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New and more modern legislation on arbitration
As explained in The Arbitration Review of the Americas 2016 edition, Argentina amended its legislation on arbitration through a special chapter included in the new Civil and Commercial Code (CCC) that entered into force on 1 August 2015.1 Since then, arbitration is regulated by two separate bodies: its procedural aspects are governed by procedural codes and its contractual aspects by the CCC.
Before the CCC, arbitration was exclusively regulated by procedural codes. Each of the 23 provinces of the country has its own procedural code that is applied in its respective territory by its own judges.2 At the federal level, there is a Federal Code of Civil and Commercial Procedure (FPC) that applies in the Buenos Aires (the federal capital) and by federal judges throughout the country.3
Since 1 August 2015, the regulation of arbitration agreements has been unified in the CCC. Although the new Code did not expressly repeal the procedural codes' provisions regarding arbitration agreements, a recent decision of a provincial court of appeals states that those provisions were deprived of significance by the CCC, which is applied by federal and provincial courts across the entire country.4
The chapter of the CCC on arbitration agreements was inspired by the Civil Code of Quebec, the UNCITRAL Model Law and the French Code of Civil Procedure. It attempts to remedy some deficiencies of the procedural codes, which normally neglect the regulation of arbitration agreements for being old-fashioned and naturally focused on the procedural aspects of arbitration.
Although the CCC contains numerous rules that are beneficial for arbitration and are in line with modern legislation and treaties, it has a couple of provisions that could cause problems in the development of arbitration if they are not correctly interpreted by the courts.
The few court rulings that have been issued since the entry into force of the CCC clarify some aspects of the new Code and, in general, are pro-arbitration. This trend is also followed by the novel administration of President Mauricio Macri with regard to investment arbitration. Some of these developments are commented on below.
Remedies against arbitral awards
Article 1656, which refers to remedies against arbitral awards, is the most controversial provision of the CCC. To comprehend the issues arising from this provision, it is necessary to understand how remedies against arbitral awards were regulated before the CCC.
Despite the existence of different procedural codes governing this matter, reference will be made mainly to the FPC for being the legislation that applies in Buenos Aires where the vast majority of arbitrations take place, and because provincial codes are in most cases based on the FPC.
Article 758 of the FPC states that the same remedies against judicial judgments are available against arbitral awards, provided that they are not waived by the parties. In practice, this means that a party can file the following remedies:
- an appeal on the merits of the award;
- a motion to vacate the award - the grounds for annulment are limited. Pursuant to articles 760 and 761 of the FPC, an award can be vacated on the following grounds:
- an essential procedural violation;
- failure to issue the award within the agreed time limit;
- rendering the award on matters not submitted to arbitration; and
- inconsistent decisions in the dispositive part of the award; and
- a motion for clarification of the award. This remedy aims at clarifying obscure aspects of the award or rectifying typing, clerical or mathematical errors.
Article 760 of the FPC states that the motion to vacate and the motion for clarification are unwaivable, so, in practice, the appeal is the only remedy that can be waived by the parties.
The National Commercial Appellate Court clarified in a recent case that the appeal and the motion to vacate are mutually exclusive because it would be inadmissible to hold simultaneously that the award is null and therefore must be vacated, and that it is valid and therefore must be modified.5 The Court pointed out in that case, that an appeal implicitly includes the motion to vacate the award; thus such motion to vacate can only be submitted if the appeal has been waived by the parties.
Unfortunately, the CCC is unclear when it establishes the rules governing remedies against arbitral awards. Nevertheless, the single case decided after the effectiveness of the new Code resolved the ambiguity in favour of arbitration.
The last paragraph of article 1656 states that final arbitral awards may be reviewed by 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 arbitral 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 awards.6
Second, it limits the parties' ability to waive the right to ‘challenge' the final award, without specifying whether it refers to the inability to waive the right to appeal the award or only to waive the right to seek to vacate the award. Procedural codes generally authorise the parties to waive their right to appeal but not the right to request to vacate the award. Some international treaties ratified by Argentina establish that the only remedy against the award is the motion to vacate.7 Therefore, consistently with those procedural codes and international treaties, the restriction established by article 1656 of the CCC could be interpreted to capture exclusively a waiver of the right to vacate the award.8 Moreover, the opposite interpretation (ie, to also prohibit a waiver of the right to appeal) would be inconsistent with the sources of inspiration of the CCC in relation to arbitration.
