The New York Convention in Latin America: Lessons From Recent Court Decisions
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The New York Convention in Latin America: Lessons From Recent Court Decisions
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 (the New York Convention) celebrates its 50th anniversary this year. While its implementation in Latin America is more recent, a growing number of cases coming from different jurisdictions in the region show an increasing use of and resort to the New York Convention for recognising and enforcing foreign arbitral awards. Therefore, it is interesting to examine whether any general conclusions can be drawn from these cases.
This article contains a review of the most relevant decisions issued in Latin American jurisdictions and dealing solely with the enforcement of arbitral awards. It does not include decisions involving Latin American parties but where the enforcement was sought outside of the region, or referring the parties to arbitration pursuant to article II(3) of the New York Convention.1 Some conclusions are then set forth to identify, in the light of the cases examined, similar patterns in certain decisions and general trends across the region.
Applicability of the New York Convention
The question here is whether Latin American judges when enforcing foreign arbitral awards refer to or rely on the provisions of the New York Convention and, if so, whether they do it on an exclusive basis or together with other provisions under other treaties or laws. Conversely, questions such as the application of the New York Convention to aspects related to arbitral awards different from its enforcement or other types of judicial intervention that may have an impact on the eventual applicability of the New York Convention shall be also addressed.
Enforcement of foreign arbitral awards under the New York Convention
The New York Convention is a recurring instrument for the enforcement of arbitral awards in Latin America. Although in the majority of cases national courts tend to use it as the exclusive basis for deciding on exequatur requests dealing with foreign arbitral awards, there are still some cases in which courts resort to other instruments, either in addition to or in lieu of the New York Convention.
This situation does not come entirely as a surprise in Latin America because there are different treaties and national laws that may have a bearing on international arbitration and, particularly, on the enforcement of arbitral awards. This may lead, in turn, to certain confusion as to which statute is to be applied when enforcing foreign awards. Indeed, on the international treaties' level, most Latin American countries have ratified both the New York Convention and the Inter American Convention on International Commercial Arbitration of 30 January 1975 (the Panama Convention).2 On the national law level, at least 16 Latin American countries have modernised their arbitration statutes including, in most cases, provisions dealing with the enforcement of foreign arbitral awards.3 Finally, there still some room for confusion resulting from the application of procedural local provisions dealing with the enforcement of foreign judgments. While it is self-evident for arbitration practitioners that these provisions should not play any role in the enforcement of arbitral awards, some cases reported below show that judges in some Latin American jurisdictions are not so clear on this point. These different situations are examined below.
Enforcement based solely on New York Convention
This article analyses some 30 decisions from Latin American national courts on the enforcement of foreign arbitral awards. Among them, the majority have dealt with the enforcement of foreign arbitral awards pursuant to the New York Convention, which reveals a clear tendency towards the application of the New York Convention as the exclusive legal instrument to allow the enforcement of foreign arbitral awards.
In this regard, particularly noteworthy is the decision taken back in 1977 in Presse Office SA v Centro Editorial Hoy SA, in which Presse Office SA sought enforcement in Mexico of an ICC award rendered abroad against Centro Editorial Hoy SA and the Superior Tribunal of Justice of the Federal District of Mexico decided to grant the enforcement based solely on the provisions of the New York Convention. In that case, having determined that the enforcement fell under the Convention, the Court stated that, pursuant to the Mexican Constitution, international treaties take legal precedence over the Mexican Code of Civil Procedure and, on this ground, it refused to apply the provisions related to enforcement of foreign judgments invoked by Centro Editorial.4 The same approach has been followed in Mexico5 and other countries, save for some specific cases reported below.
Nevertheless, national courts have sometimes refused enforcement of the foreign awards precisely on the grounds that the decisions did not come within the scope of the application of said convention. In other words, the courts in those cases did not forget about the New York Convention. They simply undertook an analysis of its scope and ultimately decided that the New York Convention was not applicable to the cases under their scrutiny for reasons related to the type of awards enforceable under such convention, or the commercial nature of the transaction which gave rise to the dispute settled by the award to be enforced.
The first situation occured in Colombia in Merck & Co Inc and others v Tecnoquímicas SA,6 in which the Supreme Court in Colombia decided that an interim award on jurisdiction issued in an ICC arbitration in New Jersey was not enforceable in Colombia pursuant to the provisions of the New York Convention. The Court found that:
a decision on jurisdiction, rendered by an arbitral tribunal in a State party to the New York Convention, is not an 'arbitral award' in the sense mentioned above when it merely decides on the jurisdiction over certain claims, establishing it or excluding it vis-à-vis the courts of that State or of another State. Even if it is formally defined an 'arbitral award', because it calls itself so or because it is so called by arbitration rules, still, according to Art. I(1) of the Convention, such a decision is not a foreign arbitral award enforceable in Colombia, since, independent of how it is called in the country of origin, it is simply a preliminary and preparatory interim decision, that is, it does not settle the dispute on the merits submitted to arbitration, which is the subject matter of a further decision.7
The same conclusion has been later reaffirmed as an obiter in Empresa Colombiana de Vías Férreas v Drummond Ltd.8
The second situation stems from a recent and very unfortunate case in Argentina, Milantric Trans SA v Ministerio de la Producción — Astillero Río Santiago and other.9 Milantric Trans SA obtained an award against the respondent (Astillero), a state-owned company, for damages due to breach of a ship building contract and sought its enforcement in Argentina under the New York Convention. The Argentinean party opposed the enforcement, inter alia, on the grounds that the award fell outside the scope of the New York Convention as the underling contract was not a commercial one, and the Procedural Code of the Province of Buenos Aires had not implemented any provision allowing the enforcement of foreign awards pursuant to the New York Convention. Initially, the first instance judge rejected the objections and granted enforcement of the award under the New York Convention on the grounds that:
- the ship construction agreement fell squarely within the definition of commercial contracts and, therefore, the award dealing with disputes arising out of this agreement was enforceable under the New York Convention; and
- despite the fact that Argentina was a federal republic, there was no need for implementation of an international treaty such as the New York Convention by provincial specific legislation since the power to sign and execute international treaties by the federal government was binding upon all the different provinces of the country.
