The Spanish Constitutional Court shields arbitration in Madrid. Why the Judgment of 23 June 2026 matters

On 23 June 2026 the Plenary of the Spanish Constitutional Court (the “TC”) handed down a judgment that everyone practising arbitration in Spain should read carefully. The application for constitutional protection (recurso de amparo) was brought by a Luxembourg company, Tempus Holdings 76, S.A.R.L. (“Tempus”), against a judgment of the Civil and Criminal Chamber of the High Court of Justice of Madrid (the “TSJM”) that had partially set aside an award.

The TC granted the amparo, quashed the TSJM decision and, without remittal, declared the award final. Beyond the specific case, the judgment lays down a doctrine that will, I hope for good, settle how the judicial control of awards is to be understood when public policy is invoked.

Summary of the case

Two companies, the Spanish Looping Webs, S.L. (“Looping”) and the Luxembourg Tempus, signed an Investment and Shareholders Agreement in February 2020 to bring together and operate several hotels under a single brand and sell them to a third party within five years.

The agreement was subject to the condition precedent of obtaining bank financing before 31 March 2020. Then the pandemic arrived, Tempus announced that it would not assume its obligations, and Looping resorted to the arbitration agreed in the contract, administered by the Madrid International Arbitration Centre (today CIIAM).

The final award, dated 13 February 2023, held that Tempus had breached the contract and ordered it to pay the consequential loss proven in the proceedings, assessed at 275,033.51 euros. However, it rejected the claim for loss of profit, which Looping put at more than 30 million.

The arbitral tribunal explained this rejection in three paragraphs of the award: the business had run at a loss after the breakdown, it was not proven that performance of the contract would have generated profits, and factors unrelated to the breach had intervened, in particular Covid-19. The contract had lasted six weeks and, in the award’s own words, was a business venture whose course was still to be defined.

The decision of the High Court of Justice of Madrid

Looping sought to set aside the award as regards the unfavourable ruling on loss of profit for breach of public policy, under article 41.1 f) of the Spanish Arbitration Act. The TSJM found in its favour. Its argument was that, although the award contained a formal reasoning on loss of profit, that reasoning was merely apparent.

For the Court, the arbitrators stated factual certainties without connecting them to the evidence taken and, above all, without the slightest reference to the expert reports in the file. The TSJM did not deny that a reasoned text existed; what it reproached was the absence of any evidentiary anchoring, which it characterised as a radical deficit of reasoning and, on that basis, as an infringement of procedural public policy.

The Court added two criticisms concerning the evidence: that a cross-examination between the experts requested by Looping had been improperly denied, and that the principle of immediacy had been infringed by failing to repeat the expert examinations after the replacement of the presiding arbitrator. It is worth knowing that the TSJM judgment carried a dissenting opinion from its President, who held that the majority had not respected the constitutional doctrine on the duty to give reasons in awards.

Under the TSJM’s scheme, the reasoning could be graded, that is, an award could be reasoned yet fall below a threshold of evidentiary sufficiency, and that deficit was enough to set it aside for breach of public policy. It is precisely this scheme that the Constitutional Court dismantles.

The doctrine laid down by the Constitutional Court

The TC starts from a premise already known, namely that arbitration rests on party autonomy under article 10.1 of the Spanish Constitution. Where the parties have excluded the ordinary courts from resolving the merits of their dispute, judicial control of the award can only be external, exceptional and strictly delimited. The action to set aside is not a second instance.

On the duty to give reasons, the Court recalls that article 37.4 of the Spanish Arbitration Act requires the award to be reasoned, nothing more. It does not impose a standard equivalent to that of court judgments, nor a given length, nor the express citation of every item of evidence, nor an individualised assessment of each of them. It is enough that the award contains reasons that allow the decision-making criterion to be reconstructed.

The central contribution of the judgment is the binary character of the standard of review. The Constitutional Court declares that the sufficiency of arbitral reasoning does not admit of degrees. One cannot ask whether an award is more or less reasoned, or whether its reasoning is more or less dense. The only legitimate question is whether there are reasons or there are not. Any assessment of the insufficiency of the reasoning that does not amount to its actual absence falls outside article 24.1 of the Constitution and article 41.1 f) of the Arbitration Act.

