar concept to the conventional joint venture, which is known in Spain as a unión temporal de empresas.
(2) However, if the court understands that such agreements or arrangements could undermine the insolvency procedure, it may order their annulment.
Facts
On July 19 2007 a construction works agreement was signed by Marina Badalona, SA and a temporary joint venture(1) formed by Tiferca, SA and Tableros y Puentes, SA (Tapusa).
According to Marina, the temporary joint venture did not fulfil its construction obligations on time; Marina therefore initiated arbitration proceedings, requesting termination of the contract, despite it already having been partially fulfilled. Marina decided to sue only Tapusa, given that it was jointly and severally liable for all obligations of the contract, and Tiferca was involved in insolvency proceedings at the time. Former Article 52 of the Insolvency Act (which has recently been amended) stated that arbitration agreements in which a debtor which has been declared insolvent shall be without value or effect during insolvency proceedings.
However, Tiferca requested to participate in the arbitration proceedings as an interested party, in accordance with Article 13 of the Civil Procedure Law. After taking this into consideration, Tapusa challenged the arbitral proceedings, arguing that Tiferca's participation was incompatible with former Article 52. Meanwhile, Marina confirmed its interest in suing only Tapusa. The arbitrator finally upheld Marina's position that Tiferca should not participate in the proceedings as an interested party, and pointed out that the fact that one of the temporary joint venture former members was involved in insolvency proceedings would not affect the temporary joint venture`s arbitration agreement, as long as this member (ie, Tiferca) was not party to the arbitration proceedings.
The award of July 6 2010 declared the termination of the contract and partially accepted Tapusa's counterclaim regarding certain amounts owed to the temporary joint venture. Nevertheless, Marina decided to request the annulment of the award and argued that it might not have legal effects, as it did not refer to all of the interested parties involved. Although the award recognised that a certain amount of money was owed to the temporary joint venture because the contract had been partially fulfilled, in the end Marina was declared not to be obliged to pay the temporary joint venture, as it was never party to the procedure.
Marina's reasons for the challenge are that the effects of the award did not extend to the temporary joint venture or its other former member (Tiferca) as a result of the joint and several liability of these types of union. However, the ruling declared that Marina had already recognised this application through its actions, by initiating the arbitration proceedings.
Amendment of Article 52 of the Insolvency Act
Former Article 52 of the Insolvency Act stated that arbitration agreements entered into by a debtor declared insolvent should be without value or effect during insolvency proceedings.
It would appear that Marina sued only Tapusa in order to avoid the application of the aforementioned article (ie, the arbitration agreement would have had no value or effect).
However, Article 52 was amended by Law 11/2011 (amending the Arbitration Law). Since June 10 2011 Article 52 states that the initiation of insolvency proceedings does not in itself affect any mediation or arbitration agreements endorsed by the insolvent party.(2) Therefore, companies involved in insolvency proceedings can be a party to arbitration proceedings.
Consequently, if Marina had initiated the arbitration proceedings after the amendment of the Insolvency Act, it would probably not have excluded Tiferca from the proceedings (logically, if more companies are sued, there is a higher likelihood of recovering the amounts owed).
Joint and several liability of temporary joint venture members
Both Tapusa and Tiferca were part of a temporary joint venture. According to Article 8.e.8 of the Temporary Joint Ventures Law (18/1982), all members of a temporary joint venture are jointly and severally liable regarding third parties.
It appears that Marina sued only Tapusa in order to avoid the application of Article 52. If it had also sued Tiferca, the arbitration agreement would have been without effect and the insolvency court would have been competent to hear the claim.
Moreover, the arbitrators considered that the claim was properly addressed against Tapusa, but they also decided that without Tiferca, Tapusa was not entitled to claim the amount that Marina should have to pay to the temporary joint venture. Only the temporary joint venture could claim for the amount owed.
As a result, despite the fact that the arbitral award declared that a certain amount of money was due to the temporary joint venture, it did not order Marina to pay it.
Barcelona Court of Appeals applied the estoppel appropriately
After the arbitral award had partially accepted Tapusa's counterclaim, Marina filed for annulment of the arbitral award before the Barcelona Court of Appeals.
The Barcelona Court of Appeals considered that Marina could not seek the annulment of the arbitral award by arguing that the arbitral proceeding should have included Tiferca, given that throughout the arbitral proceedings, Marina had challenged Tiferca's joinder.
The Barcelona Court of Appeals considered that Marina could not contradict its own acts. This understanding of the estoppel doctrine in a procedural sense is considered to be correct.
Comment
Although the arbitrators deemed it necessary for Marina to pay a certain amount of money to the temporary joint venture, Marina was not ordered to pay it because the temporary joint venture had not claimed it. Nevertheless, in light of the circumstances, both the ruling of the Barcelona Court of Appeals and the arbitral award were reasonable.
However, if the amendment of Article 52 of the Insolvency Act had been in force, Marina would probably not have excluded Tiferca from the proceedings. All parties could have been joined in one single arbitration, with the result that a single decision would have settled the dispute definitively. Such an amendment to Article 52 is a welcome decision.
For further information on this topic please contact Félix J Montero at PEREZ-LLORCA by telephone (+34 91 436 04 20), fax (+34 91 436 04 30) or email (fmontero@perezllorca.com).
Endnotes
(1) A similar concept to the conventional joint venture, which is known in Spain as a unión temporal de empresas.
(2) However, if the court understands that such agreements or arrangements could undermine the insolvency procedure, it may order their annulment.
Fonte:http://www.internationallawoffice.com/Newsletters/Detail.aspx?g=b411f4a8-d0fd-416a-b0bf-6dda5abd1114&redir=1
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