Regrettably, however, on appeal the La Plata Court of Appeals, whose jurisdiction was in principle limited to decide on the costs related to the enforcement, overturned the first instance judge's decision and held that the New York Convention was not applicable to the present case as the underlying contract involved a state party and thus it could not fall under the definition of a commercial agreement; the procedural matters were not delegated in the government federal powers; and since the New York Convention was a procedural treaty it was not binding upon the province of Buenos Aires. Ultimately, due to these grounds, the award was not enforced under the provisions of the New York Convention.
Enforcement under the New York Convention together with other treaties or laws
In the Mexican case Nordson Corporation v Industrias Camer SA de CV,10 Norsdson Corporation, a US company, obtained an award in an arbitraton under the rules of the American Arbitration Association (AAA Rules) and sought enforcement against Industrias Camer SA de CV (Camer) in Mexico pursuant to the provisions of the New York Convention. The enforcement was granted in first instance dismissing Camer's objections. Camer filed an amparo before the Sixth Civil Court of the First Circuit to overturn that decision. The Court affirmed the lower judge's decision but based its decision for granting the enforcement on both the New York Convention and the Panama Convention.
In Peru, in the case Dist Corporation v Cosmos International SA,11 a Korean corporation (Dist) obtained an award in Seoul in an arbitration conducted before the Korean Commercial Arbitration Board against Cosmos International SA (Cosmos), a Peruvian entity, for payment of certain amounts of money. Dist sought enforcement of the award before the Superior Court of Justice in Lima. Cosmos opposed recognition on certain grounds which were dismissed by the Superior Court of Justice in a decision that was based in both the provisions of the New York Convention and of the Peruvian Civil Code regarding the recognition and enforcement of judicial decisions.
More recently, in Energoprojekt Niskograndnja v Pacífico Peruano Suiza Compañía de Seguros y Reaseguros,12 the Fifth Civil Chamber of the Superior Court of Justice in Lima admitted the application of the New York Convention for the enforcement of a foreign award but also referred to the grounds established under the former Peruvian Arbitration Law of 1996, which fortunately were a replica of those under the New York Convention.
In Colombia, in turn, in Sunward Overseas v Servicios Marítimos Limitada Semar,13 Sunward Overseas (Sunward) sought enforcement in Colombia of a foreign award rendered in the US against the Colombian entity Servicios Marítimos Limitada Semar (Semar). In order to grant the enforcement requested, the Colombian Supreme Court reasoned that the request had to satisfied the conditions laid down under both the New York Convention and article 693 of the Colombian Code of Civil Procedure, which referred to the requirements applicable to foreign judgments. The Supreme Court concluded that Sunward met both the national procedural requirements for enforcement and the specific conditions of the New York Convention, thereby meeting al the conditions justifying the granting of the exequatur.
Enforcement under other laws in disregard of the New York Convention
In Reef Exploration Inc v Compañía General de Combustibles SA,14 a company incorporated in the US (Reef) requested in Buenos Aires the enforcement of a foreign award rendered in Dallas, Texas in 2000, in accordance with the AAA Rules. The award condemned Compañía General de Combustibles SA (CGC), a company incorporated in Panama, to pay a substantial amount of money. Reef sought the recognition of this amount in the bankruptcy process affecting CGC in Buenos Aires. A question arose as to set of rules pursuant to which the award should be enforced. In a judgment issued on 5 November 2002, the Buenos Aires Court of Appeals (Sala D de la Cámara Nacional en lo Comercial), decided to enforce the award pursuant to the provisions applicable to foreign judgments (articles 517 and 519(bis) of the Argentinean Code of Civil Procedure), without indicating any reasons for not applying the New York Convention or the Inter-American Convention for International Arbitration of 1975, notwithstanding the fact that both Conventions were in force in Argentina and Reef had expressly requested enforcement of the arbitral award pursuant to the New York Convention.15
Also in Argentina, in Odgen Entertainment Services Inc. v Eijo, Néstor E and other,16 a dispute arose between Néstor and Mario Eijo (N&M Eijo), both Argentineans, and US company Odgen Entertainment Services Inc (Odgen) relating to allegedly unpaid commissions to be received by N&M Eijo for procuring the execution of a joint venture between Odgen and the Sociedad Rural Argentina. N&M Eijo commenced an ICC arbitration against Odgen and an award was rendered only partially accepting N&M Eijo's claims and granting an award on costs in favour of Odgen, with the special feature that the costs of the arbitration and legal fees incurred by Odgen exceeded by more than US$200,000 the principal amount granted to N&M Eijo. The enforcement of the award was ultimately denied on public policy grounds.17 Unfortunately, neither the first instance judge nor the Court of Appeals refer to the New York Convention but to the provisions applicable to the enforcement of foreign judgments in Argentina contained in the Argentinean Code of Civil Procedure.18
Other court decisions impacting the New York Convention
Last but not least, there are some few court decisions that apply the New York Convention when dealing with arbitral awards but not in the context of enforcement. Likewise, there are decisions that, without applying the New York Convention, have a clear impact on the eventual future application of such convention.
