Author: Luis Ramón Garcés-Díaz*
| Jurisdiction: | Topics: |
INTRODUCTION
In recent years, the Colombian Supreme Court of Justice, Civil Cassation Chamber (the “Colombian Supreme Court” or “the Court”) has issued a number of important decisions adjudicating requests to set aside, recognize, or enforce international arbitral awards issued either in Colombia or abroad.
This post aims to examine how the Court has construed and applied not only the domestic regulation but also the relevant international conventions in order to identify the main interpretative criteria and, therefore, to have elements to assess the consistency and pertinence of such rulings.
ARBITRATION LEGAL FRAMEWORK
Colombia’s arbitration framework, as defined by Law 1563 of 2012 (the “Arbitration Statute”), comprehensively governs various aspects of arbitration, including domestic, international, and social arbitration. This law closely followed the UNCITRAL Model Law on International Commercial Arbitration, as indicated in the legislative process records.[1]
Colombia is a contracting state to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), which it approved through Law 39 of 1990. In the regional context, Colombia also approved the Inter-American Convention on International Commercial Arbitration (the “Panama Convention”) through Law 44 of 1986.
ANNULMENT, RECOGNITION, AND ENFORCEMENT OF AWARDS
In accordance with the Arbitration Statute, the Colombian Supreme Court has exclusive jurisdiction for resolving set-aside requests of awards resulting from international arbitrations seated in Colombia and also for recognition and enforcement of foreign arbitral awards.[2]
Suppose the dispute and respective award involve a Colombian public entity or someone who exercises administrative functions in Colombia. In such a case, this jurisdiction is assigned to the Colombian Council of State [Consejo de Estado de Colombia], a specialized court focused on deciding matters or actions in which the state or a governmental or public entity is a party.[3]
The Arbitration Statute provides substantially identical legal grounds for setting aside an international arbitral award issued in Colombia or refusing the recognition and enforcement of a foreign arbitral award, and both are aligned to Article V of the New York Convention.[4]
Generally speaking, Article III of the New York Convention establishes that contracting states shall recognize foreign arbitral awards as binding and enforce them without imposing substantially more onerous conditions than are applicable to domestic arbitral awards. As an exception, however, Article V sets out limited grounds to refuse recognition and enforcement of arbitral awards to be declared by the competent authority where the recognition and enforcement are sought either at the request of the party against whom the award is invoked (V, 1, a-e) or ex officio (V, 2, a-b).
These exceptions typically relate to a) deficiencies of the arbitration agreement, such as incapacity of the parties or invalidity, b) irregularities in the arbitral proceeding, such as lack of proper notice of the process or the appointment of the arbitrator or, otherwise, inability to present the case, c) lack of conformity between the award and the terms of the submission to arbitration or the award contains decisions on matters beyond the scope of the submission to arbitration, d) composition of the arbitral authority or the arbitral procedure was not in accordance with the arbitration agreement or the law of the country where the arbitration took place, e) award has not become binding on the parties or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. (V, 1, a-e)Additionally, some other exceptions pertain to subject matter inarbitrability or violation of the country’s public policy in which recognition and enforcement are sought. (V, 2, a-b).
JUDGMENTS OBSERVATION WINDOW
This post considers sixteen judgments by the Colombian Supreme Court issued between March 2018 and October 2023,[5] seven of which respond to set-aside or annulment requests, and the remaining nine respond to recognition and enforcement requests.
These judgments broadly fall in the following categories:
Type of Disputes
All the disputes arose from contractual relationships with an international character, such as construction,[6] settlement agreements,[7] lease agreements,[8] stock purchase agreements,[9] commodities contracts,[10] hotel management contracts,[11] technology platform contracts,[12] ship loader contracts,[13] sports agency agreements,[14] sales agreements,[15] agreements for Over-The-Counter Swaps and Derivatives contracts,[16] and stock option contracts.[17]
Type of arbitration
All arbitration proceedings were subject to institutional rules established by certain entities, such as the Court of Arbitration of the Madrid Chamber of Commerce,[18] the International Chamber of Commerce (ICC),[19] the London Court of International Arbitration,[20] the Medellín Chamber of Commerce Arbitration Center,[21] Grain and Feed Trade Association (GAFTA),[22] Bogotá Chamber of Commerce Arbitration Center,[23] Barranquilla Chamber of Commerce Arbitration Center,[24] Cuban Court of International Commercial Arbitration,[25] Court of Arbitration for Sport (CAS),[26] Society of Maritime Arbitrators,[27] Chile National Arbitration Center,[28] International Centre for Dispute Resolution (American Arbitration Association),[29] and Royal Spanish Football Federation (Jurisdictional Committee).[30]
In every case, the parties had agreed to submit the settlement of their dispute to arbitration in accordance with said rules. There were no cases of ad hoc arbitration.