Third, 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 was interpreted in the sense that it only prohibits a waiver of the right to vacate the award, then it could be interpreted that when the new Code prohibits the parties from waiving their right to challenge an award that is ‘contrary to law', this last expression refers to the relevant procedural law that contemplates the causes for vacating arbitral awards, which would normally be the procedural law of the seat of the arbitration. In other words, the parties could not waive their right to vacate an award that is invalid because it does not meet the validity requirements established by the applicable procedural law, but they could waive their right to appeal the award.
The opposite interpretation (ie, that a final award may be challenged on grounds of its alleged inconsistency with any legal provision), once more, would not only be inconsistent with international treaties and the sources of inspiration of the CCC's chapter on arbitration agreements, but moreover with the main purpose of arbitration to displace disputes from the competence of the judicial courts, except for the review of final awards based on specific causes of annulment.
Last but not least, it has been stated that the last paragraph of article 1656, in addition to being defectively drafted, is of dubious constitutionality because it refers to a procedural matter and the federal Congress is not empowered to regulate such matters.9 Pursuant to article 75(12) of the federal Constitution, the provinces maintain the exclusive right to enact procedural codes in their respective jurisdictions.
Since the entry into force of the CCC, only one case related to article 1656 appears to have been published.10 Auspiciously, the interpretation made by the National Commercial Appellate Court in that case was in favour of arbitration. It concluded that among the different interpretations that could result from article 1656, the interpretation concluding that only motions to vacate are unwaivable (ie, that the waiver of the right to appeal is valid) is best suited to its purpose.
Delocalisation and party autonomy
On 7 October 2014, the National Appellate Court on Federal Administrative Contentious Matters (the Court of Appeals) declared the jurisdiction of Argentine courts in respect of an application filed by oil company YPF to annul a partial award on liability rendered in an ICC multiparty arbitration with seat in Uruguay.11
While providing for ICC arbitration in Uruguay, the dispute settlement clause expressly established that any annulment proceedings against the award should be pursued exclusively before the Argentine courts in accordance with Argentine law.
The Court of Appeals pointed out that international arbitrations are characterised by their delocalisation, meaning that they are not attached to the law of the seat and that the parties are entitled to agree the way in which the dispute must be settled. It also emphasised that, despite the delocalised nature of international arbitration, the parties voluntarily and expressly agreed that Argentine courts had exclusive jurisdiction to resolve annulment petitions against arbitral awards, and party autonomy is the fundamental paradigm of arbitration and must always be respected unless it violates international public policy.
The Court of Appeals ruled that the forum choice in favour of Argentine courts for annulment purposes was valid under the New York Convention, the Panama Convention and the Mercosur Arbitration Agreement (which was declared not applicable to the case), and did not violate international public policy.
The Appellate Court also noted that one of the criticisms that had been made with regard to Latin American courts is precisely related to the lack of receptivity shown by some judges to party autonomy, and courts of foreign jurisdictions, such as Paris courts, have recognised the validity of this type of court agreement. Therefore, the fact that the parties agreed to the exclusive jurisdiction of the Argentine courts, which is a valid choice of forum agreement, meant that the Court of Appeals concluded that it had international jurisdiction to decide the annulment petition filed by YPF.
This decision appears to be in line with the most modern views of international arbitration. For example, Gary Born explains that:
[...] there is a substantial argument that the New York Convention requires Contracting States to give effect to arbitration agreements providing for annulment applications to be considered by courts outside the arbitral seat (if this is what the parties have in fact accepted). Nor is the ill-advised character of most agreements selecting a foreign procedural law a sufficient reason for an absolute refusal to give effect to such agreements. Rather, it should in principle be for the parties - whose autonomy over the arbitral process is confirmed by the Convention - to determine whether they wish for a particular national court to consider annulment applications. Courts should take into account the very undesirable complexities and difficulties arising from such agreements in ascertaining the parties' intentions, but where an agreement to this effect clearly and unmistakably exists, it should be enforced.12
On 22 December 2015, the Court of Appeals vacated the partial award on grounds that the arbitral tribunal had violated due process by failing to provide reasons for its decision. This ruling, as well as the decision on jurisdiction, has been appealed by YPF's counterparties and is still pending before the federal Supreme Court of Justice.
Duty to reconstruct arbitral awards
The National Commercial Appellate Court has recently determined that if there is sufficient documentary evidence to prove the content and scope of an arbitral award, judges must reconstruct the arbitration decision when necessary, because otherwise it would constitute a conscious waiver of truth that is incompatible with the proper service of justice.13
The plaintiff had sought enforcement of an arbitral award issued in an ex aequo et bono arbitration, but the respondent had opposed the enforcement on grounds that the award was non-existent. The defendant argued that, instead of accompanying a true copy of the arbitral award, the plaintiff submitted to the judge different communications related to the award that differed from each other.
