The criteria of the Constitutional Chamber of the Venezuelan Supreme Tribunal of Justice in relation to arbitration

Andrea Cruz
Torres, Plaz & Araujo, Caracas
acruz@tpa.com.ve

Gabriel Sira
​​​​​​​Centro para la Integración y el Derecho Público (CIDEP), Caracas
​​​​​​​gsira@cidep.com.ve​​​​​​​

In 1999, arbitration was included in the Venezuelan Constitution as an alternative dispute resolution method (ADR) [1], ie, alternative to the judicial process before the courts but, at the same time, considered as an integral part of the Venezuelan justice system.[2] Since then, different matters regarding the use of ADRs have been subjected to the review of the Constitutional Chamber of the Supreme Tribunal of Justice (SC/TSJ), the Highest Court in Venezuela.

This article will address some of these decisions to highlight the treatment given by the Supreme Tribunal of Justice to arbitration in Venezuela. For the sake of brevity, the comments will focus on decisions related to commercial and investment arbitration.

The legal nature of arbitration

The SC/TSJ has stated that arbitration is not part of the judicial system, understood as a rigid pyramidal organisation. However, both methods are intended to resolve disputes in an impartial, autonomous and independent manner, with respect to the due process resulting in decisions considered as res judicata and therefore enforceable.[3]

Firstly, arbitration was considered as an ‘exception to the competence’ of judicial courts to resolve disputes, based on the willingness of the parties to resort to this method.[4] Later, the Chamber has stated that arbitration does not properly constitute any exception to the ‘competence’ of ordinary courts due to the principle of unity of jurisdiction.[5]

Consequently, (1) the constitutional principles that govern the ordinary jurisdiction also govern the so called ‘arbitral jurisdiction’ and (2) the arbitral jurisdiction cannot be seen as a mere execution of a contract.[6]

Moreover, the SC/TSJ recognises that arbitration is a ‘fundamental right of constitutional rank’,[7] by which parties may obtain effective and clear decisions that guarantee access to justice and effective legal protection. However, the state maintains the monopoly on the use of force, as the enforcement of any decision – including arbitration awards – is still in the hands of the Judicial Courts. [8]

Principles and limitations of arbitration

The SC/TSJ has stated that, as well as cooperation between arbitration and ordinary jurisdiction (which can lead to the assistance and control of the latter over the former) arbitration is characterised by a series of ‘essential elements’, such as the validity and effectiveness of the arbitration agreement, the autonomy of the parties, the broad powers of the arbitrators and the immutability of the arbitration award. [9]

Constitutional Chamber has also dealt with two fundamental arbitration principles in its decisions: the kompetenz-kompetenz principle and the principle of the autonomy of the arbitration agreement. As to the first one, it has stated that only the arbitrators are empowered to rule on their own jurisdiction, provided that the arbitration agreement has not been declared null and void. [10]

As regards the second principle, the Chamber has concluded that the nullity of an agreement does not imply the nullity of the arbitration agreement contained therein. Therefore, the arbitration agreement freely, unequivocally and expressly executed by the parties preserves all legal and binding effects. [11]  

Likewise, regarding the limits of the arbitration, the SC/TSJ highlights that not every matter or dispute can be subject to arbitration. On the contrary, it is necessary that the object of the dispute is ‘arbitrable’, ie, related to rights that the legal system allows the parties to freely dispose.  However, it does not prevent disputes involving public order matters[12] or public law (for instance, a dispute related to a public-private partnership) from being solved in arbitration.[13] In these regards, it is worth noting that the Chamber has stated that an arbitration agreement included in an ‘adhesion contract’ shall be considered null and void, as this clause may infringe consumer rights.[14]

The implications of arbitration proceedings

According to the SC/TSJ, opting for arbitration instead of the ordinary jurisdiction generates ‘two immediate consequences’: the ‘express consent of the parties insofar as they may be sued in said forum, through the filing of an arbitration complaint (institutional or independent)’ and ‘the exclusion or deprivation of knowledge for those courts that, under normal conditions, would have jurisdiction over the parties or over the controversy itself’.[15]

It only applies when the parties do not tacitly waive the arbitral jurisdiction and, consequently, opt to solve the dispute before an ordinary court – as would happen if one of them files a complaint before a court and the other one does not argue lack of jurisdiction of the court but just contests the merits of the complaint filed by the plaintiff.[16]

