Introduction

Global Arbitration Review (GAR) and Latin Lawyer have combined their considerable forces to bring you an outstanding collection of works on international arbitration in Latin America. As a leading global source of information about arbitration markets and practice, GAR has a privileged vantage point from which to spot trends and identify the needs of the arbitral community. In turn, Latin Lawyer, with its years of on-the-ground reporting on the legal markets in Latin America, has in-depth knowledge about the bar and related developments in the region, giving it unique insights about what is happening in the region’s myriad legal sectors there, including, in this case, in international arbitration.

Much has been written about the evolution of international arbitration in Latin America. For many decades, Latin American states were unwilling to subject themselves to the jurisdiction of international forums for the resolution of their disputes with foreign investors. That unwillingness was embodied in the form of the ‘Calvo clause’, which required foreign investors to resort to domestic justice systems for resolution of their disputes with states. Along with other factors, including a lack of adequate legal infrastructure, as well as philosophical reservations concerned with preserving for the state the power to adjudicate disputes, it prevented international arbitration from gaining much traction in Latin America over the years.

As globalisation took hold in the 1980s and 1990s, international trade in the region grew. During the 1990s, many Latin American states undertook to privatise many functions previously executed by their governments, and entered into bilateral investment treaties and free trade agreements that included provisions allowing investors to seek redress for their disputes through international arbitration.

Globalisation also increased private international trade and investment generally. For most of those cross-border private commercial transactions, international arbitration became the dispute resolution method of choice.

Over time, states modernised their arbitration laws, and international arbitral institutions, such as the International Chamber of Commerce (ICC) and the International Centre for Dispute Resolution, saw their Latin American caseloads grow significantly. As international law firms became involved in handling disputes emanating from the region, local lawyers recognised the importance of having the knowledge and skills needed to compete effectively for the opportunities to serve as counsel in the many disputes that would eventually erupt. Locally-based arbitral institutions also recognised the potential and importance of non-domestic arbitrations.

Those factors, among others, have combined to make Latin America one of the most important regions in the world for international arbitration. By way of example, preliminary figures for 2021 show that Brazil now accounts for the second highest number of parties in ICC proceedings, with Mexico being ranked fifth globally.[2] As noted in the first chapter, the region has spawned some of the International Centre for Settlement of Investment Disputes (ICSID)’s most notable cases. Lawyers and arbitrators from the region are serving in some of the world’s largest arbitration disputes, and Latin American lawyers have led important arbitration organisations, such as the International Bar Association Arbitration Committee, spearheading important initiatives.

Against that backdrop, this tome brings you thoughtful analysis on key issues and jurisdictions in the region.

We begin with an insightful analysis by one of the world’s thought leaders in arbitration, Gary Born, and his colleague, Claudio Salas. They analyse the origins, evolution and state of ICSID arbitration in Latin America. As they note, in the first decade of this millennium, ICSID cases from the region, originating primarily from Argentina and Venezuela, grew exponentially. Those great waves of claims resulted from sweeping policy changes implemented broadly by the respondent states. As multiple investors in somewhat similarly situated positions brought claims seeking redress for those wholesale changes, multiple arbitral tribunals were called on to address the common issues. Some of the awards rendered were inconsistent with one another, leading to criticisms and dissatisfaction with ICSID as a means of resolving such disputes.

But as Gary and Claudio note, the story does not end there. Since 2015, the cases brought before ICSID have for the most part been grounded on specific government measures, not sweeping policy changes, thus reducing at least the risk of direct inconsistency. States such as Mexico have acceded to the ICSID Convention, and Ecuador has rejoined the institution. As they note, ‘ICSID’s fortunes have improved in Latin America’.

But the story does not end there, either. As Gary and Claudio point out, the political landscape in Latin America can shift quickly, and there are signs that political changes in the region might bring new sweeping policy changes, creating the prospect of a new ‘boom’ of ICSID cases, and with it, the potential for stresses on the system.