The judge ordered the arbitrator to submit a copy of the award but he had died. Therefore, the judge ordered the parties to submit the full text of the award. The plaintiff identified the documentary evidence contained in the record that, in his view, constituted the award. The defendant insisted with his defence that the arbitral award was non-existent.
The judge rejected the enforcement petition because he concluded that the award was non-existent. However, the National Commercial Appellate Court reversed such ruling. It pointed out that the defendant recognised the existence of an arbitral award, and that the communications submitted by the plaintiff proved the content and scope of that award.
Therefore, the Court concluded that the judge of first instance was not facing an oral award, which would had been unenforceable under Argentine law, but an award in writing that the judge should and could have reconstructed with the documentary evidence contained in the record.
Arbitrability of consumer disputes
The FPC contains in articles 736 and 737 a general rule that states that any matter, except for that which cannot be the subject of a settlement agreement, can be submitted to arbitration.
The CCC shifted the focus. Instead of providing a general rule, it sets forth the matters that can be the subject of an arbitration agreement. On the one hand, article 1649 establishes that the dispute has to relate to a defined legal relationship of private law in which public policy is not compromised.
On the other hand, article 1651 lists the following matters as ‘excluded' from the arbitration agreement: civil status or capacity of persons; family matters; rights of users and consumers; adhesion contracts; and labour relations. It also provides that disputes with the federal or provincial states are not governed by the CCC's provisions on the arbitration agreement.
The exclusion of consumer disputes appears to contradict several rules that were not repealed by the CCC. For example, article 59 of Law 24,240 on Consumer Protection orders the enforcement authority to establish arbitral tribunals for consumer disputes. The executive branch, in compliance with that law, created the National System of Consumer Arbitration by Decree 299/89. Law 26,993 also created a system for the resolution of consumer disputes and established in article 72(38) thereof that one of the functions of the Ministry of Economy and Public Finance is to supervise the actions of arbitral tribunals for consumer disputes.
In an attempt to reconcile this set of rules and avoid contradictions, it has been argued that consumer disputes are excluded from the arbitration agreement regulated in the CCC because the arbitrability of those matters is governed by specific laws.14 In this vein, it has also been interpreted that article 1651 of the CCC is actually seeking to prevent the consumer from being compulsively subject to arbitration through the application of an arbitration agreement prearranged by the supplier before the dispute, but it does not prevent the consumer from submitting a dispute to arbitration if he or she voluntarily agrees to do so with the supplier after the dispute has arisen.15
Despite these interpretations, a recent decision of the National Civil Appellate Court determined that, pursuant to article 1651 of the CCC, arbitration clauses related to consumer relationships are null and void, without analysing whether they are regulated by a different set of rules or if the arbitration clause was imposed by the supplier to the consumer.16
Recognition and enforcement of ICSID awards
On 13 May 2013, Peru obtained an award on costs in an ICSID arbitration against an Argentine investor, Compañía de Concesiones de Infraestructura SA. Subsequently, it filed a bankruptcy petition in Argentina against the company based on that award.
The judge of first instance denied the petition because it concluded that the recognition and enforcement of foreign arbitral awards in Argentina is subject to exequatur proceedings under articles 517 and 519 of the FPC.
On 18 August 2015, the National Commercial Appellate Court reversed such ruling.17 It concluded, on the basis of articles 53 and 54 of the ICSID Convention, that ICSID awards are not subject to exequatur proceedings under the FPC because Argentina waived its right to that proceeding when it joined the ICSID Convention, and thus, consistent with the aforementioned Convention, ICSID awards are international awards rather than foreign awards.
Notwithstanding the foregoing, the Court emphasised the fact that the award was being enforced against an Argentine investor, and not against the state; and that its decision was issued without prejudice to the courts' authority to review the potential violation of public policy principles.
Settlement of investment disputes cases
In 2013, the Argentine government settled five investment cases (Azurix, CMS Gas, Continental Casualty, Vivendi, and National Grid) that represented total claims for US$677 million.
Following this trend, and as part of a policy to re-establish Argentina's access to the capital markets and lure back foreign investors, Argentina's new administration under President Mauricio Macri has settled, during the first half of 2016, pending investment disputes that represented in the aggregate approximately US$2.8 billion, with BG, El Paso Energy and the group of thousands of Italian bondholders (Abaclat).
The CCC contains numerous rules that are beneficial for arbitration and are in line with modern legislation and treaties. Because the CCC has only recently entered into force, there is still no consolidated case law that clearly determines the content and scope of the few provisions of the CCC that could lead to problems of interpretation, and eventually affect the development of arbitration in the Argentina. However, the few court rulings that have been issued since the entry into force of the CCC are, in general, pro-arbitration. This auspicious trend is also accompanied by the policy that Argentina has adopted in recent years concerning investment arbitrations.
