International Commercial Arbitration in Chile

Introduction

Chile’s success story has naturally resulted in a greater demand for top-quality dispute resolution mechanisms at all levels. Its political stability and sustained economic growth, coupled with strong institutions and relatively low corruption indexes, have steadily drawn international investors, increasing the need for international arbitration. However, much like other regions of the world, Chile’s stability is being tested. The country not only had to manage the covid-19 pandemic, but also deal with increasing social unrest, including a violent outbreak during October 2019 that culminated in a constitutional assembly. It is reasonable to assume all of this will impact commercial arbitration and likely increase the need for investor-state dispute settlement mechanisms.

Chile has a long-standing arbitral tradition, a solid domestic practice and has made considerable progress with respect to international arbitration, furthering its goal of becoming a venue of choice within the region. The conditions are certainly met: Chile is a party to the New York Convention, enacted in full the UNCITRAL Model Law almost 20 years ago and its judiciary has generally been supportive of arbitration. Further, international proceedings have consistently increased over the last decade and the Chilean legal community has become much more sophisticated, to the point that best international practices are permeating even domestic proceedings.

Legal framework

Chile has a dual arbitration framework. Domestic arbitration is not regulated in a comprehensive body, but rather through scattered provisions in the Code of Civil Procedure enacted in 1902 (CCP)[2] and the Judiciary Organization Code of 1943 (JOC).[3] In turn, international arbitration is governed by the International Commercial Arbitration Act of 2004 (ICAA).[4]

Domestic arbitration

Chilean law defines arbitrators as ‘judges appointed by the parties, or by the courts absent their agreement, to adjudicate a dispute’.[5] Therefore, it is generally accepted that arbitrators exercise jurisdiction similar to state courts,[6] which lends much authority to their rulings.

Domestic arbitration can be classified in three categories, based on subject-matter arbitrability. Certain matters are non-arbitrable in light of the public interest involved (e.g., alimony and criminal matters).[7] On the opposite end, a peculiar feature of arbitration in Chile is that others are mandatorily subject to arbitration (e.g., division of jointly-owned assets and disputes between the partners of a corporation).[8] Compulsory arbitration has spurred criticism, based on the fundamentally consensual nature of arbitration and the right to access to justice,[9] and it is forbidden in the proposed Constitution. Finally, matters that are arbitrable but not subject to compulsory arbitration can be voluntarily submitted to arbitration.

Domestic arbitration can also be classified based on the applicable procedural and substantive rules. Absent a specific agreement, domestic arbitration will be de jure, meaning that Chilean law (both substantive and procedural) will govern the arbitration.[10] Parties may agree to grant the arbitrator the power to conduct the proceedings and to rule according to equity (ex aequo et bono). In such case, except for basic due process guarantees,[11] the arbitrator is free to set procedural rules acting as an amiable compositeur and shall issue an award according to equity and good conscience.[12] As another particular feature of Chilean law, parties may also agree to have a ‘mixed arbitration’, where the arbitrator is free to set procedural rules, but must decide according to Chilean substantive law.[13] De jure and mixed arbitrations are the most common forms of arbitration; although not rare, equity arbitration is less frequent than de jure and mixed arbitration.

These forms of arbitrations are exclusive to domestic proceedings. Under the ICAA, the arbitrator’s powers will be defined in the arbitration agreement and applicable arbitration rules.

Domestic arbitration was traditionally ad hoc until 1992, when the Santiago Chamber of Commerce founded the Arbitration and Mediation Centre (CAM Santiago). CAM Santiago quickly gained reputation as the main arbitral institution in Chile. Its model arbitration clauses[14] and rules[15] are predominantly adopted in domestic arbitration. However, ad hoc arbitration still has a relevant role in Chile, due to the existence of compulsory arbitration (where courts directly appoint arbitrators).

International arbitration

Before the enactment of the ICAA, international arbitration was only subject to specific regulation contained in international treaties.[16] The ICAA is an almost verbatim adoption of the 1985 Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law[17] (Model Law). Its declared goal was to position Chile as a hub for international commercial arbitration.[18]

According to the ICAA, an arbitration is deemed international if:

  • the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their place of business in different states;
  • one of the following places is situated outside the state in which the parties have their places of business:
    • the place of arbitration if determined in, or pursuant to, the arbitration agreement; or
    • any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject matter of the dispute is most closely connected; or
  • the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country.[19]

While it may be argued that the ICAA allows parties to agree on the international nature of their dispute, traditional doctrine and case law in Chile require international connection factors beyond the parties’ agreement.[20] One author proposes that the parties’ agreement may only be decisive when the other internationality factors are unclear (and therefore applies ex abundantia).[21] For example, this may be the case of an arbitration seated in Chile, with respect to a contract executed and performed in Chile, where one of the parties is a wholly-owned subsidiary of a foreign company, there is international financing and the parties have agreed on the international nature of the contract.

To the best of our knowledge, there are no reported decisions deeming international an otherwise domestic dispute solely based on the parties’ agreement.

The Arbitration Rules of the International Chamber of Commerce remain the most common choice of institutional procedural rules for international arbitrations. The CAM Santiago published its own International Arbitration Rules in 2006, which are gradually gaining traction.[22]

Arbitration involving state entities

It is frequent for state entities to participate in contracts with private companies and to bind themselves to arbitration, both national and international. State entities may agree to arbitrate domestic disputes, by way of example, under the Law on Public Concessions, which regulates public contracts between the Ministry of Public Works and private entities.[23] Per Article 36, the parties to a public concession contract can resort, first, to a technical panel that can issue non-binding technical recommendations regarding a specific dispute. Second, the law entitles the parties to resort to either an arbitral commission or the Santiago Court of Appeals (SCA), even after review by the technical panel.[24]

In the international arbitration sphere, Decree Law No. 2349 is worth noting, since it regulates international contracts involving the public sector.[25] In this regard, Article 1 grants a broad authorisation to the Chilean state, its organs, institutions or companies, so that they may validly execute an international contract governed by foreign substantive law, and submit differences arising from such contracts to the jurisdiction of a foreign tribunal, including arbitral tribunals. Furthermore, Article 2 allows the state and its entities to waive their immunities from execution, with respect to a dispute arising from this type of contracts.

