Introduction

Despite the relatively recent modernization of arbitration law in Latin America, the coexistence of courts of law and arbitral tribunals continues to be a source of problems in Latin American countries. National courts have strong reservations about arbitration, due to various cultural and political factors which will not be explored here. This paper will rather explore situations in which that uneasy coexistence finds expression in competing or conflicting orders and determinations relating to the jurisdiction of international arbitrators which are issued by national courts of law and arbitral tribunals. For reasons that will become apparent later, the expression 'anti-suit injunction', which might be thought to apply to some of the situations envisaged in this paper, will be avoided, because it is considered as referring only to competing orders issued by courts of law in different countries (whether or not concerning the limits of arbitral jurisdiction), which do not fall within the purview of this paper.

Two examples illustrate the above-mentioned reservations. The first is the use by courts of law in Latin America of the legal principle whereby arbitration is an exception to their 'normal' or 'natural' jurisdiction. According to this principle, which is used to limit the scope of arbitral justice, arbitration exists and is permitted to breathe only to the extent allowed by the national judicial system: in case of doubt, dispute resolution clauses are interpreted as giving jurisdiction to national courts rather than arbitral tribunals. Arbitrators and arbitral justice are thus regarded as 'suspect outsiders'. The second example reflects the opposite view, namely that arbitral tribunals are part of national judicial systems and should rather be regarded as 'untrustworthy insiders'. [Page335:]

Although the anti-arbitration bias evidenced in both examples is more obvious when the dispute concerns a public party or public interests, it is by no means limited to such cases, nor are the principles reflecting such bias enunciated by courts of law when deciding on the competing jurisdiction of courts and arbitral tribunals confined to disputes involving public interests or State parties.

Arbitral tribunals as viewed by the judiciary: suspect outsiders?

In many Latin American countries the principle still prevails that arbitration constitutes an exception to the jurisdiction of the courts of law. As a result, arbitration agreements are narrowly interpreted when it comes to determining their validity, scope, effects and enforcement. This contrasts sharply with the otherwise predominant view, at least as far as international transactions are concerned, that arbitration has become the normal means of resolving business and economic disputes.

Venezuela deserves particular attention. It would appear to be rapidly distancing itself from the receptiveness it showed some years ago. In the late 1990s, the Venezuelan Supreme Court recognized the validity and enforceability of an arbitration clause referring to arbitration in the USA in connection with a dispute that was alleged by one of the parties, on the basis of the Venezuelan Code of Procedure, to fall under the exclusive jurisdiction of the Venezuelan courts. Referring to the convergent provisions of the Panama and New York Conventions, both ratified by the United States and Venezuela, the Venezuelan Supreme Court upheld the validity and enforceability of the arbitration agreement and accordingly decided that the Venezuelan courts lacked exclusive jurisdiction to hear the dispute. 1

More recently, however, the highest court in Venezuela-renamed Tribunal Supremo de Justicia-seems to have adopted a stance much less favorable to international arbitration. It has taken the view that arbitral jurisdiction is an exception and that any perceived lack of clarity in the arbitration agreement should be resolved by referring the dispute to the courts of law instead of engaging in an exercise of construction and interpretation aimed at rescuing the underlying will of the parties to have the dispute resolved through arbitration [Page336:]

rather than decided by the courts. 2The result of this bias towards judicial adjudication is to reduce the effectiveness of arbitration agreements, particularly in connection with international cases.

In addition, amparo-an extraordinary remedy designed to safeguard citizens' constitutional rights, including that of access to the courts-is used to oppose the enforcement of arbitration agreements within and outside Venezuela on such grounds as the lack of clarity of the arbitration clause. As a result, and despite the letter of the recent Venezuelan Arbitration Act (Article 25), clearly adopting the Kompetenz-Kompetenz principle, the right of the arbitral tribunal to decide on its own jurisdiction is trumped by the self-assumed powers of the Venezuelan judiciary to decide first on the validity, meaning, scope and effects of the arbitration agreement. Also, the Venezuelan Supreme Court now allows amparo to be used directly against arbitral awards, abandoning its hitherto consistent practice of allowing such remedy only against court decisions on challenges to arbitral awards that could be considered as infringing constitutional rights. What is more, the Venezuelan Supreme Court considers that it may extend its jurisdiction to arbitrations conducted outside Venezuela under a lex arbitrii other than the laws of Venezuela. 3