Within the first group, we find the case Enersis and others v Pecom Energía SA in Uruguay.19 In this case, an ICC arbitration conducted in Montevideo, Uruguay, led to an award condemning Pecom Energia SA (Pecom) to pay an amount of money to the claimants. Pecom sought the setting aside of the award in Uruguay in light of alleged violations of requirements for the validity of the arbitration clause, the arbitral procedure, and of public policy provisions. The Appeal Court of Montevideo found that the New York Convention together with the Panama Convention were applicable to decide on the grounds invoked to set aside the award, since this arbitration was:
- decided pursuant to an international set of rules (ICC Rules for Arbitration);
- the parties were domiciled outside of Uruguay;
- the underlying agreement was governed by a foreign law (Argentinean law); and
- the execution of the award was most likely to take place abroad.
It is surprising that the Montevideo Court of Appeals decided upon this action to set aside the award at the place of arbitration pursuant to the New York Convention, which is intended to cover the enforcement of awards rather than its annulment, but the outcome was ultimately positive as the convention was used to repeal the challenge to the arbitral award.
There is a second group of cases in which the New York Convention was not applied but the decisions reached may have consequences about its future application. The first decision is a positive one and comes from Colombia in Empresa Colombiana de Vías Férreas v Drummond Ltd,20 where Section II of the highest administrative court of Colombia (Consejo de Estado) found that it lacked jurisdiction to consider setting aside an award issued abroad under a foreign lex arbitri. The court reasoned that the New York Convention prevails over Colombian laws on civil procedure, thus barring the domestic laws on which the petitioner was founding its request. The court held that even though the New York Convention does not convey jurisdiction on domestic courts for purposes of setting awards aside, it clearly authorises such courts to deny recognition of awards that have been annulled by the court of the seat of the arbitration. Under such line of reasoning, the court found it unacceptable to acknowledge jurisdiction in deference to the courts with jurisdiction to decide on actions to set aside the award at the place of arbitration. The court also noted that the procedure for recognition and enforcement of awards is the ultimate guaranty of sovereignty in the case of foreign awards.21
A decision in exactly the opposite direction was taken in Venezuela. Indeed, in Corporación Todosabor, CA v Hageen-Daz International Shoppe Company, Inc, the Constitutional Chamber of the Supreme Court in Venezuela held its right to review a foreign arbitral award through a extraordinary constitutional recourse called amparo constitucional.22 In its decision, the Court found that it could review an award rendered under the AAA Rules in Miami, US, to preserve constitutional rights. In her dissenting opinion, the president of the Chamber stated that, in so doing, the Court encouraged the use of inappropriate means of recourse against foreign awards and was not acting in accordance with the Venezuelan legal system and, in particular, with the provisions of the New York and Panama Convention which limited the role of Venezuelan courts in connection with arbitral awards rendered abroad.23
Grounds for refusal of enforcement in general: exhaustive grounds and no review on the merits
In Peru, in the Cosmos case,24 the Peruvian party Cosmos resisted enforcement of a foreign award by the Korean entity Dist and alleged that there were some defficiencies in the mechanism for delivery of the merchandise purchased under the contract. The Lima Superior Court of Justice held that that fact was completely irrelevant for purposes of enforcement under the New York Convention since it was not a ground for refusal established under said convention, and because in enforcement proceedings it was not possible to enter into the review of the merits of the case.
In the Nordson case in Mexico,25 in an amparo filed before the Sixth Civil Court of the First Circuit to overturn the first instance judge's decision to allow enforcement of the award, the Court affirmed the lower judge's decision and held that the grounds under the New York Convention were very restrictive and judges were not allowed to review the merits of the decision contained in the arbitral award. The same conclusion was reached more recently in a decision issued by a judge in San Luis de Potosí, dismissing an amparo and stating that the Court did not have any powers to review the substance of an award.26
In Brazil, in Tremond Alloys and Metals Corp v Metaltubos Indústria e Comércio de Metais,27 Metaltubos Indústria e Comércio de Metais (Metaltubos) argued before the Superior Court of Justice (Superior Tribunal de Justicia, STJ) that it had fully complied with its obligations under the underlying agreement. The STJ declared that it lacked jurisdiction to decide upon the merits of the arbitral award and its role was limited to ensuring the compliance with the formal requirements for enforcement under the New York Convention.
In Grain Partners SA v Oito Exportaçao e Importaçao de Cereais e Defensivos Agrícolas Ltda,28 Grain Partners, an Italian company, sought enforcement of an award condemning Oito Exportaçao e Importaçao de Cereais e Defensivos Agrícolas Ltda (Oito) as a result of an arbitration conducted in London. Oito requested that the enforcement be denied, inter alia, because:
- the arbitration clause was included in an adhesion contract and did not comply with the requirements set forth by the Brazilian law to be valid; and
- of the breach of the contract incurred by Grain Partners (exceptio non adimpleti contractus).
The STJ denied the objection and held that its control of the award was limited to those grounds available to attack the enforcement of a foreign award and Oito's request, if accepted, would amount to a qualification of the underlying agreement as an adhesion contract which would go beyond the boundaries established by those grounds. The STJ also found that the question of whether Grain Partners had also breached the contract called for a review of the merits of the case and fell equally outside of its enforcement powers.29
In Bouvery International SA v Valex Exportadora de Café,30 Bouvery International SA (Bouvery) requested the enforcement of the arbitral award rendered by the Arbitral Coffee and Pepper Chamber of Le Havre which resolved certain disputes concerning the sale of coffee between Valex Exportadora de Café (Valex) and Bouvery. Valex argued that there was no agreement executed between the parties and thus there was no consent to arbitrate. The STJ denied this argument and held that the existence of the agreement had been clearly established by the arbitral award and could not be subjected to a new discussion during the enforcement procedure.