The arbitral agreement

A cornerstone of arbitration, arbitral agreements allow the parties to exclude the jurisdiction of state courts and submit disputes before arbitral tribunals. As in other jurisdictions, the drafting of the arbitration agreement is of the essence to determine the scope of the arbitration and the powers of the arbitral tribunal.[26]

Domestic arbitration agreement: submission agreements and arbitration clauses

As with any agreement, arbitral provisions are subject to general validity requirements set forth in the Chilean Civil Code.[27] Chilean scholars and case law distinguish between submission agreements (compromiso) and arbitration clauses (cláusulas compromisorias).[28] Both are legally sufficient and binding: no further requirement is necessary to commence an arbitration proceeding once the conflict has arisen.

In the absence of specific regulation, there is some debate over the precise difference of the terms.[29] The distinctive feature of submission agreements is that the parties submit their dispute to a specific arbitrator only,[30] whereas arbitral clauses generally state the parties’ commitment to arbitrate without appointing an arbitrator.

A practical difference is the degree to which the parties have waived their right to access local courts: if the arbitrator appointed through a submission agreement is ultimately unable or unwilling to serve, the aggravated party may only turn to state courts for redress. However, under an arbitration clause, the parties would have to appoint a new arbitrator insofar as they have renounced to local jurisdiction.[31]

Parties should be careful when drafting arbitration agreements subject to domestic law, particularly if they appoint a specific arbitrator. If the intention of the parties is unclear as to whether they wish to arbitrate even if the specified arbitrator is unwilling or unable to serve, it would be ultimately for the state courts to construe the clause.[32]

International arbitration agreements

Unlike domestic laws, the ICAA defines the arbitration agreement as an agreement by the parties to submit all or certain disputes which have arisen or may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may take the form of an arbitration clause in a contract or a separate agreement.[33]

Chilean courts have adopted a pro-arbitration stance in cases where the validity of an international arbitration agreement was called into question.[34]

For example, in a case involving the recognition of an ICC award, the respondent contended that the arbitral tribunal lacked jurisdiction when issuing the award, arguing that the parties had settled the obligations that gave rise to the arbitration. The parties had allegedly terminated the contract that contained the arbitral clause on which the arbitral tribunal based its jurisdiction. The Chilean Supreme Court dismissed the respondent’s arguments, since it considered that the arbitral clause applied to any dispute pertaining to the extinction of the respondent’s obligations, and proceeded to enforce the award.[35]

Effects of the arbitration agreement

Both domestic and international arbitration agreements have a positive and a negative effect. The positive effect is that either party has the right to arbitrate a dispute.[36] The negative effect is that the parties are precluded from referring the dispute to domestic courts, unless otherwise agreed.[37]

Autonomy of the arbitration agreement

The CCP and JOC do not expressly provide for the autonomy and severability of the arbitration agreement. Nonetheless, case law has consistently recognised them. As stated by the Court of Appeals of Rancagua, deeming an arbitration agreement not independent would render it pointless, contravening the will of the parties, the contractual nature of arbitration and the purpose of the institution of arbitral tribunals.[38]

In contrast, Article 16(1) of the ICAA expressly states that ‘an arbitration clause that forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.’

Extension of the arbitration agreement to third parties

As a general principle, an arbitration agreement is only binding on the parties and does not affect third parties.[39] However, this rule is not absolute and certain exceptions are recognised by law.[40] For example, a submission agreement is not terminated due to the death of one the parties, and will continue with the party’s successors.[41] In the same vein, after a business merger, the absorbing firm shall succeed the absorbed firm in all its rights and duties,[42] and insurance companies can subrogate themselves on their clients’ rights to pursue damages.[43]

Theoretically, and depending on the facts of the case, other circumstances may justify extending the effects of an arbitration agreement, such as the lifting of the corporate veil, the group of companies doctrine,[44] joint ventures and stipulations in favour of third parties.[45] On the latter, the President of the Santiago Court of Appeals has ruled that a third party that expressly benefited from a stipulation within an agreement, could invoke the arbitration clause contained therein to claim such benefit.[46]

Finally, it is worth noting a case in which Santiago Court of Appeals seized of a conflict of jurisdiction between an arbitral tribunal and a local court extended the effects of the arbitration agreement based, among other things, on the joint and several liability of the third party. While the contracts invoked by the claimant did not appear to have been signed by the respondent, the court noticed that the latter had prepared certain terms of reference that formed part of the contracts. The court reasoned that, even if it were to be concluded that the respondent did not sign the arbitral agreement, not extending its effects would frustrate the joint and several liability of the debtors and highlighted that when one claim involves several parties, it must be decided by one tribunal.[47]

Ambiguous and asymmetrical arbitration agreements

Chilean courts have upheld ambiguous or asymmetrical arbitration agreements, provided that the parties’ intent to arbitrate the dispute was clear. In one case, the defendant opposed the recognition and enforcement of an award claiming that the composition of the arbitral tribunal was not in accordance with the agreement of the parties. The dispute had been decided by an arbitral tribunal appointed by the Official Chamber of Commerce, Industry and Navigation of the City of Barcelona, while the arbitration agreement provided for arbitration under the aegis of the Barcelona Chamber of Commerce. The Chilean Supreme Court dismissed the opposition, finding that the reference should be understood as made to the Official Chamber of Commerce, Industry and Navigation of the City of Barcelona, as it is the only institution in Barcelona that usually performs these functions.[48]

