Commercial Arbitration

Last verified on Tuesday 4th May 2021

Commercial Arbitration: Guatemala

Alvaro Castellanos

Consortium Legal

Infrastructure

1. Is your state a party to the New York Convention? Are there any noteworthy declarations or reservations?

Guatemala

Yes, it is. Guatemala made two reservations: first, it will only apply the Convention to awards rendered in other contracting states; and second, it will only apply the Convention to awards rendered in arbitral procedures emanating from commercial relationships.

Answer contributed by Alvaro Castellanos

2. Is your state a party to any other bilateral or multilateral treaties regarding the recognition and enforcement of arbitral awards?

Guatemala

Yes, Guatemala is part of the Inter-American Convention on International Commercial Arbitration, commonly referred to as the Panama Convention.

Answer contributed by Alvaro Castellanos

3. Is there an arbitration act or equivalent and, if so, is it based on the UNCITRAL Model Law? Does it apply to all arbitral proceedings with their seat in your jurisdiction?

Guatemala

Yes, Guatemala has an Arbitration Law based on the UNCITRAL Model Law which applies to all arbitral proceedings if the seat or place of arbitration is Guatemala, regardless if it is a national or an international arbitration (article 1, Decree 67-95 of Congress, “Arbitration Law”).

It is important to note that the Arbitration Law of Guatemala is based on the original UNCITRAL Model Law, and not on the latest version of 2006. 

Answer contributed by Alvaro Castellanos

4. What arbitration bodies relevant to international arbitration are based within your jurisdiction? Do such bodies also act as appointing authorities?

Guatemala

There are two active arbitration bodies in Guatemala: Comisión de Resolución de Conflictos de la Cámara de Industria de Guatemala (CRECIG); and, Centro de Arbitraje y Conciliación de la Cámara de Comercio de Guatemala (CENAC), both of which can act as appointing authorities.

Answer contributed by Alvaro Castellanos

5. Can foreign arbitral providers operate in your jurisdiction?

Guatemala

Yes, they can. The definition of arbitral institutions does not refer only to local entities (article 4, section 3, Arbitration Law). There are no express regulations for foreign arbitral providers, but there is also no express prohibition for their establishment in Guatemala. 

Answer contributed by Alvaro Castellanos

6. Is there a specialist arbitration court? Is the judiciary in your jurisdiction generally familiar with, and supportive of, the law and practice of international arbitration?

Guatemala

No there isn’t a specialist arbitration court. The judiciary is becoming more familiar with the law and practice of arbitration through the relatively constant request for judicial assistance to be provided under the Arbitration Law, and also, because of challenge procedures against awards, but this is more applicable to national arbitration than to international arbitration.

Answer contributed by Alvaro Castellanos

Agreement to arbitrate

7. What, if any, requirements must be met if an arbitration agreement is to be valid and enforceable under the law of your jurisdiction? Can an arbitration agreement cover future disputes?

Guatemala

The agreement must be in writing to be valid and enforceable. By in writing, it is understood that it may be in a physical document exchanged and signed by both parties, contained in a telex, telefax, telegram or any other way of communicating that provides proof of the existence of the agreement. It is also considered as a valid arbitration agreement when the parties invoke arbitration in the respective argument submissions and neither one objects. When the agreement has been incorporated into contracts by way of forms or policies it should contain a clear warning in capitals mentioning the submission to arbitration (article 10, Arbitration Law). 

Answer contributed by Alvaro Castellanos

8. Are any types of dispute non-arbitrable? If so, which?

Guatemala

Yes, there are three non-arbitrable types of disputes:

  • situations on which there is already a firm judicial resolution, except on the aspects regarding its enforcement;
  • subjects that can’t be separated from other subjects on which the parties don’t have free disposition, that is, that the matter is non-arbitrable; and
  • when the law expressively prohibits it, or when it specifies a particular procedure for certain cases (article 3, Arbitration Law).

