Argentina

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On 1 August 2015, the new Civil and Commercial Code (CCC) became effective. It was enacted by the Federal Congress in 2014 through Law 26,994. In addition to unifying the provisions of the Civil and Commercial Codes that governed Argentine legal life since 1871 and 1890 respectively, the CCC incorporates numerous innovations, including a section devoted to the ‘contract of arbitration'.

Legislative technique

The rationale for including the ‘contract of arbitration' in the CCC derives from the political organisation of Argentina and the mixed legal nature of arbitration.

Political organisation of Argentina

Argentina is a federal republic consisting of 23 provinces and the autonomous city of Buenos Aires, which is the federal capital. The Federal Constitution establishes in article 121 that provinces reserve all powers not delegated to the federal government. Additionally, article 75(12) thereof states that the Federal Congress is empowered to enact the civil, commercial, criminal, mining, labour and social security codes, in unified or separate bodies, provided that such codes do not alter local jurisdictions.

Due to the fact that the power to enact procedural codes has not been delegated to the Federal Congress by article 75(12) of the Constitution, the provinces maintain the exclusive right to enact those codes in their respective jurisdictions. Consequently, each province has enacted its own procedural code, and the Federal Congress has enacted a Federal Procedural Code that is only applied by federal courts and courts in the autonomous city of Buenos Aires.

Mixed legal nature of arbitration

Procedural codes in Argentina normally regulate arbitration. This is because, originally, arbitration was conceived as a ‘special procedure'. The problem with this approach is that procedural codes naturally focus on the procedural aspects of arbitration, but neglect the treatment of other aspects that are equally important. One of those aspects is the regulation of the arbitration agreement.¹

The Federal Procedural Code, for example, establishes that, despite the existence of an arbitration clause, parties need to conclude a compromise after the dispute has arisen. This provision is outdated and is inconsistent with international treaties ratified by Argentina. Moreover, this requirement is generally considered to be overridden by the parties' consent when, for example, they agree to an institutional arbitration that is governed by its own rules or when they otherwise agree in the arbitration clause waiving such a condition.²

Nowadays, it is universally accepted that the legal nature of arbitration is neither jurisdictional nor contractual, but a blend of both of them. The Federal Supreme Court of Argentina has also recognised this.³ Modern laws on arbitration, whatever the way in which they are instrumented, equally regulate the ‘contract of arbitration' and the procedural aspects of arbitration.

The rationale of the legislative technique

The mixed legal nature of arbitration requires, according to the political organisation of Argentina, that civil and commercial matters embodied in the ‘contract of arbitration' be regulated in a uniform manner for all the country by the Federal Congress, and that procedural matters of arbitration be regulated by Provincial Legislatures in their respective jurisdictions and by the Federal Congress in relation to federal territories, such as the autonomous city of Buenos Aires.

To avoid this double-regulation of arbitration and unify federal and provincial laws, the Federal Congress could have passed a federal law on arbitration and invited the provinces to adhere to it. Several bills proposed this solution in recent years, but none of them succeeded in obtaining congressional approval. Therefore, it was decided to take advantage of the unification of the civil and commercial codes to include a modern regulation of arbitration agreements and thereby remedy the deficiencies of the procedural codes on this matter.

Thus, as of 1 August 2015, arbitration has a double-regulation: the ‘contract of arbitration' is governed by the CCC, and the procedural matters of arbitration are governed by the relevant procedural codes. The problem with this approach is that some of the provisions of the CCC contradict the provisions of the procedural codes, or regulate some matters that are arguably procedural. This may give rise to discussions on the procedural nature of those provisions, and on whether they are unconstitutional because the Federal Congress is not empowered to regulate procedural matters.

Unity or duality of rules governing the arbitration agreement?

Procedural codes generally make no distinction between domestic and international arbitration. Although the CCC contains a section on Private International Law for international cases, it does not establish special rules for international arbitration.

It only provides, in article 2605, that, in economic and international matters, the parties are entitled to defer jurisdiction in favour of judges or arbitrators outside of the Republic of Argentina, unless Argentine judges have exclusive jurisdiction or choice of forum agreements is prohibited by law.

Although the CCC does not regulate the arbitration agreement in the private international law section, it has been interpreted that, by reason of specialty, reference should be made to provisions of the CCC relating to the ‘contract of arbitration'.⁴

The contract of arbitration

The CCC contains a number of rules that are beneficial for arbitration and that are in line with modern legislations. Its provisions were inspired by the Civil Code of Quebec, the UNCITRAL Model Law and the French Code of Civil Procedure. However, certain last-minute changes have created some smudges that have to be cleaned up by case law and scholars for arbitration to function properly.

