2016: Latin America continues to move forward

  • 10 November 2016
DOCDEX expert

The biggest arbitration event of the International Chamber of Commerce (ICC), the 14th ICC Miami Conference, is about to get underway on 13 November. In preparation for the sold out event, Hogan Lovells partner Daniel E. Gonzalez takes a moment to reflect on Latin America’s recent progress in the field of international arbitration in this guest column for ICC.

Like the tortoise that beat the hare, Latin America continues a steady path, thoughtfully addressing many issues that international arbitration faces around the world. As 2016 draws to an end, a year of positive developments closes. Legislative advancements made with new arbitration-friendly laws and important court decisions rendered regarding the recognition of international awards further demonstrate the respect Latin America is giving international arbitration. Investment arbitration also made strides in the region, as the governments of Argentina and Ecuador settled long-lasting investment disputes and UNASUR is now a potential new forum for these types of matters.

In late 2015, the Brazilian Arbitration Act was modified, reforming Brazilian arbitration practice. For example, the new provisions introduced the new “arbitral letter,” which works as an instrument for arbitrators to request assistance from courts, such as orders to compel witness appearances. In mid-2015, Argentina modified its Commercial Code, expressly including some international arbitration principles (e.g., severability). Even though the new legislation does not mirror the UNCITRAL Model law–and some think that not all the new provisions are arbitration-friendly–it still appears to be a step in the right direction.

Crossing over into Chile, the Chilean Supreme Court recently demonstrated its intent to reinforce the country as a pro-arbitration jurisdiction. The Chilean courts granted the recognition and enforcement of an arbitral award rendered by an ICC tribunal seated in The Hague. The dispute was between a Chilean corporation and a Hong Kong based company. When the latter moved to enforce the award, the Chilean company opposed. They argued that, among other issues, the tribunal violated Chilean public policy by denying due process when it accepted untimely evidence without granting an opportunity for the other party to challenge it. Although the challenges to awards on the basis of lack of “due process” are on the rise around the world, the Chilean Supreme Court showed wisdom and restraint in rejecting this argument. Their explanation being that the enforcement proceeding should not entail a reassessment of the evidence.

In a similar case in June 2016, Colombian courts finally settled the discussion on the choice-of-law clauses incorporated in commercial agency agreements. The Colombian Supreme Court confirmed and enforced an award concerning a commercial agency agreement between an American company and its Colombian sales representative, which selected a foreign governing law. The Colombian party opposed the enforcement, arguing that the choice-of-law provision violated Colombia’s Commercial Code provision that prohibits the application of foreign laws to these types of contracts. The court rejected the argument and clarified that parties’ choice of foreign law in a commercial agency agreement is a matter of domestic public policy. The court further stated that it was not to be confused with the concept of international public policy–a narrower concept restricted to the basic fundamental principles and values of the local legal framework. Ultimately, the court found there were no sufficient grounds to deny enforcement under the New York Convention.

On the investment arbitration side, Latin American states reached important settlements throughout this year. In May 2016, seeking to attract foreign direct investment, Argentina agreed to pay US$217 million to finally end long-lasting disputes in the oil and gas sectors (BG and El Paso)–an industry critical to the country. Additionally, the Abaclat ICSID case settled. Argentina agreed to pay US$1.35 billion to Italian banks representing 50,000 claimants in exchange for the dismissal of the ICSID claim with prejudice. This represents the first settlement of an ICSID class action claim. Also, published in late 2015, the Argentine National Court of Appeals issued a notable investment arbitration decision. The court affirmed that ICSID awards are not subject to exequatur proceedings. These developments show that Argentina is embracing a new approach to investment disputes as it seeks to attract new investment.

In July 2016, Ecuador settled an important pending dispute over an award from the Hague Permanent Court of Arbitration.

Finally, 2016 ushered the UNASUR Arbitration Centre, a new potential forum for investment disputes among its 12 member countries. One of the particularities of the UNASUR arbitration rules is the creation of an appeal mechanism. The effectiveness of this new option remains to be seen.

The race to legitimise, support and enforce international arbitration is a long one that started many years ago. Although Latin America may not have been in the front row of the starting line, it certainly has shown the patience and resolve of the tortoise. With each small step, Latin America is being recognised as a leader in international arbitration.

©Hogan Lovells 2016