In this case, the losing party to arbitration proceedings before the Madrid Court of Arbitration brought an action to set aside the award before the Court of Appeal of Madrid on the grounds of a breach of public policy alleging, among other reasons, that the award relied upon documents produced by the other party, which had been forged.

To support this argument, the challenging party initiated criminal proceedings before the Criminal Courts of Madrid accusing the other party of forgery. The challenging party then requested a stay of the proceedings to set aside the arbitral award until the Criminal Court ruled on the forgery charges, since the determination of the forgery issue was essential for the decision of the setting aside action. This request for a stay was based on the Spanish civil procedure principle of prejudicialidad penal (based on the general civil law principle of le criminel tient le civil en état), which provides for the suspension of civil proceedings when there are criminal proceedings on foot whose outcome may be decisive for the civil proceedings. The suspension will last until the criminal proceedings are concluded.

The Court of Appeal, although acknowledging the application of this principle to the action to set aside an award, rejected the request to stay the proceedings, on the grounds that the determination of whether the documents were forged or not might have been relevant for the arbitration proceedings, but was irrelevant for the action to set aside. An action to set aside, the judgment continues, only allows for an external and formal review of the proceedings and does not permit consideration of the merits of the case; and the alleged forgery of the documents was an argument that only related to the merits of the case. In its ruling, the Court of Appeal relied on a recent judgment of the Court of Appeal of Barcelona, of 15 January 2010 (SAP B 1720/2010), where the court rejected an application to stay the proceedings on similar grounds.

Having rejected the request for a stay, the Court of Appeal of Madrid then dismissed the grounds for a challenge of the award. In particular, and in respect of the alleged forgery of documents, the Court of Appeal ruled that, even if the documents produced in arbitration had been forged, this would only affect the merits of the case, whose review would exceed the role of the court in an action to set aside under the Spanish Arbitration Act 60/2003 (SAA) and would not constitute a breach of public policy, as it has to be understood in the context of the challenge of an arbitral award.

This decision constitutes another sign of the resolved pro-arbitration position of Spanish courts, which in this case applied the narrowest interpretation of the public policy ground for annulment and distinguished the action to set aside from a review of the merits. This appears to be the position even in a case where criminal proceedings are on foot in respect of the alleged forgery of evidence upon which the award relied.

Such an extreme ruling might differ from the position taken by the courts of other jurisdictions, such as France, and by international commentators, which understand that fraud or falsification may be covered by the public policy ground in an action to set aside an award.

However, this decision does not mean that Spanish law fails to provide a remedy against forged documents produced as evidence in arbitration and relied upon in an award. The SAA provides for an action in revision before the Spanish Supreme Court (common for final judgments and arbitral awards issued in Spain), which includes as a possible ground that a final decision in criminal proceedings declares that the documents on which the award relied upon were forged. This action in revision does not exist, however, in many jurisdictions. In others (such as France or Switzerland) there is discussion as to whether, despite not being included in their laws, this action is possible and under what conditions.

Finally, the decision of the Court of Appeal of Madrid did not tackle another hot topic for arbitration in Spain, that is, whether the principle of le criminel tient le civil en état obliges or allows an arbitral tribunal seated in Spain to stay arbitration proceedings at the request of a party, when criminal proceedings exist in Spain (or abroad), where the outcome may be decisive for the issues to be decided by the arbitral tribunal. This question remains, for the time being, undecided.

Case: SAP M 17907/2010.