As of 1 August 2015, arbitration is regulated by two separate bodies: contractual aspects are governed by the Civil and Commercial Code (CCC); and procedural aspects are governed by procedural codes. Each of the country's 23 provinces has its own procedural code that is applied in its respective territory by its own judges. At the federal level, there is a Federal Code of Civil and Commercial Procedure (FPC) that applies in the city of Buenos Aires and by federal judges throughout the country.
This double regulation is due to the fact that, pursuant to articles 75(12) and 121 of the Federal Constitution, the Federal Congress is empowered to enact the civil, commercial, criminal, mining, labour and social security codes, and the provinces have the exclusive authority to enact procedural codes in their respective jurisdictions.
The Federal Executive is promoting changes to the arbitration regime. At the end of 2016 and at the beginning of 2017, it submitted two bills to the Federal Congress and is currently working on a third bill, all of them with the purpose of improving the arbitration legal framework and promoting the country as a venue for arbitration.
Meanwhile, as it will be seen below when commenting on each of the bills, most Argentine judicial courts continue to interpret favourably the few controversial and obscure rules contained in the CCC.
The first bill
The first bill was submitted on 3 November 2016. In this bill, the Federal Executive proposes the Federal Congress to adopt, with some adaptations, the Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (UNCITRAL).
The bill limits the scope of the law to international commercial arbitration. Therefore, if the bill is passed, Argentina would move from a monist regime, in which the provisions of the CCC and the procedural codes regulate arbitration without distinguishing between national and international arbitration, to a dualist regime, in which international commercial arbitration would be regulated by one set of rules and domestic arbitration by another.
The Federal Executive states in the bill's fundamentals that the country's legislation is currently set out in a fragmentary way in the CCC and the procedural codes, both designed for purely domestic arbitrations, and does not respond to regular practice or meet the expectations of the parties in international arbitration. Therefore, the bill aims at equipping the country with a legal framework for international commercial arbitration that is adequate to favour the election by the parties of the country as a venue for international arbitrations and that reflects the modern concept of arbitration, in line with the laws of the region and much of the world.
The Federal Executive proposes the adoption of the UNCITRAL Model Law, as amended in 2006, with a few changes, including:
- The exclusion of the opt-in provision contained in article 1(3)(c) of the UNCITRAL Model Law, which sets forth that an arbitration is international when ‘the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country'. Although the bill's fundamentals do not explain the underlying reason for this exclusion, it appears that the intention is to prevent the parties to a purely domestic transaction from the provisions of domestic arbitration. This is supported by the fact that the bill includes a new article that states that the general provisions of the new law shall not preclude the application of article 2605 of the CCC, pursuant to which, only in ‘monetary international matters', the parties are entitled to defer jurisdiction in favour of arbitrators outside of the country.
- A definition of ‘commercial' arbitration as any legal relationship, contractual or non-contractual, of private law or governed predominantly by it under Argentine law. It also states that the term commercial shall be widely interpreted and, in case of doubt, a legal relationship shall be deemed to be commercial. The bill does not specify which set of rules will govern international arbitrations that are non-commercial.
- A 20-day time limit to exercise the right to object to violations of the law or any requirement under the arbitration agreement, in lieu of the obligation of a party to state its objection to such non-compliance ‘without undue delay' in order to avoid the waiver presumption.
- A new provision, in the section devoted to the receipt of written communications, which states that the parties may agree that services are made electronically.
- The removal of the last sentence of article 7(3) of the UNCITRAL Model Law, which specifies that an arbitration agreement is in writing if its content is recorded in any form, ‘whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means'. The underlying reason for the removal of this sentence is unclear, since it appears to contain only examples of the forms in which the arbitration agreement can be concluded.
- The elimination of the possibility contained in article 31(2) of the UNCITRAL Model Law of agreeing that no reasons need to be expressed in the award. Even though the bill's fundamentals are silent in this regard, the underlying reason for this elimination is probably that, under Argentine law, failure to state reasons can be considered as a violation of due process and, therefore, as a ground to set aside the award or refuse its recognition and enforcement.
