Jurisprudential novelty: The Constitutional Court's decision on the action for annulment of arbitration awards and the limits of the annulment judge, Decision No. 2520-18-EP/23.

By: María José Blum Moarry

The Constitutional Court of Ecuador as the highest body of interpretation, control and constitutional justice has issued several rulings on the constitutional standards that should govern national arbitration. Recently, it has pronounced in judgment No. 2520-18-EP/23 on the limits of the presidents of the Provincial Courts in the actions of nullity of arbitral awards submitted to its knowledge and resolution under the grounds of Article 31 paragraph d) of the Arbitration and Mediation Law.

Although the Constitutional Court in previous cases such as judgments 308-14-EP/20 and 1703-11-EP/ 19 has referred to the speciality of this action for annulment of arbitral awards and the procedural rules that are specific to it, -such as the impossibility of filing vertical appeals- the jurisprudential advance in Judgment 2520-18-EP is noteworthy, since it sheds light on how to interpret the grounds for nullity set forth in Article 31 paragraph d) LAM, which establishes that “Any of the parties may file an action for nullity of the award, when (...) d) The award is referred to in Article 31 paragraph d) of LAM.) d) The award refers to matters not submitted to arbitration or awards more than what was claimed”.

For this purpose, the Court begins by highlighting basic arbitration issues such as:

• Constitutional recognition of arbitration as an alternative method of conflict resolution, with emphasis on alternability, since citizens may freely choose this method to resolve their disputes before state courts.
• The effects of the arbitration agreement. Positive because it gives the arbitrators the power to rule on their own jurisdiction and negative because it limits the parties to initiate their disputes to the state courts and imposes on the latter the obligation to refrain from doing so in the face of the existence of an arbitration agreement.
• Reiterates the kompetenz-kompetenz principle and how arbitrators are the competent authorities to “judge on the validity, scope and effectiveness of an arbitration agreement” (para. 36).

However, the Court clarifies this last point and refers specifically to the assessment made by the arbitrators at the substantive hearing provided for in Article 22 LAM and introduces the notions of “objective arbitrability” and “subjective arbitrability” (para. 37).

In simple terms, the Court refers to the fact that the arbitrators have jurisdiction to assess whether they have jurisdiction over the matters submitted to arbitration by reason of the scope of the agreement or whether they are matters that can be compromised (ratione materiae) or with respect to the parties involved (ratione personae) (para. 37) and reiterates the negative effects of the arbitration agreement, with the purpose of reaffirming that the decision of the arbitrators on their competence is “conclusive and indisputable and cannot be subsequently reviewed since (...) it would be absurd if, having agreed to arbitration to settle the conflict outside the ordinary courts, it is the latter who reviews the merits of the arbitrators” decisions" (para. 38).

Next, the Court reviews the existence of the action for annulment of the arbitral award as an exceptional mechanism of control of legality in arbitration, of defects in procedendo or formal validity and with taxable grounds (paras. 44 and 45), issues that had already been addressed in previous judgments such as 323-13-EP/19 and 31-14-EP/19. The real contribution of the judgment is that in this framework it interprets paragraph d) of article 31 LAM specifying that such grounds are exclusive to verify possible defects of congruence in the arbitration award, that is,

• Vices extra Petita (when the arbitration award refers to issues not submitted to arbitration).
• Ultra Petita defects (when the award resolves beyond what has been claimed) (para. 48)

In this way, it clearly states the criteria set forth in Judgments 323-13-EP/19 and 2813-17-EP/21, alluding to the fact that the mission of the president of the Provincial Court is “to review the points that made up the dispute: claims and defenses to the claim, and then to compare the information with the decision issued in the arbitration award”.”

This leaves out of the scenario the possibility for the president of the Provincial Court or the judge of the nullity action to evaluate or interpret in any way the arbitration agreement or its objective or subjective scope or even to rule on the declaration made by the arbitrators on their own competence. That is, the alleged “lack of competence of the arbitrators” can no longer be alleged via an action for annulment of the arbitration award under ground 31.d LAM. (paras. 50 and 54)

Subsequently, the Constitutional Court clarifies that this does not imply that the decisions of the arbitrators on their competence lack control, but rather specifies that they are related to the minimum guarantees of due process (art 76.3 and 76.7.k Constitution) and that if there are “possible abuses or violations of rights that are not supported by the action for annulment, they could be subject to an extraordinary action for protection” (para. 57). (para. 57), clarifying the limits of this jurisdictional guarantee as it concludes that this does not constitute an additional instance (para. 58).

In the specific case, it declared that the president of the Provincial Court exceeded his powers by having analyzed the arbitrability of the subject matter of the dispute (para. 63) and annulled an award on that ground when it is not a ground for annulment of an arbitral award provided for in Art. 31 LAM (paras. 63, 64 and 72).

Finally, to concretize the contribution of the judgment, the Constitutional Court establishes a jurisprudential rule for future cases with a hypothesis -factual assumption- and a legal consequence:

Para. 79: “If, (i) in the hearing of an action for annulment of an arbitral award, (ii) the president of the Provincial Court resolves matters that have to do with the compromise of the matter (iii) under the grounds established in paragraph d) of Article 31 of the Arbitration and Mediation Law that addresses inconsistency defects in the award, [factual assumption], then it disregards said rule of procedure and violates the right to due process in the guarantee of compliance with rules and rights of the parties [legal consequence].”

This rule is certainly aimed at a better understanding of arbitration as an alternative dispute resolution method and guides the presidents of the Provincial Courts not to overstep their functions as judges of nullity or in the control of legality of arbitral awards under the grounds of paragraph d) of Article 31 LAM.

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