Answer contributed by Alvaro Castellanos

9. Can a third party be bound by an arbitration clause and, if so, in what circumstances? Can third parties participate in the arbitration process through joinder or a third-party notice?

Guatemala

Normally, a third party can only be bound by an arbitration clause when they expressly consent to it. Implied consent could be argued through different legal theories, but will remain subject to the criteria of the arbitral tribunal. There is an existing trend of decisions from the Court of Constitutionality in Guatemala, stating that parties need to sign an arbitration agreement to be bound by such an agreement. Regarding joiners or third-party notices, it is expressively prohibited for third parties to participate through joinders or third-party notices. 

Answer contributed by Alvaro Castellanos

10. Would an arbitral tribunal with its seat in your jurisdiction be able to consolidate separate arbitral proceedings under one or more contracts and, if so, in what circumstances?

Guatemala

Yes, it is possible when the parties agree to it. If the parties do not agree, it is expressly prohibited for an arbitral tribunal to consolidate (article 21, Arbitration Law).

Answer contributed by Alvaro Castellanos

11. Is the "group of companies doctrine" recognised in your jurisdiction?

Guatemala

No, the piercing of the corporate veil or other similar doctrines are generally not recognised in our legal system. There is no legal rule that contemplates these doctrines, and we are not aware of any judicial cases where judges could have adopted them in particular cases. The only possible exception is in labour law disputes that are governed by particular statutes and that are not arbitrable disputes.

Answer contributed by Alvaro Castellanos

12. Are arbitration clauses considered separable from the main contract?

Guatemala

Yes, they are (article 21, section 1 Arbitration Law).

Answer contributed by Alvaro Castellanos

13. Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunals jurisdiction and competence?

Guatemala

Yes, it is recognised. No, the parties should not ask the courts to determine any issues relating to the tribunal’s jurisdiction or competence (article 21, section 1, Arbitration Law). A court that finds in the original pleadings that there is an arbitral agreement shall decline competence and jurisdiction even ex oficio.

Answer contributed by Alvaro Castellanos

14. Are there particular issues to note when drafting an arbitration clause where your jurisdiction will be the seat of arbitration or the place where enforcement of an award will be sought?

Guatemala

When considering Guatemala as the seat of the arbitration it is necessary to take into account the scope of the revision recourse (a challenge to an arbitral award similar to the motion to set aside an award under the Model Law, but with the "added feature" that the competent court (Appellate Court) can either confirm, annul or modify the award). According to the Arbitration Law, local judges can modify the award; therefore, it is advisable to limit this power and reduce it only to the confirmation or the annulment of the award. However, this is not a unanimous criterion, and whether this pact would violate public policy or not is debatable.

It is also advised to avoid pathologies in the clause by using the institutional model clauses as a basis during the drafting stages. Lastly, precaution is advised when using staggered clauses; the drafting should be very clear to avoid any unnecessary delays in commencing the arbitral procedure.  

Answer contributed by Alvaro Castellanos

15. Is institutional international arbitration more or less common than ad hoc international arbitration? Are the UNCITRAL Rules commonly used in ad hoc international arbitrations in your jurisdiction?

Guatemala

Institutional arbitration is generally more common than ad hoc arbitration. Regarding the few cases that we are aware as ad hoc arbitrations, UNCITRAL Rules were used in both of them. 

Answer contributed by Alvaro Castellanos

16. What, if any, are the particular points to note when drafting a multi-party arbitration agreement with your jurisdiction in mind? In relation to, for example, the appointment of arbitrators.

Guatemala

Equal treatment of the parties is considered to be a subject of public policy; therefore, multi-party arbitration agreements should take it into account when drafting the agreement as to not violate that principle, specifically in the way of appointing arbitrators. The Arbitration Law remains silent on the multi-party arbitrations, so it is necessary to consider, during the drafting stages, institutional rules that have addressed this subject in the past, such as the ICC Rules of Arbitration. 

