Written by Luke Musto, Associate
In recent years, international arbitration has gained prominence as a preferred method for resolving cross-border disputes across South America. This method of dispute resolution offers numerous advantages over traditional litigation, such as efficiency, neutrality, and flexibility. As a result, South American countries have increasingly embraced international arbitration, making it a significant trend in the region. In this blog post, we will explore the growing importance of international arbitration in South America, the key players in the field, the legal framework that supports its development, along with some key tips if you are considering arbitrating a dispute in the region.
What is arbitration?
International arbitration is a method of dispute resolution in which parties agree to submit their dispute to a neutral third party, known as an arbitrator, for a binding decision. Arbitration is a popular method of resolving international commercial disputes because it is confidential, efficient, and enforceable in most countries around the world.
Arbitration can be initiated both with or without a formal written contract, depending on the circumstances and the willingness of the parties to arbitrate. As a general rule, arbitration clauses within contracts are common and provide a clear framework for dispute resolution. This being said, arbitration can also be initiated in situations where there is no pre-existing contract or where the dispute falls outside the scope of the existing contract. As long as both parties agree to submit their dispute to arbitration, they can negotiate the terms of the arbitration process and create a separate agreement or follow applicable legal frameworks to commence the arbitration.
However, it’s important to note that the absence of a well-defined arbitration clause can lead to uncertainties and potential disputes over procedural matters. We strongly recommend to all our clients to include a robust alternative dispute resolution clause (including a process for arbitration) in important contracts. This helps to ensure a smoother and more predictable arbitration process.
The Growing Importance of International Arbitration
Arbitration holds paramount importance for international businesses due to its unique advantages in facilitating efficient and effective dispute resolution. In the complex landscape of global commerce, parties from diverse legal systems and cultures can choose arbitration as a neutral forum, reducing the risk of biased judgments. Arbitration is an indispensable tool for international businesses seeking to manage legal risks and maintain stable, mutually beneficial relationships across borders. Some of the key benefits include:
- Neutrality: Parties from different South American countries often prefer neutral venues for dispute resolution. International arbitration allows them to choose a neutral jurisdiction and governing law, ensuring a level playing field.
- Efficiency: Arbitration is generally faster than traditional litigation, which can drag on for years in some South American courts. This efficiency is especially important for international business transactions.
- Expertise: Arbitrators with specialised knowledge and experience in various industries can be appointed, ensuring that disputes are resolved by professionals familiar with the subject matter.
- Enforceability: Arbitral awards are widely enforceable across South American countries and internationally under the New York Convention. This provides parties with assurance that their awards will be respected.
Key Players in International Arbitration in South America
Several institutions and cities in South America have gained recognition as essential hubs for international arbitration. Some of the key hubs include:
- Santiago: Chile has a well-established reputation for international arbitration, with the Santiago Chamber of Commerce’s Arbitration and Mediation Center being a key institution in the region.
- Centro Internacional de Arbitraje, Mediación y Negociación (CIAMEN): Based in Lima, Peru, CIAMEN is a prominent institution in South American international arbitration, providing arbitration and mediation services to parties in the region.
- São Paulo: The city has developed a strong presence in the field of international arbitration, with law firms and arbitrators specializing in various industries.
- Bogotá: The Bogotá Chamber of Commerce’s Arbitration and Conciliation Center is a well-regarded institution for dispute resolution in Colombia and beyond.
- Buenos Aires: The Buenos Aires Stock Exchange provides arbitration services, and the city itself is home to many experienced arbitrators.
The Legal Framework Supporting International Arbitration
South American countries have actively embraced international arbitration and modernised their legal frameworks to provide a supportive environment. Some key legal developments include:
- Adoption of the New York Convention: Almost all South American countries have ratified the New York Convention, which facilitates the enforcement of arbitral awards internationally.
- National Arbitration Laws: Many South American countries, such as Brazil, Colombia, and Peru, have enacted modern arbitration laws based on the UNCITRAL Model Law, providing a clear legal framework for international arbitration.
- Bilateral and Multilateral Investment Treaties: South American countries have entered into numerous treaties that provide for arbitration as a dispute resolution mechanism, often with provisions allowing investors to bring claims against states.
- Arbitration-Friendly Courts: Some South American courts have developed a pro-arbitration approach, with judges increasingly supporting the enforcement of arbitral awards and the arbitration process.
Tips for implementing arbitration
If you are considering using international arbitration to resolve a dispute in South America, there are a few things you should keep in mind.
- Choose the right arbitral institution: There are a number of different arbitral institutions in South America. When choosing an arbitral institution, it is important to consider factors such as the institution’s reputation, its experience in handling disputes in your industry, and its fees.
- Draft a clear and comprehensive arbitration agreement: The arbitration agreement is the contract between the parties that sets out the terms of the arbitration. It is important to have a clear and comprehensive arbitration agreement that covers all of the important issues, such as the scope of the arbitration, the rules of procedure, and the law that will be applied to the dispute.
- Choose experienced and qualified arbitrators: The arbitrators will be responsible for making a binding decision in your dispute. It is important to choose arbitrators who are experienced and qualified in the area of law that is relevant to your dispute.
International arbitration has gained significant traction in South America, offering parties a preferred means of dispute resolution that is efficient, neutral, and enforceable. South American countries have adapted their legal frameworks to support international arbitration, while institutions and cities in the region have become key players in the field. As this trend continues, South America is set to remain an attractive destination for international arbitration, helping to foster economic development and enhance cross-border business relations in the region.