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Institutional Arbitration in Latin America
The role of arbitral institutions in the development of arbitration is a subject that has been increasingly discussed in international forums. In the last ICCA Congress, in Miami, the relationship of such entities with legitimacy was the topic of an entire panel. And one of the main concerns regarding the matter is the growth of local institutions in opposition to the predominance of traditional international centres of arbitration.
Such discussion is especially important in Latin America, where the development of arbitration is related to the emergence of local arbitral institutions. In fact, in the continent, such entities encouraged best practices and provided national markets with the necessary certainty for the strengthening of commercial exchanges. Interestingly, the evolution of ADRs in such areas also promoted the growth of several local institutions.
In this context, the Institute for Transnational Arbitration (ITA) conducted a survey regarding the situation of local arbitral institutions in Latin America. The results of the survey pointed out that most of these entities were created after 1990, when local jurisdictions had already set a legal framework for arbitration.
Theoretically, relevant institutions provide better conditions for parties and counsel through the reduction of costs and more adequacy to the national legal order or traditions. Moreover, it is often pointed as a reply to the criticism directed towards arbitration’s legitimacy, based on the fact that most arbitrators and counsels belong to developed countries. Local entities from developing countries have among their roster national arbitrators, who do not come from Europe or the United States.
In this scenario, local arbitral entities would serve as an antidote to protect the legitimacy of arbitration with respect to regional particularities. However, there are two facts that undermine such argument.
First, the strength of traditional international arbitral institutions continues in Latin America. At the end of 2002 there were 1,135 cases in the International Arbitration Court of the ICC; 175 from Latin America. In 2012, there were 158 cases submitted to the six most-renowned Brazilian arbitral institutions, while the ICC received 82 cases from Brazil alone. This illustrates the appeal that traditional ‘arbitral institutions’ keep in Latin America, despite the development of new centres that compete with them.
Second, most Latin American counsels and arbitrators are used to carrying out their cases in European and North American traditional institutions, meaning that they tend to keep the same practices in their proceedings submitted to local entities. Moreover, they attend courses offered by such entities and obtain LLMs or PhDs in universities in countries that have an ‘arbitral tradition’. As a result, the arbitral culture of such countries are incorporated by Latin American professionals who reproduce it, instead of creating a regional standard.
On the other hand, despite the fact that nowadays it is not possible to state that local institutions are capable of securing the legitimacy of arbitration, their perspective is interesting. The survey carried out by the ITA, mentioned above, concluded that the number of cases involving at least one foreign party has significantly increased in Latin American institutions. The same thing happened in terms of arbitrations concerning the public administration and in cases with multiple parties. Such outcomes reflect the evolution of those entities and their emergence as international players.
As president of the most traditional and renowned Brazilian arbitral institution, I can certify that the development of arbitration is related to the role taken by arbitral institutions in Brazil.
Certainly, the enactment of our Arbitration Act, in 1996, followed by the recognition of its accordance to the Brazilian constitutional order by the Supreme Court, was essential for the consolidation of arbitration in our juridical reality. The fact that, before 1996, only two arbitral procedures were submitted to the Arbitration and Mediation Centre
of the Canada–Brazil Chamber of Commerce (CAM–CCBC) demonstrates the importance of a legal framework for the growth of ADRs in Latin America.
However, after the creation of a legal framework, the efforts directed to the consolidation of arbitration were made mostly by arbitral institutions that joined forces with the academy and non-profit organisations with the purpose of fostering knowledge related to ADRs (such as the Brazilian Arbitration Committee). As a result, the number of arbitrations submitted to Brazilian institutions has been increasing in incredible proportions. Before 2003, there was an average of five new procedures in CAM-CCBC each year. In 2004, 11 cases were initiated, and in 2006 the number raised significantly to 21 proceedings. Last year alone, we received 90 requests for arbitration.
Moreover, before 2010, more than 90 per cent of the cases under CAM-CCBC rules involved only Brazilian parties. In contrast, from 2011 on, around 17 per cent of arbitration proceedings have had at least one foreign party. Important foreign companies include arbitration clauses under our rules in their agreements. It is important to notice that our data is in accordance with surveys recently carried out in other Latin American institutions, demonstrating the development of arbitration in the continent. In other words, those numbers are the ultimate evidence that foreign parties have sufficient confidence in such institutions to sign agreements containing arbitral clauses under their rules.
Despite these optimistic numbers, it is important to bear in mind that there is still space for growth. A relevant share of the Latin American arbitration market still belongs to traditional institutions. Also, there are specific areas in which arbitration is embryonic, such as arbitration with the public administration or in consumer relations. As such, it is possible to conclude that local arbitral institutions from Latin America have grown significantly but that many obstacles must be faced for them to achieve their full potential.