On 8 January 2018, the Tribunal Superior de Justicia de Madrid (the ‘TSJ’) considered that the arbitrator, who had to decide the case in amiable composition, had not complied with its duty to motivate its decision According to the TSJ, the arbitrator should have taken into consideration all evidence in the record that would be relevant to establish the dispositive part of the award. 1

The case relates to a dispute arising between the four shareholders of a company, Mazacruz S.L. (‘Mazacruz’). One shareholder, D. Ángel Daniel, owned 27.46% of the shares but benefited from multiple voting rights. He allegedly abused of said rights and obstructed the correct and efficient operation of the company. The rest of the shareholders filed an arbitration against him to seek a remedy against what they considered as an abusive use of his minority corporate powers.

Mazacruz’s bylaws provided an arbitration clause in case of dispute between the shareholders, according to which, the arbitrator had to decide in amiable composition and in compliance with the Spanish Arbitration Act.

On 6 April 2017, the arbitrator rendered its award in favor of the claimants. He decided that D. Ángel Daniel’s conduct constituted an abuse of its voting rights and ordered the dissolution of Mazacruz.

The challenge of the award

D. Ángel Daniel sought the annulment of the award as he considered that the arbitrator violated public policy, putting forward six grounds for the annulment of the award that the TSJ dismissed entirely, except for the ground relating to the lack of motivation.

The Applicant claimed that the arbitrator would have appreciated an abuse of the minority voting rights without a proper and correct assessment of the evidence and arguments put forward. In particular, it pleaded that the arbitrator considered that ‘the assessment of the evidence unequivocally emphasizes the abusive exercise of D. Ángel Daniel’s rights’, but fails to make any reference to the evidence in question and to its assessment.

D. Ángel Daniel also provided some illustrations of factual evidence and arguments that he claims the arbitrator did not take into consideration, or incorrectly evaluated in his decision. For instance, he stressed out (i) the omission of the arbitrator to consider the fact that the others shareholders never challenged the companies’ resolutions for being abusive; (ii) the existence of previous judgments confirming previous corporate agreements; (iii) the incorrect assessment of the company and its assets, and (iv) other errors concerning the facts of the dispute, such as the fact that Mazacruz’s subsidiaries bylaws had been modified after, and not before, the commencement of the arbitration.

The decision of the TSJ

The TSJ decided to set aside the award on the ground that it lacked motivation. After reviewing settled case law on the legal requirements to motivate an award rendered in equity, the TSJ acknowledged that:

[T]he Award, repeatedly, states that the assessment of evidence revealed in an unequivocal manner that D. Angel Daniel’s conduct was abusive to the detriment of his corporate partners, who owns 72.54% of the capital, specifically considering in this regard his witness testimony and that of the defendants.2

Notwithstanding this, the TSJ highlighted some factual aspects that the arbitrator failed to take into consideration, or that would have required more motivation. Specifically, the tribunal stated that:

After a thorough review by this Tribunal of the motivation of the Award relating to the ground on which the dissolution of Mazacruz had been ordered – D. Ángel Daniel’s abuse of rights – we reached the same conclusion as the appellant, that an award is not sufficiently motivated in equity whenever it does not evaluate the evidence submitted in the arbitration in its entirety ….3


The question that comes to mind is: does the rendering of justice necessarily imply setting forth each and every reason beneath the decision issued? A philosophical approach to the question would certainly lead to more questions than answers.

However, the analysis of the relevant lex arbitri might provide some guidance on the possible answers. In some countries, the applicable arbitration laws do not require arbitrators to justify their award. Such is the case, for instance, in Switzerland where Article 190 of the Code on Private International Law does not provide for the lack of motivation as a ground for annulment of an award. Thus, an award cannot be set aside, or its enforcement be refused, on the ground that an arbitrator did not motivate an award.4

In other countries, arbitrators are expressly instructed to render a reasoned award, as is the case for the United Kingdom,5 where the courts consider that ‘[a]ll that is necessary is that the arbitrators should set out what, on their view of the evidence, did or did not happen and should explain succinctly why, in the light of what happened, they have reached their decision and what that decision is. This is all that is meant by a "reasoned award"’.6

In Spain, alike France7 and Mexico8, arbitrators are also expected to motivate their awards. Article 37(4) of the Spanish Arbitration Act provides that ‘the award shall always be motivated’.9 However, what should be the scope of said obligation, and to what extent should it be controlled by local courts in the framework of an award annulment proceeding?

