Annulment of Arbitral Award due to Arbitrator's Inability and Procedural Violations: Successful Case

Dear Friends and Clients,

We successfully obtained the annulment of an arbitration award issued by the tribunal of the National Mediation and Arbitration Center of the Construction Industry Chamber of Quito (CENAMACO). Thanks to this annulment, we prevented our client from having to pay a sum of three million three hundred and fifty thousand US dollars (USD 3,350,000).

The original award ruled against our client due to serious irregularities in the arbitration proceedings, including the disqualification of one of the arbitrators and the violation of fundamental principles of arbitration.

The defense of the nullity action was led by doctors José Meythaler y Vanesa Aguirre, who were supported by a team of expert lawyers: Jhon Mora, Juan José Peña y Ricardo Enríquez. Together they argued and demonstrated the irregularities of the process, which led to the annulment of the arbitration award.

Case Background

Our client, a company in charge of managing the Logistics Center of the Quito Airport, was sued by a civil engineer, who alleged that he had not received the corresponding payment for an earthwork. The contract related to this work had been signed with a third party, unrelated to our client.

Relevant Aspects

This case presented several legal challenges, among them:

1. Amount Claimed: USD 3,350,000, plus accrued interest since the issuance of the award.

2. Irregularities in the Arbitral Tribunal: The presiding arbitrator did not inform the arbitration center or his co-arbitrators that he had previously advised our client in the case he subsequently tried. This omission compromised his impartiality and affected due process. His conduct violated the procedures set forth in Article 31, letter e) of the Arbitration and Mediation Law, which guarantees respect for due process in arbitration. In addition, this advice was concealed by the previous owners of the company, which is now the subject of international arbitration.

3. Violation of the Principle of Confidentiality: The arbitration claim used evidence obtained from another arbitration process, in clear contravention of Article 34 of the Arbitration and Mediation Law, which constituted a serious irregularity in the Ecuadorian arbitration system.

4. Questionable Assumption of Jurisdiction: The arbitral tribunal decided to assume jurisdiction, despite the fact that the person who signed the contract and arbitration agreement with the claimant was not acting as a representative of our client, who was not yet incorporated as a company at that time.

Impact of the Resolution

Our team's legal strategy has resulted in two key achievements:

1. Protection of the Client's Patrimony: The annulment of the arbitration award prevented our client from having to pay a large sum based on an irregular process.

2. Restoration of the Right to Due Process: A significant violation of the fundamental principles of arbitration was corrected, with an impact that transcends this particular case, by:

   1. Strengthening confidence in the arbitral system: this resolution reaffirms arbitration as a valid mechanism for dispute resolution, as established in Article 190 of the Constitution.

   2. Reaffirming the obligation of arbitrators to act in accordance with the law: The ruling emphasizes that arbitrators, like judges, must guarantee legal certainty, as provided in Article 82 of the Constitution.

This case highlights the following key issues:

1. It reaffirms Equality Before the Law: Neither judges nor arbitrators are above the law. All must comply with their legal obligations and ensure the fairness and transparency of the proceedings.

2. Obligation of Arbitrators to disclose Conflicts of Interest (vices in the conformation of the arbitral tribunal): The presiding arbitrator concealed that he had previously advised our client in the same matter he was resolving, which constitutes a violation of Article 19 of the Arbitration and Mediation Law. This omission was determinative for the nullity of the award, as the arbitrator was under an obligation to disclose any conflict of interest. Failure to comply with this obligation vitiates the arbitration process and justifies the appointment of another arbitrator without conflicts.

3. Abuse of the arbitral tribunal's decision: Despite the fact that the claimant only requested interest until the issuance of the award, the tribunal decided that interest would continue to accrue. This action exceeded what was requested by the claimant, which constitutes a serious irregularity and reinforces the invalidity of the award.

   
   

Conclusion

This case not only highlights our firm's ability to handle complex arbitration disputes, but also reaffirms our commitment to the defense of our clients' fundamental rights, especially the right to due process.

We have also succeeded in establishing an important precedent that reinforces the importance of keeping arbitration under strict controls, ensuring that the parties involved act on a level playing field. This ruling guarantees the fundamental right to a truly impartial arbitral tribunal and contributes to the strengthening of the principle of legal certainty in the country.

If you need legal advice or wish to discuss a similar case, please do not hesitate to contact us. We are here to help you.

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