What is a Jurisdictional Challenge Due to Arbitration Agreement?
When the parties to a contract agree to submit any disputes arising from it to arbitration, such disputes must be resolved through that means.
If one party, instead of resorting to arbitration, initiates judicial proceedings against the other on the basis of the contract, the defendant may, in accordance with Article 63.1 et seq. of the Civil Procedure Act, file a jurisdictional challenge due to arbitration submission, with the aim of having the dispute resolved through arbitration.
Ruling of the Barcelona Provincial Court (15th Section) 204/2024 of 18 December
In a contractual dispute that was initially subject to arbitration, one of the parties brought proceedings before the Commercial Court, which—at the request of the defendant—upheld the jurisdictional challenge due to lack of jurisdiction and also proceeded to the judicial formalisation of the arbitration by appointing an arbitrator in accordance with Article 15 of the Arbitration Act.
The same defendant appealed the decision before the Barcelona Provincial Court, raising the issue of whether the challenged ruling had appointed the arbitrator “in the appropriate procedure for this purpose”. On this point, the Court stated:
“The issue at the heart of the appeal is straightforward: whether, when ruling on a jurisdictional challenge, the appointment of an arbitrator is admissible, as considered by the contested decision.”
Reasoning of the Barcelona Provincial Court
The Court held that:
“The answer to this question is very clear and categorical: it is not admissible.”
It then set out several reasons supporting this conclusion:
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“Firstly, the Commercial Court does not have jurisdiction to appoint an arbitrator, as this competence lies with the Civil and Criminal Chamber of the High Court of Justice.”
Indeed, pursuant to Article 8.1 of the Arbitration Act:
“For the judicial appointment and removal of arbitrators, jurisdiction shall lie with the Civil and Criminal Chamber of the High Court of Justice of the Autonomous Community where the arbitration is to take place.”
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“Secondly, and equally crucially, the appointment of an arbitrator is not made in this procedure but through the one provided for and regulated in the Arbitration Act. Therefore, we must set aside the specific part of the contested decision concerning the appointment of an arbitrator.”
Thus, Article 15.3 of the Arbitration Act states: “If it is not possible to appoint arbitrators through the procedure agreed upon by the parties, either party may request the competent court to appoint the arbitrators or, where appropriate, to take the necessary measures for that purpose.”
No Order for Costs
The Court also decided not to impose costs, citing two reasons:
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“The imposition of costs based on the principle of objective loss may be justified in cases where filing the claim before the court was entirely unjustified. However, this is not the case where the jurisdictional challenge is based on arbitration submission. This is because the negative effect (exclusion of jurisdiction) only applies if the jurisdictional challenge is raised, which is not necessarily always the case, even when an arbitration agreement exists.”
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“The claimants were not partners at the time of the company’s incorporation, when the arbitration submission clause was included in the articles of association, which certainly contributes to the legal uncertainty that underpins the contested decision.”
Conclusions
The Barcelona Provincial Court (15th Section) Ruling 204/2024 of 18 December clarifies the limits of the effects of upholding a jurisdictional challenge in cases where an arbitration agreement exists. It confirms that a ruling upholding such a challenge cannot, in turn, order the judicial appointment of an arbitrator, as this request must be properly submitted to the competent High Court of Justice.