Answer contributed by Alvaro Castellanos

Commencing the arbitration

17. How are arbitral proceedings commenced in your jurisdiction? Are there any key provisions under the arbitration laws of your jurisdiction relating to limitation periods of which the parties should be aware?

Guatemala

When the parties haven’t agreed to anything else, the arbitral proceedings commence when the request for arbitration is presented to the respondent. There aren’t any key provisions relating to the limitation periods regarding the commencing of the arbitration. However, when the applicable law is the Guatemalan Civil Law, the statute of limitation for obligations in general is five years (article 1508, Civil Code).

Answer contributed by Alvaro Castellanos

Choice of law

18. How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?

Guatemala

The parties are in the liberty of determining the substantive law of the dispute.When a choice of law is made, the Arbitration Law of Guatemala provides that such choice is without regard to the conflict-of-law rules of such jurisdiction, unless the parties decide to include them in such choice. When the parties haven’t made their decision clear, the tribunal is authorised to determine the applicable law, taking into account common international practice and Commercial Law Principles (article 36, Arbitration Law, article 31 of the Judicial Branch Act).

Answer contributed by Alvaro Castellanos

Appointing the tribunal

19. Does the law of your jurisdiction place any limitations in respect of a partys choice of arbitrator?

Guatemala

Yes, the law states that there’s a prohibition to appoint members of the judicial branch of the government, and also those that fall under the prohibitions stated for local judges in connection with their relationships to certain claims or the parties. Otherwise, there are no other limitations, generally, as long as impartiality and independence are the guiding principles (article 14, section 3, Arbitration Law).

Answer contributed by Alvaro Castellanos

20. Can non-nationals act as arbitrators where the seat is in your jurisdiction or hearings are held there? Is this subject to any immigration or other requirements?

Guatemala

Non-nationals can act as arbitrators. There is no distinction in the Arbitration Law on this subject.

Answer contributed by Alvaro Castellanos

21. How are arbitrators appointed where no nomination is made by a party or parties or the selection mechanism fails for any reason? Do the courts have any role to play?

Guatemala

Yes, when there is no nomination made by the parties, a specific judge from the jurisdiction has to name the arbitrator. The courts also decide the arbitrator to be appointed when it is a single arbitrator and the parties can’t agree on it, and when it’s a three-person tribunal and the two nominated arbitrators can’t agree on the third member (article 15, Arbitration Law). The above applies only if the parties did not enter into an institutional arbitral agreement. If an institution is appointed, such institution normally acts upon default of appointment by the parties.

Answer contributed by Alvaro Castellanos

22. Are arbitrators afforded immunity from suit under the law of your jurisdiction and, if so, in what terms?

Guatemala

No, they are not afforded immunity of any kind. 

Answer contributed by Alvaro Castellanos

23. Can arbitrators secure payment of their fees in your jurisdiction? Are there fundholding services provided by relevant institutions?

Guatemala

Not as securing itself, but as a related matter, arbitrators can request advanced payment of their fees and the costs of the proceedings. We are not aware of fundholding services (article 20, Arbitration Law).

Answer contributed by Alvaro Castellanos

Challenges to arbitrators

24. On what grounds may a party challenge an arbitrator? How are challenges dealt with in the courts or (as applicable) the main arbitration institutions in your jurisdiction? Will the IBA Guidelines on Conflicts of Interest in International Arbitration generally be taken into account?

Guatemala

The Arbitration Law only states that a party may challenge an arbitrator when there are circumstances that may affect an arbitrator’s impartiality and independence, or if she or he doesn’t possess the qualifications agreed previously by the parties. The parties can agree on a specific way of dealing with the challenges or use the rules of the institution they’ve chosen. If the parties have not chosen any specific way and it’s not an institutional arbitration, the Arbitration Law states a specific way of dealing with the challenge. It states that it is the tribunal’s obligation, without the member who’s being challenged, to decide on the challenge merits (article 17, Arbitration Law). The IBA Guidelines on Conflicts of Interest in International Arbitration are generally taken into consideration.

