International Commercial Arbitration in the Dominican Republic

As was the case in many Latin American countries, commercial arbitration, and in particular international commercial arbitration, was not popular in the Dominican Republic, with very few cases prior to the 1990s. Before Dominican Law 50-87, dated June 1987 (which regulates the Chambers of Commerce and provides that these may create institutional arbitration and mediation centres), arbitration was mainly provided for, but rarely used, in the Civil Procedure Code. As judicial proceedings increased and lengthened, and the confidence in the impartiality of some courts decreased, parties became more inclined to use arbitration as a method of commercial dispute resolution, both for local and international conflicts.

In the intervening years, the culture and legislation that pertain to arbitration in the Dominican Republic have been expanded and refined. As a result of the progressive growth of arbitration in the Dominican Republic, during the 1990s and early 2000s, the state entered into several bilateral investment treaties and many international agreements that contained dispute resolution provisions that included arbitration. As a natural progression of arbitration as a method of local and international dispute resolution, the Dominican Republic adopted important multilateral conventions such as the Convention for the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), which was ratified by the Dominican Republic on 8 November 2001 and entered into force on 10 July 2002, and the Inter-American Convention on International Commercial Arbitration (the Panama Convention), ratified on 24 December 2007.

However, it was not until the enactment of Law 489-08 on 19 December 2008 that the foundations of modern arbitral practice were laid in the Dominican Republic. Law 489-08 is modelled on the UNCITRAL Model Law on International Commercial Arbitration (the UNCITRAL Model Law) and governs both domestic and international arbitration proceedings that take place in the Dominican Republic, as well as the enforcement of international and local awards. There are, however, several minor differences between Law 489-08 and the UNCITRAL Model Law. For instance, the definition of international arbitration in Law 489-08 is narrower than that of the Model Law, so that, while the latter’s Article 1 Paragraph 3(c) establishes an opt-in option, according to which the parties may expressly agree that the subject matter of the arbitration agreement relates to more than one country, Law 489-08 does not include said provision.

According to Law 489-08, an arbitration is considered international if (1) the parties to an arbitration agreement have, at the time of the conclusion of the agreement, their places of business in different states; (2) the parties are domiciled outside the Dominican Republic; or (3) the place of execution or fulfilment of a substantial part of the obligations of the commercial relationship is a state other than the one in which the parties have their domiciles. Furthermore, for the arbitral clause in an arbitration that is deemed international to be valid under the provisions of Law 489-08, it must meet the requirements established by the legal rules chosen by the parties to govern the arbitration agreement, or by the legal rules applicable to the merits of the dispute, or by Dominican law. In all other respects, both domestic and international arbitration are treated equally and subject to the same regulating legislation in the Dominican Republic.

In accordance with international arbitration practices, Law 489-08 sets forth the doctrine of party autonomy for ad hoc arbitral proceedings. Consequently, the parties are free to agree to the procedures to be followed by the arbitral tribunal conducting the proceedings, including such matters as the number of arbitrators, the way in which they are appointed and challenged, procedural rules and place of arbitration. There is, however, in Law 498-08, also the option to elect an institutional arbitration forum in the Dominican Republic, the most popular of which is the Centro de Resolución Alternativa de Controversias de la Cámara de Comercio y Producción de Santo Domingo (CRC),^[2] organised pursuant to the afore­mentioned Law 50-87, and whose arbitration rules are very similar to those of the International Court of Arbitration of the International Chamber of Commerce (ICC). The vast majority of commercial arbitrations in the Dominican Republic are carried out in institutional forums such as the CRC, and those forums, which exist in several of the major cities, have similar arbitration rules as the CRC’s or simply apply these.

Law 489-08 provides that, when an institutional arbitration is adopted by the parties, the arbitration shall be governed by the arbitration rules of such an institution, except for matters explicitly provided for in that law. Consequently, important issues such as the designation of arbitral tribunals, the proceedings, hearings, seat and language of the arbitral proceedings, etc., are generally governed by the institutional arbitration rules. Therefore, the comments that follow below, unless indicated to the contrary, apply to ad hoc arbitrations and are not necessarily applicable to intuitional arbitrations in the Dominican Republic.