Applied to the case, the award did contain reasoning on loss of profit, integrated moreover into its logic on the attribution of damage and the standard of proof. What the TSJM called apparent reasoning was not an absence of reasons, but a requirement of reinforced evidentiary explicitness that does not form part of the arbitral standard. Under the guise of reviewing the reasoning, the TSJM had reconstructed the arbitrators’ reasoning and replaced their assessment of the evidence with a standard of full judicial review. That is reviewing the merits, and that is what public policy does not authorise.

The Court identifies a second excess, since the TSJM went on to assess the denial of the cross-examination between experts and the non-repetition of the expert examinations even though Looping had never raised those matters within the arbitral proceedings. It had several opportunities and acquiesced in all of them. Article 6 of the Arbitration Act is clear in providing that a party who is aware of an infringement and does not object to it in time waives the right to object later. That matter had therefore lapsed and could not be introduced for the first time before the courts.

The most striking part of the judgment is the remedy afforded by the TC. Tempus had asked that the proceedings be remitted so that the TSJM could deliver a fresh judgment. The Constitutional Court, however, went further, since it quashed the TSJM judgment and directly declared final the part of the award that rejected loss of profit, without returning the matter to the ordinary courts. The reasoning is consistent with the main doctrine, for as the parties had excluded judicial jurisdiction over the merits, restoring the claimant in its right meant returning the award to its full effectiveness. The award thus recovers its effectiveness in its original terms.

This judgment strengthens Spain and Madrid as an arbitral seat

For years, a recurring criticism of Madrid-seated arbitration was the breadth with which some rulings of the TSJM itself had interpreted public policy as a ground for setting aside. The concern of parties and international institutions was specific, for if a court can set aside an award because it considers the reasoning insufficiently robust or that the assessment of the evidence could have been done better, then arbitration ceases to be final and becomes a reviewable first instance. That uncertainty raises costs and discourages the choice of the seat.

This judgment attacks that problem at its root in three ways.

• Predictability. By turning the control of reasoning into a binary question, the Constitutional Court reduces the margin of judicial review. An award with comprehensible reasons cannot be attacked for lack of reasoning, regardless of whether a judge would have drafted them differently or in more detail. Parties who choose Madrid as the seat of arbitration now know with greater certainty what to expect from any action to set aside.

• Respect for party autonomy. The TC places article 10.1 of the Constitution at the centre of its reasoning and draws from it a practical consequence, not merely a rhetorical one, in providing that the judge hearing the action to set aside must respect the parties’ decision to remove the ruling on the merits from the courts. This is precisely the guarantee that every sophisticated user of arbitration seeks.

• Discipline over waiver. The firm application of article 6 of the Arbitration Act closes a common avenue of challenge, where a party stays silent during the proceedings and reserves its procedural objections for the setting-aside stage. The TC’s message to the parties is that objections must be raised when they arise, before the arbitral tribunal, not later before the judge.

There is an institutional detail worth underlining. The doctrine does not come from a Chamber, but from the Plenary, which took the matter to itself. And it is built on a line already begun in earlier judgments (among others, TC judgments 17/2021, 65/2021 and 146/2024), so that it is not an isolated turn but the consolidation of a criterion. For anyone assessing an arbitral seat, the difference between a Chamber judgment and a Plenary doctrine settled on precedents is relevant, since the latter offers stability.

That said, the message should not be taken out of context. The judgment does not render the award immune. Public policy continues to operate as a limit, and an award with no reason at all, an arbitrary decision in the strict sense, will remain open to being set aside. What the Constitutional Court rules out is the use of public policy as a gateway to a review of the merits disguised as control of reasoning. That distinction, between absence of reasoning and disagreement with its intensity, is what provides certainty.

Conclusion

For arbitrators seated in Spain, the judgment confirms that their duty is to set out comprehensible reasons, not to draft a judgment in the judicial manner with a detailed citation of every item of evidence. A well-built award, with a clear core of argument, is protected.

For parties and their lawyers, the message is twofold. Whoever defends an award in an action to set aside now has a weighty argument against challenges that, in substance, ask for a fresh assessment of the evidence. And whoever intends to challenge must know that procedural matters not raised in time in the arbitration are lost.

For arbitral institutions seated in Madrid, and for the CIIAM itself, the judgment is a competitive argument against other European venues. The reliability of a seat is measured by the attitude of its courts towards awards, and this ruling marks a clear direction.

Madrid had long been working to place itself among the reference seats for international arbitration in the Spanish language. A doctrine of the TC Plenary that precisely delimits the judicial control of awards and reinforces the primacy of the parties’ will is exactly the kind of signal that the arbitration market observes before choosing where to litigate.

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