Answer contributed by Alvaro Castellanos

Interim relief

25. What main types of interim relief are available in respect of international arbitration and from whom (the tribunal or the courts)? Are anti-suit injunctions available where proceedings are brought elsewhere in breach of an arbitration agreement?

Guatemala

The interim relief measures are numerus apertus by nature, which means the parties aren’t bound by a specific type or list of measures, they can request whatever type of measure they deem necessary for the specific case from the courts, including anti-suit injunctions. 

Answer contributed by Alvaro Castellanos

26. Does the law of your jurisdiction allow a court or tribunal to order a party to provide security for costs?

Guatemala

No, it doesn't. Guatemalan Law is silent on this issue.

Answer contributed by Alvaro Castellanos

Procedure

27. Are there any mandatory rules in your jurisdiction that govern the conduct of the arbitration (eg, general duties of the tribunal and/or the parties)?

Guatemala

As the UNCITRAL Model Law is the main basis of the Arbitration Law in Guatemala, there are few rules regarded as mandatory. For example, article 23, that provides the following:

Parties have to be treated equitably and each of them must be given the opportunity of defending their own rights, based on the essential principles of being heard, contradiction and equal treatment.

Answer contributed by Alvaro Castellanos

28. What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration?

Guatemala

The applicable law is the Arbitration Law, which contains a provision specifically for this scenario. It states that the procedure will continue to move forward without the participation of the respondent; in that case, the refusal to participate is not considered an acceptance of the initial claims (article 32, Arbitration Law).

Answer contributed by Alvaro Castellanos

29. What types of evidence are usually admitted, and how is evidence usually taken? Will the IBA Rules on the Taking of Evidence in International Arbitration generally be taken into account?

Guatemala

Standard types of evidence are admitted (eg, documental, testimonies and experts). Taking into account Guatemala is a civil law tradition country, the evidence is usually taken with civil law principles in mind. 

The IBA Rules on the Taking of Evidence are becoming more popular and taken into consideration by arbitral tribunals, as the Arbitration Rules of the two main arbitral institutions in Guatemala have very few regulations regarding evidence, and even more so, the local "lex arbitri", substantially drafted in this subject matter, very closely follows the UNCITRAL Model Law.

Owing to the broad content of the applicable rules regarding evidence in the Arbitration Law, it is legally possible to use the IBA Rules, totally or partially, in local arbitration proceedings, and national arbitral procedures.

The same could be said about the “Prague Rules”, although such rules are currently much less well known in the country. As the Prague Rules are said to be more aligned to the civil law tradition, it is expected that in the future such rules will have a greater impact in arbitrations having their seat in Guatemala.

Answer contributed by Alvaro Castellanos

30. Will the courts in your jurisdiction play any role in the obtaining of evidence?

Guatemala

Yes, the parties and the tribunal can request the national courts for assistance in the obtaining of evidence (article 34, Arbitration Law).

Answer contributed by Alvaro Castellanos

31. What is the relevant law and prevailing practice relating to document production in international arbitration in your jurisdiction?

Guatemala

The Guatemalan Arbitration Law remains silent on this issue. Therefore, the IBA Rules on Taking of Evidence could have a major role, when parties agree to use them. Otherwise, final reference to the Civil and Mercantile Procedural Code is made regarding the rules on the issue of document production. The rules of the two arbitral institutions referred to in question 4 have very broad rules in this regard.

Answer contributed by Alvaro Castellanos

32. Is it mandatory to have a final hearing on the merits?

Guatemala

There’s no mandatory final hearing contemplated on the Arbitration Law; however, both of the arbitration institutions contemplate, in their respective rules, the need for a final hearing before rendering the award.

Answer contributed by Alvaro Castellanos

33. If your jurisdiction is selected as the seat of arbitration, may hearings and procedural meetings be conducted elsewhere?

Guatemala

Yes, there is no restriction regarding this topic. Parties may choose freely or can allow the arbitral tribunal to freely decide where to have hearings and meetings. Due to covid-19, the use of virtual hearings have become common practice.