- A change to the grounds for setting aside the award or refusing its recognition and enforcement. Articles 34(2)(a)(i) and 36(1)(a)(i) of the UNCITRAL Model Law set forth that an award may be set aside and that the recognition or enforcement of an award may be refused if a party to the arbitration agreement was ‘under some incapacity'. After that text, the bill adds ‘or capacity restriction'. The scope of this insertion is uncertain, and the fundamentals of the bill do not explain its reason for being.
- The characterisation of the public policy ground to refuse the recognition and enforcement of a foreign award as the ‘international' public policy of the country. It is unclear why this characterisation was not also made with respect to the public policy ground to set aside awards.
- The UNCITRAL's recommendation regarding the interpretation of article II(2) of the New York Convention, recognising that the circumstances described therein are not exhaustive. The bill's fundamentals do not explain why the other recommendation made by UNCITRAL regarding the extension of the more favourable law provision contained in article VII(1) of the New York Convention to arbitral agreements was not included.
The second bill
The second bill was submitted on 3 March 2017 and intends to partially amend the CCC provisions regarding the arbitration agreement, eliminating and modifying those provisions that received significant criticism from experts, and that were described in The Arbitration Review of the Americas 2016. The bill proposes five amendments.
Article 1649 of the CCC currently defines the ‘contract of arbitration' as an agreement whereby the parties undertake to submit to one or more arbitrators all or any disputes that have arisen or may arise between them in respect of a defined legal relationship of private law, whether contractual or not, in which public policy is not compromised. The bill proposes to remove the words ‘of private law' and ‘in which public policy is not compromised'.
The limitation to relationships of private law appears to be related to the last paragraph of article 1651 of the CCC, whereby disputes with the federal or provincial states are not governed by the CCC rules that apply to the arbitration agreement. Given that, as will be seen below, the bill proposes to modify this paragraph of article 1651, it is consistent to modify also the limitation contained in article 1649.
The limitation related to public policy can lead to controversy if it is not properly interpreted. Prior to the entry into force of the CCC, Argentine courts recognised that the fact that the merits of a dispute are governed by public policy rules does not mean that the matter is not arbitrable to the extent it relates to monetary rights of the parties.1
After the entry into force of the CCC, it was unclear if this line of jurisprudence would be maintained due to the wording employed by article 1649. So far, Argentine courts have interpreted article 1649 in a favourable manner. In a recent case, it was held that when article 1649 in fine determines the non-arbitrability of private law disputes in which public policy is compromised
it does so with the scope of establishing that the mere fact that the matter submitted to arbitration is regulated by public policy rules does not in itself exclude arbitrability, insofar as the rights involved are disposable by the parties. In other words, in the case of a dispute over disposable rights, even if the decision involves rules of public policy, arbitration will be possible... When article 1649 in fine of the Civil and Commercial Code refers to a ‘compromised' public policy, it must be understood that this occurs when the claim contained in the arbitration claim is perceived as ‘contrary' to it, but not when it is directed to maintain it.2
Notwithstanding that Argentine courts have so far followed the same line of jurisprudence that existed prior to the entry into force of the CCC, the bill proposed by the Federal Executive is positive in this aspect, as it directly eliminates the uncertainties that the current text of article 1649 may create. Moreover, to avoid all kinds of doubt, the bill also proposes to incorporate into article 1651 a text stating that the arbitrability of a dispute is not affected by the fact that the applicable rules to resolve it are public policy rules.
Article 1651 of the CCC currently states that the following matters are ‘excluded' from the arbitration agreement: civil status or capacity of persons; family issues; rights of users and consumers; adhesion contracts; and labour relations. It also provides that the CCC provisions concerning the arbitration agreement do not apply to disputes with the federal or provincial states.