Definition

Article 1649 of the CCC defines the ‘contract of arbitration' as an agreement whereby the parties undertake to submit to one or more arbitrators all or any disputes that have arisen or may arise between them in respect of a defined legal relationship of private law, whether contractual or not, in which public policy is not compromised.

The limitation to relationships of private law is related to the last paragraph of article 1651 of the CCC, whereby disputes with the federal or provincial states are not governed by the rules that apply to the ‘contract of arbitration'.

The limitation related to public policy can lead to controversy if it is not properly interpreted. In line with case law preceding the CCC, it has been concluded that the fact that a particular matter is regulated by public policy rules does not imply that such matter cannot be submitted to arbitration because the arbitrability of a matter is not determined by the rules applicable to the merits of the case, but by the law applicable to the arbitration agreement.⁵ Argentine courts have recognised that the fact that the merits of a dispute are governed by rules that are deemed to constitute public policy does not mean that the matter is not arbitrable to the extent it relates to monetary rights of the parties.⁶

Form

Article 1650 of the CCC establishes that the arbitration agreement must be in writing and may consist of an arbitration clause or a compromis. Unlike some procedural codes, the CCC does not require the conclusion of a compromis after the dispute has arisen, when the parties had already included an arbitration clause in their contract.

It also provides that a reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract.

Arbitrability

According to article 1651 of the CCC, the following matters are ‘excluded' from the arbitration agreement: civil status or capacity of persons; family issues; rights of users and consumers; adhesion contracts; and labour relations. Consumer and labour disputes are excluded from the ‘contract of arbitration' regulated in the CCC because the arbitrability of those matters is governed by specific laws.

The CCC provisions concerning the ‘contract of arbitration' do not apply to disputes with the federal or provincial states. This is consistent with article 1649 thereof in the sense that only private law matters can be submitted to arbitration.

Arbitration in law and in equity

Article 1652 of the CCC establishes that disputes can be submitted to arbitration in law or arbitration ex aequo et bono. If nothing is stipulated in the arbitration agreement, or if the parties do not expressly authorise the arbitrators to decide the dispute in equity, it is deemed that the parties decided to submit their dispute to arbitration in law.

This provision contradicts the solution established by different procedural codes. Pursuant to several procedural codes, unless it is otherwise agreed, it is deemed that the parties decided to submit their dispute to arbitration ex aequo et bono.

Separability

Article 1653 of the CCC provides that the arbitration agreement is independent of the contract to which it relates. Therefore, the invalidity of a contract does not necessarily determine the invalidity of the arbitration agreement, and the arbitrators remain competent to resolve the dispute.

Competence

Article 1654 of the CCC sets forth that, unless otherwise agreed, the arbitration agreement confers on arbitrators the power to decide on their own competence, including preliminary objections with respect to the existence or validity of the arbitration agreements or any other matter that could prevent arbitrators from settling the dispute.

Preliminary measures

Article 1655 of the CCC establishes that, unless otherwise agreed, the arbitration agreement confers on arbitrators the power to adopt, at the request of any party, the precautionary measures they deem necessary regarding the subject of the dispute. The arbitrators may require adequate security from the applicant. Only courts have the authority to enforce those measures.

The application of a party to a court for such measures shall not be deemed to constitute an infringement or a waiver of the arbitration agreement, and shall not affect the authority reserved for the arbitrators.

Preliminary measures requested by the arbitrators may be challenged in court if they violate constitutional rights or are unreasonable.

Effects of arbitration agreements and review of awards

According to 1656 of the CCC, the arbitration agreement obliges the parties to honour its terms and excludes the competence of the courts in disputes submitted to arbitration, unless the arbitral tribunal is not yet hearing the case and the arbitration agreement appears to be manifestly void or inapplicable. In case of doubt, the most favourable interpretation for the efficiency of the arbitration agreement should prevail.

The last paragraph of article 1656 is the most problematic. It states that final arbitral awards may be reviewed before the competent courts when grounds for total or partial annulment are invoked, pursuant to the provisions of ‘this Code'. It also provides that the parties cannot waive their right to ‘challenge' the final award that is ‘contrary to law'.

This paragraph presents at least three problems. First, it refers to grounds of annulment that are invoked pursuant to the provisions of ‘this Code', when the CCC does not contemplate any grounds for annulment of arbitration awards. The intent was possibly to refer to the procedural codes that could apply to the case, which do establish specific causes for annulment of arbitral awards.