Answer contributed by Alvaro Castellanos

Award

34. Can the tribunal decide by majority?

Guatemala

Yes, they can (articles 38 and 40, section 1, Arbitration Law).

Answer contributed by Alvaro Castellanos

35. Are there any particular types of remedies or relief that an arbitral tribunal may not grant?

Guatemala

No, the Arbitration Law does not impose any limit in regard to this subject matter.

Answer contributed by Alvaro Castellanos

36. Are dissenting opinions permitted under the law of your jurisdiction? If so, are they common in practice?

Guatemala

Yes, they are permitted (article 40, section 2, Arbitration Law). The dissenting opinions are not common in practice.

Answer contributed by Alvaro Castellanos

37. What, if any, are the legal and formal requirements for a valid and enforceable award?

Guatemala

For the award to be valid and enforceable, it must be duly motivated or reasoned, unless the parties have agreed otherwise, and it must be in written form, contain the place and date when it was rendered, and be signed by the arbitrators. In the case of a split decision, the signatures of the majority are enough (article 40, Arbitration Law).

Answer contributed by Alvaro Castellanos

38. What time limits, if any, should parties be aware of in respect of an award? In particular, do any time limits govern the interpretation and correction of an award?

Guatemala

In respect to such requests for interpretation and correction of and for the rendering of an additional award, the Arbitration Law provides a time limit of a month for the request to be formulated. Nevertheless, the parties con agree to extend or reduce that limit. Both Guatemalan arbitral institutions reduce the time limit significantly in their respective rules to 10 (CENAC) and 15 days (CRECIG) accordingly (article 42, Arbitration Law). 

Answer contributed by Alvaro Castellanos

Costs and interest

39. Are parties able to recover fees paid and costs incurred? Does the "loser pays" rule generally apply in your jurisdiction?

Guatemala

No, the "loser pays" rule isn’t generally applied. It is much more common to split the costs of the process equally, and for each party to pay their counsel fees. Of course, the arbitral tribunal can decide to use the “loser pays” rule when it so deems justifiable.

Therefore, the parties are not able to recover fees paid and costs incurred, unless the arbitral tribunal decides differently.

Answer contributed by Alvaro Castellanos

40. Can interest be included on the principal claim and costs? Is there any mandatory or customary rate?

Guatemala

Yes, it can be included. National law states a mandatory rate in case the parties didn’t agree one in the contract. Said rate is calculated by averaging the lending rate of all the banks in the system (article 1947 Civil Code).

This will be the case, when the substantive law applicable in the dispute is the Guatemalan law. If the applicable law to the dispute is a foreign law, the rate that can be used by the arbitral tribunal shall be found in that foreign law. 

Answer contributed by Alvaro Castellanos

Challenging awards

41. Are there any grounds on which an award may be appealed before the courts of your jurisdiction?

Guatemala

Yes, the Arbitration Law provides a revision recourse, which can be alleged under the same grounds for challenge as the ones contemplated in the New York Convention to present or file opposition against the enforcement of the award. In other words, the grounds on which an award may be challenged are those contemplated in the UNCITRAL Model Law (article 43, Arbitration Law).

Answer contributed by Alvaro Castellanos

42. Are there any other bases on which an award may be challenged, and if so what?

Guatemala

No, there aren’t any other bases on which an award may be challenged.

Answer contributed by Alvaro Castellanos

43. Is it open to the parties to exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?

Guatemala

This issue remains a disputed matter. The Arbitration Law is silent on this matter. The fact that parties can allow the arbitral tribunal to render an award without any motivation could lead to the conclusion that, the right to close an award can be excluded “a priori” in the arbitral agreement. Also, as the causes to oppose to an enforcement of an award are basically the very same causes for making a challenge of the award, it could be argued that the right of defence and due process of the parties are intact. But it seems that the majority among the practitioners in the arbitration field in Guatemala considers that it is not legal to exclude or waive “a priori” the right to file a motion to set aside an award (under the Guatemalan Arbitration Law).

