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Corporate arbitration in Spain

The Spanish Arbitration Club (CEA) has just launched a report on corporate arbitration in Spain. The report, prepared by a committee of specialists, aims at clarifying the rules on arbitration within joint-stock companies, particularly after the Spanish Arbitration Law was amended in 2011, and new articles on corporate arbitration were introduced.

The report has been recently shared with the members of the arbitration community and is expected to be publicly available soon at the CEA’s website. Here you can find the most relevant highlights.

The report clarifies that the Spanish Arbitration Law provides for all corporate-related disputes to be referred to arbitration, including those related to the incorporation of companies; liability actions against those who acted on behalf of a company before the company’s registration and liability actions against the founding members of the company; disputes related to monetary and non-monetary contributions, disbursement of funds, payment of capital calls and ancillary obligations; challenges to the resolutions of the General Shareholders’ Meeting and the Board of Directors, including approval of annual accounts; disputes relating to shareholders’ rights, as well as between shareholders and directors, liability actions against directors, among other disputes.

The report also highlights three basic rules for corporate arbitration in Spain:

  • First, the requirement of at least two thirds of the company’s share capital to vote in favour of including an arbitration agreement in the company’s by-laws (which, in practice, will mean that an arbitration agreement is also binding on dissenting and absent shareholders).
  • Second, that it will be for an arbitration institution to appoint the arbitrator(s) in cases of challenge of corporate resolutions.
  • Third, that the Mercantile Registries will register awards that declare corporate resolutions null and void, and will cancel registrations of invalid resolutions and of any other entry contrary to the content of the award. In connection with this, the report establishes that it is also feasible to register interim measures contained in an award.

In terms of legal standing, the report clarifies that the company, its directors and its shareholders are parties to the arbitration agreement included in the company’s by-laws and thus are entitled to bring disputes to arbitration; the contrary conclusion is reached for third parties.

However, the report explains that the binding effects of the award are not just limited to the company itself. Thus, creditors might become personally bound or affected by the award (for example, in the case of a freezing injunction ordered by an award in support of arbitration proceedings). For this reason, the report insists on increasing the levels of transparency and publicity with regard to the procedure for corporate arbitration and the appointment of arbitrators.

Last but not least, the report proposes a model arbitration agreement to be included in a company’s by-laws:

“Any corporate conflict, that has effects upon the company, its shareholders and/or its directors, shall be submitted to [one or three] arbitrator [s]. The conflict shall be settled by arbitration administered by [name of the arbitration institution chosen by the parties], according to its rules.

The arbitration shall be based on law.

The place of arbitration shall be the place where the arbitration institution is established.

The company agrees to carry out the prompt payment of any funds that, pursuant to the arbitration proceedings, it shall satisfy in order to cover any admission and management fees corresponding to the arbitration institution, as well as any fees and costs corresponding to the arbitrator[s].

In the event of amendment or termination of this arbitration agreement, it is necessary to take the relevant decision by means of an identical qualified majority vote to the one carried out at the time of its adoption.

The present agreement shall become enforceable after registering it with the Mercantile Registry and, from that point on, it shall be binding upon the company, its directors and all its shareholders, imposing them the duty to submit to arbitration any corporate conflict.

As an exception, the challenge to the Board’s decision, approving the present agreement’s inclusion within the by-laws, shall be brought before the ordinary courts deemed to be competent on this matter.”