In the recent Four Seasons/Consorcio Barr case, 4the Venezuelan Supreme Court decided, in an amparo action brought by the Venezuelan respondent against a partial award rendered in Miami, Florida, USA, chosen by the parties as the place of arbitration in the exercise of their free will, that the pending arbitration outside Venezuela does not bar any party that has challenged the validity or application of the underlying arbitration agreement, from referring disputes covered by the arbitration proceedings to the Venezuelan courts, notwithstanding the arbitral tribunal's rejection of the challenge. Hence, a [Page337:]

Venezuelan court would be entitled to render such a declaratory judgment in amparo proceedings even before any application is made in Venezuela for the recognition or enforcement of an arbitral award issued by the challenged arbitral tribunal or of a foreign court decision supporting that award. The Venezuelan Supreme Court arrived at its decision through an analogical application of Article 53(6) of the Venezuelan Private International Law Act on the recognition and enforcement of foreign court decisions, and found that an arbitral award rendered outside Venezuela cannot be enforced in Venezuela if proceedings relating to the same matter and involving the same parties are already pending in the Venezuelan courts and were initiated before the arbitral award was rendered. After rejecting the respondent's challenge to the jurisdiction of the arbitral tribunal, which, following the stance taken by the Venezuelan Supreme Court described above, was based on the claim that the dispute resolution clause did not constitute a clear referral to arbitration, the partial award had ordered the Venezuelan respondent to discontinue the court proceedings it had initiated and not to initiate any new court proceedings in Venezuela in disregard of what was deemed to be a valid and enforceable arbitration clause. The arbitrators issued this order in response to an application by the claimant for an interim measure of protection. It should be noted that in view of the broad wording of article R-7 of the AAA Commercial Arbitration Rules governing this case, and Article 25 of the Venezuelan Arbitration Act mentioned above, the arbitral tribunal was vested with broad authority to decide on any objections regarding its own jurisdiction and on the existence, scope and validity of the arbitration agreement. There was no allegation that the respondent had been fraudulently induced to enter into the arbitration agreement in question.

Although the arbitral tribunal's order was couched in imperative terms-as had to be the case if the arbitration agreement was to be upheld and the tribunal's jurisdiction protected-there was no provision for any sanction, such as a penalty for non-compliance, so it could not properly be considered as a measure directed towards compulsory enforcement through coercive means unavailable to an arbitral tribunal lacking the necessary imperium.

This case developed into a cross-fire of opposing orders and conflicting decisions involving the Venezuelan courts of law, the arbitral tribunal seated in Miami, Florida, and the US Federal Court in Florida that was called upon to determine whether or not the partial award on jurisdiction should be confirmed. At the time of writing, proceedings relating to confirmation of the arbitral award are pending in the US Federal Court in Florida. 5An additional point[Page338:] which has a bearing on the situation is that sometime after the partial award was rendered a Venezuelan court issued an injunction addressed to the members of the arbitral tribunal ordering them to suspend the arbitral proceedings. As a consequence of this order, the Venezuelan member of the arbitral tribunal decided to resign, so as to avoid being held in contempt of court. The American Arbitration Association replaced him and, in its new composition, the arbitral tribunal rendered a final award on the merits in favour of the claimants. The parallel court proceedings in Venezuela ended with a Venezuelan Supreme Court decision affirming the exclusive jurisdiction of the Venezuelan courts to decide the case arbitrated in Florida, as reported above.