The current text of article 1651 is inconsistent with several rules that were not repealed by the CCC. For example, while article 1651 appears to exclude consumer disputes from arbitration, article 59 of Law 24,240 on Consumer Protection orders the enforcement authority to establish arbitral tribunals for consumer disputes. Furthermore, the Federal Executive, in compliance with that law, created the National System of Consumer Arbitration by Decree 299/89. Law 26,993 also created a system for the resolution of consumer disputes and established in article 72(38) thereof that one of the functions of the Ministry of Economy and Public Finance is to supervise the actions of arbitral tribunals for consumer disputes.
In an attempt to reconcile this set of rules and avoid contradictions, it has been argued that consumer disputes are excluded from the arbitration agreement regulated in the CCC because the arbitrability of those matters is governed by specific laws.3 In this vein, it has also been interpreted that article 1651 of the CCC is actually seeking to prevent the consumer from being compulsively subject to arbitration through the application of an arbitration agreement prearranged by the supplier before the dispute, but it does not prevent the consumer from submitting a dispute to arbitration if he or she voluntarily agrees to do so with the supplier after the dispute has arisen.4
In spite of these interpretations, recent rulings of the National Civil Appellate Court and the National Commercial Appellate Court concluded that, pursuant to article 1651 of the CCC, arbitration clauses related to consumer relationships are null and void or inapplicable, without analysing whether they are regulated by a different set of rules or if the arbitration clause was imposed by the supplier to the consumer.5
The bill proposes to replace the text of article 1656 entirely with a new text stating that matters that cannot be the subject of a settlement agreement cannot be submitted to arbitration, and that the arbitrability of a dispute is not affected by the fact that the rules applicable to resolve it are public policy rules.
The proposal of the Federal Executive is positive, not only because of the public policy issues mentioned above, but also because it contains a general and broader definition of the matters that can be submitted to arbitration, and thus eliminates some of the inconsistencies that now exist between the CCC and other laws.
Article 1655 of the CCC currently establishes, among other things, that, unless otherwise agreed, the arbitration agreement confers on arbitrators the power to adopt, at the request of any party, the precautionary measures they deem necessary regarding the subject of the dispute. The arbitrators may require adequate security from the applicant. Only courts have the authority to enforce those measures.
It also states that the application of a party to a court for such measures shall not be deemed to constitute an infringement or a waiver of the arbitration agreement, and shall not affect the authority reserved for the arbitrators. And that preliminary measures requested by the arbitrators may be challenged in court if they violate constitutional rights or are unreasonable.
The bill proposes to remove the words in italics. The underlying reasons for this proposal are uncertain. The sentences related to the request of security could have been considered redundant by the Federal Executive. The sentence regarding the authority of courts to enforce precautionary measures could have been considered excessive, since it may not be always necessary to resort to courts in order to enforce a precautionary measure. The removal of the vague sentence referring to the challenge of preliminary measures was probably proposed to avoid interferences of courts and the delays that those interferences may have in the arbitral proceeding.
Notwithstanding the above, it has been stated that article 1655 is of dubious constitutionality because it refers to a procedural matter and the Federal Congress is not empowered to regulate such matters.6
Article 1656 of the CCC currently contains three paragraphs. The first and the second paragraphs provide that the arbitration agreement requires the parties to honour its terms and excludes the competence of the courts in disputes submitted to arbitration, unless the arbitral tribunal is not yet hearing the case and the arbitration agreement appears to be manifestly void or inapplicable. In case of doubt, the most favourable interpretation for the efficiency of the arbitration agreement should prevail.
The bill proposes to replace the sentences in italics for one stating that a court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
In some aspects, the proposed text appears to be less favourable to arbitration than the current text. For example, the proposed text does not require the arbitration agreement to be manifestly null and void, inoperative or incapable of being performed in order to refer the parties to arbitration. It also eliminates the interpretation rule in favour of arbitration. The fundamentals of the bill do not contain any explanation regarding these changes, so the underlying reasons remain unknown.