Spanish case law is clear and settled on this point.10 It does not require extensive reasoning from the arbitrators, and does not require arbitrators to make an express reference to each and every means of evidence submitted. Spanish case law further relaxes the requirements to motivate the decision when it deals with awards rendered in amiable composition, and does not allow the court to second - guess the assessment of evidence or the application of the law.

The aforementioned ruling, however, gives in our opinion an illustration of a wrong application by a Spanish Court of this obligation to motivate an award, particularly, when it comes to an award rendered in amiable composition. In this case, the Court held that the arbitrator should have made express reference to some pieces of evidence produced by the parties within the arbitration, indicating the weight that each piece had in the ruling, as well as to provide an answer to every issue and submission raised during the arbitration.

On the other hand, the control that the TSJ exercised in the commented decision expressly consisted in a ‘thorough review’ 11 of the motivation of the award in order to determine if every evidence and argument had been taken into account. Particularly, the judges stressed out three factual aspects that the arbitrator would not have taken into account, or at least, insufficiently evaluated from a legal perspective.12 In other words, the TSJ reviewed the reasoning of the arbitrator in its substance, evaluating the merits of the relevant evidence and suggesting that some facts had to be more relevant than others were.

This decision of the TSJ should be distinguished from other similar judgments of 5 April 2018 and 12 April 2018 recently published. On 5 April, the TSJ set aside an award on a similar ground, following a methodology that could also imply the review of the merits under the pretext of assessing whether or not the award was sufficiently motivated. In this judgment, the TSJ held that the evaluation of the evidence was arbitrary:

The first reason for setting aside the arbitral award is based upon the irrational evaluation of the evidence and the irrational non-application of the applicable norms […]

This Tribunal is not entitled to decide on the relevance of that evidence nor to determine which position should prevail in the light of the pieces of evidence submitted in the arbitration. However, this Tribunal is entitled to verify if the evaluation of the evidence in the award would appear to be arbitrary in diverging from the evidential result or omitting without justification the evaluation of evidence that appear to be essential for the resolution of the issues.13

In that particular case, the TSJ held that the arbitrators had not taken into account a set of documentary evidence, which, according to the dissenting opinion, would have justified a different outcome. The majority did not even mention these documents and decided to reason its decision regardless of that evidence. The TSJ found that the lack of reference to the relevant evidence revealed some arbitrariness.14

The TSJ’s last decisions suggest that the arbitrator’s reasoning is not clear enough but respectfully, we think that this is just a way to cover an unaccepted interference of a court in the role of arbitrators. The vast majority of the Spanish Courts, including the TSJ of Madrid, understand very clearly this limited role, but the latest judgements of the TSJ of Madrid raise some doubts.

Is the TSJ suggesting that the arbitrators should identify in the award each and every single piece of evidence from the many submitted by the parties? Would an ‘omission’ constitute a sufficient ground to set aside the award, or should the TSJ first determine if said evidence is relevant in light of the merits of the dispute? We submit that the answer is negative and that should be regarded as exceptional and not alter two decades of well-established jurisprudence in Spain on this point.

Otherwise, this approach could lead in our opinion to an undesired legal uncertainty, infringing some of the fundamental arbitration principles with serious practical consequences.

  • First, the commented decision would be inconsistent with the very essence of arbitration, which is to remove from the jurisdiction of local judges the decision on the merits of a dispute. In the decision at hand, it seems that the TSJ adopted an approach that, in itself, prejudged and revised both the legal requirements and rules of the burden of proof corresponding to each party, which the case required in order to be able to determine which arguments or evidence were relevant or “essential” for the resolution of the dispute. This exercise would constitute a clear interference in the role of the arbitrator whereas a judge should be solely entitled to verify the formal existence of a motivation.
  • Second, the decision would be inconsistent with Article 25(2) of the Spanish Arbitration Act,15 according to which arbitrators are free to decide on the admissibility, relevance and usefulness of the evidence submitted by the parties. We consider that parties should expect that the arbitrators give reasons to reach a specific decision but should not expect arbitrators to give reasons as to why they rejected parties’ legal theories or submissions.
  • Third, the approach of the TSJ in this case would tempt the parties to set up procedural strategies, such as submitting legal arguments and pieces of evidence in excess while expressly requesting an exhaustive decision from the arbitrator. Such strategies are used to delay the rendering of the award and, alternatively, to seek its annulment on the ground of lack of motivation as defined by the decision commented herein.
  • Fourth, the fact that the arbitrators do not make express reference to some pieces of evidence, per se, does not necessarily imply a violation of a party’s right to be heard. That is, an award should only be set aside when there is direct evidence of the disruption of due process, i.e. evident partiality of the arbitrator or orders that would have breached the procedural equality of the parties. In this framework, the lack of motivation should be taken as a relevant circumstance to analyze the respect of the fundamental rights of defense, but not an end in itself.

