Chilean Litigation: Enforcing International Arbitration
Written by Andrea Dawson and Osvaldo Cabezas.
Sooner or later, most businesses will face a litigation process. Situations could include: Contract Breach, Labor Issues, Anti-Trust, Tax Problems, Commercial Issues, Product Liability, Partnership Disputes, etc.
Litigation instantly becomes more complex the moment that multiple jurisdictions are involved. Even with a positive judgement in your home country, it can be difficult to enforce in a foreign country.
What are the possibilities of enforcing an international arbitration verdict in Chile?
The recognition of a foreign arbitration award in Chile is mainly governed by the Civil Procedure Code (hereinafter “CPC”) a fundamental rule that governs judicial procedures in our country.
Along with this, the Chilean legal system presents special rules on the recognition and execution of foreign judgments, for which:
- For the execution of foreign arbitration awards, the 1958 New York Convention governs;
- For the execution of arbitration awards on investments, the 1965 Washington Convention governs;
- For the execution of international commercial arbitration awards, Chilean Law No. 19.971 of 2004 also governs;
- Finally, for the execution of rulings handed down by foreign courts, the Convention of Private International Law (also known as the “Bustamante Code”) of 1928 also governs.
Enforcing International Arbitration
In order to enforce an international arbitration award, the CPC contains three standards that must be applied as a “waterfall”:
a) It must be analyzed whether there is an international treaty applicable to the arbitration award. If such treaty is in force, the ruling is likely to be enforced.
b) If there is no treaty, it is necessary to check if there is reciprocity with Chile, that is, if the country from which the arbitration ruling emanates accepts resolutions issued by local courts or arbitrators.
c) If it is not possible to prove the lack of reciprocity, the rules of “international regularity” apply: i) First, that the ruling does not contravene the Chilean public order; ii) Second, that the Chilean courts do not have jurisdiction, and; iii) Third, that the decision is enforceable in the jurisdiction where the award was rendered.
Fulfillment of the Verdict
Once it has been analyzed that the arbitration award can be enforced in Chile, there are two stages for the fulfillment of such verdict: the recognition stage and its subsequent execution:
1) Recognition stage through the procedure of the “Exequátur”.
This is the procedure tending to obtain the approval or authorization of the State in whose territory a foreign ruling is intended to be enforced. The competent authority to hear cases of exequatur in Chile is the Supreme Court, whose decision is not subject to appeal.
Therefore, this procedure constitutes a contentious procedure that seeks to determine if the sentence that is being carried out in Chile meets the necessary requirements for it to be recognized in the national legal system, without analyzing the merits of the matter.
In short, the foreign ruling is endowed with the character of an “enforcement title”, to obtain the fulfillment of the ruling within the territory of the Republic of Chile.
2) Stage of enforcement through the executive judgment procedure.
This is a relatively short procedure, which can be started once the foreign award has been properly recognized by the Supreme Court.
The purpose of this final stage is the foreclosure of assets and/or real state, and its subsequent sale through an auction, to obtain payment of what is owed. The enforcement stage is carried on before the Chilean Ordinary Civil Courts.
Once the assets and/or real state have been auctioned and sold, the plaintiff can request the Judge the payment of the debt, and the process is finished.
It is important to consider that since 2004, Law No. 19.971 has been aiding the enforcement of international commercial arbitration awards in Chile.
In cases where this law has been disputed, the Supreme Court has settled on what we consider good precedents, such as the minimum intervention of the courts and encouragement of the competition as a basic principle. This has allowed companies to obtain the enforcement of foreign arbitration awards in Chile.
Given the general acceptance of foreign arbitration awards, Chile is in an excellent position to become an important arbitration venue in Latin America.
Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. We also have legal teams in Mexico, Peru, Ecuador, Brazil, and Argentina. Over the last 20 years, our team of English speaking Lawyers and Attorneys 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 email@example.com