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The Arbitration Review of the Americas 2018

Bolivia

On 25 June 2015, the new Conciliation and Arbitration Law No. 708 was enacted with the purpose of providing the new rules for the application of conciliation and arbitration as alternative methods to resolve controversies within Bolivian territory.

The new Conciliation and Arbitration Law has abrogated the previous Law No. 1770 of Arbitration and Conciliation, in force in Bolivia since 10 March 1997, which - in spite of any flaws - was based on the United Nations Commission on International Trade Law (UNCITRAL) model law and provided the legal framework that allowed the growth and development of arbitration in Bolivia.

The Conciliation and Arbitration Law No. 708 (Law No. 708) comprises 135 articles, distributed under four main titles, chapters and sections.

Arbitration is addressed in Title III of Law No. 708 and includes various modifications and novelties in comparison with the previous law: it divides the arbitration into four phases (initial, merits, granting of the award and recourses); allows for a maximum duration of the merits phase of 270 days, exceptionally extendable to 365 days; and incorporates the emergency arbitrator, among others.

Notwithstanding the fact that Law No. 708 encompasses diverse elements worthy of comment, the descriptive analysis contained herein focuses on Chapter II of Title IV (special regimes), which is dedicated to investment controversies with the Bolivian state. In turn, Chapter II is divided in three sections that provide for applicable general stipulations (section I), controversies relating to Bolivian investment (section II) and controversies relating to foreign and mixed investment (section III). Each of these sections will be addressed below.

General stipulations

Principles applicable to investment dispute resolution

In addition to those principles established as part of the general dispute resolution stipulations provided by Law No. 708 (good faith, celerity, peace culture, economy, purpose, flexibility, aptitude, equality, impartiality, independence, legality, oral process and wilfulness), investment dispute resolution in Bolivia shall be governed by the following principles:

Equity

Consisting in the distribution and redistribution of conditions that ensure the possibility for all individuals and legal entities, to exercise their rights.

Veracity

The conciliator or the arbitrator must completely verify the facts that support their decisions, for which they should adopt the necessary, adequate and legal means, respecting the right of defence of the parties.

Neutrality

The conciliator or the arbitrator have complete freedom and autonomy to exercise their attributions and they must remain impartial during the proceedings, having no personal, professional or commercial relationship with either party or third parties with an interest, nor should they themselves have an interest in the controversy.

Mutual acceptance

Parties submit voluntarily to the effects of conciliation or arbitration.

Reasonableness

The decisions of the arbitrator must be oriented to the protection of legal certainty, the values of the Bolivian Political Constitution, prudence and proportionality.

Investment dispute resolution features

Pursuant to Law No. 708, any controversies of a contractual or non-contractual nature that involve the state and arise from or are related to an investment made under Law No. 516 for the Promotion of Investments1 shall be bound by the following rules:

  • investment controversies shall be subject to Bolivian juris­diction, laws and authorities.
  • the parties must submit the controversy to conciliation prior to arbitration;
  • conciliation or arbitration will be local;
  • conciliation or arbitration will have the territory of Bolivia as their seat. Nevertheless, hearings, evidence production and other procedures, could be conducted outside of Bolivian territory; and
  • the existence of an arbitration clause or the willingness to conciliate, do not limit or restrict the attributions and competences of control and supervision from the corresponding regulatory entities and competent authorities, to whom the parties will be subjected at all times according to applicable norms.

In addition, Law No. 708 states that controversies with public entities that fall within the stipulations of the previous paragraph will be resolved in the following manner:

  • By the application of section II related to disputes that involve Bolivian investment:
    • when they arise as a consequence of the interpretation, application and execution of decisions, activities and regulations between partners of a state ­inter-governmental company; and
    • when they arise within and between state companies and state inter-governmental companies.
  • By the application of section III related to disputes that involve foreign investment:
    • when they arise as a consequence of the interpretation, application and execution of decisions, activities and regulations between partners of a state mixed company and mixed company; and
    • when they arise within and between state mixed companies and mixed companies.