Following Gary and Claudio’s review of ICSID arbitration, a team from Uría Menéndez in Spain, comprised of Álvaro López de Argumedo Piñeiro, Jana Lamas de Mesa, Ana Amorín Fernández and Alberto de Unzurrunzaga Rubio, analyses the way in which the New York Convention has been applied across the region. The team focuses on Article V’s grounds to refuse recognition and enforcement of foreign arbitral awards. Extensive jurisprudence on the interpretation of each section of Article V does not yet exist, but, as they explain, some local arbitration laws contain similar grounds for opposing the enforcement of awards. Thus, local courts’ interpretations of those domestic provisions can inform efforts to divine how the same courts might apply the corresponding sections of Article V.

International arbitration’s growth in Latin America has taken place within legal systems that historically guarded the state’s power to adjudicate disputes and render justice. Despite the fact that arbitration may be regarded as the product of an agreement between private parties to resolve disputes among themselves, with the law lending its force to carry out the intention of the parties, some Latin American jurisdictions have viewed arbitration as an arm or dimension of the state’s adjudicatory function. That basic premise has a multitude of implications for international arbitration, including whether remedies and writs designed to protect constitutional rights can be brought to bear on the arbitration process.

Eduardo Silva Romero and Javier Echeverri Díaz bring us a sterling summary of this important issue in the region. They note that, in some jurisdictions, the availability of constitutional remedies to challenge the decisions of arbitrators has not yet been tested. In addition, they conclude with an interesting point: while, on the one hand, the potential application of constitutional remedies against arbitration can cast a cloud over the reliability of arbitration as a dispute resolution mechanism, constitutional provisions throughout the region can also serve to protect arbitration against undue interference, thereby helping to develop pro-arbitration constitutional case law.

In recent years, the globally important issue of arbitrating disputes over transactions allegedly tainted with corruption has arisen in Latin America. In their contribution, Ari MacKinnon, Katie Gonzalez, Elisa Zavala and Roberta Mayerle of Cleary Gottlieb examine the impact of corruption in two phases of arbitration: first, when the issue arises during the course of the arbitral proceeding, and second, when it arises in the context of annulment, recognition and enforcement of the award. As they note, although there have been important recent developments on how tribunals and courts should confront issues of corruption, the law is far from settled. They examine the duty of tribunals to investigate corruption where the case has indicia of corruption but neither party raises the issue. They also compare the varying degrees of deference that tribunals have accorded to parallel proceedings involving the same allegations of corruption. As they remind us, corruption is an issue of increasing importance in arbitrations and post-award proceedings, particularly in Latin America, so their report identifies issues about which we will likely be hearing more on the road ahead.

From there, we move to a sector that is another source of important arbitration developments in the region. As Harry Burnett and Craig Miles of King and Spalding note, mining is a major component of Latin America’s GDP and a major source of its exports. This sector has given rise to multiple important investor-state cases. In addition, the sector is at the cutting-edge of legal issues currently ascending in importance, such as those concerning human rights and environmental protection. As Harry and Craig report, states are increasingly raising human rights and environmental protection claims and defences against investors. In addition to analysing trends and reviewing recent commercial disputes in the mining sector, the authors explore the effect that community consultation (or a lack thereof ) and ‘social licence’ can have on the legal rights of investors in extractive industries. Their review of recent investor-state cases dealing with these doctrines provides useful guidance for those facing similar issues.

In light of the issues that historically impeded arbitration from achieving its potential in the region, Cecilia Azar and Paola Aldrete of Galicia Abogados assumed the task of assessing the reasons why arbitration of disputes in Latin America is today a viable and sound option. In the early days of Latin American arbitration, traditional venues, such as New York and Paris, were virtually the default arbitral seats for international disputes originating in the region. As Latin America developed its arbitral infrastructure, however, including by modernising its laws, executing arbitration-related treaties and conventions, sensitising the judiciary to the value of arbitration, and the number of experienced and knowledgeable local arbitration lawyers grew, new seats emerged.

Cecilia and Paola cite multiple reasons why arbitration is currently the optimal choice for the resolution of business disputes in Latin America. They note, for example, that in addition to international arbitration institutions such as the ICC, the region now offers local arbitral institutions that are solidly positioned to administer arbitrations. Their view that international arbitration has ‘a bright future . . . in the region’ validates Global Arbitration Review and Latin Lawyer’s decision to publish this book.