From the above, the TSJ should rectify its approach and make sure that it does not open the door to a substantive revision of an award. There is a necessity for a more reasonable approach by the judiciary in order to conciliate the right to a reasoned award with efficiency, which is of the essence in arbitration proceedings.

TSJ, Annulment proceeding 52/2017.

TSJ, Annulment proceeding 52/2017, p. 12 (free translation).

TSJ, Annulment proceeding 52/2017, p. 13 (free translation).

See, for instance, ATF 130 III 125, 130: ‘Le défaut de motivation de la sentence arbitrale ne constitue pas un motif de recours; cette circonstance ne s'oppose par conséquent pas non plus à l'octroi de la mainlevée définitive sur la base de la sentence arbitrale’.

See, Article 52(4) of the Arbitration Act: ‘Form of award … (4) The award shall contain the reasons for the award unless it is an agreed award or the parties have agreed to dispense with reasons’.

Bremer Handelsgesellschaft mbH v Westzucker GmbH (No.2), Court of Appeal (Stephenson L.J., Shaw L.J. and Donaldson L.J.) - 15 May 1981, [1981] 2 Lloyd’s Rep 130.

Article 1482 of the Code of civil procedure: ‘Article 1482: La sentence arbitrale expose succinctement les prétentions respectives des parties et leurs moyens. Elle est motivée’. Alike Spain and Mexico, when it comes to international arbitration in France, the lack of motivation is not a ground for the annulment of an award. Moreover, the obligation to motivate in international arbitration is not imperative and does not fall under the concept of French international public policy. To this respect, see Christophe Seraglini / Jérôme Ortscheidt, Droit de l’arbitrage interne et international, (Montchrestien, 2013) No. 872.

Article 1448 al. 2 of the Mexican Code of Commerce sets forth the obligation, which is not imperative, for the arbitrators motivate their awards: ‘Artículo 1448.- […] El laudo del tribunal arbitral deberá ser motivado, a menos que las partes hayan convenido otra cosa o se trate de un laudo pronunciado en los términos convenidos por las partes conforme al artículo 1447’.

‘Artículo 37. Plazo, forma, contenido y notificación del laudo. [...] 4. El laudo deberá ser siempre motivado, a menos que se trate de un laudo en los términos convenidos por las partes conforme al artículo anterior’.

See, for instance, SSTC 14/91, 28/94, 153/95 and 32/96, according to which arbitrators and judges’ decisions are not expected to contain an exhaustive reasoning, that is, to cover every aspect and issue raised by parties. See also Bernardo M. Cremades, ‘El Arbitraje en la Doctrina Constitucional Española’, in Lima Arbitration, No 1, 2006, p. 203.

TSJ, Annulment proceeding 52/2017, p. 13 (free translation).

TSJ, Annulment proceeding 52/2017, p. 13: the arbitrator would have illegitimately omitted to discuss (i) the fact that the others shareholders never challenged the companies’ resolutions for being abusive; (ii) the existence of previous judgments confirming previous corporate agreements and (iii) the reasons for which he dismissed information relating to Mazacruz’s subsidiaries.

TSJ, Annulment proceeding 6/2017, p. 28 and 31 (free translation).

See Alberto Fortún / María Pérez de Prada, ‘Award set aside on public policy grounds for arbitrators’ failure to consider relevant evidence’ (Madrid High Court of Justice), in Practical Law, Thomson Reuters, 2018.

‘Artículo 25. Determinación del procedimiento. [...] 2. A falta de acuerdo, los árbitros podrán, con sujeción a lo dispuesto en esta Ley, dirigir el arbitraje del modo que consideren apropiado. Esta potestad de los árbitros comprende la de decidir sobre admisibilidad, pertinencia y utilidad de las pruebas, sobre su práctica, incluso de oficio, y sobre su valoración’.