Insofar as the situation described above does not involve national courts of law vying for jurisdiction over the same controversy, but instead concerns an order made by an arbitral tribunal, it is inappropriate to view it as an exchange of anti-suit injunctions. The considerations that determine whether or not a court of law may grant an anti-suit injunction are not necessarily relevant when it is an arbitral tribunal that is requested to order a party not to pursue parallel litigation before a court of law. It is clear that the tribunal hearing the Four Seasons/Consorcio Barr case did not belong to the national judicial system of either Venezuela or the United States of America. When it asserted its jurisdiction, it did not do so as a scion or on behalf of any sovereign State, national jurisdiction or judicial system. Rather, its authority derived from the agreement of the parties, i.e. the contractual stipulations which the arbitral tribunal found to be valid and enforceable in their own terms under applicable law, including international conventions which the parties' respective home countries had ratified.

Anti-suit injunctions usually arise in situations where courts of law compete for extraterritorial jurisdiction. Each State imperatively and unilaterally asserts the jurisdiction of its national courts in spatial terms. When an arbitral tribunal, on the other hand, asserts its authority, it does so on the basis of an arbitration clause that it has found to be valid and enforceable in terms of subject matter. Its jurisdiction is not conditioned by spatial criteria, but results directly from the will of the parties and depends solely on the validity of the arbitration[Page339:]

agreement under applicable law. Rather than any spatial assertion of jurisdiction, the arbitral tribunal is here exercising its authority to give full force and effect to the contractual stipulation from which it derives its jurisdictional powers and, if need be, issuing orders and directions to the parties for that purpose.

When an arbitral tribunal orders a party subject to its jurisdiction to refrain from initiating or continuing parallel court litigation in disregard of the arbitral agreement, it is not addressing any particular court of law but rather the recalcitrant party that has refused to honour a contractual clause. Insofar as the tribunal's order or instruction does not target a court of law or judicial system, it does not impinge on such court's powers to continue hearing the case subject to arbitration should it choose to do so despite the tribunal's order. Nor does the order reduce in any way the powers of a court of law not to recognize or enforce the ensuing award when enforcement is sought within its forum, including on grounds of the arbitral tribunal's lack of jurisdiction to decide the case. Hence, there is no clash of sovereignty or competing jurisdiction, although the party that fails to abide by an arbitral tribunal's order to discontinue parallel court proceedings may be held to be in contempt under the lex arbitri or expose itself to sanctions imposed by the arbitral tribunal in accordance with the lex arbitri, if-and only if-under such lex arbitri arbitrators sitting where it applies are entitled to do so.

It was therefore appropriate for the arbitral tribunal to order the respondent to refrain from pursuing those legal actions in Venezuela that concerned matters falling within the scope of the arbitration agreements in the contracts that had given rise to the arbitration, i.e. the actions filed before the Venezuelan courts in disregard of the arbitration clause. The arbitral tribunal found that the matters and disputes to which such actions related were not only covered by the arbitration agreement, but were also closely linked to the claims that were the subject of the then extant arbitral proceedings.

Arbitral tribunals as viewed by the judiciary: untrustworthy insiders?

The Venezuelan Supreme Court's decisions to circumscribe the scope of arbitration, discussed above, are premised on the belief that since arbitral tribunals do not belong to the judiciary their power to exercise a jurisdictional function, which is considered above all as a sovereign attribute and thus the preserve of national courts, should be limited whenever possible. [Page340:]

However, the opposite view has also been expressed, leading to similar undesirable consequences, as shown by certain Argentine court decisions. In Argentina, when different judges assert their jurisdiction to decide the same case, the resulting conflict is resolved as follows: one judge sends a rogatory letter, or inhibitoria, to the other judge inviting the latter not to hear the case; if the latter does as requested the matter ends there, and the first judge will decide the case; if not, a court having jurisdiction over both judges, such as a court of appeal or the Argentine Supreme Court of Justice, will decide which of the judges has jurisdiction to hear and adjudicate the case.

In a relatively recent case, 6the Argentine Supreme Court held that this provision also applies to arbitral tribunals. According to the Court, an arbitral tribunal claiming jurisdiction with respect to a matter over which a court of law has asserted exclusive jurisdiction should be regarded as if it were a court of law. Thus, a judge claiming jurisdiction over a case concurrently with that of an arbitral tribunal should send an inhibitoria to the arbitral tribunal as explained above. If the arbitral tribunal rejects the request to decline jurisdiction, it is for the superior court-in this case the Supreme Court of Justice-to finally decide the issue. The arbitrators are required to suspend the arbitral proceedings pending the Supreme Court's decision.

