The Barcelona Provincial Court delimits the scope of arbitration agreements

Factual background

On 11 May 2011, a French producer of spirits and a Spanish distributor signed an agreement for the exclusive distribution of certain vodkas and gins in Spain. The parties expressly agreed that the French law would be the law applicable to the contract and that any dispute relating to the agreement would be submitted to arbitration.

Furthermore, there was a verbal agreement between the parties for the exclusive distribution of other products in Spain since 2001.

On 30 January 2018, the spirits company informed the distributor of its decision to terminate the commercial relationship because the minimum sales targets for 2016 and 2017 had not been met. The distributor did not agree and argued that it had been unable to achieve the agreed volume of purchases due to the existence of parallel imports of the product.

The distributor brought an action for unfair competition and breach of contract against the spirits company before the Barcelona Commercial Court on the basis that the commercial relationship was unilaterally terminated without just cause. The subject of the dispute encompassed the 2011 agreement and any previous commercial relationship between the parties.

Declinatory exception

Subsequently, the spirits company filed a declinatory exception on the ground that the dispute had to be settled by arbitration. In its ruling of 16 November 2018, the  Commercial Court dismissed the declinatory exception.

The defendant filed an appeal insisting on the following points:

• The preclusive effect of an arbitration clause for ordinary jurisdiction (the New York Convention on the Recognition and Enforcement of Arbitral Awards and the European Convention on International Commercial Arbitration).
• Both the unfair competition action and the breach of contract fell within the bounds of the arbitration agreement. In addition, the appellant considered that arbitration could not be avoided by the fact that the termination might affect other products governed by agreements that were not in written form.
• The appeal emphasised that the Kompetenz-Kompetenz principle (article 22 of the Arbitration Act) gives arbitrators the power to rule on their own jurisdictions.

Ruling of the Provincial Court of Barcelona

The Provincial Court of Barcelona dismissed the declinatory exception again.

According to the provincial court, any understandings reached prior to the 2011 agreement did not fall within the scope of application of the arbitration agreement. Based on earlier case law, the ruling pointed out that the arbitration agreement was only effective in respect of the matters expressly fixed by the parties or arising from a specific legal relationship. In other words, it could not be indiscriminately applied to all disputes between the parties.

The provincial court also concluded that the claim could not be split into an arbitration proceeding and a court proceeding because this would break the principle of the unity of proceedings. The ruling determined that, since the spirits company terminated the commercial distribution relationship in a single act and for the same reason, it was not possible to split the dispute.