The same conclusion was reached in a fourth consecutive case by the STJ in International Cotton Trading Limited v Odil Pereira Campos Filho,31 where a dispute between International Cotton Trading Limited (ICT) and Odil Pereira Campos Filho (Odil) arose as to the performance of a cotton purchase agreement and was referred to the rules of the International Cotton Association. An arbitral award ordering Odil to pay losses and damages to ICT was rendered and ICT requested its enforcement in Brazil before the STJ. Odil objected to the enforcement and sought to reopen the discussion in connection with certain findings about its breach of the contract. The STJ held that the grounds for refusal of enforcement did not allow any discussion on matters related to the underlying agreement at the stage of enforcement of an award which has already ruled upon them.
In Chile, a similar allegation was made before the Chilean Supreme Court in Gold Nutrition Industria e Comercio v Laboratorio Garden House SA,32 which gave rise to a recent and excellent decision on the enforcement of a foreign arbitral award under the New York Convention. In this case, Laboratorio Garden House SA (Garden House) sought to reopen the discussion about its liability for breach of the agreement vis-à-vis the Brazilian claimant. The Supreme Court stated that the sole purpose of the enforcement proceeding was to verify the compliance of certain minimum requirements related to the respect of public policy, the valid notification to the party against the award is invoked, the respect to the limits of jurisdiction and the definite character of the decisions to be enforced. The Court added that the procedure was not aimed at examining the justice or unjustice obtained with the award so it could not constitute an instance to review the findings of fact or law made in the award.
Particular grounds for refusal of enforcement
Invalidity of the arbitration agreement (article V(1)(a))
A quick review shows that a good number of cases dealing with this particular ground under the New York Convention come solely from Brazil. In the case Spie Enertrans SA v Inepar SA Indústria e Construçoes,33 an ICC award was rendered in France against Inepar SA Indústria e Construçoes (Inepar) awarding damages for breach of a consortium agreement for the construction of a power transmission line in Ethiopia entered into by Spie Enertrans SA with Sage Vigesa, an entity subsequently taken over by Inepar, and the Ethiopian Electric Power Authority. Spie Enertrans sought enforcement of the award in Brazil before the STJ and Inepar objected on the grounds that there was no valid arbitration agreement. According to Inepar, the arbitration clause:
- was executed prior to the entry into force of the Brazilian Arbitration Act and therefore the award was subjected to the double homologation requirement under the prior regime before obtaining enforcement in Brazil; and
- at any rate, was not enforceable against it as Inepar was not an original party to the agreement and the arbitration clause was non-transferable.
The STJ found that the Brazilian Arbitration Act applied retroactively to agreements executed prior to its effectiveness, and that Inepar had assumed all of Sage Vigesa's rights and obligations under the contract and thus was also bound by the arbitration clause.
In L'Aiglon SA v Textil Uniao SA,34 a dispute arose between the parties for outstanding payments owed by Textil Uniao (Textil) to L'Aiglon under two contracts for sale of cotton. An award at the Liverpool Cotton Association was obtained condemning Textil to pay an amount of money plus interest. L'Aiglon sought enforcement of the award in Brazil. Textil resisted the enforcement on the grounds that there was no valid arbitration agreement between the parties because the contracts had not been signed by its representatives and, even if they were deemed to be valid, the arbitration clauses were not as they had not been expressly accepted by Textil. L'Aiglon submitted in reply that under the Brazilian Arbitration Act and the New York Convention, the fact that the contracts may not have been validly signed did not affect the validity of the arbitration agreement, which was formed by Textil's active intervention during the arbitration and by the communications sent to the arbitral institution without raising a plea of lack of jurisdiction. The STJ noted that, while in this case there was no correspondence of the parties showing their intention to refer disputes to arbitration, Textil appeared in the arbitration, appointed an arbitrator and presented its case on the merits without objecting to the arbitrators' jurisdiction, thus consenting to arbitrate with L'Aiglon. On this ground, the enforcement of the award was granted.
In Brazil in the Grain Partners case,35 the STJ dismissed the respondent's objections based on the invalidity of an arbitration agreement contained in an adhesion contract, as the issue has already been decided by the arbitral tribunal and could not be reviewed by the enforcing court and, in any event, the contract at stake had been freely negotiated and entered into by the parties. A similar outcome was obtained in the Bouvery case,36 where the respondent Valex argued that there was no agreement executed between the parties and thus there was no consent to arbitrate. The STJ denied this argument and held that the existence of the agreement has been clearly established by the arbitral award and cannot be subjected to a new discussion in the enforcement procedure.
The STJ reached the same conclusion in the ICT case,37 where the respondent Odil objected to the enforcement of the award and argued that the parties had not execute a compromisso or formal submission to validly commence the arbitration. The STJ denied this argument on the basis that the arbitration clause alone was sufficient to resort to arbitration.