The consequences of this approach represent a considerable handicap for an arbitral tribunal. Not only can it lead to an arbitral tribunal being denied the possibility of deciding on its own jurisdiction without court interference, but also, if the arbitral tribunal considers that it does have jurisdiction, it is prevented from hearing and deciding on the merits so long as the superior court has not resolved the jurisdictional conflict. Thus, a party wishing to sabotage arbitration proceedings has a powerful tool for doing so, provided it can find a court of law willing to assert jurisdiction over the matter subject to arbitration. Furthermore, the Kompetenz-Kompetenz principle is effectively neutralized, since arbitrators have to wait for the so-called jurisdictional conflict to be finally determined by a court of law before they can proceed. It may be noted that this is at odds with other decisions in which, despite lingering doubts over the power of arbitrators to decide on their own jurisdiction, the Argentine judiciary has recognized such power. This retrograde attitude reflects the judiciary's wariness and even distrust of arbitration, which it sees as a threat. The courts are clearly concerned that they risk losing control over what may and may not be arbitrated, even though this is only until the legal system affords an[Page341:]

opportunity to challenge the arbitrators' determination of their own jurisdiction or their ensuing award on the merits in a court of law. They wish such control to remain fully and firmly in their own hands.

The right approach would of course be to view the problem not as a conflict of jurisdiction between courts of law leading to an exchange of rogatory requests between the court of law and the arbitral tribunal vying for jurisdiction, but simply as a determination on the validity and effects of the arbitration agreement in question. Such an approach would require a policy decision, preferably by the legislator, on who-judge or arbitrator-will be first called upon to make this determination and the effects of the determination. Rather than a matter of conflict of competencies or jurisdiction, it is a question, first, of the degree of deference to be paid to the determinations of an arbitral tribunal on jurisdictional matters in light of the Kompetenz-Kompetenz principle, and secondly, of the validity and effects of the arbitration agreement from the perspective of the national court called upon to decide on the issue. This is quite distinct from the notion of a conflict of jurisdiction or competence within the judicial organization of a State. As mentioned previously, an arbitral tribunal is not a component of the judicial structure of a State and thus should not be subject to rules intended to resolve problems of jurisdiction relating to courts of law.

Accordingly, court decisions on the jurisdiction of arbitrators to hear a case should be postponed until a foreign arbitral award is presented for recognition or enforcement or an application made for the award to be set aside. In the meantime, the arbitrators should be entitled to continue hearing the case. This is in fact the approach predominantly followed by Argentine courts when arbitration agreements or the initiation of arbitral proceedings are judicially challenged and no Argentine court of law asserts exclusive jurisdiction in parallel court proceedings initiated in disregard of the arbitration clause. Perhaps an appropriate compromise could be struck by allowing the court proceedings, as in France, to trump the arbitral proceedings whenever the invalidity of the arbitral agreement is manifest and the arbitral tribunal has not been yet constituted. In this case, however, the stay of the arbitral proceedings should simply be the result of a final court decision on the validity of the arbitration agreement made without addressing an inhibitoria to the arbitral tribunal. 7[Page342:]

Ample evidence of the insuperable problems-both theoretical and practical- raised by following a different course of action is to be found in a recent decision of the Buenos Aires Commercial Court of Appeal upholding the decision of an Argentine court to issue an inhibitoria directed at an arbitral tribunal sitting in Dallas, Texas, USA and acting under the Arbitration Rules of the American Arbitration Association Arbitration Rules. 8The inhibitoria had been issued as a result of proceedings brought in the Argentine court with respect to a joint venture and a farm-in agreement. The joint-venture agreement referred disputes to ICC arbitration in Buenos Aires, Argentina; the second contained a choice-of-forum clause designating the Federal Courts of Buenos Aires, Argentina. On the basis of these contracts, and without hearing the foreign party in the arbitration proceedings (not a party to those contracts), the Commercial Court of Appeal found that the Argentine courts had sole international jurisdiction over the dispute. The arbitration, however, was based on a different, although related, contract: a stock purchase agreement containing an AAA arbitration clause and different parties from those to the farm-in and joint venture agreements. The particular question submitted to the arbitrators was whether the claimant had been induced to buy shares from the respondents through untrue statements. The arbitral tribunal found that it had jurisdiction to decide on this matter, rejected the jurisdictional claims of the Argentine court, refused to recognize that the inhibitoria had any extraterritorial effect, and went on hearing the case.

