In a decision issued on 30 June 2011 (Decision No. 506/2011), section 12 of the Court of Appeal of Madrid annulled an award rendered under the auspices of the Spanish Court of Arbitration (Corte Española de Arbitraje) because of a violation of the right to an independent and impartial arbitrator.

The party seeking the annulment of the award had made a timely challenge of the arbitrator during the arbitration proceedings, but the challenge was dismissed. The party restated the same arguments in the annulment action, namely:

The Court of Appeal indicated that it is not necessary to determine whether the challenged arbitrator will act on that precise case in a violation of objectivity and justice, but rather whether the existing relationships may cast doubts as to his impartiality. The court determined that the mere existence of reasons that can cast doubts on the impartiality of the arbitrator should be enough for him to resign, especially in an ex aequo et bono arbitration, such as the one at hand.

The court, when analysing the existence of "justified doubts regarding his independence and impartiality", indicated that not every kind of previous relationship between an arbitrator and parties or their counsel shall result in the court upholding a challenge against an arbitrator's independence or impartiality. That could lead to challenges being accepted based on infrequent, incidental or irrelevant relationships. The court confirmed that decisions should be made on a case-by-case basis.

Taking all this into account, the court found that the relationship between the arbitrator and the opposing party's counsel constituted an important relationship of friendship and not a mere sporadic relation. This, together with the fact that the arbitrator had not disclosed some of these relationships until he was challenged, was held to be sufficient to question his independence and impartiality and, thus, the arbitrator's challenge should have been upheld.

This Madrid Court of Appeal's decision that the relationship between the arbitrator and the party was one that cast doubt on the arbitrator's independence and impartiality may be considered rather strict. However, it may be read as a warning to arbitrators to disclose any relevant information at the time of their appointment, and to arbitration practitioners in general regarding the level of professional and personal relationships that can be considered inadmissible on a challenge to an arbitrator's independence and impartiality.

In a decision rendered on 21 June 2011 (Decision No. 338/2011), section 14 of the Court of Appeal of Madrid dismissed an annulment action based on the alleged lack of impartiality and independence of the sole arbitrator, by applying a high standard of due diligence with regard to the party challenging the arbitrator.

In this case, the challenging party requesting the annulment argued that the sole arbitrator lacked independence for the following reasons:

The challenging party further argued that this lack of independence had become evident in a number of decisions which showed the arbitrator's lack of impartiality. Indeed, the party unsuccessfully challenged the arbitrator during the proceedings, but solely on the basis of a lack of impartiality.

The Court of Appeal indicated that all these circumstances were already part of the arbitrator's declaration of independence and impartiality (he had disclosed his position in different companies, though not the relationship between these companies and the parties in the arbitration) and all the relevant information was available on the internet. According to the court's reasoning, the fact that the information was available on the internet meant that these circumstances were public and of common knowledge, and thus part of the grounds for challenging the arbitrator that the party knew or should have known. Furthermore, the court concluded that the party, having been informed of the arbitrator's different positions, would have waived its right to challenge when signing the Terms of Reference, which provided that the parties were not aware of any circumstances that could compromise the arbitrator's independence.

The court concluded that it is the parties' minimum standard of due diligence to carry out exhaustive research when the arbitrator is appointed and thus, certain information that can easily be found cannot be raised later as a valid ground for challenging an award. To this extent, any information available on the internet is deemed to be part of what the parties should have known.

The court then rejected the alleged lack of impartiality, concluding that all of the arbitrator's decisions were part of its right to conduct the arbitration and/or decisions taken on solid grounds (such as time-barred restrictions).

This decision of the Court of Appeal might be read as a warning for parties as to the importance of carrying out extensive and thorough research on possible grounds for challenging an arbitrator at the time of appointment, in order to avoid waiver of the right to challenge.