However, still in Brazil, a recent case, Inepar v Itiquira Energática,38 can be considered as a step backwards in the interpretation of this ground under the New York Convention. In this case, Itiquira Energática (Itiquira) sought enforcement of an award against Inepar for payment of damages due to breach of contract. Inepar objected to the enforcement by alleging that there was no valid arbitration agreement executed between the parties. The District Court denied Inepar's arguments and accepted the enforcement of the award. Nevertheless, on an interlocutory appeal, the Paraná State Court of Justice, by majority of votes, held that an arbitration clause, in order to be operative, requires the subsequent execution of a compromisso that allows the regular commencement of the arbitration. The same court found that execution of the terms of reference and the parties' intervention in the arbitration was not equivalent to the signing of a compromisso. The dissenting minority vote of Judge Dalacqua indicated, rightly in our view, that the need for a compromisso is only required when there is no previous arbitration clause or that clause is not sufficient to commence the arbitration, which was not the case here.39 Nonetheless, to put this case in context, one may expect this decision to be overturned by the STJ where this case will be ultimately heard as it goes against a stream of decisions taken by this higher court on this point.40
In the Milantric case,41 the La Plata Court of Appeals in Argentina denied the enforcement of a foreign arbitral award, inter alia, on the grounds that there was no valid arbitration agreement or agreement to refer the dispute to arbitrators (comprometer en árbitros) since there was a state party involved and, pursuant to prevailing case law from the Argentinean Supreme Court, the state or its instrumentalities had to be authorised by law in order to remove a dispute from the jurisdiction of national courts. Surprisingly, the decision gave no attention or relevance to the fact that in this case the Province of Buenos Aires had previously authorised the execution of the underlying agreement for construction of ships, which contained an arbitration clause. In any event, as this decision came after rejecting the application of the New York Convention, one may argue that this was not a truly case of enforcement under the New York Convention. The fact remains, however, that the same allegation and decision could have been made under article V(1)(b) of the convention, which represents a dangerous precedent in the context of state arbitration proceedings.
In Gold Nutrition,42 Garden House opposed the enforcement of the foreign award by submitting that the arbitration clause was obscure and unenforceable as it contained references to both an arbitration at law and in equity. The Supreme Court dissmised this argument and held that the ambiguities of the arbitration clause expressed by Garden House were presented before the arbitrators and, in any event, would not give rise to invalidity of the arbitration agreement but rather to the interpretation of the clause pursuant to the governing interpretation rules, which are those established by Brazilian law.
Violation of due process (article V(1)(b))
In Chile, in Sociedad Quote Food Products BV v Sociedad Agroindustrial Sacramento,43 a dispute arose between a Dutch and a Chilean company and an award was obtained under the aegis of a local arbitration association in the Netherlands. Sociedad Quote Food Products BV (Sociedad Quote Food) sought enforcement of the arbitral award in Chile and the Respondent opposed on the grounds that it had not been given proper notice pursuant to the personal means of notification established by Chilean procedural laws. The Supreme Court of Justice in Chile dissmised the objection and accorded the enforcement requested on the basis that the notification has been made in accordance with the rules of the arbitration association chosen by the parties.
In Gold Nutrition,44 the respondent Garden House also argued that its rights of due process, constitutionally protected in Chile, were seriously infringed because:
- the case was heard and decided by an arbitral tribunal appointed by a third entity and not by the parties;
- the case was conducted in Portuguese, and
- Garden House was not allowed to submit certain expert and documentary evidence.
The Supreme Court rejected each of these arguments and held that:
- the appointment of arbitrators by a third entity was agreed by the parties and is consistent with the formulas found under arbitration national laws;
- the fact that the case was conducted in Portuguese does not imply a violation of due process and is rather related to the main elements of the contract and the arbitration which were connected to Brazil; and
- the rejection of evidence sought by Garden House is a question that exceeds the exam under the New York Convention.
Along the same lines, in Uruguay in the Enersis case, the Court of Appeals of Montevideo dismissed the allegations made by Pecom consisting in the violation of the rules of procedure under Uruguayan laws on the grounds that the parties have consented on an arbitration conducted pursuant to the ICC Rules for Arbitration, which prevailed over the procedural rules in Uruguay since pursuant to the New York Convention the parties' autonomy is to be respected in the selection of the rules applicable to the procedure.45
In Galapesca SA s/ conc prev in exeqatur by Kerchrybpromb,46 an Argentinean judge of first instance denied the enforcement of an award obtained by the Ukranian company Kerchrybprom against Galapesca SA (Galapesca), an Argentinean company that at the time was in bankruptcy proceedings, on the basis of violation of article V(1)(b) of the New York Convention. The defence put forward by Galapesca and accepted by the judge was based on the fact that when being seized with the claims, Galapesca received a number of documents attached to the request for arbitration in Russian, without any translation, which made it impossible for Galapesca to exercise its right of defence. On appeal, however, the Court of Appeals (Cámara Nacional en lo Comercial) overturned the first instance decision and granted the enforcement pursuant to the New York Convention, on the grounds that:
- the contractual provision obliging the parties to send all documentation in both Russian and Spanish was for the performance of the underlying agreement but not for the conduct of the arbitration;
- the arbitration clause did not establish the language of the arbitration; and
- the lack of translation into Spanish did not amount to violation of due process as Galapesca was granted a period of five months to translate these documents to Spanish in order to preserve its defence rights during the arbitration.
In the Spie Enertrans case,47 the STJ in Brazil rejected the alleged violation of due process as a result of lack of notification to the respondent. The STJ found that there was no evidence suggesting the lack of notification, which was further confirmed by Inepar's active participation in the arbitral proceedings.
But even in defaulting proceedings, the STJ has reached the same finding. Indeed, in Tremond,48 the Brazilian party against which the enforcement of the award was sought objected on the basis that it had been improperly notified and, despite its lack of participation in the proceedings, the STJ dismissed this argument due to lack of evidence. A similar conclusion was established by the STJ in Bouvery International SA v Irmãos Pereira — Comercial e Exportadora Ltda.49
Excess of jurisdiction (article V(1)(c))
In Mexico in the San Luis Potosí case,50 the Mexican party opposed the enforcement of an award on the grounds that the award on interest was beyond the limits of the arbitral's mandate. The decision by the Fourth District Judge of San Luis de Potosí held that the parties had agreed on the application of New York laws, which allowed for payment of interest, and the claimant has requested them accordingly in the arbitration, thus the award did not exceed the agreement to arbitrate.
