Common trends in international arbitration in Latin America

  • 14 November 2016
ICC in Latin America

The much anticipated ICC Miami Conference, the International Chamber of Commerce’s (ICC) biggest arbitration event of the year, begins today.

To kick off the 14th edition, Linklaters’ head of Latin America Arbitration Christian Albanesi provides his insight into the region’s international arbitration trends in this guest column for ICC.

International arbitration in Latin America is far from being a homogeneous unit. Countries in the region are different and each have a distinct legal system and approach to international arbitration. Yet, despite these inevitable differences between sovereign states, a number of common trends can be discerned.

First, there is widespread distrust by the way arbitration is handled in the region. Although largely unjustified, such distrust has been fueled by the former attitude of some Latin American countries towards arbitration. This is in addition to some unfavourable, but isolated, decisions by national courts.

Until the early 1990s, many Latin American countries adhered to the Calvo doctrine. The doctrine was based on the premise that no preferential treatment should be afforded to foreign nationals as compared to local nationals-thus being an obstacle to using arbitration to resolve disputes between foreign nationals and Latin American states. However, the influence of the Calvo doctrine has greatly diminished, with Latin American countries’ ratification of international treaties, providing for investor-state arbitrations and the enactment of modern arbitration laws in most countries.

The dwindling influence of the Calvo doctrine gave room to the emergence of a new trend: the constitutionalisation of the arbitral process. This process was understood as the use of remedies designed for the protection of constitutional rights (known as amparo in several jurisdictions) in the field of arbitration. The application of constitutional remedies against arbitral awards or decisions results in judicial interference and disruption of the arbitral process. This is due to the fact that it broadens the limited scope of review allowed to judicial courts under both the New York Convention and most national legislations-thus undermining the principle of finality of arbitral awards. This application does not seem to be justified given that the enduring principles of due process and public policy already offer sufficient protection to substantive rights. Fortunately, in most Latin American countries, national courts have limited the use of amparo to rather exceptional situations.

However, in the context of investor-state arbitration, there is talk of the return of the Calvo doctrine. Countries such as Bolivia, Ecuador and Venezuela have denounced the ICSID Convention and introduced changes to their law on grounds of sovereignty. Similarly, in an effort to limit the jurisdiction of ICSID, a group of Latin American countries led by Ecuador have called for an alternate Arbitration Centre, which would allow for state-to-state and investor-state dispute settlement under the rubric of the Union of South American Nations (UNASUR).

Arbitration in the region has sadly suffered from stigmatisation. This has resulted from a number of infamous court decisions-the most notable being Yacyretá, Copel, TermoRio and Radio Centro-notwithstanding the fact that some of these cases ultimately ended in a satisfactory manner. No jurisdiction is immune from bad decisions, however, no matter how conversant with international arbitration their courts may be. The decisions of the New York courts in VRG Linhas Aereas S.A. v. MatlinPatterson Global Opportunities Partners II L.P. prove the point. Here, the enforcement of an award was refused because the arbitral tribunal had accepted jurisdiction over a non-signatory, even though the non-signatory had signed an amendment to the contract containing the arbitration agreement and the award had been confirmed by the courts at the seat of the arbitration. The difference between this decision and a bad decision from a national court in Latin America is that the former had almost no repercussions.

Other trends that span the entire region are fortunately more positive. One of these is the continuing growth in the use of commercial arbitration. According to ICC statistics, the number of Latin American parties in ICC Arbitration rose from 170 in 2005 to 393 in 2015 (+131%), while the number of arbitrations seated in Latin America increased from 20 to 66 in the same time span (+230%).

Equally impressive is how receptive Latin American countries are to international conventions on international arbitration. The great majority of the countries in the region have ratified the New York Convention; 18 countries have ratified the Panama Convention; and 10 have ratified the Montevideo Convention. Most Latin American countries have modernised their arbitration laws. Ten countries have adopted-to varying degrees-the UNCITRAL Model Law, as well as other measures, including creating specialised courts dealing with arbitration.

The rise in the number of arbitrations in Latin America and the increasing sophistication of practitioners in the region has led to an increase in the number of Latin American arbitrators. In ICC Arbitration alone, the number of Latin American arbitrators grew from 70 in 2005 to 185 in 2015 (+164%). Many of them also sit in arbitrations unrelated to the region. The use of Spanish and Portuguese in the conduct of arbitrations, as well as in conferences and publications on arbitration, is no longer unusual.

The increase of international commercial arbitration in Latin America is further reflected by the proliferation of local arbitral institutions in the region. The Inaugural Survey of Latin American Arbitral Institutions conducted by the Institute for Transnational Arbitration (ITA) in 2011 identified 165 local arbitral institutions operating in the region. Another positive pan-regional development was the creation of the Latin American Association of Arbitration (ALARB) in 2010. ALARB is a group of lawyers dedicated to the practice of international arbitration in Latin America. Through the exchange of ideas, groups like ALARB and the ICC Latin American Arbitration Group have contributed to the development of international arbitration in Latin America and drawn attention to the challenges it still faces.

No effort should be spared to educate public officials, judges and the general public so that international arbitration continues its development in Latin America.

©Linklaters 2016