1 Law 26,994.
2 Buenos Aires (Decree-Law 7,425/68), Catamarca (Law 2,339), Chaco (Law 968), Chubut (Law XIII - No. 5), Córdoba (Law 8,465), Corrientes (Decree-Law 14/2000), Entre Ríos (Law 4,870), Formosa (Decree-Law 424/69), Jujuy (Law 1,967), La Pampa (Law 1,828), La Rioja (Law 1,575), Mendoza (Law 2,269), Misiones (Law 2,335), Neuquén (Law 912), Río Negro (Law 4,142), Salta (Law 5,233), San Juan (Law 7,942), San Luis (Law VI-0150-2004 5606), Santa Cruz (Law 1,418), Santa Fe (Law 5,531), Santiago del Estero (Law 6,910), Tierra del Fuego (Law 147), and Tucumán (Law 6,176).
3 Federal Code of Civil and Commercial Procedure (Law 17,454 as amended).
4 ‘C. D. C. B. V. L. c. C. I. S.R.L.', Civil and Commercial Appellate Court of San Isidro, Panel I, 28.12.2015. El Derecho Digital (85521) .
5 ‘Transplata S.A. c. Companhia Libra de Navegacao y otras', National Commercial Appellate Court, Panel B, 10.06.2015, El Derecho Digital (85755) .
6 Verónica Sandler Obregón, commentary to article 1656, in Marisa Herrera et al. (dirs.), Código Civil y Comercial de la Nación Comentado, T. VI, Infojus, Buenos Aires, 2015; José A Martínez De Hoz (H), ‘El Contrato de Arbitraje en el Código Civil y Comercial de la Nación', Centro Empresarial de Mediación y Arbitraje, June 2015.
7 Article 22 of the 1998 Mercosur Agreement on International Commercial Arbitration.
8 Julio C Rivera, Arbitraje comercial: internacional y doméstico, Abeledo Perrot, 2ª ed., Buenos Aires, 2014, pp. 206 and 919; José A Martínez De Hoz (H), ‘El Contrato de Arbitraje en el Código Civil y Comercial de la Nación', Centro Empresarial de Mediación y Arbitraje, June 2015; Verónica Sandler Obregón, commentary to article 1656, in Marisa Herrera et al. (dirs.), Código Civil y Comercial de la Nación Comentado, T. VI, Infojus, Buenos Aires, 2015.
9 Julio C Rivera, Arbitraje comercial: internacional y doméstico, Abeledo Perrot, 2ª ed., Buenos Aires, 2014, p. 918; Gustavo Parodi, commentary to article 1656, in Julio C Rivera and Graciela Medina (dirs.), Código Civil y Comercial de la Nación Comentado, T. VI, La Ley, Buenos Aires, 2014.
10 ‘Olam Argentina S.A. c. Cubero, Alberto Martín y otro', National Commercial Appellate Court, Panel E, 22.12.2015, La Ley Online AR/JUR/79122/2015.
11 ‘Incidente de recurso de queja de YPF S.A. en autos ‘YPF S.A. c/ AES Uruguaiana Emprendimientos S.A. y otros s/ recurso directo de organismo externo'', National Appellate Court on Federal Administrative Contentious Matters, Panel IV, 07.10.2014. The authors of this article represented the plaintiff.
12 Gary B Born, ‘International Commercial Arbitration', Kluwer Law International, 2009, pp. 1340-1341.
13 ‘F., R. C. c. C., M., C. H.', National Commercial Appellate Court, Panel D, 15.09.2015, El Derecho Digital (83399) .
14 Julio C Rivera, Arbitraje comercial: internacional y doméstico, Abeledo Perrot, 2ª ed., Buenos Aires, 2014, p. 266; Gustavo Parodi, commentary to article 1651, in Julio C Rivera and Graciela Medina (dirs.), Código Civil y Comercial de la Nación Comentado, T. VI, La Ley, Buenos Aires, 2014.
15 Verónica Sandler Obregón, commentary to article 1651, in Marisa Herrera et al. (dirs.), Código Civil y Comercial de la Nación Comentado, T. VI, Infojus, Buenos Aires, 2015.
16 ‘Blanco Rodriguez, Maria De Las Mercedes c. Madero Urbana S.A.', National Appellate Civil Court, Panel F, 16 December 2015.
17 ‘CCI - Compañía de Concesiones de Infraestructura S.A. s/ pedido de quiebra', National Commercial Appellate Court, Panel A, 18 August 2015, La Ley Online AR/JUR/33122/2015.