Controversies relating to Bolivian investment

Law No. 708 stipulates that the following common rules shall apply to conciliation and arbitration regarding controversies that involve Bolivian investments made by a Bolivian individual or legal entity, whether public or private:

  • conciliation and arbitration will be administered by a Bolivian centre;
  • applicable rules for conciliation or arbitration will be those pertaining to the centre chosen by the parties; and
  • the nominating authority will be appointed by the centre ­chosen by the parties.

Moreover, in the case of conciliation, the conciliator will be appointed by the parties based on the list of conciliators from the chosen centre. In case of disagreement, the parties may request that the appointment is made by the nominating authority.

As regards arbitration, the following rules shall apply:

  • the controversy will be solved by a sole arbitrator or a tribunal formed by three arbitrators, in which case each party will appoint one arbitrator from the list of the centre chosen by the parties;
  • the third arbitrator will perform as president of the arbitration tribunal and will be elected by the two arbitrators appointed by the parties from the list of arbitrators of the chosen centre;
  • in case of disagreement regarding the appointment of a sole arbitrator or the president of the tribunal, the appointment shall be made by the nominating authority;
  • the sole arbitrator or arbitral tribunal shall apply the Bolivian constitution, laws and norms to decide the merits of the dispute; and
  • the arbitration shall be at law.

Controversies relating to foreign investment

For the conciliation of disputes that involve the Bolivian state and foreign investment, the following rules shall apply:

  • The conciliator shall be appointed by the parties. In the event of a disagreement, the parties may request that the appointment of the conciliator be performed by the nominating authority, which shall be designated by the conciliation centre or by the secretary general or equivalent authority of the centre for the solution of investment controversies of an organi­sation Bolivia is a part of, within the framework of an integration process.
  • The conciliation rules shall be those chosen by the parties. If no agreement is reached, the applicable conciliation rules shall be those of the centre for the solution of investment controversies of an organisation Bolivia is a part of, within the framework of an integration process.

Pursuant to Law No. 708, in order to solve any dispute that involves the Bolivian state and foreign investment by means of arbitration, the following rules shall apply:

  • The arbitral tribunal shall comprise three arbitrators, with each party having the right to appoint one arbitrator. The third arbitrator shall be the president of the tribunal and shall be appointed by the two arbitrators selected by the parties. If no agreement is reached, the nominating authority will conduct the appointment upon request of the parties.
  • The nominating authority shall be elected by the parties. If no agreement is reached, the nominating authority shall be the secretary general or equivalent authority of the centre for the solution of investment controversies of an organisation Bolivia is a part of, within the framework of an integration process. If the latter is non-existent, the nominating authority shall be the secretary general of the Permanent Court of Arbitration in The Hague.
  • The arbitral tribunal shall apply the Constitution, laws and norms of Bolivia to decide the merits of the controversy.
  • The arbitration rules shall be those selected by the parties. If no agreement is reached, the applicable arbitration rules shall be those of the centre for the solution of investment controversies of an organisation Bolivia is a part of, within the framework of an integration process.
  • The arbitration term may be extended up to an additional 600 calendar days.2
  • The arbitral tribunal shall decide and resolve any objection to jurisdiction as an issue of preliminary nature.
  • The arbitral award shall be definitive and unappealable. The arbitral award shall be issued within a term of 90 calendar days to be counted from the last procedural act. The term may be extended only once for an equivalent number of days, unless the arbitration rules chosen by the parties provide otherwise.
  • The arbitration shall be resolved at law.