The surrealistic nature of this situation was further brought out by the fact that there is no superior Argentine, national or international court with authority to resolve a supposed conflict of jurisdiction between an Argentine court of law and an international arbitral tribunal sitting in another country. The fiction that the arbitral tribunal is a part of the Argentine judiciary or of some other wide-reaching judicial structure was thus exposed in all its hollowness. It was clearly impossible, bearing in mind the reality of the international sphere in which cross-border transactions and arbitrations are situated, for any Argentine court, let alone the Supreme Court, to resolve the supposed 'jurisdictional' conflict, or to curtail the power of an arbitral tribunal sitting abroad to decide on its own jurisdiction pursuant to the authority it was given to do so under the Arbitration Rules of the American Arbitration Association and the lex arbitri (US federal law). [Page343:]

The fiction could no longer be maintained when the subsequent arbitral award on the merits was brought for enforcement in Argentina. On this occasion, the Commercial Court of Appeal, composed of different judges, authorized enforcement on the grounds that there is no superior, overarching court of law in the international sphere capable of deciding the jurisdictional conflict in accordance with Argentine procedural law and that the arbitral tribunal had properly asserted its jurisdiction under the AAA rules and the lex arbitri. The Court of Appeal recognized that the assertion of jurisdiction by an Argentine judge by way of a rogatory letter addressed to the arbitrators constituted an infringement of the agreement to arbitrate and an unjustified attempt to interfere in the arbitral proceedings. 9Consequently, the arbitrators' decision in favour of their own jurisdiction remained intact, although at the time of writing an extraordinary action initiated in the Argentine Supreme Court against the decision of the Court of Appeal is pending. It is surprising that, when deciding in favour of enforcement, the Court of Appeal did not refer to the Panama or the New York Convention, both ratified by Argentina and the United States, but relied solely on Argentine procedural legislation. This is but a further sign of the parochial attitude not infrequently adopted by Latin American judges even when rendering decisions endorsing the effectiveness of international arbitration agreements and awards. 10

Conclusion

Some of the problems evoked by these examples are not peculiar to Latin American jurisdictions. For instance, the issue of competing orders between courts of law and arbitral tribunals is not contained within national boundaries, 11although it is difficult to find elsewhere claims as exorbitant as those of the Venezuelan Supreme Court when seeking to extend its jurisdiction extraterritorially over arbitrations held abroad. [Page344:]

Other problems, on the other hand, such as those raised by the inhibitoria procedure in Argentina, are deeply coloured by a particularly idiosyncratic vision of the interaction between arbitral tribunals and the courts.

However, what they all show is that courts of law and arbitration are still uneasy bedfellows in certain Latin American jurisdictions, despite the fact that most have enacted legislation and ratified international treaties with the clear intention of promoting arbitration as a part of broader national policies aimed at attracting foreign investment and integrating the countries concerned into the global economy. When, due to a total or partial reversal of economic policy, the pendulum no longer swings towards arbitration, this typically leads to attempts by Latin American courts to deny or at least weaken the authority of arbitrators to decide on their own jurisdiction and the effectiveness of the decisions they make on the basis of such authority. As illustrated in this paper, such attempts are legally unprincipled because of inconsistencies in their underlying rationale (arbitral tribunals are regarded as being both within and outside the judicial system), and-not infrequently-the blatant contradiction between such attempts and the letter of the law. It is likely that such inconsistency and lack of legal justification stem from the fact that the real reasons underlying the Argentine and Venezuelan court decisions denying arbitrators authority to decide on their own jurisdiction are to do with policy rather than law. In such circumstances, the Kompetenz-Kompetenz principle, which itself reflects pro-arbitration policy rather than legal logic, seems to lend itself to attack if policy considerations are behind the blows being dealt. Given the growing endorsement of arbitration in law and amongst the judiciary prior to this change in policy, not the least damaging consequence of the shift is the uncertainty and unpredictability it generates and the fact that it undermines the rule of law. [Page345:]

1
Corte Suprema de Justicia de Venezuela, Sala Político-Administrativa, Expte 13 354, 9 October 1997, Pepsi Cola Panamericana.