Chilean courts have also recognised the validity of asymmetric arbitration agreements. In one case, the agreement provided the unilateral option for one party to refer a dispute either to arbitration or to local courts. The Supreme Court upheld the validity of the entire clause, reasoning that arbitration is based on party autonomy and contractual freedom.[49]

The arbitral tribunal

Domestic arbitration and the CAM Santiago Arbitration Rules

In domestic arbitrations, the arbitral tribunal shall be constituted by de jure arbitrators, mixed arbitrators or arbitrators in equity (ex aequo et bono), as agreed by the parties. Absent an agreement, the arbitrators shall act de jure.[50] Since de jure arbitrators and mixed arbitrators must rule in accordance with Chilean substantive law, foreign lawyers are excluded (only Chilean-qualified lawyers may serve as these types of arbitrators).[51] The exception is arbitration in equity, as non-lawyers (including foreign lawyers) may be appointed as arbitrators.

The constitution of the tribunal in domestic arbitration is subject to several rules:

  • If arbitration is compulsory or there is an arbitral agreement in place,[52] the parties may jointly nominate the arbitrator. Absent such agreement, either party may initiate a judicial nomination proceeding.
  • If the parties have agreed on a submission agreement, no nomination process is required since the parties have already agreed on the arbitrator.[53]
  • An arbitrator may also be nominated by the testator, for the process of dividing his or her estate between the heirs.[54]

However nominated, the arbitrators must accept to serve as such.[55] The arbitral tribunal shall be constituted once the arbitrators accept the appointment and swear or promise to fulfil the mandate faithfully and diligently.[56] Should the oath be omitted, any decision by the tribunal would be null and void.[57]

The CAM Santiago Arbitration Rules set forth a different procedure for the constitution of the arbitral tribunal, by which arbitrators shall be appointed in accordance with the procedure agreed upon by the parties, or in the absence of such an agreement, by the Santiago Chamber of Commerce from a roster published by the CAM Santiago.[58] The arbitrators shall sign a statement of independence, impartiality and availability, and disclose any circumstance that could give rise to justifiable doubt as to their independence and impartiality.

International arbitration

Under the ICAA, the parties may freely agree on the appointment process. Unlike domestic arbitration, the ICAA expressly provides that nationality shall not be an obstacle for the appointment of an arbitrator.[59]

If no consensus is reached and the agreement provides for a three-member panel, each party may nominate an arbitrator, and the party-appointed arbitrators will then agree on a third arbitrator to serve as president. If a party fails to appoint an arbitrator within 30 days of receipt of the request to do so, or if the two party-appointed arbitrators fail to agree on the third arbitrator within 30 days of their appointment, the appointment shall be made, upon request of a party, by the president of the competent court of appeals. In the case of a sole arbitrator, absent an agreement, any party may request the president of the competent court of appeals to nominate the arbitrator.

Conflicts of interest

There is stark contrast between domestic and international arbitration in matters of conflict of interest. Outdated early 20th-century civil litigation rules apply to ad hoc domestic arbitration.[60] Conflicts of interest are regulated in the form of ‘implicancias’ and ‘recusaciones’, which consist of closed catalogues of conflicts of interest that must be declared by the arbitrators sua sponte or at the request of either party, depending on the specific conflict. By contrast, the CAM Santiago Arbitration Rules adopt modern standards, requiring arbitrators to disclose any circumstance that may give rise to reasonable doubts as to their independence or impartiality.

The ICAA imposes a similar duty on arbitrators to disclose any circumstances that may give rise to justifiable doubts as to their independence or impartiality.[61]

Conduct of the proceedings

Overview

The conduct of domestic arbitration depends on the type of arbitration. Mixed arbitrators and arbitrators in equity shall follow the procedure agreed by the parties or the basic default legal procedure.[62] De jure arbitrators shall apply ordinary rules of civil proceedings before national courts. This does not mean that de jure arbitrators must conduct the proceedings exactly like a judge, but rather, respect the essence of the procedure mandated by law.[63] In this vein, the specific rules of procedure will ordinarily be defined in a preliminary hearing, with the CCP rules applying in the absence of agreement.[64]

The ICAA allows the parties to define the procedure, based on the principles of equal treatment and equal opportunity to present their case.[65] Absent an agreement, the arbitral tribunal shall conduct the arbitration in the manner it considers appropriate, including the power to rule on admissibility, pertinence and weight of evidence. The recognition of party autonomy allows parties to incorporate foreign practices, such as discovery, proceedings in languages other than Spanish, or party-appointed expert witnesses, within the natural limit of due process.[66]

Kompetenz-kompetenz

The principle of kompentez-kompetenz is well established both in domestic and international arbitration. Although there is no explicit provision in domestic arbitration law, case law has stated that the principle is ‘indirectly’ recognised.[67] In contrast, the ICAA expressly recognises the power of the arbitral tribunal to rule on its own jurisdiction, either as a preliminary question or in an award on the merits.[68] If dealt with as a preliminary matter on an award on jurisdiction, the parties may file a recourse within 30 days to the president of the competent court of appeals, whose decision is final.

Law applicable to the merits

When deciding the case, de jure arbitrators and mixed arbitrators must apply Chilean substantive law, while arbitrators in equity shall rule in accordance with equity and good conscience.[69] In practice, arbitrators in equity will frequently resort to substantive Chilean law.