Challenge of arbitral awards

Bearing in mind that in accordance with the aforementioned provisions regarding investment arbitration, the seat shall be located in Bolivia, the corresponding arbitral award shall be subject to the recourses allowed by local law. In this regard, Law No. 708 establishes that the only way to challenge an arbitral award is by means of a nullity recourse. The grounds that allow the competent judicial authority to declare an arbitral award as null and void are as follows:

  • arbitrability (the subject matter of the dispute is not capable of settlement by arbitration);
  • public policy; and
    • if the party requesting the nullity of the award proves one or more of the following:
    • the existence of grounds for annulment or nullity of the arbitration clause according to civil law;
    • right of defence violations during the arbitration proceedings;
    • that the arbitral tribunal exceeded its powers in the award rendered, deciding ultra petita over controversies not comprehended by the arbitration clause; or
    • irregular constitution of the arbitral tribunal.

The parties may invoke one or more grounds for nullity of the award if such causes were raised during the course of the arbitration proceedings.

The nullity recourse shall be filed before the sole arbitrator or the arbitral tribunal that issued the award, reasoning the alleged grievance within a term of 10 days from the date the arbitral award was notified or the notification date of the amendment, complementation or clarification of the award. The nullity recourse shall be notified to the other party, which shall have the same period of time to respond. Once this term is finalised, the sole arbitrator or the arbitral tribunal, with or without said response, shall grant the recourse determining the submission of the supporting documents to the competent judicial authority of the jurisdiction where the arbitration took place. This submission must be made within three days from the admission of the nullity recourse.

The sole arbitrator or the arbitral tribunal will reject, without delay, any nullity recourse filed past the 10-day term or not founded on the grounds described above.

The competent judicial authority will declare the admission of the recourse once the supporting documents have been received. When the nullity of an award is requested, the judicial authority may suspend the enforcement of the award, if applicable and if requested by one of the parties, for the length of time the authority deems necessary in order to give the sole arbitrator or arbitral tribunal the opportunity to reinitiate the arbitration proceedings or to adopt any measure that in its perspective eliminates the grounds that motivated the nullity of the award.

The judicial authority will issue a resolution within a term of 30 days from the date of reception of the case file. The judicial authority may admit the production of evidence within an eight-day term, according to civil procedure.

The resolution of the nullity recourse admits no further appeals or recourses.

Nevertheless, in the event that the nullity recourse is rejected by the sole arbitrator or arbitral tribunal, the affected party or parties could turn to the competent judicial authority of the place where the award was issued, within a term of three days, for the purpose of requesting admission of the recourse.

In such a case, the judicial authority will require the sole arbitrator or the arbitral tribunal to submit the supporting documentation in a term of three days from the reception of the notice. The judicial authority will solve the matter within three days from the reception of the documentation.

Recognition and enforcement of foreign awards

Notwithstanding the fact that investment arbitration under the new Law shall only generate awards to be rendered in Bolivia, due to the relevance of the subject and the potential existence of awards to be issued under arbitration proceedings currently in place against the Bolivian state, we hereby describe the process of recognition and enforcement of foreign arbitral awards.

Law No. 708 commences the description of the process by stating that any arbitral award issued in a seat different from the Bolivian territory shall be deemed as a foreign arbitral award. Furthermore, it establishes that foreign awards will be recognised and enforced in Bolivia in accordance with the rules of judicial international cooperation established in the current Code of Civil Procedure and the treaties related to recognition and enforcement of foreign awards, so long as they do not contradict the procedure established by Law No. 708.

Unless otherwise agreed by the parties and in the case of more than one international applicable instrument, the treaty or convention most favourable to the party that requested the recognition and enforcement of the award shall apply. In the absence of any treaty or convention, foreign arbitral awards shall be recognised and enforced in Bolivia according to the stipulations of Law No. 708.

Regarding causes for inadmissibility, the new Law provides that the recognition and enforcement of a foreign award will be denied and declared inadmissible for the following reasons:

  • existence of any grounds for nullity in accordance with the provisions relating to the nullity recourse, demonstrated by the party against which the foreign award recognition and enforcement was invoked;
  • absence of enforceability owing to non-existence of writ of execution, nullity or suspension of the foreign award by a competent judicial authority of the state where it was issued, demonstrated by the party against which the foreign award recognition and enforcement was invoked;
  • existence of causes for nullity or inadmissibility established by currently valid international treaties or conventions; and
  • breach of the rules contained in the civil procedure code regarding international judicial cooperation.

