Argentine Federal Civil and Commercial Court of Appeals applies principle of "separability" and enforces arbitration agreement | Practical Law

Argentine Federal Civil and Commercial Court of Appeals applies principle of "separability" and enforces arbitration agreement | Practical Law

Francisco M. Gutiérrez (Partner) and Federico Campolieti (Senior Associate), M. & M. Bomchil

Argentine Federal Civil and Commercial Court of Appeals applies principle of "separability" and enforces arbitration agreement

by Practical Law
Published on 04 Aug 2011Argentina
Francisco M. Gutiérrez (Partner) and Federico Campolieti (Senior Associate), M. & M. Bomchil
In a decision rendered on 1 March 2011, and published on 7 July 2011, the Federal Civil and Commercial Court of Appeals, chamber I, seated in Buenos Aires, applied the principle of separability of arbitration clauses, and enforced an arbitration agreement by ordering the constitution of an arbitral tribunal.
In Smit International Argentina SA v Puerto Mariel SA s/Tribunal Arbitral ED (07/07/2011, nro 12.786), the parties had executed a maritime contract, which contained an arbitration clause providing that any dispute arising out of the contract would be settled through ad hoc arbitration. Once Puerto Mariel SA (the respondent) had declared the contract terminated, Smit International Argentina SA (the claimant) notified its request for arbitration. The respondent rejected the request for arbitration on the ground that the arbitration clause was no longer in force.
The federal court rejected a request for preliminary measures filed by the claimant, who sought enforcement of the arbitration agreement.
The Federal Civil and Commercial Court of Appeals (Court of Appeals) revoked the decision of the federal court, stating that the termination of a contract containing an arbitration clause does not affect the arbitration agreement itself. In this regard, the Court of Appeals declared that, even though Argentine law does not expressly recognise the principle of separability of arbitration agreements, that principle should apply to the present case pursuant to case law and modern legal doctrine. Therefore, the Court of Appeals compelled the respondent to constitute the arbitral tribunal in accordance with the arbitration clause.
In a separate dissenting opinion, a judge of the Court of Appeals stated that the dispute was not arbitrable because it did not concern a simple breach of the contract, but rather the effects of its termination, which should be decided by the courts. Additionally, in the judge's view, the dispute was no longer covered by the arbitration clause since the contract had been terminated.
The majority decision is relevant because it recognises that an arbitration agreement is separate from the contract in which it is included and, therefore, survives its termination, which is a well-established rule in international arbitration. Additionally, it is important to highlight that the court provided assistance in support of the arbitration by enforcing a valid arbitration agreement and ordering the constitution of the arbitral tribunal to settle the dispute, without interfering in what the parties had initially agreed.