Regardless of whether the parties choose an ad hoc or institutional arbitration, Law 489-08 explicitly sets forth two guiding principles as the pillars of any arbitral proceeding under Dominican law: the first is the requirement that the parties should be treated equally and each should be given a full opportunity to assert their rights; and the second is that the arbitrators, the parties and the arbitration centres, as the case may be, are obliged to keep confidential any information resulting from the arbitration proceedings. The first set of principles, those regarding equality and contradiction, exist to allow both parties to have parity regarding the rules of evidence and the enjoyment of the same possibilities to present and argue their case, and refute the opponent before an impartial and independent arbitrator. The imperative nature of this legal mandate is addressed mainly to the arbitrators, who are required to avoid granting any sort of advantage to one litigant to the detriment of the other, thus avoiding states of defenselessness or partiality contrary to established principles, and potentially causing the resulting award to be annulled. As far as the principle of confidentiality is concerned, issues as sensitive as commercial or industrial secrets, the management of computer programs, know-how, or corporate strategies, to name a few, must be handled with absolute discretion.

For the sake of assuring the autonomy of any arbitral proceeding, Law 489-08, inspired by Article 5 of the UNCITRAL Model Law, sponsors a system of collaboration with the minimum indispensable participation of ordinary courts. It is undeniable that the progressive consolidation of the principle of kompetenz-kompetenz, the autonomy of the arbitration clause in relation to the contract that serves as its framework, the institution of the action for annulment of the award as the only means of challenging it, thus avoiding judicial intervention in the examination of substantive issues, among other aspects, constitute a framework of independence that serves as the cornerstone of the nature and purpose of arbitration as a means of dispute resolution in the Dominican Republic.

As it pertains to arbitrability, Law 489-08 establishes a general principle whereby all matters that can be subjected to compromise and settlement are subject to arbitration. This formula for establishing matters that may be subject to arbitration is broad enough that the principle implied by the legislators is an inclination towards arbitrability. However, Law 489-08 explicitly states that matters such as (1) the marital status of persons, (2) gifts and legacies of food, (3) housing, accommodation and clothing, (3) separations between husband and wife, (4) guardianship of minors, of those subject to interdiction or absentees, and (5) matters that concern public order, are not arbitrable.

As it pertains to the concept of ‘public order’, as used in Law 489-89, the legislator refers to such rights that may not be freely disposed of or are not subject to transaction, such as actions related to guardianships or the civil status of persons, judicial procedures of private law that requires the intervention of the public prosecutor as an attached party, and naturally actions of a criminal nature or related to the protection of fundamental rights. All matters that do not fit into these categories are arbitrable, including disputes wherein one of the parties is an association, organisation, or company property of or controlled by a state, in which cases said state may not invoke the prerogatives of its own law or principles of sovereignty to evade the obligations arising from the arbitration agreement. There are, however, two elements of note in the way Law 489-08 treats arbitrations wherein a state, be it the Dominican state or a foreign state, is a party to the arbitration: the Law refers only to international arbitrations and is silent regarding domestic arbitration, and the statute refers only to arbitrations wherein the counterparty to the state is a private individual.

In the spirit of strengthening arbitration as an effective and independent method of resolving disputes, Law 489-08 is quite clear in limiting the intervention of ordinary courts in arbitral proceedings to those instances expressly permitted by the statute. The wording pertaining to the limits of court intervention in arbitral proceedings is set forth in such a way that it may not be ignored nor circumvented by the parties or the courts. The exclusion is broad and covers any case of judicial intervention that has not been expressly provided for in the text of Law 489-08. From the foregoing, it follows that not even the parties, in the exercise of their autonomy, can extend the powers of judges to situations not provided in Law 489-08. Such exceptions are as follows:

• the appointment of arbitrators, when necessary;
• judicial assistance for the taking of evidence;
• collaboration for the adoption of preliminary or interim measures;
• decisions pertaining to challenges to a sole arbitrator or against the entire arbitral tribunal;
• the exercise of direct action in annulment of the arbitration award; and
• the granting of the exequatur for the execution in the Dominican Republic of foreign arbitral awards.

In accordance with the established principle of limiting judicial intervention in arbitral proceedings described above, Law 489-08 provides for the application of both the positive and negative effects of the kompetenz-kompetenz principle to both domestic and international arbitration in the Dominican Republic. Accordingly, any judicial authority that finds itself called on to hear a dispute subject to an arbitration agreement must declare itself incompetent or lacking jurisdiction when requested to do so by the respondent. In this case, said party may raise the objection of incompetence or jurisdiction based on the arbitration agreement, and the objection must be resolved in a preliminary manner and without any recourse. However, this provision operates only when it is requested by the respondent. If the responding party does not invoke lack of jurisdiction, the national courts will judge the matter and decide the controversy, based on the assumption that an implicit prorogation or extension of jurisdiction has been consented to and taken place. This, then, represents the embodiment in the law of the negative effects of kompetenz-kompetenz. Additionally, Law 498-08 also provides the positive effects of this same principle, recognising that the arbitral tribunal has the primary authority to determine its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement.

