Arbitration in Latin America

Arbitration in Latin America

Arbitration in Latin America has now ceased to be a mystery. The phenomenon of arbitration has been increasing both in the amount of cases and the number of institutions dedicated to managing cases.

Ten years ago the big boom was in commercial arbitration; the different legal provisions that were instated in each country, along with the appearance of national arbitration institutions, give us a clear picture of that fact. So much so that the Inter American Development bank financed projects in 12 countries starting in the late 1990s. Thus, Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Paraguay, Peru, Uruguay and Venezuela were able to revise the laws pertaining to alternative dispute resolution and set up or strengthen institutions in order to manage commercial arbitration and mediation cases. Most of these institutions were created within existing entities such as chambers of commerce. The need to insure that internal laws did not conflict with proposed legislation brought about an interest of its own reflected in the inclusion of arbitration and mediation as material for seminaries and such.

It is not easy, nor is it proper, to include all Latin American countries in one general opinion. There is no such thing as Latin American arbitration. Each and every country has its own legislation, institutions and by-rules, and even the group efforts that have been made at the regional level have not given any uniform results.

There are many projects undertaken in the belief that a uniform approach to arbitration exists. But this is not the case. While there are countries whose legal system is very friendly to arbitration and have been party to the New York Convention for a long time, and whose court system may also be friendly, things are not so everywhere, nor is there constancy. A country like Colombia was pioneering in the field while Brazil did not show any interest and others were still timid about the subject. The passage of time has brought Brazil into the modern arbitration world and Colombia has begun to make steps in the same direction. Consequently, conditions of arbitration in different countries are not as clear as they used to be.

Commercial interests in the region vary over time and changes of governments and their policies. What may have been true of Venezuela a decade ago is no longer the case owing to a new government that has extremely different priorities, and thus even traditional commercial allies have been substituted by others. We need to question traditional paradigms if we are to meet today’s challenges, including globalisation, new trade and investment methods and constant financial constraints. What worked in the past will not necessarily work in the future.

Sometimes it is conveniently forgotten that in commercial contracts parties consent to arbitration by including their arbitration clause in the contract. States, on the other hand, give their consent in their treaties. But consent is present either way you look at the situation. That the perception could be changed because of political reasons does not alter the fact that the treaty was signed and consent was given for that particular treaty, be it regional or bilateral, and the protection of investments that may come as a consequence of the treaty or that are in any way protected by the treaty continues to be valid.

As politics and enforcement of previous commitments change, so does arbitration. It must adapt to the new circumstances and so must all those who work within the boundaries. There seems to be an increasing visibility of the subject in every area, be it commerce, employment or investment. With the increased visibility has also come a division of perspectives, with the legal world looking one way and the political world looking another.

Investment arbitration is in vogue in Latin America. The number of investment arbitration cases has increased in the past years. We could try to analyse the reasons but they are many, some legal, some political and some commercial. The point is that they exist and arbitral proceedings have become increasingly complex and difficult in every sense. The reactions of the parties to arbitration procedures have also changed considerably. Investment arbitration cases have been used as political leverage by some regimes in their efforts to erase the line between state and government. The same can be said for the reaction of counsel to the parties. The firms that have arbitration teams have subsequently arrived at the conclusion that investment arbitration requires specialised attention and so have dedicated parts of their teams exclusively to arbitration. There is much ground to cover, and the proliferation of cases has influenced the escalation of fees.

We are at a loss to elaborate on the various criteria developed to distinguish the exclusive approach that must be given to investment arbitration in contrast to the principles of commercial arbitration. We do recognise that confidentiality, remedies and a series of other issues substantially differ from one to another, yet the relationship between them is not clear.

The quality and quantity of information that is available has also increased. Publications in Spanish and Portuguese have been created and translated into English. Specialised publications have also increased and information abounds on the internet on the subject.

The figures below give a good indication of the increase of cases in the big international institutions with a presence in Latin America. The ICC has published that 12.4 per cent of their cases last year were from Latin America, which gives us 200 cases in total with 115 Latin American arbitrators. ICDR states that 87 out of 703 cases had parties from Latin America and nine Latin American arbitrators were named. ICSID figures also show an increase in cases coming from Latin America.

In this year’s General Assembly of the International Federation of Commercial Arbitration Institutions (IFCAI) there was general consent as to the growing number of cases that have come out of the world economic crisis at both the domestic and international level. There tends to be the belief that many cases have arisen from the crisis and the numbers may decrease when the crisis subsides. We believe that information on arbitration in the legal and business circles has assumed an important role in conflict resolution and that this role will, in the end, determine the increase or decrease of cases.

Arbitration is a wonderful legal tool to work with, but like any tool, if mishandled it can create more problems than it pretends to solve. The use of arbitration as a means to resolve disputes and the possibility of problems arising is where the challenge lies for all those who handle arbitration cases from different angles, such as counsel, arbitrators and institutions. And we mustn’t exclude the courts, even though they only interfere when asked to do so by the aforementioned.