International arbitration leaves the choice of substantive law to the parties, who may refer to the laws of any given state or even soft law.[70]If the arbitration agreement is silent on the matter, the arbitral tribunal shall apply the substantive law that results from the application of conflict of laws’ provisions. Additionally, the arbitral tribunal shall take into account the applicable usages of the trade.[71]

Evidence

Regarding domestic arbitration, the production of evidence differs according to the type of arbitration. De jure arbitration is limited to evidentiary means provided for by law, which are highly formalistic.[72] The parties may only submit evidence set out by Article 341 of the CCP: documents, witness testimony, confessions, tribunal inspections, expert reports and legal inferences.

Moreover, these evidentiary means are further limited by other formal considerations. For example, a private document issued by a party will only have evidentiary value when recognised by such party,[73] whereas private documents belonging to third parties are only admissible if they appear as witnesses and recognise the document.[74] In the case of witness testimony, not every person is admitted to testify,[75] and testimony may only be oral (not written).[76] As for expert reports, Chilean law only provides expressly for independent experts mutually appointed by the parties or by the arbitral tribunal.[77]

In theory, mixed and in equity arbitrators are not bound by these rules and the parties are free to establish their own rules.[78]However, in practice, these types of proceedings are usually also formalistic when it comes to evidence.

Under the ICAA, the rules on evidence shall be defined by the parties or by the applicable arbitration rules; for example, it is common practice in Chile for the parties to refer to the International Bar Association Rules on the Taking of Evidence. In the absence of specific rules, the arbitral tribunal shall determine the admissibility and pertinence of the evidence submitted by the parties.[79]

With regard to probative value, again domestic arbitration follows the outdated standards of Chilean civil procedure, setting the weight to be given to each means of evidence.[80]In the case of arbitrators in equity, the Santiago Court of Appeals has stated that they shall weigh evidence in accordance with the rules of reasoned assessment, in addition to their prudence and good conscience.[81]International arbitrators, on the other hand, shall freely determine the weight to be given to the evidence.[82]

Interim relief

While the domestic arbitration system does not contain a general rule on interim relief, the power of arbitrators to order interim measures has been broadly accepted.[83] However, the CCP provides that rulings that require compulsive measures or that may affect third parties must be enforced through domestic courts.[84]

Chilean law is also silent on the issue of interim measures requested before the arbitral tribunal is constituted. Since the constitution of the arbitral tribunal is not immediate, it is accepted that the interested party may request an interim measure before state courts, who will remain competent until the arbitral tribunal is constituted.[85]

In the case of interim measures issued by a foreign tribunal, Chilean courts have traditionally refused to enforce them, noting that, per Article 16 of the Civil Code,[86]assets located in Chile are governed by Chilean law.[87]Moreover, since interim measures are not traditionally considered final, the New York Convention does not apply.[88]

The parties, however, may obtain interim measures in aid of international arbitral proceedings from Chilean courts.[89]Article 9 of the ICAA states that requesting provisional relief to a domestic court is not incompatible with the arbitration agreement. Chilean courts have granted various forms of interim relief, such as a prohibition to execute bank guarantees[90]and freezing orders.[91]Courts have also understood that once the arbitral tribunal is constituted, the tribunal has jurisdiction to rule on pre-arbitration interim measures ordered by state courts.[92]

The award

In Chile, domestic arbitral tribunals may award various forms of relief, such as declaratory relief, specific performance, restitution and damages. In the case of de jure and mixed arbitrators, who apply Chilean substantive law, damages are limited to compensation for the actual harm suffered (including loss of profits) and do not extend to indirect or punitive damages.[93]

The formalities of the award differ according to the type of arbitration. Mixed and de jure arbitrators must follow the same formalities as domestic courts, the omission of which may result in annulment;[94]while arbitrators in equity are subject to fewer formalities.[95]

In international arbitration, Article 31 of the ICAA requires the award to (1) be made in writing and signed by the arbitrators; (2) state the reasons upon which it is based, unless otherwise agreed by the parties; and (3) state its date and the place of arbitration.

While Chilean law does not expressly provide for partial awards in eitherdomestic or international arbitration, authors support them and in practice they have been issued.[96]

Challenges to the award

One of the most salient differences between domestic and international arbitration is the possibility to challenge the arbitral award. Domestic arbitrations are subject to different recourses depending on the type of arbitration chosen by the parties, whereas international awards are only subject to set-aside proceedings under the ICAA.

De jure and mixed arbitration

Parties to a de jure arbitration may resort to, in principle, all recourses provided by law before state courts, that is, appeal, annulment for substantive or procedural deficiencies under the CCP (‘recurso de casación en el fondo and ‘recurso de casación en la forma’), and disciplinary complaint for serious misconduct or abuse in issuing an award (which may lead the court to set aside or reverse the award).[97]

However, following the principle of party autonomy, the parties can waive the right to appeal or annulment or agree on an appeal before another arbitral tribunal.[98]

Even if the parties have waived the right to all remedies, Chilean courts have traditionally held that annulment for certain specific procedural defects – ultra petita and lack of jurisdiction of the arbitral tribunal – cannot be waived.[99]Parties may also request the rectification, clarification or correction of the award[100]or file a disciplnary complaint against the arbitrator before local courts.[101]

Arbitration in equity

Remedies in arbitration in equity are limited. Appeal will only be possible when the parties have expressly included it in the arbitration agreement, before an appellate arbitral tribunal composed of arbitrators in equity. Annulment for substantive defects (i.e., incorrect application of the law to the facts of the case) is excluded altogether by the JOC, since an arbitrator in equity does not adjudge based on substantive law.[102]

Parties may file a disciplinary complaint and an annulment action for procedural defects,[103]even if they have waived all procedural remedies – but in this case, annulment will only proceed in cases of ultra petita or lack of jurisdiction.

