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Update: Reforms to Argentina’s Arbitration System

Update: Reforms to Argentina’s Arbitration System

It has been widely recognised that since the 2001 economic crisis, Argentina has generally struggled to reach its full potential economically. Under the successive Kirchner administrations, the country took an increasingly closed and nationalist approach towards foreign policy. Argentina is widely seen as one of the countries with the most untapped economic potential worldwide. Since his election in late 2015, President Mauricio Macri has been working to change this, with a steady stream of economic, political and legal reforms seeking to improve Argentina’s business atmosphere and in turn stimulate long-term private investment and foreign interest within the market, with the aim of ultimately moving beyond the economic issues that have remained persistent challenges over recent years.

It has certainly not been an easy path for Macri’s coalition, Cambiemos (literally translated, the party name means ‘Let’s Change’). Macri has made frequent reference to his administration’s ‘heavy inheritance’, as they deal with an economy coming out of a recession as well as the ill effects of soaring inflation and over-spending by the previous government. While progress towards change has been slower than some would have liked, investors have shown a strong and clear preference for Macri’s positions and ideologies. However, many observers are waiting for further signs that efforts towards reform will continue.

This post will discuss some of the changes being made to the legal system—in particular, the current system of arbitration.  As it stands, Argentina’s arbitration system stands as one of the biggest negative detractors to foreign investment. Argentina’s arbitration legal framework is a clunky relic, with a disintegrated system lacking a unifying arbitration statute, either domestically or internationally. There are currently two different federal statutes regulating arbitration, and in turn, the majority of the 23 provinces each have their own provisions outlaying separate arbitration practices. To make matters even more confusing, a number of inconsistencies and contradictions have become evident which only compound the existing difficulties.

Big steps are already being made to resolve these issues. On 7 September 2017, the Argentine Senate voted 43-1 strongly in favour of adopting the International Commercial Law bill, which in turn is strongly based on the United Nations Commission on International Trade Law’s (UNCITRAL) Model Law on Commercial Arbitration, which aims to provide a method to fairly and efficiently settle disputes arising in the course of international commercial relations.  This means the bill will now be able to be voted on by the House of Deputies. The Model Law has been widely adopted internationally—with the exception of Argentina and Uruguay (which is already moving towards adopting), every other country in Latin America has already adopted it. Argentine lawmakers now clearly understand the importance of a uniform legal and arbitration system to the global market and for attracting foreign investment.

This bill, along with an additional proposed amendment to the Civil and Commercial Code, make good progress towards bringing the Argentine system into line with the international standards set out under the framework established by UNCITRAL, however, it should be noted that the bill does make some significant changes to key provisions of the Model Law which undermine its potential effectiveness. For one example, under the proposed bill, parties cannot agree that the subject matter of the arbitration agreement relates to multiple countries.

The Model Law has been promoted by the Argentine Ministry of Justice and Human Rights as part of Justicia 2020, a wider plan for reform associated with the UN’s Agenda for Sustainable Development, and represents the Macri administrations steps to promote Argentina as a destination for foreign investment. Should they be passed, these reforms would represent welcome changes to Argentina’s civil law, and would significantly improve certainty and familiarity for foreign investors and other players in the market.

If you have ever considered expanding into the Argentine market, the time is definitely now to begin planning and executing. Our team has a wealth of experience in Argentina and the region as a whole and can help you transition into what can be a challenging market for someone with no prior experience in the area.

Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. Over the last 16 years, we have been supporting foreign companies with their growth in Latin America. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets. 

To better understand how we can support your management team in the Region, please contact Cody Mcfarlane at cmm@hgomezgroup.com