In Chile, in Gold Nutrition,51 the respondent Garden House alleged that the award on costs had not been sought by the claimant and thus amounted to an excess of jurisdiction. The Court found that, as the claimant decided not to participate in the proceedings commenced in Brazil, a Brazilian judge had to signed up a formal submission or compromisso, whereby the arbitrators were expressly given powers to decide on the costs of the arbitration. Thus, the Supreme Court dismissed the objection made on this ground.
Irregularity in the arbitral procedure (article V(1)(d))
There are not reported cases in which this particular ground has been invoked as basis to resist enforcement of arbitral awards under the New York Convention.
Violation of public policy (article V(2))
In the Enersis case,52 the respondent invoked the public policy defence due to violation of certain procedural guarantees to ensure the parties' right of fair trial. The Court of Appeals decided that, in ratifying the New York Convention, Uruguay had recognised the principle of free circulation of foreign arbitral awards with the international public policy as the sole limitation. The Court went on to hold that the threshold of public policy control cannot be that of a fair or equitable trial in Uruguay pursuant to local standards but rather an international one, consistent with the notion of fair trial in the ius gentium, which recognises the right to be heard and the principle of the contradictoire, in particular with regards to the administration of evidence. On this basis, the Court rejected the public policy defence.
In the San Luis de Potosí case,53 the respondent used the public policy defence, alleging a violation of Mexican public policy without really articulating it. The Mexican court dismissed this defense and ruled that the notion of Mexican public policy must be understood as the legal, political and moral values that form the basis of the Mexican system of law. The court went on to find that, in the circumstances of this case, those values and institutions of the highest range in Mexico were not affected by the award.
In the Chilean Golden Nutrition case,54 the respondent alleged that the Chilean public policy has been infringed with the granting of an award on compound interest by the arbitrators, which was forbidden by Chilean laws. The Supreme Court did not even entertain this allegation and simply dismissed it on the basis that it went beyond the formal review of the enforcement procedure and constituted an allegation related to the merits of the case. In any event, the report prepared by the Court's attorney (Fiscal) also concluded that the compound interest, save for exceptional cases different from the one at issue, was permitted by Chilean law.
However, in Transpacific Steamship Limitada v Euroamérica SA,55 the Chilean Supreme Court for the first and only time so far refused to recognise an international arbitral award rendered by a sole English arbitrator as the same matter decided in arbitration was being subject to a pending judicial proceeding in Chile which had commenced prior to the filing of the arbitration. The Supreme Court found that since the Chilean court had already confirmed its jurisdiction to hear the case, the foreign award should not be enforced as it ran against the res judicata effect of the prior ruling on jurisdiction issued by the Chilean court, thereby violating Chilean public policy.
In Brazil, in Grain Partners,56 the public policy defence was justified in the violation of the constitutional right of right of access to the justice, as the foreign party was allowed to resort to private justice infringing the right of the Brazilian party to its natural judge, which was equally rejected by the STJ. In both the Bouvery57 and ICT58 cases, the STJ also did not find any violation of the Brazilian public policy, which shows a clear tendency from the STJ not consider this ground unless there is a serious cause justifying it.
In Argentina, in the Odgen case,59 Odgen requested the enforcement of the award on costs, which exceeded the award on the principal claims in favour of N&M Eijo, in Argentina and the first instance judge granted the enforcement but pursuant to article 518 of the Argentinean Code of Civil Procedure. On appeal, the Buenos Aires Court of Appeals denied the enforcement on the basis that it was against the Argentinean public policy. The Court went on to hold that the disproportion between the award on costs and the the ultimate success on the principal claims was in clear violation of due process and the right of defense in a twofold manner: first, because the award lacked any reasoning to justify an award on costs to Odgen whereas N&M Eijo had partially prevailed in their claims and, second, because to impose an award on costs on the prevailing party that exceeded the amount of its award on the principal claims would amount to a denial of the right of access to justice, a right constitutionally protected in Argentina.
In the Milantric case60 in Argentina, the judge of first instance dismissed an objection to the enforcement based on public policy concerns consisting in the application of compound interest in the award. In the judge's view, there was no violation of Argentinean public policy as, under local law, compound interest was permitted when agreed by the parties, which was the case here. On appeal, the La Plata Court of Appeals in Argentina denied the enforcement of a foreign arbitral award. What is interesting about this decision, as far as public policy is concerned, is that it used the public policy defence raised before, and dismissed by, the judge a quo to enter again into the substance of the grounds opposing the enforcement of the arbitral award, when its jurisdiction was originally limited to a mere ruling on costs.
An attempt at systematisation: the good, the bad & the ugly
The general picture of the application New York Convention in Latin America is far from being complete and clear. But, with some degree of boldness, certain conclusions may be drawn.
First, the decisions are, unsurprisingly, only related to the most developed economies in Latin America, namely, Brazil, Argentina, Chile, Colombia, Peru, Venezuela and Uruguay. Save for these seven countries, the rest have had little, if not any, real experience in applying the New York Convention. Thus, any conclusion is, at best, limited to these countries.
Second, the cases examined above reveal an increasing tendency to resort to the provisions of the New York Convention when dealing with the enforcement of arbitral awards in Latin America. This is particularly the case in countries like Brazil, Chile and Mexico which stand up as reflecting a strong policy favouring the enforcement of foreign arbitral awards.
Third, from a comparative standpoint, borrowing the classification from Alan Redfern in his notable 2003 Freshfields Lecture,61 there are good, bad and ugly decisions. The good news is that Latin American judges will generally not entertain requests under the New York Convention to review the merits of the case and the grounds under article V will be construed as being exhaustive. In particular, grounds related to an alleged violation of due process based on miscompliance or violation of procedural rules under the country in which enforcement is sought have been systematically denied, and the fear of a too broad interpretation of the public policy defence seems to be more apparent than real because, save for some isolated decisions, this defence has not been accepted as a ground to reject the enforcement of a foreign award.
