Precautionary measures in the exequatur for the recognition of foreign arbitral awards

Increasingly, obtaining a favourable arbitral award in an international dispute is not enough. A successful outcome in international arbitration proceedings is often contingent on the actual enforcement of the relevant arbitral award. However, across all jurisdictions, there are some practical issues that need to be navigated in order to enforce an award, and Spain is no exception.

Firstly, the enforcement of foreign arbitral awards in Spain is not automatic, and requires an exequatur procedure. In this regard there are sometimes discrepancies about the competent court to hear the exequatur procedure. The Spanish Law on International Legal Cooperation on Civil Matters governs this matter in conjunction with treaties relating to recognition and enforcement to which Spain is a party. These include: the 1958 New York Convention, the 1961 European Convention on International Commercial Arbitration (Geneva Convention), the 1965 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (Washington Convention) and several bilateral treaties. In certain aspects, the Spanish Law on International Legal Cooperation on Civil Matters is incomplete, so it is necessary to refer to Spanish Arbitration Law or Spanish Judiciary Law. It has been established, based on the Spanish Judiciary Law and in line with the Spanish Arbitration Law, that the competent court to hear exequatur procedures for foreign arbitral awards should be the Civil Chamber of the High Court of the appropriate Autonomous Community.

Even though the Spanish Law on International Legal Cooperation allows an applicant to apply for recognition and enforcement of an arbitral award through the same writ, the aforementioned issues regarding the appropriate court to hear the exequatur proceeding has led to the assumption among practitioners that it is best to obtain the successful recognition of the arbitral award from the Civil Chamber of the High Court of the Autonomous Community as a first step, and then to request its enforcement. This is due to the fact that the Spanish Judiciary Law establishes that the competent court for the enforcement of foreign arbitral awards is the Court of First Instance with territorial jurisdiction (therefore, a different court to the one competent for the exequatur procedure).

The foregoing scenario leads to the obvious conclusion that the delay related to navigating two different court proceedings before different courts may cause difficulties in actually enforcing the arbitral award and affect the likelihood of successful recovery.

Furthermore, there is also the possibility of requesting the adoption of interim measures while the exequatur procedure is ongoing. The first question that arises in this regard concerns the confirmation of which court would have jurisdiction to hear the interim measures application (taking into account that the exequatur procedure is heard by the Civil Chamber of the High Court of the appropriate Autonomous Community and the enforcement proceeding takes place before the Court of First Instance). The answer to this question is established in article 8.3 of the Spanish Arbitration Law, which states that for the adoption of interim measures the competent court shall be that of the location where the arbitral award is to be enforced, or in the absence thereof, that of the location where the interim measures shall be effective. Therefore, the relevant application of interim measures shall be filed with the Court of First Instance with jurisdiction to hear the enforcement of the arbitral award, or in the absence thereof, that of the location where the interim measures shall be effective.

As a result, the claimant seeking interim relief while the exequatur procedure is ongoing would have to file two separate writs before two different courts: the first, requesting the recognition of the foreign arbitral award (to be filed before the Civil Chamber of the High Court of the appropriate Autonomous Community); and simultaneously, the second, requesting the adoption of interim measures (to be filed before the Court of First Instance with jurisdiction to hear the enforcement of the arbitral award or in the absence thereof that of the location where the interim measures shall be effective).

In the writ of application for the adoption of interim measures, the applicant must comply with the Spanish legal requirements for interim relief in general but focus on the scope of the recognition and subsequent enforcement of the foreign arbitral award.

In practice, the structure of the said application is similar to the one used in writs of claim in main proceedings and can be divided into two sections:

1. Factual basis in which the main facts of the dispute are set out. Jointly with those facts, the applicant may provide documentary evidence. In this case, the relevant description would refer to the arbitration proceedings, the decision reached in the arbitral award and the facts that will lead the court to believe that there is a risk that the respondent will not be able comply with the arbitral award upon its enforcement (e.g. delicate financial situation of the respondent).
2. Legal grounds. In this section, the applicant should define which specific interim measure is requested (e.g. preventive seizure of assets) and prove the existence of all the conditions needed for it to be granted. The referred legal requirements are the appearance of legal standing (fumus boni iuris) and the risk of delay (periculum in mora).
   
   Spanish law refers to “fumus boni iuris” or the appearance of legal standing as a requirement for interim measures to be granted. The applicant must provide evidence that a verdict in their favour is sufficiently likely to be granted at the end of the main proceeding. In this case, the aim would be to prove that the Civil Chamber of the High Court of the Autonomous Community would grant the recognition of the foreign arbitral award. This may be achieved, for example and among other ways, by proving that none of the causes established in the 1958 New York Convention for the refusal of the recognition of an arbitral award occur in the case at hand.
   
   The Spanish legislator refers to “periculum in mora” (risk of procedural delay) in the sense that interim measures may only be granted if the court is satisfied that failure to grant the interim measures sought could lead to circumstances preventing or hindering the effectiveness of the protection that may be granted, and/or the enforcement of an eventual judgment in favour of the applicant. Applying the referred legal requirement to this scenario, the risk to be prevented is that the delay related to obtaining the recognition of the arbitral award through the exequatur procedure will create a situation where, when the time comes to enforce the arbitral award, the enforced party will not have sufficient assets of enough value to cover the relevant debt.
3. Moreover, the applicant should include in the request an offer to provide security, specifying the type or types of security offered (e.g. cash, a personal guarantee) and justifying the value of the one proposed. The posting of security is aimed at preventing the party affected by the measure from bearing damages arising from the said measure.

Whereas the general rule is that the court will hear the respondent prior to deciding on the application of interim measures, it is also noteworthy that Spanish law allows in exceptional cases that the interim measures are adopted inaudita parte (i.e. without hearing the respondent prior to the adoption of the interim relief and hearing them afterwards instead). For this expedited procedure to be granted, the applicant needs to evidence that there are extraordinary circumstances of urgency or that hearing the respondent prior to the adoption of the interim measures may put the effectiveness of the interim relief at risk.

Even though there are some aspects of Spanish law that would be better consolidated before the same court and set out in a clearer way in the relevant rules, it is safe to say that mechanisms are available for claimants who have obtained favourable foreign arbitral awards and who are seeking to protect the effectiveness of these awards.