Introduction

Law 1563 of 2012 contains the Colombian Arbitration Statute (‘CAS’) and provides for a dual arbitration system, which divides arbitrations seated in Colombia into either domestic or international arbitrations.1 Under the CAS, arbitrations are considered to be ‘international’ if they meet one of the objective criteria set forth in the law.2 While the provisions for domestic arbitrations follow civil procedure rules to some extent, international arbitrations are governed by rules essentially inspired by the UNCITRAL Model Law on International Commercial Arbitration (‘UNCITRAL Model Law’). The CAS provides that (i) annulment actions against awards issued by national arbitral tribunals are to be decided by appellate courts (Tribunales Superiores de Distritro Judicial), (ii) annulment actions against awards issued in international arbitrations are to be decided by the Civil Chamber of the Colombian Supreme Court when the seat of the arbitration is in Colombia.3

In two recent cases, the Colombian Supreme Court denied the annulment requests and set the general framework for annulment of international arbitration awards, holding that:

  • Judicial intervention with respect to arbitration awards should be minimal and limited to specific grounds listed in the law.
  • Judges are strictly prohibited from reviewing the merits of the dispute.
  • The principle of harmonised interpretation should be followed when interpreting grounds to set aside an award and when considering international public policy. In the Ferrovial case, the Court importantly stated that international public policy should be differentiated from Colombian public policy.

1. The Ferrovial case4

Claimant filed a request for arbitration following Respondents’ termination of a contract for the construction of a port facility. A member of Claimant’s consortium was domiciled in Spain and Respondent was a Colombian company. Therefore, the arbitration was deemed to be international under the CAS. Claimant filed for payment of cost overruns generated by Respondents. Respondent in turn filed a counterclaim alleging breach of contract. The tribunal ordered Claimant to pay respondents approximately US$ 35 million.

Claimant had raised objections to the award on the following grounds:

  1. Claimants’ inability to exercise their right of defence. Claimants alleged that the tribunal had failed to consider the evidence they had submitted. The Court dismissed this claim on the grounds that it did not meet the threshold of being an egregious, substantial and irrational breach that directly influenced the tribunal’s decision.
  2. The arbitral tribunal exceeded its authority by deciding on matters that were not covered by the agreement to arbitrate. The Court held that annulment based on this cause must be raised with the tribunal, or will otherwise be deemed to have been waived by the party who was entitled to raise it. The Court held that the ground for annulment regarding arbitration awards that exceed the scope of the arbitration agreement materializes when an award materially differs from the issues subject to consideration of the tribunal by the arbitration clause.
  3. The arbitration proceedings did not conform to the procedure set forth and agreed by the parties. Claimants alleged that the tribunal failed to hear the testimony of one witness. The Court considered the objection to be meritless as the parties agreed to be bound by the ICC Arbitration Rules, which allow the parties to agree on the procedural rules that will govern the proceeding. The parties had agreed to Procedural Order No. 1 which bound the parties to the IBA Rules on the Taking of Evidence in International Arbitration. The Court found that the fact that a witness did not appear before the tribunal did not invalidate, annul or exclude its witness statement, which had been provided in writing as allowed by IBA Rules.5
  4. Violation of due process and Colombian international public policy as a consequence of alleged evidentiary omissions from the tribunal. The Court once again drew a distinction between Colombian international public policy and domestic public policy.6 The Court stated that the annulment of an international award was admissible where there had been a breach of a fundamental principle such as the prohibition of abuse of rights, impartiality of courts and tribunals, and due process. Such principles aimed at preserving the guarantee of a fair trial and right to defence within the procedural context of an arbitration cannot be overlooked in determining the enforcement of a foreign arbitral award.

Overall, the Court determined that the request for annulment had been an attempt to review the merits of the case and use annulment proceedings to reopen the case. The Court reiterated that annulment proceedings are not aimed at revisiting the subject matter of the dispute and are limited to reviewing the grounds established in the law.

2. The Ventura case7

Claimants filed a request for arbitration in September 2013 alleging a contractual breach by Respondents of a settlement agreement between the parties. As the Respondents had their domicile outside Colombia, the arbitration was international under the CAS. The award ordered respondents to pay US$ 900,000.

Respondents subsequently filed an action to have the award annulled by the Colombian Supreme Court under the CAS. In deciding the annulment action, the court relied on the principle of minimal judicial intervention in arbitration, which includes the following four elements:

  1. no review of the merits;
  2. all grounds for annulment are exhaustively listed in the CAS;
  3. principle of international harmonization; and
  4. no possible waiver to annulment recourse.

With regard to the first two elements, the Court reiterated the country’s long-standing doctrine that the annulment recourse can only be used in reliance of the specific grounds established in the law and that none of those grounds allow the courts to interfere with the merits of the case.

With regard to the third element, the Court made a ground-breaking statement according to which the courts must follow international practice when interpreting grounds to set aside an award. It based its assertion on the fact that Law 1563 followed the UNCITRAL Model Law which, in turn, followed the New York Convention. The Court then relied on its own ruling of 2017,8 which specifically stated that domestic standards of interpretation did not apply to the annulment of awards rendered in international arbitrations seated in Colombia and that the Court should observe the principle of international uniformity when deciding these actions.