Nevertheless, the changes proposed in relation to the third paragraph of the current text of article 1656 are important. That paragraph states that final arbitral awards may be reviewed before the competent courts when grounds for total or partial annulment are invoked, pursuant to the provisions of ‘this Code'. It also provides that the parties cannot waive their right to ‘challenge' the final award that is ‘contrary to law'. This paragraph presents at least three problems.
- It refers to grounds of annulment that are invoked pursuant to the provisions of ‘this Code', when the CCC does not contemplate any grounds for annulment of arbitral awards. The intent was possibly to refer to the procedural codes that could apply to the case, which do establish specific causes for annulment of awards.7
- It limits the parties' ability to waive the right to ‘challenge' the final award, without specifying whether it refers to the inability to waive the right to appeal the award or only to waive the right to set aside the award. Procedural codes generally authorise the parties to waive their right to appeal but not the right to set aside the award. Some international treaties ratified by Argentina establish that the only remedy against the award is the motion to set aside.8 Therefore, consistently with those procedural codes and international treaties, the restriction established by article 1656 could be interpreted to capture exclusively a waiver of the right to set aside the award.9 Moreover, the opposite interpretation (ie, to also prohibit a waiver of the right to appeal) would be inconsistent with the sources of inspiration of the CCC in relation to arbitration.
- Article 1656 refers to the challenge of final awards that are ‘contrary to law', which is a very broad concept. If, as explained above, the CCC were interpreted in the sense that it only prohibits a waiver of the right to set aside the award, then it could be interpreted that when the new code prohibits the parties from waiving their right to challenge an award that is ‘contrary to law', this last expression refers to the relevant procedural law that contemplates the causes for setting aside arbitral awards, which would normally be established by the procedural law of the seat of the arbitration. In other words, the parties could not waive their right to set aside an award that is invalid because it does not meet the validity requirements established by the applicable procedural law, but they could waive their right to appeal the award.
The opposite interpretation (ie, that a final award may be challenged on grounds of its alleged inconsistency with any legal provision), once more, would not only be inconsistent with international treaties and the sources of inspiration of the CCC's chapter on arbitration agreements, but moreover with the main purpose of arbitration to displace disputes from the competence of the judicial courts, except for the review of final awards based on specific causes of annulment.
Last but not least, it has been stated that the last paragraph of article 1656, in addition to being defectively drafted, is of dubious constitutionality because it refers to a procedural matter.10
Since the entry into force of the CCC, all the cases that have been published involving the last paragraph of article 1656 decided in favour of arbitration. In those cases, the courts basically concluded that among the different interpretations that could result from article 1656, the one concluding that only motions to set aside are unwaivable (ie, that the waiver of the right to appeal is valid) is best suited to its purpose.11 Nevertheless, it is positive that the bill submitted by the Federal Executive proposes the elimination of such a controversial paragraph.
Article 1658 of the CCC currently provides that parties can agree on: the seat of arbitration; the language of the arbitration; the arbitration procedure (if there is no agreement, the arbitral tribunal may conduct the arbitration in the manner it deems appropriate); the time limit within which the award must be rendered (if there is no agreement, the time limit will be governed by the arbitration rules of the arbitral institution, and, failing that, by the law of the seat); the confidentiality of the arbitration; and the distribution of the arbitration costs.
The bill adds the possibility of agreeing on the waiver of recourses against the arbitral awards, to the extent permitted by local law. This proposal seems to have the dual objective of recognizing, on the one hand, that some remedies may be waived, and on the other hand, that this matter is of a procedural nature and has to be regulated by local procedural codes.
The third bill
The Federal Executive is working on a third bill that has not yet been submitted to the Federal Congress and which aims at reforming the FPC, including its provisions on arbitration. The content of this project is unknown, but it is imperative that the old arbitration regulation contained in the FPC be modernised.