2
Tribunal Supremo de Justicia de Venezuela, Sala Político-Administrativa, Expte. 0775, 20 June 2001, Hoteles Doral C.A. v. Corporación L'Hoteles C.A. See also B. Weininger & D.Lindsey,'Venezuela' in N.Blackaby, D.Lindsey & A.Spinillo, eds., International Arbitration in Latin America (Kluwer Law International, 2003) at 231-32.

3
In general, J.E. Anzola & F. Zumbiehl, 'El Tribunal Supremo de Venezuela Riñe con el Arbitraje' [unpublished].

4
The reference is to the case conducted under the AAA Commercial Arbitration Rules between Four Seasons Hotels and Resorts B.V., Four Seasons Hotels Limited and Four Seasons Caracas C.A. as claimants, and Consorcio Barr S.A. as respondent. The final decision discussed here was rendered by the Constitutional Chamber (Sala Constitucional) of the Venezuelan Supreme Court (Tribunal Supremo de Justicia) on 19 November 2004, Consorcio Barr, CA v. Four Seasons (file no. 04-0163), <www.tsj.gov.ve>.

5
The partial award in the Four Seasons/Consorcio Barr case was initially confirmed by the United States District Court for the Southern District of Florida, Case No. 02-23249-CIV-Moore, by order issued on 4 June 2003. It has since been vacated and remanded for further consideration of an argument raised by Consorcio Barr S.A., pursuant to a decision of the United States Court of Appeals for the Eleventh Circuit, 20 July 2004, DC Docket No. 01-04572-CV-KMM.

6
Argentine Supreme Court of Justice, Nidera Argentina S.A. v. Alvarez de Canale, Elena G., in La Ley, no. 24, advanced sheet of 2 February 1990.

7
This solution has in fact already been endorsed-although with some variations-by a significant number of Latin American countries: Peru (Ley General de Arbitraje No. 26572, Arts. 16, 99); Bolivia (Ley de Arbitraje y Conciliación, Art.12; see also, F. Montilla Zavalía, 'La Excepción de Arbitraje en el Procedimiento Jurisdiccional Boliviano', [2001-E] La Ley 1270-73, on the confirmation by the Bolivian Constitutional Court of the constitutional validity of this provision); and El Salvador, which has closely followed the Bolivian model (Ley de Mediación, Conciliación y Arbitraje, Decree No. 914, Art.31).

8
National Commercial Court of Appeal 'B', 23 September 1999, Compañía General de Combustibles S.A., [2002-III] Jurisprudencia Argentina 53ff.

9
Commercial Court of Appeal 'D', decision of 5 November 2002, Reef Exploration Inc. v. Compañía General de Combustibles S.A., El Derecho, vol. 203, 32-39. See comment by R. Caivano & R.Bianchi, 'El Exequatur de un Laudo Extranjero y la Inhbitoria en Relación con un Arbitraje Internacional', Jurisprudencia Argentina, advanced sheet of 16 July 2003, 38-46.

10
See comment by M.Noodt Taquela in [2004-1] Derecho del Comercio Internaciona (DeCITA) 344-45.

11
See L. Lévy, 'Les Anti-Suit Injunctions Prononcées Par les Arbitres en Droit Commun de l'Arbitrage' [2003] IDLI 1-8; ICC arbitral award of 14 May 2001 rendered by Professor Tercier as sole arbitrator in ICC case 8307; E. Gaillard, 'Il est interdit d'interdire : réflexions sur l'utilisation des anti-suit injunctions dans l' arbitrage commercial international', Rev. arb. 2004.47, esp. at 57-58; ICC case 8887, (2000) 11:1 ICC ICArb. Bull. 91-94.