Concerning competence and authority, the request for recognition and enforcement of a foreign arbitral award shall be filed before the Bolivian Supreme Tribunal of Justice.

The party that requests the recognition and enforcement of a foreign award must submit duly legalised copies of the arbitration agreement and foreign award, and if such agreement and award are not in Spanish, the petitioner must submit a translation of the documents signed by an authorised translator.

The recognition and enforcement procedure states that once the request is filed, the Supreme Tribunal of Justice will submit it to the other party so that it may respond within 10 days from its notification, having the opportunity to file and offer the evidence considered necessary.

Evidence must be produced in the maximum period of eight days from the last notice to the parties with the decree that initiates such a term. Once this term is over, the Supreme Tribunal of Justice has five days to issue a resolution.

If the request is admitted, the enforcement of the foreign arbitral award shall be executed by the competent judicial authority appointed by the Supreme Tribunal of Justice, corresponding to the domicile of the party against which the foreign award recognition and enforcement was invoked or by any other authority with jurisdiction.

Oppositions to the enforcement of a foreign arbitral award can be filed before the Supreme Tribunal of Justice based on documentary evidence regarding the compliance of such an award or the existence of a pending nullity recourse. Should this be proven, the Supreme Tribunal of Justice will suspend the recognition and enforcement of the foreign award.

Final considerations and updates

Over the past few years, rumours have been circulating regarding the abolishment of arbitration from the Bolivian legal system. Fortunately, the new Law No. 708 discards these rumours, confirming and ratifying that the Bolivian state considers conciliation and arbitration to be valid legal mechanisms for dispute resolution.

In summary, having abrogated the previous Arbitration and Conciliation Law No. 1770, the new Law incorporates a series of modifications and introduces specific rules concerning investment dispute resolution involving the Bolivian state.

The specific chapter dedicated to investment dispute resolution establishes the central rules that will govern arbitration, distinguishing two sections, one referring to controversies related to Bolivian investment and the other to foreign investment.

On the subject of foreign investment disputes, these main rules provide that prior to the initiation of arbitration proceedings, the parties must submit their dispute to conciliation. If the controversy is further submitted to arbitration, the arbitration process shall be local, entailing that the seat will be the Bolivian territory and that the dispute will be subject to Bolivian juris­diction, laws and authorities.

Notwithstanding the foregoing, the new Law allows for the parties to freely determine the applicable arbitration rules, which in the case of foreign investment controversies may be those of the ICC, LCIA, ICDR, UNCITRAL or any other chosen by the parties, providing the referred mandatory conditions are met. If no consensus is reached, the applicable arbitration rules shall be those of a centre for the solution of investment controversies of an organisation of which Bolivia is a part of, within the framework of an integration process.

The latter is a relevant feature of the new investor state arbitration provisions, considering that before the enactment of Law No. 708 there was a trend intending to apply to foreign investment the same conditions now established for Bolivian investment. That is to say, the arbitration rules had to be those of a Bolivian centre, which also implies that the appointment of the sole arbitrator or arbitral tribunal would be limited to the list of the Bolivian centre chosen by the parties.

In addition, a nominating authority can be elected by the parties. If no agreement is met, the nominating authority shall be the secretary general or equivalent authority of the centre for the solution of investment controversies of an organisation Bolivia is a part of, within the framework of an integration process, and otherwise, the nominating authority shall be the secretary general of the Permanent Court of Arbitration in The Hague.

As regards the arbitral award, it should be noted that, bearing in mind the main features described above, the challenge of such an award must be addressed to the court of the seat of the arbitration: Bolivia. As a consequence, pursuant to Law No. 708, the award can only be challenged by means of a nullity recourse, providing the following grounds for challenge: arbitrability, public policy, invalidity of the agreement to arbitrate, arbitral tribunal's excess of powers and procedural irregularities.