Regarding the arbitration clause, the essential defining element of the wording of Law 489-08 is that it reflects the will of the parties to submit their current or future disagreement or dispute to arbitration. Therefore, it is not imperative that the clause include precise information about the number of arbitrators, the place or seat of the arbitration, the language in which the proceedings will be carried out, the term to issue the award, the applicable law, or other specific matters. Law 489-08 does require, however, in order to guarantee legal certainty and as evidence of the will of the parties, that the arbitration clause be set forth in writing. Nevertheless, this obligation admits different types of writings, such as a document signed by the parties or an exchange of letters, faxes, telegrams, emails or other means of telecommunication that leave a record of the agreement and are accessible for further consultation in electronic format, in a visual representation or otherwise.

As it pertains to enforceability, and in accordance with arbitral principles and common practice, Law 489-08 states that arbitration agreements that are part of a contract are independent of the other terms of the contract. Thus, the invalidity or unenforceability of the underlying agreement or contract does not necessarily affect the arbitration agreement. However, similarly to article 8 of the UNCITRAL Model Law, Law 489-08 does limit the broad principle by expressly providing that, if a definite and irrevocable judgement is rendered declaring the annulment of the underlying contract, then the arbitration agreement is no longer enforceable.

Regarding whether the enforceability of the arbitration clause or agreement extends to third parties, the governing principle is that arbitration agreements cannot be extended to non-signatory parties. However, there are exceptions to this principle, such as cases where the assignment to a third party of the underlying contract may be presumed to include the acceptance of any arbitration agreement therein contained. In any case, Law 489-08 is silent on the matter. There is no special provision regarding the extension of the arbitration agreement to non-signatories or third-party intervention. However, under the arbitration rules of several institutional arbitration centres, as is the case with the CRC, there are specific provisions that resemble the practice under the ICC Court Arbitration Rules for the joinder of an additional party, whereby, at the request of a party, the arbitral tribunal may accept intervention in the arbitration of one or more third parties, provided that the third party is part of the arbitration agreement, specific claims are made against said party and there is a direct and legitimate interest in the outcome of the arbitration. Furthermore, the Supreme Court of the Dominican Republic has set a precedent by ruling that the arbitration agreement in a main contract entered into by the parties, may extend to ancillary contracts, which may have been entered into by only one of the original parties and a third party.^[3]

In this particular ruling by the Supreme Court, the justices clearly establish that claims brought forth regarding obligations contained in an agreement that is itself dependent on another agreement that contains an arbitral clause, are subject to the arbitral jurisdiction chosen by the original parties – even when the signatories of the ancillary agreement are different from the original parties. This particular case is quite clear because the ancillary agreement contained a provision that stated that the parties to the ancillary agreement recognise and accept all the clauses and stipulations established in the original agreement, which had not been modified by means of the second document, and which remained fully in force and were recognised as valid. However, the enforcement of the precedent set forth by the Supreme Court in this ruling means that, unless ancillary agreements expressly state that the parties thereto choose to bring forth their disputes before the ordinary courts, said disputes will be subject to the arbitral clause set forth in the original agreement.

According to the provisions of Law 489-08, arbitral proceedings are initiated the moment the claimant submits the request for arbitration, which, in accordance with Dominican common practice, usually includes details regarding the nature of the dispute, the underlying agreement, the reliefs sought, the evidence in support of the claims, along with the nomination of potential arbitrators.

As established in Law 489-08, the composition of the arbitration tribunal in ad hoc arbitration may be determined by the mutual agreement of the parties, as long as the number of arbitrators is odd. Similarly, the parties may designate the arbitrators by mutual agreement or delegate such designation of one or all arbitrators to a third party or institution. However, when there is a lack of agreement between the parties, the arbitrators shall be appointed by the courts at the request of one of the parties. All natural persons who are in full exercise of their civil rights can be arbitrators, regardless of their nationality or whether they are lawyers, unless the parties in dispute establish otherwise. Nevertheless, any person appointed as an arbitrator shall disclose in writing any circumstances likely to give rise to justifiable doubts as to their impartiality or independence. Consequently, arbitrators may be challenged on the grounds of lack of independence or impartiality, and for not meeting the qualifications agreed upon by the parties, as set forth in Law 489-08.