Answer contributed by Alvaro Castellanos

Enforcement in your jurisdiction

44. Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?

Guatemala

There is no prohibition to enforce an award that has been set aside, but, to the best of our knowledge, no awards like this have been enforced in the Guatemalan jurisdiction. 

Answer contributed by Alvaro Castellanos

45. What trends, if any, are suggested by recent enforcement decisions? What is the prevailing approach of the courts in this regard?

Guatemala

The reporters are not aware of any trend suggested by recent enforcement decisions. It can only be reported that, in cases of foreign arbitral awards, the New York Convention should be fully applicable (taking into account the two reservations identified in the response to question No. 1), but due to the abuse of a constitutional defence known as amparo in some cases, the enforcement has been significantly delayed.

Answer contributed by Alvaro Castellanos

46. To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

Guatemala

Guatemala is not a part of the United Nations Convention on Jurisdictional Immunities of States and their Property, therefore, a defence base on the sovereign immunity has a high chance of succeeding. Furthermore, local legislation states the prohibition to seize state property, which makes it even harder to succeed at the enforcement stages. 

Answer contributed by Alvaro Castellanos

Further considerations

47. To what extent are arbitral proceedings in your jurisdiction confidential?

Guatemala

The arbitration law doesn’t contemplate confidentiality as an immediate consequence of starting an arbitration procedure. However, CRECIG does contemplate confidentiality as an essential characteristic of the arbitration procedures it administrates. So, if parties really want their arbitral proceedings to be confidential, it is advised to state so in the arbitral agreement, if the rules selected, in case the arbitration clause provides for an institutional one, does not contemplate the confidentiality rule.

Answer contributed by Alvaro Castellanos

48. What is the position relating to evidence produced and pleadings filed in the arbitration? Are these confidential? Is there any way that they might be relied on in other proceedings (whether arbitral or court proceedings)?

Guatemala

Following the response from question 47, the evidence and pleadings are confidential only if confidentiality is assured by the parties by express agreement or by referring to rules that impose confidentiality.

If confidentiality was assured, the evidence and pleadings filed in one arbitration may not be used or reproduced o relied on in other proceedings (arbitral or court proceedings).

Answer contributed by Alvaro Castellanos

49. What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?

Guatemala

No, there aren’t any mandatory ethical codes or standards relating to international arbitrations.

CENAC however, as one of the main arbitration institutions in Guatemala, has its own ethical code that shall be observed by arbitrators and the parties.

Answer contributed by Alvaro Castellanos

50. Are there any particular procedural expectations or assumptions of which counsel or arbitrators participating in an international arbitration with its seat in your jurisdiction should be aware?

Guatemala

Yes, parties, counsel and arbitrators should be aware that there is a great possibility of swamping the arbitration and enforcement procedures with the previously mentioned constitutional action known as amparo. The abuse on filing amparos at many stages of the procedure is not only related to arbitration proceedings, but is a major concern in all judicial proceedings. Currently, this concern is decreasing in importance, as with the passage of time, legal teams involved in arbitral proceedings do not favour the excessive use of amparo.

Therefore, it is expected that in the near future, some reforms will take place in the applicable law and even at a constitutional level, to attack this problem and reduce the use of amparos to only final decisions, and only when a constitutional right could have been violated through such final decisions. In the arbitration field, therefore, only if through the revision recourse, once exhausted, the violation remains, the amparo could be the final recourse against the award.

Answer contributed by Alvaro Castellanos

51. Is third-party funding permitted in your jurisdiction? If so, are there any rules governing its use?

Guatemala

There is no regulation regarding third-party funding in Guatemala. In fact, there is limited knowledge about availability or sources for third-party funding, so there is no local practice in resorting to this type of funding to support costs related to arbitration proceedings.

But as there are no current regulations, it can be said that parties can freely consider this option.

Answer contributed by Alvaro Castellanos

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