Alleged grounds to set aside or to refuse recognition of awards
This post is not aimed to review particularities of the grounds alleged in every single case but to analyze them from a general perspective.[31]
Still, it should be noted that there were not only cases in which the arguments to set aside or to refuse recognition and enforcement were, despite their success, aligned to the specific grounds provided by the Arbitration Statute.
Furthermore, there were some cases in which the challenge was primarily addressed to question the merits of the arbitral award or to point out a variety of general deficiencies or irregularities of the underlying agreement or legal relationship, such as lack or defect of consent, mistake, payment of the obligation, lack of legal standing, among others.
In some other cases, even if there was no response or objection from the counterparty, the Court, nevertheless, analyzed the grounds that allowed its review (arbitrability and public policy).[32]
Requests outcome
In this particular aspect, it is relevant to highlight that most of the international arbitral awards set aside requests were refused.[33] In contrast, all the applications for recognition and enforcement of foreign arbitral awards were granted by the Court.
COURT INTERPRETATIVE CRITERIA
Application of Arbitration Statute and New York Convention
In resolving the requests to set aside or to recognize and enforce international arbitral awards, the Court primarily applied the Arbitration Statute.[34] The Court simultaneously or complementary invoked the New York Convention.
Taking into consideration that the Arbitration Statute reproduced the provisions of the New York Convention, both are aligned, and their application by the Court was consistent.
Exhaustive character of the grounds
Articles 107 and 112 of the Arbitration Statute expressly provide that grounds for annulment or refusal of recognition and enforcement of an international arbitral award are exhaustive.
The Court has constantly reminded this character[35] and, therefore, conducted a strict analysis within the allowed scope, without prejudice of its power to review ex officio some other aspects.
Correlatively, the Court also emphasized that set aside or recognition proceedings are not the proper scenario to challenge or discuss substantive aspects of the dispute that should have been alleged before the arbitral tribunal.
Similar reasoning was expressed in a particular case[36] regarding allegations of payment of the underlying obligation or compliance with the arbitral award, that the Court deemed to be matters or defenses to be invoked in other scenarios, such as enforcement actions or execution proceedings.
Minimum judicial intervention
As a general principle, Article 67 of the Arbitration Statute states that, in matters governed by this section, International Arbitration, no judicial authority may intervene, except in cases and for purposes expressly provided for by this section.
Notably, Article 107 of the Arbitration Statute defines annulment as the “sole judicial recourse against the arbitral award,” which also reflects the legislative purpose of restricting judicial intervention in the arbitral proceedings.[37]
Further, the same provision expressly indicates that “the judicial authority shall not rule on the merits of the dispute nor assess the criteria, evidentiary evaluations, motivations, or interpretations presented by the arbitral tribunal.”
In developing the principle of minimum judicial intervention in arbitration, the Court has sustained that it embodies several facets, such as a) Absence of substantial review, b) exhaustive grounds, c) international harmonization, and d) unavailability.[38]
In this direction, it has also been underlined by the Court that annulment requires the conduct of an “objective test” to compare the arbitral agreement and the decisions contained in the arbitral award without regard to any substantial or evidentiary aspect.[39]
In addition, any error should be “manifest,”[40] which necessarily means that the arbitral tribunal considered matters that were not governed by the arbitration agreement or exceeded the scope governed by said agreement.
Finally, the Court has reiterated the “extraordinary” character of the annulment mechanism, the main purpose of which is to protect the due process of law of the parties but not to constitute an additional instance to review the arbitral decision.[41]
Arbitrability review
Article 1 of the Arbitration Statute defines “Arbitration” as an alternative mechanism for conflict resolution by which the parties submit the resolution of a dispute “concerning disposable matters or those authorized by law” to arbitrators.
This rule provides the criteria to determine whether a certain subject matter is capable of settlement by arbitration, namely “arbitrable,” either because it is a matter of “free disposition” or because it has been authorized by law.
Further, Article 69 of the Arbitration Statute, when regulating the arbitration agreement, provides that by this means, parties consent to submit to arbitration disputes among themselves arising from a determined legal relationship, whether contractual or not.
As it was noted previously, this is an aspect in which, either in front of a request for annulment or a request for recognition and enforcement of an international arbitral award, the Court is authorized to review it panoramically by itself, even if the interested party has brought no allegation or defense in that sense.[42]
Based on our exam, there were no cases in which the Court identified situations of “non-arbitrability.” On the contrary, as all the disputes originated in contractual relationships, the Court generally found that the arbitral awards were rendered to resolve disputes concerning arbitrable matters, as long as they involved merely economic or waivable rights or controversies with patrimonial character.[43]
Public Policy review
In conducting the review on the conformity of the award with public policy, the Court has consistently followed criteria established in some precedents. It interpreted said notion as limited to the “basic or fundamental principles of the institutions,” referring particularly in an illustrative manner, to the prohibition of abusive exercise of rights, good faith, enforceability of contracts, impartiality of the arbitral tribunal, and respect for due process of law.