Following up on Cecilia and Paola’s point that the region features significant local institutions, my colleagues, Cristina Cárdenas, Arturo Muñoz Holguin and Daniel Ávila of Reed Smith, provide an overview of regional centres, and, in particular, of the different ways in which those centres address common issues, such as the selection and appointment of arbitrators, emergency measures, consolidation of proceedings and information exchange.

As they point out, the arbitration boom in Latin America brought a corresponding, marked increase in new arbitral institutions. The authors raise the provocative question of whether consolidation among the centres will occur as the industry matures. They maintain that, while in the early days, local centres could gain traction simply by offering an attractive alternative to local courts, the future may see such centres having to compete more intensely for market share. In their view, the most innovative and responsive centres are likely to emerge as the significant players, protecting their advantage through proprietary technologies and differentiated procedures attractive to arbitration users.

A running theme so far has been the evolution and maturation of the international arbitration ‘market’ in Latin America, including by virtue of the sophisticated nature of investor-state cases originating in the region, increasingly generalised adherence to the New York Convention, the growth of arbitration centres and multiple other factors that make arbitration in Latin America a sound choice. Annie Lespérance, Daniela Raz and Leticia Goñi of Omni Bridgeway highlight an important new aspect of the maturation of the region’s marketplace, namely, the growth of dispute funding. As they point out, dispute finance is firmly established in Europe and common law jurisdictions such as the United States and the United Kingdom. In recent years, though, Latin America has become ‘the new hotspot for dispute funding’.

In their chapter, Annie, Daniela and Leticia review the legal framework governing dispute funding in Latin America, specifically addressing some of the issues that have arisen elsewhere in connection with dispute funding, such as the limitation on the transfer of litigious rights. They report that the state of dispute funding in the region continues to evolve. For example, they observe an increasing shift in Latin American users away from distressed claimants lacking the resources to fund their ‘one-off’ claims towards well-capitalised companies that utilise funding as a financial tool. In their view, dispute funding in Latin America is ‘poised to take off’.

Finally, at the end of the day, save in exceptional circumstances, the arbitration of Latin American disputes will involve local law in either one or both of two ways: for arbitrations seated in the region, local law will bear on the arbitration proceedings and annulment of awards; and, for arbitrations seated outside the region, local law will bear on efforts to enforce awards. In either instance, local law will be at the front and centre of the key issues. With that in mind, we have assembled a compendium of chapters on local arbitration law and practice in key jurisdictions in the region, written by leading firms:

  • Argentina, by Ricardo A Ostrower, Martín Vainstein and Victoria Rodríguez Goyena of Marval O’Farrell Mairal;
  • Bolivia, by Andrés Moreno Gutierrez and René Claure Veizaga of Moreno Baldivieso;
  • Brazil, by Lucas Mejias, Fernando Eduardo Serec, Antonio Marzagão Barbuto Neto and Maria Isabel de Sá Dias Machado of TozziniFreire;
  • Chile, by Felipe Ossa, Felipe de Marinis and Martín Álvarez of Claro & Cia;
  • Colombia, by Daniel Posse Velásquez, Carolina Posada Isaacs and Laura Vengoechea Ballesteros of Posse Herrera Ruiz;
  • the Dominican Republic, by Andrés E Bobadilla and Gabriella M Muñiz Bobadilla of Bobadilla Abogados;
  • Ecuador, by Rodrigo Jijón-Letort, Juan Manuel Marchán, Javier Jaramillo-Troya and Camila Boriz Carrasco of Pérez Bustamante & Ponce;
  • Mexico, by Francisco Rivero and Eduardo J De la Peña Bernal of Reed Smith LLP; and
  • Peru, by Mauricio Raffo, Luis Alonso Navarro and José Luis Repetto of Miranda & Amado.

While the foregoing collection does not exhaust the arbitral jurisdictions in Latin America, it covers key jurisdictions, including those having the highest volumes of cases.

We hope you will enjoy this work. With sincere thanks to the authors for their excellent and thoughtful contributions, Global Arbitration Review, Latin Lawyer and I look forward to bringing you expanded coverage in future editions.


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