International arbitration

Aside from requesting the correction or interpretation of the award, the ICAA provides for set-aside proceedings before the competent Court of Appeals. The express wording of the ICAA[104] has led to consistent case law rejecting any other form of remedy, including disciplinary complaints.[105]

Notwithstanding the above, the Chilean Supreme Court recently admitted an appeal against an international award.[106]In their arbitration agreement, the parties had provided for appeal and annulment for procedural defects before domestic courts. The award was challenged before the Santiago Court of Appeals, which dismissed the appeal since the ICAA only allows for set-aside proceedings.[107]

The Supreme Court reversed that decision, stating that the Court had to consider the will of the parties. Moreover, it noted that, when drafting the arbitration agreement, the parties did not state that their dispute would be solved in accordance with the ICAA. Only after new conflicts arose between the parties, different from the conflict decided by the award under review, did the parties modify the submission agreement to eliminate the possibility of an appeal. Based on the principles of party autonomy and venire contra factum proprium non valet, the Supreme Court declared the appeal admissible.

The grounds for setting aside an award are those of the Model Law.[108]The most frequently invoked is violation of Chilean public policy. The Santiago Court of Appeals, however, has established that the concept of ‘public policy’ contained in the ICAA is international, therefore limited to the most serious violations of the principles and fundamental tenets of Chilean law.[109]

Chilean courts have adopted a minimum-intervention approach when ruling on setting-aside proceedings, emphasising the prohibition of de novo review: the Court of Appeals may only verify that certain minimum standards of legality have been met.[110]Given this deference for international arbitration, to date, no international award has been annulled in Chile.

Recognition and enforcement of the award

In domestic arbitration, a party may request enforcement of an award to the arbitrator or to state courts.[111] Nevertheless, when the enforcement procedure entails the use of public force or other compulsory measures, the party will have to resort to state courts.

Foreign decisions, arbitral or not, are subject to leave to enforce (exequatur) from the Supreme Court, which traditionally applies the ‘cascade’ test contemplated in the CCP: foreign decisions shall have in Chile (1) the effect recognised by applicable treaties; (2) in the absence of a treaty, the same legal effect as decisions issued in Chile would have in that foreign state (reciprocity principle); or (3) alternatively, the same effect as a decision by a Chilean court, provided it complies with certain Chilean legal rules.[112]

While the Supreme Court usually recognises foreign decisions, it has on occasions refused enforcement, for example in the case of a precautionary measure (injunction) since it did not qualify as a final or interlocutory decision.[113]

In a recent case, the Supreme Court enforced an international award, highlighting that the exequatur procedure did not allow a broad review on the merits of the award, since its exclusive purpose is to verify the fulfilment of certain minimum procedural requirements that any award must comply with in order to be recognised.[114]

Chapter VIII of the ICAA deals specifically with the recognition and enforcement of awards. Arbitral awards, irrespective of their country of origin, shall be recognised as binding and enforced upon written application before the competent court. The Supreme Court has ruled that the grounds to oppose enforcement are limited to those contained in the ICAA, and that it may not review the merits of the award.[115]

Recent case law has highlighted the primacy of the ICAA and the New York Convention when dealing with the enforcement of foreign awards.[116]However, the Supreme Court has still required that foreign decisions be ‘final’.[117]

Conclusion

Arbitration in Chile has increased exponentially in the past decades as a reflection of the country’s economic growth and political stability. The development of the CAM Santiago, the enactment of laws such as the ICAA and the steady flow of foreign investment have allowed arbitration in Chile to flourish. Moreover, Chilean courts have adopted a pro-arbitration stance, showing great respect for international awards and enforcing their decisions. Unfortunately, while international arbitration has been provided with a modern framework in line with international standards, national arbitration remains notoriously outdated. Legislative efforts should be made to modernise the national arbitration framework, in order to enable the adoption of the best international practices.

While Chile remains open for transnational business and respectful of international arbitration, it remains to be seen how the October 2019 protests, and the prospect of a new Constitution, will change Chile’s legislative and business framework. We hope that, if the proposed constitutional changes are implemented, the respect and deference to domestic and international arbitration continues to be the norm. Arbitration will continue to be key to address conflicts likely to arise in relevant economic sectors, such as mining, energy, infrastructure, public concessions, pension funds and healthcare.


Notes

[1] Felipe Ossa is a partner, Felipe de Marinis is a senior associate and Martín Álvarez is an associate at Claro & Cía.

[2] Articles 628–644 of the CCP establish a special procedure for domestic arbitrations.

[3] Articles 222–243 of the JOC regulate the function of arbitrators, insofar as they are considered as judges in Chile.

[4] Law No. 19.971. Other relevant applicable arbitration rules include the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the Interamerican Convention on International Commercial Arbitration, the Bustamante Code on Private International Law, the Agreement on Cooperation and Jurisdictional Assistance in Civil, Commercial, Labour and Administrative Matters between the Mercosur States and the Republic of Bolivia and Chile, the Washington Convention, and Decree Law No. 2349 of 1978 on International Contracts for the Public Sector.

[5] JOC, Article 222.

[6] Constitutional Tribunal of Chile, Case No. 2755-2014, judgment of 30 December 2014.

[7] JOC, Article 229 and 230. Other non-arbitrable matters are disputes referring to the right to request separation of assets between spouses; disputes between legal representatives and their principal; and disputes in which a public prosecutor must be heard. Labour disputes and disputes referring to the termination of a mining concession are also non-arbitrable (Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), p. 17).

[8] JOC, Article 227.

[9] Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), p. 20.