From this perspective, as long as the arbitral proceeding had been conducted properly, giving the parties timely and adequate notice of its existence, the opportunity to present their case, and equal treatment, the Court found no violations of public policy and, therefore, generally granted recognition and enforcement.[44]
Pro-Arbitration and Pro-Recognition Principles
Lastly, in several decisions, the Court expressly relied on pro-arbitration and pro-recognition principles underlying the Arbitral Statute and the international conventions.
This reference was provided not only with respect to set aside applications but also to recognition and enforcement requests.
As a matter of fact, for instance, the pro-arbitration principle was considered for establishing the existence of an implicit consent to arbitrate. In contrast, the pro-recognition principle was invoked in order to give preference to the application of the Arbitration Statute over the New York Convention with respect to formal documental requirements, taking into account that the former was more flexible than the latter.[45]
CONCLUSION
Colombian Arbitration Statute, International Conventions in force, and their interpretation by the Colombian Supreme Court, as it has been reflected in the judgments issued in the last years, provide a framework that favors predictability and certainty with respect to proceedings involving the annulment, recognition, and enforcement of international arbitral awards.
This approach shows consistency with the presumptive validity of international arbitral awards[46], respect for the autonomy of the parties when deferring the settlement of a dispute by arbitration, and support for international harmonization.
Some of the most recent decisions have clearly reiterated the interpretative course already established by the Court.[47]
In the first case,[48] the Court granted recognition and enforcement of an arbitral award issued under the rules of the International Centre for Dispute Resolution (American Arbitration Association).
The dispute arose from an agreement for Over-The-Counter Swaps and Derivatives – OTC Contract concluded between a US company and a Colombian cooperative. The arbitration was seated in New York City. The award found that the cooperative had breached the contract and consequently ordered the payment of a certain amount, plus interests, legal fees, and arbitration expenses.
The foreign company applied for the recognition and enforcement of the award. The cooperative participated in the proceeding, informing the Court that the claimant had already been recognized as a creditor in the insolvency process underway. Furthermore, it requested the Court to analyze “the legality of the actions conducted prior to the foreign arbitral award [. . .].”
The Court supported its decision on the Arbitration Statute and the New York Convention. In particular, the Court emphasized the exhaustive character of the grounds to refuse recognition and enforcement. Further, considering that the cooperative had raised no objection or defense, the Court proceeded to review ex officio the matters related to arbitrability and public policy.
The Court stated that the subject matter was arbitrable, as related to the economic effects of a contractual breach, which was within the parameters of the Arbitration Statute, provided its patrimonial character and freely disposable nature.
It was also affirmed that there was no evidence that the award recognition would threaten or harm Colombian international public policy, being understood, in line with precedents, as “basic or fundamental values and principles in which the institutions of the national legal order are inspired [. . .].”
On the contrary, concluded the Court, legal institutions of national private Law are based on the binding character of contracts and the necessity to perform them with the seriousness, integrity, and good faith demanded for the functioning of a market economy, principles that, in fact, were considered by the foreign arbitral tribunal.
The second case is related to a dispute that originated in a sports agency agreement. In granting recognition and enforcement of an arbitral award issued by the Jurisdictional Committee of the Royal Spanish Football Federation, the Court based its decision on the arbitrable nature of the conflict, which centered around the payment of outstanding fees, the content and scope of the arbitration agreement, and the conformity of the award with international public policy. This was determined as long as the award did not harm or put the “founding and irreplaceable elements of the national legal order” at risk.
Moreover, the Court expressly emphasized the current legal and economic significance of sports arbitration as an effective mechanism for alternative dispute resolution. It also mentioned some of the relevant institutions specialized in this discipline.[49] [50]
* Luis Ramón Garcés-Díaz is a Colombian Lawyer practicing in Bogotá.He graduated from Externado University of Colombia (1992), holds a Postgraduate degree from the University of Rome “Tor Vergata” (1996), and an LL.M. from Columbia Law School (2023). Since 1992, he has practiced commercial, corporate, and financial law, gaining extensive experience in both the private and public sectors. He served as Assistant Magistrate of the Civil Chamber of the Colombian Supreme Court of Justice (2002 – 2008) and as General Counsel for Scotiabank Colpatria (2008 – 2021). He is a professor at the Externado University of Colombia, with publications on negotiable instruments, pre-contractual liability, and international contracts. Luis is the Founding Partner of GarcesLegal Law Firm.