The bad decisions are those that bring more confusion as to when and under which conditions the New York Convention should apply. Indeed, there seems to be some lack of knowledge or understanding about the situations in which the New York Convention should be applied on an exclusive basis. Some cases reported here show that judges are still keen to accept enforcement under other treaties or laws, either in addition to or in lieu of the New York Convention, such as the provisions under national arbitration laws or, even worst, the provisions applicable to foreign judgments. The risk is evident when those other bodies of law contain different, and perhaps broader, means to deny the enforcement of the foreign award. Nevertheless, in practice, most of the decisions that have taken this path, have ultimately accepted the enforcement of the arbitral award.
Finally, there are also some ugly decisions. The Merck case in Colombia disallowing enforcement of an award on jurisdiction under the New York Convention runs contrary to standard practice. The Todosabor case in Venezuela stepping into the review of an award rendered abroad in violation of the powers of the judge at the place of arbitration and the regime of subsequent control at the stage of enforcement established by the New York Convention is also highly worrying. Moreover, the Milantric case in Argentina is probably one of the ugliest decisions in connection with the New York Convention as it is a clear sign of protection of the interest of a state party on grounds that do not find much substance from a legal perspective.62 One may still expect that decisions like Milantric will not ultimately be upheld or followed, and are rather the result of the arbitration pendulum that is currently affecting state interests in certain Latin American countries.63
Some years ago it would have been an impossible task to identify common trends in the interpretation and application of the New York Convention throughout Latin America. Due to the few and disparate juducial decisions, our analysis would have been forced to follow a geographical, rather than systematic, path, like the journey taken by the Che Guevara and his friend Alberto Granado through different countries of the region, beautifully described in The Motorcycle Diaries.64
The increasing number of cases applying the New York Convention reveals some clear traces of uniformity not only among Latin American countries but also, and more importantly, with the rest of jurisdictions around the world that have implemented the New York Convention. Thus, the goal of a truly transnational instrument promoting the efficacy of foreign arbitral awards is no longer an uthopy, not even in Latin America.
It is undeniable that there is a long way to go from here, with more mistakes and bad cases to appear. Decisions in some countries are scarce and isolated and there are several countries whose judges have not even touched the provisions of the New York Convention. Nevertheless, it is very much expected that instead of tripping over the same stone already encountered by their learned neighbors, they can profit from these mistakes. We hope indeed that these collection of lessons will provide some learning guidance.
1. Although the few reported cases in Latin America on referral of the parties to arbitration under the New York Convention (article II(3)) are highly positive. See, in Venezuela, Embotelladora Caracas and others v Pepsi Cola Panamericana, Supreme Court of Justice, Political-Administrative Chamber, judgment no. 605 of 9 October 1997 [in file with the author], and, in Mexico, Mitsui de Mexico and Mitsui & Co Ltd v Alkon Textil, Superior Court of Appeals, Fourth Chamber, judgment of 21 October 1988, Yearbook Commercial Arbitration, ed. A J van den Berg, vol. XVI (1991), pp594-598.
2. The issue of whether the existence of both Conventions is redundant and compatible has been addressed in A J van den Berg, 'The New York Convention 1958 and Panama Convention 1975: Redundancy or Compatibility?', Arbitration International, vol. 5, no. 3 (1989), p214-229.
3. See, C Conejero Roos, 'El impacto de la Ley Modelo de la CNUDMI sobre arbitraje comercial internacional en América Latina: Un análisis comparativo', Revista de la Corte Española de Arbitraje (2004), p255; and F Mantilla Serrano, 'Le traitement législatif de l'arbitrage en Amé-rique Latine', Revue de L'Arbitrage, no. 3 (2005), p561.
4. Decision of 24 February 1977, Yearbook Commercial Arbitration, ed. P Sanders, vol. IV (1979), p301.
5. For a more recent decision with the same rationale, see below, note 10.
6. Decision of 16 January 2001, Yearbook Commercial Arbitration, A. J. Van den Berg (Ed.), vol. XXVI (2001), p755.
7. Id, p759.
8. See below, note 20.
9. Decision of 30 August 2007, published in La Ley, 4 July 2008, p1. For a comment on this decision, see F. Godoy, ITA Monthly Report, vol. 6, issue 5, May 2008, available at www.kluwerarbitration.com.
10. Decision of 14 March 1996, commented by J. Treviño, Mexico, LatinLawyer Review: Arbitration 2001, p23.
11. Decision of 30 October 1998. For a comment on this decision, see F. Cantuarias, ITA Monthly Report, vol. 6, issue 5, May 2008, available at www.kluwerarbitration.com.
12. Decision of 31 March 2005, in file with the author.
13. Decision of 20 November 1992, Yearbook Commercial Arbitration, ed. A J van den Berg, vol. XX (1995), p651.
14. For a copy of this decision, see SJA, semanario, 16 July 2003, p30.
15. For comments on this judgment, see R Caivano, 'El exequátur de un laudo extranjero y la inhibi-toria en relación con un arbitraje internacional', in Derecho del Comercio Internacional, ed. A Dreyzin de Klor and D Fernández Arroyo (Buenos Aires, Zavalía), no. 1, 2004, p344; and M B Noodt Taquela, 'Crónica sobre Jurisprudencia de Arbitraje de Argentina', in Revista Latinoamericana de Mediación y Arbitraje, no. 2 (2005), available at www.med-arb.net.
16. Decision of 20 September 2004, published in La Ley, 22 February 2005, p6; and Lexis Nexis No. 35001029, available at www.lexisnexis.com.ar.