[10] JOC, Article 223: ‘The arbitrator may be appointed either as an arbitrator at law or as an arbitrator in equity or amiable compositeur. The arbitrator at law shall rule in accordance with the law and shall be subject, both in the processing and in the pronouncement of the final judgment, to the rules established for ordinary judges, according to the nature of the action submitted. The arbitrator in equity shall rule according to what his prudence and equity dictate and shall not be bound to observe in his proceedings and in his decision any rules other than those expressed by the parties in the act constituting the compromise, and if they have not expressed anything, to those established for this case in the Code of Civil Procedure. However, in cases where the law so permits, the arbitrator at law may be granted the powers of an arbitrator in equity with regards to procedure and limit the strict application of the law to the final ruling.’

[11] Article 636 and 637 of the CCP provide that, in the absence of an agreement on procedure, arbitrators in equity shall hear the parties, allow them to present evidence, carry out the fact-finding missions they deem appropriate, and rule based on equity and good conscience.

[12] JOC, Article 223.

[13] JOC, Article 223. Given the legal definition of mixed arbitrators, parties may simply stipulate that they grant the arbitrator powers to serve as a mixed arbitrator. It is also customary to define these mixed powers as in CAM Santiago’s model mixed arbitration clause: ‘The parties grant a special and irrevocable power of attorney to the Santiago Chamber of Commerce, so that, at the written request of either party, it may appoint an arbitrator acting in equity with respect to the procedure and in law with respect to the substance, among the members of the arbitration body of CAM Santiago.’

[14] See CAM Santiago’s model domestic arbitration clause (https://www.camsantiago.cl/servicio/arbitraje-nacional/) and international arbitration clause (https://www.camsantiago.cl/servicio/arbitraje-internacional/).

[15] See CAM Santiago’s 2021 arbitration rules (https://www.camsantiago.cl/wp-content/uploads/2020/03/Reglamento-Procesal-Arbitraje-Nacional-CAM-2021-1.pdf). According to the CAM Santiago’s website, it has registered nearly 5,000 cases to date.

[16] María Fernanda Vásquez, ‘Tratado de arbitraje en Chile’, Thomson Reuters (1st ed., 2018), p. 56.

[17] The 2006 amendment to the Model Law has not been incorporated into the ICAA.

[18] Bill No. 15-349 of 2 June 2003, which proposed to Chilean Congress what was ultimately enacted as the ICAA. pp. 4–5.

[19] ICAA, Article 1(3).

[20] María Fernanda Vásquez, ‘Tratado de arbitraje en Chile’, Thomson Reuters (1st ed., 2018), p. 59; Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), p. 14; Eduardo Picand (ed.), ‘Estudios de arbitraje en homenaje a Patricio Aylwin Azócar’, Thomson Reuters (2nd ed., 2014), p 975; Supreme Court of Chile, case No. 2026-2007, judgment of 28 July 2008; Supreme Court of Chile, case No. 1724-2010, judgment of 21 June 2010.

[21] María Fernanda Vásquez, ‘Tratado de arbitraje en Chile’, Thomson Reuters (1st ed., 2018), p. 60.

[23] Decree No. 900 of 1996.

[24] Article 36.

[25] Decree Law No. 2349 of 1978.

[26] The Santiago Court of Appeals has stated that ‘arbitrators only and exclusively possess the competence that the parties have granted them when constituting the arbitration and cannot, under any circumstances, act sua sponte’ (Case No. 95-2013, judgment of 7 November 2013).

[27] Under the Civil Code, Articles 1444–1445, a contract requires: valid consent, a lawful object (for example, submitting to arbitration matters that are not arbitrable would render the object of the contract unlawful), a lawful cause, and legal capacity of the parties.

[28] The JOC does not regulate the arbitration clauses, but insofar as this constitutes a contract in Chile, it must fulfil the general requirements explained at the beginning of Section III. Moreover, the specific provisions regarding the submission agreement are considered applicable, mutatis mutandis (Patricio Aylwin, ‘El juicio arbitral’, Editorial Jurídica de Chile (5th ed., 2005), p. 308).

[29] One approach has been to define submission agreements as agreements by virtue of which the parties agree to submit an existing dispute to the competence of a specific arbitrator, whereas an arbitration clause would be an agreement to refer a potential dispute to the competence of an arbitrator to be nominated on a future act. Other definitions forego the element of time, and only focus on whether a specific arbitrator has been nominated or not (María Fernanda Vásquez, ‘Tratado de arbitraje en Chile’, Thomson Reuters (1st ed., 2018), pp. 346–347; Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), pp. 26–32).

[30] Article 234 of the JOC, which refers to the nomination of arbitrators, has been considered to set forth requisites for the validity of the submission agreement. Under Article 234, the agreement must (1) be done in writing; (2) specify the full name of the disputing parties, the nominated arbitrator and the matter that is submitted to arbitration; and (3) specify the powers granted to the arbitrator, as well as the place and time frame for the fulfilment of his or her duties. (Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), p. 28). In line with the discussion on the differences between the submission agreement and arbitration clauses, it should be noted that Article 234 of the JOC does not refer specifically to the submission agreement, but rather to the appointment of arbitrators, which has been understood by some authors to be a different, separate act (see María Fernanda Vásquez, ‘Tratado de arbitraje en Chile’, Thomson Reuters (1st ed., 2018), p. 363).

[31] María Fernanda Vásquez, ‘Tratado de arbitraje en Chile’, Thomson Reuters (1st ed., 2018), pp. 349–50.

[32] The Supreme Court stated in a case that the circumstance that it was not clear whether the parties had entered into a submission agreement or an arbitration clause did not prevent it from finding that the parties had clearly intended to remove their dispute definitively and permanently from the state justice system and submit it to arbitration, and referred to a proposed bill of 1992 that, among other things, sought to eliminate the distinction between submission agreement and arbitral clause (Supreme Court of Chile, Case No. 5643-2012, judgment of 3 October 2012).

[33] ICAA, Article 7.