[1] Congressional Journal 542, July 29, 2011, p. 21.
[2] Article 68 of the Arbitration Statute.
[3] Council of State decisions are outside the scope of this commentary.
[4] Articles 34 and 36 of UNCITRAL Model Law; Judgments SC4480-2021, SC4481-2021, SC5615-2021, and SC264-2023, among others.
[5] Following Court methodology, judgments are identified by number and year: SC877-2018; SC5677-2018; SC001-2019; SC4111-2021; SC4480-2021; SC4481-2021; SC4887-2021; SC5288-2021; SC5615-2021; SC5679-2021; SC2606-2022; SC3462-2022; SC3650-2022; SC264-2023; SC326-2023; and SC389-2023.
[6] Judgment SC5677-2018.
[7] Judgment SC001-2019.
[8] Judgment SC4111-2021.
[9] Judgment SC4480-2021.
[10] Judgment SC4481-2021.
[11] Judgment SC4887-2021.
[12] Judgment SC5288-2021.
[13] Judgment SC5679-2021.
[14] Judgments SC2606-2022 and SC389-2023.
[15] Judgments SC877-2018, SC5615-2021, SC3462-2022 and SC3650-2022.
[16] Judgment SC264-2023.
[17] Judgment SC326-2023.
[18] Judgment SC877-2018.
[19] Judgments SC5677-2018, SC001-2019 and SC326-2023.
[20] Judgment SC4111-2021.
[21] Judgment SC4480-2021.
[22] Judgment SC4481-2021.
[23] Judgments SC4887-2021 and SC5679-2021.
[24] Judgment SC5288-2021.
[25] Judgment SC5615-2021.
[26] Judgment SC2606-2022.
[27] Judgment SC3462-2022.
[28] Judgment SC3650-2022.
[29] Judgment SC264-2023.
[30] Judgment SC389-2023.
[31] For specific analysis in 2 cases see: https://arbitrationblog.kluwerarbitration.com/2023/04/17/colombias-supreme-court-of-justice-recent-decisions-on-recognition-and-enforcement-of-foreign-awards/
[32] Judgments SC877-2018, SC4111-2021, SC5615-2021, SC3462-2022, SC3650-2022 and SC389-2023.
[33] In case SC5288-2021 the arbitral award was partly annulled.
[34] Judgments SC4481-2021, SC5615-2021 and SC264-2023, among others.
[35] Judgments SC877-2018, SC5677-2018, SC4480-2021, SC4887-2021, SC5679-2021, SC2606-2022, SC3462-2022, SC264-2023, SC326-2023 and SC389-2023, among others.
[36] SC2606-2022.
[37] Article 34 of the UNCITRAL Model Law; Congressional Journal 542, July 29, 2011, p. 21.Pertinence and feasibility of constitutional actions (“acción de tutela”) against decisions adopted during the arbitral proceedings or against the arbitral award are outside the scope of this analysis.
[38] Judgment SC001-2019.
[39] Judgment SC2606-2022 supported in precedent rulings in SC5288-2021, SC4887-2021 and SC5677-2018.
[40] Judgment SC2606-2022 supported in precedent rulings in SC5288-2021, SC4887-2021 and SC5677-2018.
[41] Article 109 of the Arbitration Statute; Judgments SC5207-2017, SC5677-2018, SC001-2019, SC4480-2021, SC4887-2021, SC5679-2021 and SC326-2023.
[42] Judgments SC4481-2021, SC5615-2021 and SC389-2023.
[43] Judgments SC877-2018, SC2606-2022, C3462-2022, SC3650-2022, SC264-2023 and SC389-2023, among others.
[44] Judgments SC389-2023, SC326-2023, SC2606-2022, SC3650-2022, SC4481-2021, SC5288-2021, SC5615-2021, SC001-2019, SC877-2018, SC9909-2017, SC8453-2016, SC12467-2016, and July 27, 2011.
[45] Judgments SC9909-2017, SC5288-2021, SC3650-2022 and SC389-2023.
[46] Gary B. Born, International Arbitration: Law and Practice, 3rd Ed. 2021, Wolters Kluwer, p. 363.
[47] Judgments SC264-2023 (August 1, 2023) and SC389-2023 (October 10, 2023).
[48] Judgment SC264-2023, August 1, 2023
[49] The Court of Arbitration for Sport (CAS), the Sport Dispute Resolution Centre of Canada (SDRCC) and the Japan Sports Arbitration Agency (JSAA).
[50] For a broad analysis of international commercial arbitration in Colombia, see: https://globalarbitrationreview.com/guide/the-guide-arbitration-in-latin-america/first-edition/article/international-commercial-arbitration-in-colombia#footnote-002 and https://thelawreviews.co.uk/title/the-international-arbitration-review/colombia.