In keeping with the flexible nature of ad hoc arbitral proceedings, the parties may establish mutually agreed-upon procedures for challenges to the arbitrators. If, however, the parties fail to agree on a procedure to challenge and replace arbitrators, the party who intends to issue the challenge shall file with the arbitral tribunal a written statement setting forth the reasons for the challenge within 15 days of the arbitrator’s acceptance of his or her designation or after the challenging party becomes aware of circumstances that may give rise to justifiable doubts regarding the arbitrator’s impartiality or independence. The arbitral tribunal must then decide on the challenge. However, the law is silent on the details of this decision-making process: it makes no reference to the adjournment of the proceedings while the challenge is discussed, it sets forth no time frame for the decision to be taken and, most importantly, it does not establish whether the arbitrator subject to the challenge may participate in the debate regarding his or her impartiality or independence in the proceedings. If the challenge to the arbitrator is not successful, the challenging party may request that the Court of Appeals of the place of arbitration render a decision in chambers. The appointment of substitute arbitrators arising from a successful challenge shall follow the same rules and proceedings applicable to the original appointment.

As far as the holding of hearings is concerned, in accordance with the provisions of Law 489-08, the parties may determine whether the proceeding is held with or without the hearings. In practice, however, what happens most frequently is that at least one hearing is held, whether it is for oral debates, discussion of preliminary motions, taking of evidence or for closing statements. Hearings shall be held if one or both parties so request, or when the arbitrators order it of their own initiative if there is no prior agreement to the contrary between the parties. Law 489-08 does not set forth any particulars regarding the conducting of hearings, which are determined by the arbitral tribunal.

Pursuant to Article 28 of Law 489-08, which states that the assistance of an attorney will be required for arbitral proceedings, requires that the parties to an arbitral proceeding be represented by legal counsel. Therefore, while there is flexibility as to who may be designated to an arbitral tribunal, in the sense that there is no requirement for an arbitrator to be a member of the legal profession, there is no such flexibility in the issue of representation of the parties. The apparent objective of this requirement is to ensure the speed and certainty of the procedure. The expenses caused by said representation are to be included in the final award in accordance with the provisions of Article 36, Subsection 6, of Law 489-08.

Regarding the evidentiary rules applicable to both local and international arbitral proceedings in the Dominican Republic, the practice is to require the parties to present the evidence on which they rely concurrently with the submission of their respective briefs. However, the admissibility, relevance, materiality and weight of any evidence submitted before the arbitral tribunal are subject to its discretion. Consequently, in the absence of an agreement between the parties, the arbitrators may rule on the aforementioned matters at their discretion. Furthermore, at any stage of the proceedings, arbitrators may undertake to request clarification or suppletory information, or any additional taking of evidence that they deem necessary or useful. Therefore, arbitrators, for example, may require a party to produce specific documents, appoint experts to assist in a specific fact-finding mission, order site inspections and hear experts and witnesses. Conversely, arbitrators have the authority to reject any means of evidence that they consider useless or frustrating. In essence, unless the parties agree to specific proceedings or evidentiary rules, Dominican arbitral tribunals tend to follow customary proceedings in international arbitration as it pertains to memorials, expert reports and production of documents. The notable exception pertains to witness and party statements. It is not customary in the Dominican Republic to submit these statements in writing before the arbitral tribunal. Rather, hearings are usually scheduled and the witnesses’ statements are first heard in the hearing, where they are examined and cross-examined.

In accordance with the provisions of Law 489-08, failing any party agreement, decisions are adopted by a majority of votes of the members of the arbitral tribunal. If no majority is reached, the decision shall be the one with which the chairperson of the arbitral tribunal concurs. The decision of the arbitral tribunal will be set forth in a written arbitral award. That award shall contain, at a minimum, and without prejudice to any other information that, in the opinion of the arbitrators, is necessary for its proper drafting and enforceability:

• the signature of the arbitrators as a manner of establishing its authenticity and an intrinsic requirement of validity (although it is enough for the majority of the members of the tribunal to sign the award, provided that the reasons why an arbitrator does not do so are stated in the award);
• the reasoning for the decision, the absence of which is cause for annulment of the award, whose purpose is to inform the parties of the reflections that led to the ruling, facilitate its control in any challenging actions and avoid arbitrariness;
• the place and date of the award; and
• the judgment and the corresponding determination of the costs, which includes expenses in general and the fees of arbitrators, the experts and the legal counsel to the parties.

Additionally, the award shall include any dissenting vote or a separate concurring opinion, as appropriate, of any of the participating arbitrators.