17. See below, 'Violation of public policy (article V(2))'.
18. For a comment on this decision, see M B Noodt Taquela, above, note 15.
19. For a comment about this decision, see F Mantilla Serrano and E Silva Romero, 'Panorama de jurisprudence latino-américaine', Gazette Du Palais (2005), p421.
20. Decisions of 24 October 2003, No. 25,251 and and 22 April 2004, No. 25,261, Council of State, Administrative Chamber, Third Section; 24 October 2003, No. 25,251; Yearbook Commercial Arbitration, ed. A J van den Berg, vol. XXIX (2004), p643, and; ITA Monthly Report, vol. 3, issue 3, September 2004, available at www.kluwerarbitration.com.
21. For further comments on this decision, see E. Zuleta Jaramillo, ITA Monthly Report, vol. 3, issue 3, September 2004, available at www.kluwerarbitration.com.
22. Decisions of 14 February 2006, ITA Monthly Report, vol. 4, issue 11, May 2006, available at www.kluwerarbitration.com.
23. For further comments on this decision, see A de Jesús, ITA Monthly Report, vol. 4, issue 11, May 2006, available at www.kluwerarbitration.com.
24. See above, note 11.
25. See above, note 10.
26. Decision in amparo of 13 June 2001, Fourth District Judge of San Luis de Potosí, unknown parties, available at www.kluwerarbitration.com. See, in the same line, Mexicali BC, amparo en revisión, Decision of 28 May 2002, First Court of the 15th Circuit [unpublished and in file with the author].
27. Decision of 19 June 2006. For comments on this decision, see J Bosco Lee, ITA Monthly Report, vol. 5, issue 1, January 2007, available at www.kluwerarbitration.com
28. Decision of 18 October 2006, ITA Monthly Report, vol. 5, issue 1, January 2007.
29. For a comment about this decision, see F Mantilla Serrano and E Silva Romero, 'Panorama de jurisprudence latino-américaine', Gazette Du Palais, 13a ,17 July 2007, p50-51.
30. Decision of 16 May 2007, available at ITA Monthly Report, vol. 6, issue 1, January 2008 (see also comment by J Bosco Lee).
31. Decision of 20 July 2007, available at ITA Monthly Report, vol. 6, issue 1, January 2008 (see also comment by J Bosco Lee).
32. Decision of 15 September 2008 [in file with the author].
33. Decision of 3 October 2007, available at ITA Monthly Report, vol. 6, issue 1, January 2008 (see also comment by J Bosco Lee).
34. Decision of 18 May 2005, Yearbook Commercial Arbitration, ed. A J van den Berg, vol. XXX (2005), p437-439, and; ITA Monthly Report, vol. 4, issue 1, July 2005 (see also comment by J Bosco Lee).
35. See above, note 28.
36. See above, note 30.
37. See above, note 31.
38. Decision of 29 January 2008, available at ITA Monthly Report, vol. 6, issue 4, April 2008 (see also comment by J Bosco Lee).
39. The requirement of a compromisso was mandatory before the 1996 Brazilian Arbitration Act and is still foreseen under the current law. However, the prevailing view is the one sustained by Judge Dalacqua. See C Conejero Roos and R Grión, 'Arbitration in Brazil: Law and Practice from an ICC perspective', ICC International Court of Arbitration Bulletin, vol. 17, no. 2, p18.
40. See, 'Appeal Court Halts Brazil's Progress', in LatinLawyer, 4 February 2008, available at www.latinlawyer.com.
41. See above, note 9.
42. See above, note 32.
43. Decision of 5 July 1999, available (for subscribers) at www.microjuris.com.
44. See above, note 32.
45. See above, note 19.
46. Decision of 31 October 2002, available at www.csjn.gov.ar/index.html.
47. See above, note 33.
48. See above, note 27.
49. Decision of 15 February 2006, available at ITA Monthly Report, vol. 4, issue 14, August 2006. The STJ considered in this case that the notification was regularly made and the defendant voluntarily decided not to participate in the proceedings. Consequently, there was no violation to its right of defence.
50. See above, note 26.
51. See above, note 32.
52. See above, note 19.
53. See above, note 26.
54. See above, note 32.
55. Decision of 18 October 1999, commented by J Irrarázabal and R Riesco, 'Chile', Latin Lawyer Review: Arbitration 2008, available at www.latinlawyer.com.
56. See above, note 28.
57. See above, note 30.
58. See above, note 31.
59. See above, note 16.
60. See above, note 9.
61. A Redfern, 2003 Freshfields Lecture, 'Dissenting Opinions in International Commercial Arbitration: The Good, the Bad and the Ugly', Arbitration International, vol. 20, no. 3 (2004) p223. The author recognises having borrowed the term himself from the famous western movie with Clint Eastwood.
62. The consequences are clearly described by a reputed Argentinean professor and arbitrator: 'The judges must have been convinced that they were acting in order to protect the province and the interests of their citizens. They should know that what they have really achieved is that nobody in one's right mind will execute contracts again with the province unless the staty party constitutes some liquidated guarantee abroad on which the award may be enforced. Thus, the only goal achieved has been to hamper the involvement of the province and its com-panies in international trade, to rise their costs for contracting and to exclude them from the control of Argentinean judges' (J C Rivera, 'Incomprensión Judicial del Arbitraje', yet to be published).
63. See, H Grigera Naón, 'Arbitration in Latin America: Progress and Setbacks', 2004 Freshfields Lecture, Arbitration International, vol. 21, no. 2, p172 (the author refers to the fragility of the pro-arbitration movement in the region, which lies to a large extent in a pendulum oscillation depending on political and economic exogenous factors).
64. The Motorcycle Diaries (2004), directed by Walter Salles.