Even though the conditions discussed above restrict foreign investors from choosing and having a ‘neutral' seat of arbitration among other features, Law No. 708 provides the framework and rules to be considered in advance by foreign investors currently analysing the feasibility of investing in Bolivia, which contrasts with the uncertainty that surrounded the subject in previous years.

Furthermore, even though Law No. 708 establishes as a rule that administrative contracts fall out of the scope of arbitration,3 pursuant to its fourth transitory provision, said rule would not be applicable to administrative contracts of state-owned companies until their migration or conversion process is complied with and concluded per the terms of Law No. 466 of Public Companies. In the meantime, these companies are enabled to include conciliation and arbitration clauses in their contracts, subject to the mandatory inclusion of Bolivian law as governing law and having the seat within Bolivian territory.

In light of the foregoing, it should be noted that despite the fact that more than two years have passed since the enactment of Arbitration Law No. 708 and over three years of Law No. 466 of Public Companies; most state-owned companies - including those managing natural resources - have not concluded their migration/conversion process and therefore are currently able to submit their contractual disputes to arbitration, within the limits previously expressed.

It is also relevant to underline that, the principal national arbitration centres maintained in their respective amended rules that an arbitration procedure is to take a total of 180 days from the constitution of the arbitration tribunal to the issuance of the arbitral award, as stated in the previous norm, in comparison to the ample time terms allowed by Law No. 708 (merits phase of up to 270 days, exceptionally extendable to 365 days).

With respect to amendments, articles 78 and 135 of Law No. 708 have been modified by means of Law No. 936 dated 3 May 2017. The first refers to the case of assistance requested from judicial authorities in arbitration, as Law No. 708 referred to ‘the competent judicial authority' without proper identification (which led to confusion), while Law No. 936 amended the article by specifying that the competent judicial authority shall be the Civil and Commercial Public Courts. The latter amendment refers to the Inter-American System of Human Rights, creating the State Council for Amicable Solutions in Human Rights matters.

Finally, over two years after the enactment of Law No. 708, to our knowledge, no investment arbitration has been initiated under the provisions of Law No. 708 and no foreign arbitral awards have been presented to the Supreme Tribunal of Justice for recognition and enforcement, leaving the first precedents as pending.

Notes

1. Pursuant to Law No. 516, ‘investment' is defined as the allocation of investment contributions within the different investment mechanisms provided by law, aimed at the permanent development of economic activities and the generation of income that contributes to the social and economic development of the country.

As investment conditions, Law No. 516 establishes that the investments to be made in Bolivia must take into account:

(i)   that the transfer of foreign capital is funnelled through the local financial system;

(ii)  that the foreign investments comply with the regulations on transfer costs established in the country;

(iii)  that the profitability of the proposed investment projects that purport to be classified as preferred is not conditioned upon the incentives provided by the state;

(iv)  that the state does not endorse or guarantee any internal or external credit contracts executed by private individuals or legal entities that are either Bolivian or foreign;

(v)  that the transfer of technology is to be performed in accordance with the terms thereto;

(vi) that the employment relationships that emerge from the investments are subject to the General Labour Law and its regulations; and

(vii)that the investments established within the Law are subject to the tax, customs, environmental and other applicable laws in the country.

2. It should be noted that according to the general rules applicable to arbitration under Law No. 708, the merits phase which begins with the acceptance of the sole arbitrator or the constitution of the arbitral tribunal, as the case may be, ends with the conclusive hearing or the presentation of closing written statements or the last procedural act. This phase allows for a maximum duration of 270 days, exceptionally extendable to 365 days.

3. Article 4 section (4) of Law No. 708 states that administrative contracts are a subject matter excluded from conciliation and arbitration, except as otherwise provided therein.