Second, it refers to the inability of waiving the right to ‘challenge' the final award, without specifying whether it refers to the inability to waive the right to appeal the award or the right to vacate the award. The procedural codes in general provide that the parties may waive their right to appeal the award, but cannot waive their right to vacate the award on the grounds provided thereby. Some international treaties ratified by Argentina establish that the only remedy against the award is the petition for annulment.⁷ Therefore, consistent with those procedural codes and international treaties, article 1656 of the CCC may be interpreted to refer to the inability of waiving the right to vacate the award.

Third, said article 1656 refers to the challenge of final awards that are ‘contrary to law', which is a very broad concept. If, as explained above, the CCC were interpreted in the sense that it refers to the inability of waiving the right to vacate an award on grounds of annulment, and not to the right to appeal the award, then it could be interpreted that the CCC refers to procedural law that is applicable to the case, which would normally be that of the seat of the arbitration. That is, the parties cannot waive their right to vacate an award that it is invalid because it does not meet the validity requirements established by applicable procedural law.

The opposite interpretation, this is, that a final award may be challenged on grounds of its alleged inconsistency with any legal provision, would not only be inconsistent with several international treaties and the sources of inspiration of the arbitration chapter of the CCC, but moreover with the main purpose of arbitration to displace disputes from the competence of the judicial courts, except for their review of final awards based on specific causes of annulment.

Institutional arbitration

Article 1657 of the CCC establishes that the parties may entrust the administration of the arbitration and the appointment of arbitrators to civil associations or other institutions, whether national or foreign, that are statutorily authorised to exercise that function. The arbitration rules of these entities govern the arbitral procedure and integrate the arbitration agreement.

Optional clauses

Article 1658 of the CCC provides that parties can agree on:
(i) the seat of arbitration; (ii) the language of the arbitration; (iii) the arbitration procedure (if there is no agreement, the arbitral tribunal may conduct the arbitration in the manner it deems appropriate); (iv) the time limit within which the award must be rendered (if there is no agreement, the time limit will be governed by the arbitration rules of the arbitral institution, and, failing that, by the law of the seat); (v) the confidentiality of the arbitration; and (vi) the distribution of the arbitration costs.

Appointment of arbitrators

According to article 1659 of the CCC, the arbitral tribunal shall be composed of one or more arbitrators of an odd number. If nothing is stipulated, the arbitrators shall be three. The parties may freely agree on the procedure for the appointment of the arbitrators.

In the absence of such an agreement:

if there are three arbitrators, each party shall appoint an
arbitrator and the party-appointed arbitrators shall appoint the third arbitrator. If a party fails to appoint its arbitrator within 30 days of receiving the request from the other party to do so, or if the two arbitrators fail to agree on the third arbitrator within 30 days of their appointment, the appointment must be made, upon the request of any party, by the institution administering the arbitration or, failing that, by the courts;
if there is a sole arbitrator, he shall be appointed, at the request of any party, by the institution administering the arbitration or, failing that, by the courts.

If the dispute involves more than two parties and they cannot reach an agreement on how to constitute the arbitral tribunal, the arbitrator or arbitrators shall be appointed by the institution administering the arbitration or, failing that, by the courts.

Qualification of arbitrators

Article 1660 of the CCC establishes that any person with full civil capacity can act as arbitrator. The parties may agree that the arbitrators meet certain conditions of nationality, profession or experience.

Void provisions

Pursuant to article 1661 of the CCC, a clause that privileges one party with regard to the appointment of arbitrators is null.

Arbitrators' obligations

Article 1662 of the CCC provides that the arbitrator who accepts the appointment enters into a contract with each of the parties and undertakes:

to disclose any circumstance prior or after his acceptance that might affect his independence or impartiality;
to remain in the arbitral tribunal until the termination of the arbitration, unless there is an impediment or a legitimate cause for resignation;
to respect the confidentiality of the proceedings;
to be available to conduct the arbitration diligently;
to participate personally in hearings;
to deliberate with the other arbitrators; and
to render a reasoned award within the established time limit.

In all cases, the arbitrators must ensure equality of the parties, the principle of adversarial debate and sufficient opportunity to present their case.

Challenge of arbitrators

Article 1663 of the CCC sets forth that arbitrators may be challenged for the same reasons as the judges in accordance with the law of the seat of the arbitration.