The legislative changes promoted by the Federal Executive are in general terms positive and in spite of some of their shortfalls, the improvements are significant and welcomed by the arbitration community because the country needs to continue improving its arbitration regime.
1 Francisco Ctibor S.A.C.I. Y F. c. Wall-Mart Argentina S.R.L., Cámara Nacional de Apelaciones en lo Comercial, Sala D, 20.12.2016.
2 Otondo, César AC Cortina Beruatto SA', Cámara Nacional de Apelaciones en lo Comercial, Sala E, 11.06.2003, LL 2003-F-744.
3 Julio C Rivera, Arbitraje comercial: internacional y doméstico, Abeledo Perrot, 2ª ed., Buenos Aires, 2014, p. 266; Gustavo Parodi, commentary to article 1651, in Julio C Rivera and Graciela Medina (dirs.), Código Civil y Comercial de la Nación Comentado, T. VI, La Ley, Buenos Aires, 2014.
4 Verónica Sandler Obregón, commentary to article 1651, in Marisa Herrera et al. (dirs.), Código Civil y Comercial de la Nación Comentado, T. VI, Infojus, Buenos Aires, 2015.
5 Blanco Rodriguez, Maria De Las Mercedes c. Madero Urbana S.A.', Cámara Nacional de Apelaciones en lo Civil. Sala F, 16.12.2015; ‘Bonzio S.A. y otro c. Fideicomiso Saravi y otro', Cámara Nacional de Apelaciones en lo Comercial, Sala C, 15.03.2016.
6 Julio C. Rivera, Arbitraje comercial: internacional y doméstico, Abeledo Perrot, 2ª ed., Buenos Aires, 2014, p. 570.
7 Verónica Sandler Obregón, commentary to Article 1656, in Marisa Herrera et al. (dirs.), Código Civil y Comercial de la Nación Comentado, T. VI, Infojus, Buenos Aires, 2015; José. A. Martínez de Hoz (h), "El Contrato de Arbitraje en el Código Civil y Comercial de la Nación", Centro Empresarial de Mediación y Arbitraje, June 2015.
8 Article 22 of the 1998 Mercosur Agreement on International Commercial Arbitration.
9 Julio C. Rivera, Arbitraje comercial: internacional y doméstico, Abeledo Perrot, 2ª ed., Buenos Aires, 2014, pp. 206 and 919; José. A. Martínez de Hoz (h), "El Contrato de Arbitraje en el Código Civil y Comercial de la Nación", Centro Empresarial de Mediación y Arbitraje, June 2015; Verónica Sandler Obregón, commentary to Article 1656, in Marisa Herrera et al. (dirs.), Código Civil y Comercial de la Nación Comentado, T. VI, Infojus, Buenos Aires, 2015.
10 Julio C. Rivera, Arbitraje comercial: internacional y doméstico, Abeledo Perrot, 2ª ed., Buenos Aires, 2014, p. 918; Gustavo Parodi, commentary to Article 1656, in Julio C. Rivera and Graciela Medina (dirs.), Código Civil y Comercial de la Nación Comentado, T. VI, La Ley, Buenos Aires, 2014.
11 Olam Argentina S.A. c. Cubero, Alberto Martín y otro', Cámara Nacional de Apelaciones en lo Comercial, Sala E, 22.12.2015, La Ley Online AR/JUR/79122/2015; ‘Amarilla Automotores S.A. c. BMW Argentina S.A.', Cámara Nacional de Apelaciones en lo Comercial, Sala D, 12.04.2016; ‘Díaz, Ruben Hector c. Techint Cía. Técnica Internacional SACEI', Cámara Nacional de Apelaciones en lo Comercial, Sala B, 12.04.2016; ‘Complejo Alimenticio San Salvador S.A. c. Kimei Cereales', Juzgado Comercial N° 27, Secretaría N° 54, 22.12.2016.