With regard to the fourth element, the Court explained that the annulment recourse against awards is designed to protect the parties’ procedural rights and ensure that the award does not infringe upon the founding principles of Colombian institutions. A waiver of such recourse is therefore not valid.

After explaining the framework that would govern its review of the arguments for annulment, the Supreme Court analysed them one by one:

  1. Invalidity of the arbitration agreement due to one party’s alleged lack of consent to arbitrate. Claimants alleged that one of the respondents did not specifically consent to arbitration as (i) he did not receive legal counsel during the negotiation and execution of the agreement, and (ii) he was not fluent in Spanish in order to fully understand the arbitration agreement in the contract. The Court acknowledged that the principle of kompetenz-kompetenz establishes a rule of precedence, i.e. arbitration tribunals decide on their own jurisdiction and the court of annulment reviews the decision. The Court considered that a party’s execution of the contract required sufficient diligence to prevent the party from raising such an objection to the arbitration agreement.
  2. Internationality of the arbitration. Claimants alleged that the arbitration clause was invalid because the parties had failed to mention the international nature of the arbitration. The court indicated that CAS removed the requirement provided for in 1996,9 according to which the parties should specifically agree that the arbitration is international. Under CAS an arbitration is international when it meets the objective criteria set forth in the law.10
  3. The appointment of foreign arbitrators is contrary to the parties' agreement to a domestic arbitration. Claimants alleged that the award was null because foreign arbitrators were appointed for the resolution of a dispute that, according to them, was domestic in nature because the parties failed to specifically mention in the arbitration agreement that the arbitration would be international. The court considered the objection to be meritless for the same reasons as above.
  4. Violation of Colombian international public policy. Claimants alleged that the award violated Colombian international public policy because the arbitrators did not grant the request to stay the proceedings in light of pending criminal proceedings initiated by Claimants against Respondents for fraud. The Court held that the existence of a pending criminal case was not a part of the essential public policy or due process that could breach Colombian international public policy.
  5. The tribunal ruled on defences that were not raised during the proceedings. The Court determined that the arbitration tribunal had not exceeded its authority as it had followed the terms of reference, which were binding on the parties.
  6. The award ruled on issues that were not subject to arbitration after the withdrawal of the counterclaim. The Court held that a decision over certain issues that had been raised in the counterclaim (which was later withdrawn) did not compromise the validity of the award as they were covered by the arbitration agreement and had been raised in other documents of the proceeding.

Conclusion

The Ferrovial and Ventura decisions firmly emphasize the limited review that is to be performed by the Colombian Supreme Court when deciding annulment requests, as well as the need to interpret annulment grounds in favour of international uniformity and harmonization. The Supreme Court’s decisions remove the awards rendered in international arbitrations seated in Colombia from the perils embodied by local idiosyncrasies, and allow international practitioners to more accurately predict the scope of judicial control over arbitration awards. These two decisions have shed light on how the Court will interpret specific grounds for annulling awards and will likely be the backdrop against which the Colombian Supreme Court decides over annulment actions against awards issued in international arbitrations seated in Colombia.


1
Art. 62 of Law 1563 states that the law applies to arbitrations whose seat is located on Colombian territory, with the exception of the provisions contained in Arts. 70, 71, 88, 89, 90 and 111 to 116.

2
Under Art. 62 of Law 1563 an arbitration is international when a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their domiciles in different States; b) the place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected, is located outside of the State in which the parties have their domicile; or c)The controversy submitted to the arbitration affects the interests of international commerce.

3
In the case of awards involving State entities, the Consejo de Estado decides annulment actions against awards issued in both domestic and international arbitrations.

4
Consorcio Ferrovial – Sainc v. Carbones del Cerrejón Ltd., Supreme Court of Justice, Civil Chamber, 19 Dec. 2018, Decision No. SC5677-2018, Issuing Justice: Margarita Cabello Blanco (ICC Case No. 19725/ASM). See http://www.cortesuprema.gov.co/corte/wp-content/uploads/2019/02/SC5677-2018-2017-03480-00-1-62.pdf

5
See Art. 4(8) of the IBA Rules on the Taking of Evidence in International Arbitration provides: ‘If the appearance of a witness has not been requested pursuant to Article 8(1), none of the other Parties shall be deemed to have agreed to the correctness of the content of the Witness Statement’.

6
International public policy refers to the set of the most basic and fundamental principles of Colombian judicial institutions and has been construed by the Court to refer to ‘public policy in the context of private international law’. In relation to the foregoing, the Court has understood any violation to Colombian international public policy as an arguable defense against the enforcement of an international award, and has strictly separated international public policy from domestic public policy, encompassing the former as a much narrower realm.

7
Esther Ventura de Rendón & Juan María Rendón Gutiérrez v. Viviane & Michael Ventura, Supreme Court of Justice, Civil Chamber, 15 Jan. 2019. See http://www.cortesuprema.gov.co/corte/wp-content/uploads/2019/07/SC001-2019-2016-03020-00_compressed.pdf.

8
Supreme Court of Justice, Civil Chamber, 12 July 2017, Decision No. SC9909-2017, Issuing Justice: Aroldo W. Quiroz.

9
Law 315 of 1996 was the previous international arbitration statute in Colombia.

10
See supra note 2.