Article 17 of the Federal Procedural Code, for example, establishes the following grounds for recusal:

the judge is a relative within the fourth degree of consanguinity or the second degree of affinity with any of the parties, their representatives or lawyers;

the judge, or his relatives within the grades mentioned above, has an interest in the case or in another similar case, or has a company or partnership (shareholder) with any of the parties, prosecutors or lawyers, unless the company is a sociedad anónima (corporation);

the judge has a pending lawsuit with the challenger;
the judge is a creditor, debtor or guarantor of any of the parties, with the exception of official banks;
the judge has reported a crime or has filed a criminal action against the challenger; or the challenger has reported a crime or has filed a criminal action against the judge prior to the initiation of the lawsuit;
the judge has been reported by the challenger under the impeachment law, provided that the Supreme Court has decided to proceed with the impeachment;
the judge has been the lawyer of any of the parties or has issued an opinion or made recommendations concerning the case before or after its initiation;
the judge has received important benefits from either party;
the judge has a friendship, expressed by great familiarity or frequent treatment, with any of the parties; and
the judge holds enmity, hatred or resentment against the challenger, expressed by known facts, unless the attacks or offences against the judge were made after his involvement in the case commenced.

The challenge is resolved by the institution administering the arbitration or, failing that, by the courts. The parties may agree that the challenge is resolved by the other arbitrators.

Although it is not expressly established in the CCC, it is reasonable to assume that the parties may also agree that the reasons for challenging the arbitrators and the procedure be governed by the rules of an arbitral institution.

Arbitrators' compensation

Pursuant to article 1664 of the CCC, the parties and the arbitrators may agree their fees or how they should be determined (eg, pursuant to the rules of the chosen arbitral institution). If there is no agreement, the fees of the arbitrators shall be fixed by the court, in accordance with local rules applicable to the extrajudicial activity of lawyers.

Functus officio

Article 1665 of the CCC establishes that the powers conferred to arbitrators through the arbitration agreement are extinguished with the issuance of the final award, except for clarification or additional decisions, in accordance with the agreement of the parties or the law of the seat.

Conclusions

The enactment of a federal law on arbitration to which the provinces could have adhered would have been the desirable mechanism to avoid a double regulation of arbitration and to unify federal and provincial laws on this matter. As explained, the double regulation established by the CCC and the procedural codes may give rise to discussions on the procedural nature of some of the CCC's provisions, and on whether they are unconstitutional on the basis that Federal Congress is not empowered to regulate procedural matters.

Notwithstanding the above, the CCC contains several provisions related to the ‘contract of arbitration' that are beneficial for arbitration, and that, unlike some procedural codes, are in line with modern legislations and treaties. The positive aspects of the CCC are rather overshadowed by a couple of provisions that might cause problems in the development of arbitration if they are not correctly interpreted by scholars and courts. It is expected that these doubts will be gradually dispelled with the first cases to be resolved under the CCC.

Notes

Roque J Caivano, Arbitraje, 2º ed., Ad-Hoc, Buenos Aires, 2008, pp. 54-55.
Roque J Caivano, Arbitraje, 2º ed., Ad-Hoc, Buenos Aires, 2008, pp. 141-144; Julio C Rivera, Arbitraje comercial: internacional y doméstico, LexisNexis, 2007, p. 203. In 1990, the Commercial Court of Appeals took the opposite view in Naviera Pérez Companc v Ecofisa (ED 143-436). After considering circumstances that appear to be somewhat exceptional (eg, that arbitration was domestic, the wording employed by the parties in the arbitration clause, and the fact that the arbitration involved actions of the federal government that were deemed not arbitrable), the court decided to review and rewrite the terms of reference drafted by an ICC arbitral tribunal.
‘Rocca, JC c/ Consultara S.A. s/ ordinario' (Expte. R. 298. XXIII. ROR), CSJN, 31.05.1999, Fallos 322:1100.
Diego P. Fernández Arroyo, commentary to article 2605, in Julio César Rivera and Graciela Medina (dirs.), Código Civil y Comercial de la Nación Comentado, T VI, La Ley, Buenos Aires, 2014.
Gustavo Parodi, commentary to article 1649, in Julio César Rivera and Graciela Medina (dirs.), Código Civil y Comercial de la Nación Comentado, T VI, La Ley, Buenos Aires, 2014.
‘Otondo, César AC Cortina Beruatto SA', Cámara Nacional de Apelaciones en lo Comercial, Sala E, 11.06.2003, LL 2003-F -744.
Article 22 of MERCOSUR Agreement on International Commercial Arbitration.