[34] Supreme Court of Chile, Case No. 5228-2008, judgment of 15 December 2009; Supreme Court of Chile Case No. 2026-2007, judgment of 28 July 2008.

[35] Supreme Court of Chile, Case No. 5228-2008, judgment of 15 December 2009.

[36] Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), p. 33.

[37] Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), p. 33.

[38] Court of Appeals of Rancagua, Case No. 431-2012, judgment of 24 May 2012. See also María Fernanda Vásquez, ‘Tratado de arbitraje en Chile’, Thomson Reuters (1st ed., 2018), p. 428.

[39] Supreme Court of Chile, RDJ, T. XXX sec. 1, p. 52, judgment of 29 January 1932.

[40] Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), pp. 36–38.

[41] JOC, Article 242.

[42] Public Corporations Act No. 18.046, Article 99.

[43] Code of Commerce, Article 534.

[44] To the best of the our knowledge, the Dow Chemical group of companies doctrine has not been expressly applied by Chilean courts. However, while controversial, certain doctrine has recognised that an arbitral agreement could be extended to the entities of one of the parties’ business group, when those entities have participated in the conclusion of the contract and it is the common intention of the parties to extend the effects of the arbitration clause. (See Dione Meruane, ‘La extensión del acuerdo arbitral a partes no signatarias en el arbitraje comercial internacional’, Ediciones Jurídicas El Jurista (1st ed., 2018), p. 91. In a more general sense, Alejandro Romero and José Ignacio Díaz explain that an arbitration agreement could in theory be extended to the members of one of the parties’ business group (‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), p. 44.)

[45] Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), pp. 43–46.

[46] President of the Santiago Court of Appeals, Case No. 1186-2011, judgment of 30 December 2011. In another case, it was established that an arbitral clause incorporated into the bidding conditions for a public tender were applicable to bidders without the need for them to subscribe the arbitration agreement (President of the Santiago Court of Appeals, Case No. 1019-2014, judgment 13 May 2014).

[47] Santiago Court of Appeals, Case No. 10171-2015, judgment of 15 March 2016.

[48] Supreme Court of Chile, Case No. 1270-2014, judgment of 3 October 2012.

[49] Supreme Court of Chile, Case No. 31071-2014, judgment of 8 October 2015. Chilean courts have also upheld the validity of an arbitration agreement that gave the defendant the right to opt between arbitration and the competent courts according to the laws of Wisconsin (21st Civil Court of Santiago, Case No. 16361-2006, judgment 2 November 2007).

[50] JOC, Article 235.

[51] JOC, Article 225.

[52] Patricio Aylwin, ‘El juicio arbitral’, Editorial Jurídica de Chile (5th ed., 2005), pp. 327–328.

[53] Patricio Aylwin, ‘El juicio arbitral’, Editorial Jurídica de Chile (5th ed., 2005), pp. 327–328.

[54] Patricio Aylwin, ‘El juicio arbitral’, Editorial Jurídica de Chile (5th ed., 2005), pp. 329.

[55] JOC, Article 236.

[56] JOC, Article 236; Patricio Aylwin, ‘El juicio arbitral’, Editorial Jurídica de Chile (5th ed., 2005), p. 371.

[57] Patricio Aylwin, ‘El juicio arbitral’, Editorial Jurídica de Chile (5th ed., 2005), pp. 372–73.

[58] CAM Santiago 2021 Domestic Arbitration Rules, Article 14.

[59] ICAA, Article 11.

[60] JOC, Article 243.

[61] ICAA, Article 12.

[62] Article 637 of the CCP states that, in the absence of an agreement on procedure, arbitrators in equity shall hear the parties, allow them to present evidence, carry out the necessary fact-finding, and rule based on equity and good conscience.

[63] Patricio Aylwin, ‘El juicio arbitral’, Editorial Jurídica de Chile (5th ed., 2005), p. 445.

[64] Title VIII of the Book III of the CCP sets out special rules for arbitral proceedings.

[65] ICAA, Articles 18.

[66] Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), p. 141.

[67] Court of Appeals of Concepción, Case No. 431-2012, judgment of 24 May 2012; see also Supreme Court of Chile, Case No. 5114-2005, judgment of 24 April 2007; Santiago Court of Appeals, Case No. 2826-1994, 25 July 1995. There are, however, isolated decisions ruling that domestic courts can be seized of a dispute concerning the existence or validity of an arbitration award, due to considerations of due process, notwithstanding the power of arbitral tribunals to be seized of the same matters (Santiago Court of Appeals, Case No. 2592-2010, judgment of 10 May 2011).

[68] ICAA, Article 16.

[69] JOC, Article 233.

[70] ICAA, Article 28.

[71] ICAA, Article 28.

[72] On 12 March 2012, a bill was submitted to Congress to replace the current CCP in favour of a new, modern code of civil procedure. However, the bill has been stagnated in Congress and is yet to be approved. Among other issues, the proposed code modernises the rules on evidence.

[73] Chilean Civil Code, Article 1702.

[74] Court of Appeals of Concepción, RDJ T. 61, Sec. 2, p. 1, judgment of 4 October 1963; Santiago Court of Appeals, RDJ, T. LXXVII, Sec. 2, p. 154, judgment of 5 December 1980.

[75] Under Articles 327 and 328, certain individuals are not capable of testifying in any trial (for example, those under 14 years old, mentally ill or who are deemed unworthy of trust for having being convicted for crimes, among others) or are not capable of testifying in a specific trial (for example, relatives of the parties, close friends, workers of the parties, among others).

[76] CCP, Article 367. However, it is common practice to provide written testimony in domestic arbitration.

[77] CCP, Articles 411 and 414.

[78] Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), p. 149.

[79] ICAA, Article 19.

[80] CCP, Articles 384, 399, 425, and Civil Code, Articles 1700 and 1702.