Once the arbitration award is issued, the arbitral tribunals are no longer empowered or have any further jurisdiction, except for possible residual actions that allow the arbitrators to make material corrections, clarifications, interpretations or the supplementation of the award on motions made but not answered or resolved by the original award rendered.

Under the regulations set forth in Law 489-08, the challenges against an arbitral award can only be undertaken by an action for annulment, which must be presented before the Court of Appeals of the Judicial Department of the place where the award was rendered. Law 489-08 lists the specific causes that may give rise to an action for annulment, which are that:

• one of the parties to the arbitration agreement was affected by some incapacity or that the arbitration agreement is not valid according to applicable law;
• there has been a failure to observe due process, resulting in the violation of the right to defence of one of the parties;
• the award refers to a dispute not provided for in the arbitration agreement or contains decisions that exceed the terms of the arbitration agreement;
• the composition of the arbitral tribunal or the arbitral procedure has not been in accordance with the arbitration agreement of the parties;
• the arbitrators have ruled on issues not subject to arbitration; or
• the award is contrary to public policy. One of the aforementioned occurrences must be proven for an award to be annulled.

Once issued, awards resulting from ad hoc arbitration procedures must be recognised or approved by the court, specifically the Court of First Instance of the place where the award is deemed to have been issued, in order to be enforceable. This process is known in Dominican Republic as obtaining an exequatur or homologation.

The proceeding to obtain an exequatur takes the form of a non-contentious request to the court. The court is not authorised to delve into substantive issues or determine the merits of the claim submitted to arbitration. Pending recognition or approval by the court, the award is only a declaratory title containing the pronouncement of an already existing, but controverted right, because it does not yet have the effect of res judicata, which allows all conservatory measures to be applied, which, with a view to their definitive conversion into an enforceable instrument, will require of the exequatur. Accordingly, until an arbitral award has obtained an exequatur or homologation, it does not grant sufficient force to obtain from the courts the assistance in enforcement. However, subject to the provisions of Law 50-87, as amended by Law 181-2009, the provision that orders the recognition and approval of awards to be processed before the Civil and Commercial Chamber of the Court of First Instance does not apply to awards emanating from institutional arbitration under the rules of the centres of the Chambers of Commerce. On the contrary, awards emanating from arbitrations held under the auspices of the Chambers of Commerce are automatically purported to be enforceable, after the term for an action of annulment of the award has expired.

As far as foreign awards are concerned, the recognition procedure, meaning the request for exequatur and their execution or enforceability in the Dominican Republic, are governed by the provisions of the New York Convention. The provisions of that Convention coincide with Law 489-08 by establishing that a review of the merits of the arbitration award is not allowed and that the grounds that could cause an award to be deemed unenforceable, and therefore denied an exequatur, are those explicitly indicated in the text of the Convention or in Article 45 of Law 489-08.

Finally, there is the matter of investor-state arbitration. The Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID) was signed by the Dominican Republic on 20 March 2000, but has yet to be ratified by Congress. The Dominican Republic is, however, party to several multilateral and bilateral conventions that contain dispute resolution clauses, the most notable of which is the multi-lateral investment treaty between the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the United States of America (DR-CAFTA). As such, the rules set forth in such treaties regarding dispute resolution must be followed and guide the proceedings. When confronting issues of the defence of state immunity regarding jurisdiction and enforcement in arbitral proceedings, national courts must respect the applicable rules and international treaties for arbitration in the Dominican Republic. Specifically, when one of the parties to an arbitration is the Dominican state, or a company, an organisation or entity property of, or controlled by, the Dominican state, this party cannot invoke the prerogatives of its own law or principles of sovereignty to avoid obligations stemming from the arbitral agreement.

Under Law 489-08, contracts entered into between the Dominican state and its companies, entities and departments, and private individuals and entities, whether local or foreign, may be subject to arbitration, and frequently are. These include concession, construction and commercial contracts. Furthermore, there are no limitations on local or foreign arbitrations, which may be administered, and usually are, by foreign arbitral institutions. There are no specific requirements for the arbitration clauses in such contracts or agreements to be valid and enforceable.

Arbitration in the Dominican Republic continues to grow, and the courts tend to be collaborative with arbitrations, whether they be ad hoc or institutional. This collaboration is evident in the assistance the courts tend to give to arbitral proceedings prior to or during the same, as well as when deciding annulment or enforcement actions. Consequently, arbitrations continue to increase in numbers, not only for international commercial matters, but also from a domestic point of view, primarily through the various institutional centres established by the Chambers of Commerce.

Notes