However, in the absence of such waiver, the dispute shall be submitted to arbitration which proceedings must be accessible, impartial, suitable, transparent, autonomous, independent, responsible, equitable and without undue delay.[17]

Likewise, the SC/TSJ has been prone to accept that the parties provide evidence during arbitration proceedings, if the right to control and challenge such evidence and the principle of immediacy are not put in jeopardy.[18] Also, the Chamber has accepted that the plaintiff could ask for a precautionary measure before an ordinary court, before the arbitration tribunal is constituted. The Chamber has clarified that (1) this action could not be construed as a tacit waiver of the arbitral jurisdiction; and (2) such measures will perish once the arbitral tribunal is constituted, which may modify, expand, or even revoke the preliminary decision.[19]

The enforcement of the arbitration award

When an arbitration award is issued, it has res judicata authority and, therefore, the State shall guarantee its effects. [20] To preserve the celerity that characterises arbitration, the Venezuelan legal system allows the plaintiff to seek enforcement of the arbitration award before the corresponding court, as provided for by Article 48 of the Commercial Arbitration Law[21], thus preventing the prevailing party from trying to use force against the losing party.[22]

However, in some cases the SC/TSJ has stated that the arbitration award may be unenforceable for contravening the Constitution of the Republic or the interpretations made by the Chamber on the same text.[23] In our opinion, this understanding violates the principle of intangibility of the arbitration award, mentioned above.

It is noteworthy that the Chamber does not have a consistent approach regarding the criteria applicable to the enforcement of foreign arbitration awards in cases with the same parties and objects before Venezuelan courts. In some cases, the SC/TSJ has considered that the arbitration award confirms that the parties waived national jurisdiction. In others, it has stated that the trial known by national courts shall continue regardless of the arbitration award.[24]

Challenging an arbitration award

Under Venezuelan law, the challenge of an arbitration award is only acceptable when an action for the annulment of the award is filed. This is admitted when the interested party demonstrates the existence of one of the causes of nullity restrictively included in Article 44 of the Commercial Arbitration Law.[25]​​​​​​​

Such action is not considered an appeal mechanism[26] and it must be filed before a competent superior court of the place where the arbitration award was issued, according to Article 43 of the Commercial Arbitration Law.[27] If no annulment action is filed, the award can be enforced. [28] 

The Chamber has stated that other mechanisms, such as amparo constitucional (constitutional injunction)[29], recurso de casación (cassation appeal),[30] and revisión constitucional (constitutional review),[31] are not acceptable to annul an arbitration award. Nevertheless, in practice, it is very common to see amparos constitucionales (constitutional injunctions) filed by parties of arbitrations proceedings in order to avoid the enforcement of such awards.

Currently, the SC/TSJ is judging a case where the interested party asked the Chamber to take control over a case initially subjected to arbitration,[32] based on arguments of serious violations of constitutional rights and principles allegedly committed by the arbitral tribunal, which, if admitted by the Chamber, would lead to the annulment of the award, in accordance with Venezuelan law and the provisions of several legal systems of the world.

This action was taken through a constitutional mechanism called avocamiento.

In Venezuela, an avocamiento allows any Chamber of the Supreme Tribunal of Justice –depending on the matter – to take control over a case initially accepted by another court or even by another Chamber of the Supreme Tribunal of Justice when there are serious circumstances. These include as denial of justice, a superlative threat to the public and social interest or the need to restore order, which affect cases of great significance and importance.

Since 2020, the SC/TSJ asked the arbitral tribunal to suspend the arbitration proceedings and send the files to the Chamber. Thereafter, the possibility has increased for the SC/TSJ to deal with cases when the arbitration proceedings are affected by constitutional irregularities and violations of rights, duly demonstrated by the alleging party. Until the present date, the case is still under review by the SC/TSJ.

Although the Chamber has prevented some other mechanisms mentioned above to annul an arbitration award (ie, revision constitucional), the precedents mentioned in this article seem to indicate that there is a high probability that the Chamber, claiming its duty to guarantee the integrity of the Constitution and the fundamental rights of any of the parties, considers that it is ‘necessary’ to proceed with the avocamiento of the case. This situation may affect an arbitration agreement executed by the parties, at the time that the Chamber restates the arbitration as an integral part of the justice system and a fundamental right of constitutional rank.[33]