[81] Santiago Court of Appeals, Case No. 4181-2016, judgment of 3 August 2016.

[82] ICAA, Article 19.

[83] Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), p. 227, citing the SCC, RDJ, T. LXXXIV, Sec. 1, p. 125, judgment of 24 September 1987.

[84] CCP, Article 635.

[85] Court of Appeals of Presidente Pedro Aguirre Cerda, judgment of 7 November 1984, and Court of Appeals of Concepción, judgment of 24 July 1985, cited in CAM Santiago, ‘Arbitration and Interim Measures’, p. 12.

[86] Article 16.

[87] Supreme Court of Chile, RDJ, T. XCVI, Sec. 1, p. 175, judgment of 17 November 1999.

[88] Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), p. 229; CAM Santiago ‘Arbitration and Interim Measures’, p. 16.

[89] CAM Santiago, ‘Arbitration and Interim Measures’, p. 17.

[90] 28th Civil Court of Santiago, Case No. 5243-2005, judgment of 26 May 2005.

[91] 11th Civil Court of Santiago, Case No. 6853-2007, judgment of 16 May 2007; 26th Civil Court of Santiago, Case No. 24011-2009, judgment of 24 August 2009.

[92] 11th Civil Court of Santiago, Case No. 6853-2007, judgment of 16 May 2007

[93] Hugo Cárdenas and Ricardo Reveco, ‘Remedios Contractuales’, Thomson Reuters (1st ed., 2018), p. 415; Enrique Barros, ‘Tratado de Responsabilidad Extracontractual, Tomo I’, Editorial Jurídica de Chile (2nd ed., 2020), p. 242.

[94] According to Article 170 of the CCP the award of arbitrators in law or mixed shall state: (1) the parties, their domiciles and occupation; (2) a brief description of claims asserted by the claimant and their grounds; (3) a brief description of the defenses raised by the defendant; (4) the reasoning relating to the facts and the law that explain the award; (5) the laws or in subsidy the principles in equity according to which the award is issued; and (6) the decision of the dispute.

[95] Article 640 of the CCP mandates that the award shall include: (1) the designation of the parties; (2) a brief description of claims asserted by the claimant; (3) a brief description of the defences; (4) the reasons of equity or best judgment contained in the award; and (5) the decision of the dispute.

[96] Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), pp. 249–250.

[97] Under Chilean law, parties are entitled to file a disciplinary complaint against individual judges when they consider that a resolution has been issued with serious misconduct or abuse.

[98] JOC, Article 239.

[99] Supreme Court of Chile, Case No. 5736-2016, judgment of 29 August 2011.

[100] JOC, Article 545.

[101] Supreme Court of Chile, RDJ, T. LVIII, Sec. 1, p. 308, judgment of 22 August 1961.

[102] JOC, Article 239.

[103] JOC, Article 545.

[104] Article 34 of the ICAA defines set-aside procedures as the ‘only recourse against an award’.

[105] Supreme Court of Chile, Case No. 8699-2014, judgment of 30 April 2014; Supreme Court of Chile, Case No. 30967-2015, judgment of 3 December 2015; Santiago Court of Appeals, Case No. 1971-2012, 9 September 2013.

[106] Supreme Court of Chile, Case No. 19568-2020, judgment of 14 September 2020.

[107] The difference between the domestic appeal and set-aside proceedings under the ICAA is significant. An appeal allows the court to review all factual and legal findings of the arbitrator de novo. On the other hand, set-aside proceedings under the ICAA only allow for a limited review based on specific grounds of procedural fairness and conformity of the award with basic public policy tenets, excluding review of the merits of the award.

[108] Article 34.

[109] Santiago Court of Appeals, Case No. 7413-2019, judgment of 17 March 2021; Santiago Court of Appeals, Case No. 1971-2012, judgment of 9 September 2013; Santiago Court of Appeals, Case No. 11.466-2015, judgment of 28 June 2016..

[110] Alejandro Romero and José Ignacio Díaz, ‘El arbitraje interno y comercial internacional (parte general)’, Ediciones UC (2nd ed., 2016), p. 278; María Fernanda Vásquez, ‘Tratado de arbitraje en Chile’, Thomson Reuters (1st ed., 2018), p. 819; Santiago Court of Appeals, Case No. 9134-2007, judgment of 4 August 2009; Santiago Court of Appeals, Case No. 11466-2015, judgment of 28 June 2016.

[111] CCP, Articles 635 and 643.

[112] This last criterion is subject to the following limitations: the foreign award must not be contrary to Chilean laws or jurisdiction, and the party against whom enforcement is sought must have been duly notified of the claim (CCP, Article 245).

[113] Supreme Court of Chile, Case No. 5468-2009, judgment of 11 May 2010.

[114] Supreme Court of Chile, Case No. 104262-2020, judgment of 19 July 2021.

[115] Supreme Court of Chile, Case No. 6615-2007, judgment of 15 September 2008; Supreme Court of Chile, Case No. 5228-2008, judgment of 15 December 2009; Supreme Court of Chile, Case No. 4390-2010, judgment of 8 September 2011; Supreme Court of Chile, Case No. 1724-2010, judgment of 21 June 2010; Supreme Court of Chile, Case No. 3225-2008, judgment of 8 September 2009.

[116] Supreme Court of Chile, Case No. 41841-2017, judgment of 26 July 2018; see further, Elina Mereminskaya, ‘Arbitraje commercial internacional en Chile, desafíos y desarollo’, Legal Publishing (1st ed., 2014), p. 129.

[117] Supreme Court of Chile, Case No. 3225-2008, judgment of 8 September 2009; Supreme Court of Chile, Case No. 4390-2010, judgment of 8 September 2011.

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