Quito, 31 August 2018

Words of thanks

Ana Serra e Moura, Deputy Secretary General, ICC International Court of Arbitration

The paradigm of international commercial arbitration in Latin America has shifted in the last 15 years. Arbitration has, with certainty, become the natural and often preferred method to resolve domestic or international commercial disputes. Together with a new economic reality in the region, the various countries have engaged in legislative reform to support arbitration as an alternative to court litigation to resolve disputes. Argentina and Paraguay, as discussed at the ICC Latin American Arbitration Group Meeting and reported in this issue of the ICC Dispute Resolution Bulletin, are two of the latest countries which have modernized their arbitration acts.

The ICC International Court of Arbitration has always followed and supported these favourable steps leading to the development and growth of arbitration in the region. The 2017 Statistical Report revealed a total of 16% of the parties involved in cases administered by the ICC Court were from Latin America, and 22% of new cases involved a party from Latin American and the Caribbean. Also, following the establishment of a case management team in Sao Paulo, Brazil, in 2018, Brazil rose to 3rd place in parties rankings worldwide, with 117 parties from Brazil in 49 cases. Statistics over the years demonstrate both the increasing use of arbitration in the region and the importance of the region for the ICC Court.

It would be difficult to reflect on the development of ICC Arbitration in Latin America without mentioning the existence of the ICC Latin American Arbitration Group. The Group was created in 2004 by Mr Eduardo Silva Romero, then Deputy Secretary General of the ICC Court, with the purpose of creating a think tank to contribute to the development of arbitration and ADR in the region, and by bringing together, at least once a year, the most renowned arbitration practitioners from different cities in Latin America.

The Group has evolved at the same pace of the region over the past 15 years, and is currently composed by 169 members from over 25 countries. In 2018, its annual meeting took place in September in Quito, Ecuador, with the participation of more than 100 members. To celebrate its 15th anniversary and also to better reflect its current composition, members of the Group were invited to choose among three different topics to be discussed during parallel sessions, as reported in this issue of the Bulletin: 1) ‘Opportunities and threats of ICC Arbitration involving state and state entities in Latin America’, 2) ‘Production of evidence in Latin America: Practical cases’, and 3) ‘Fifteen years of legislative developments and case law in Latin America’.

During the Meeting, the President of the ICC Court, Alexis Mourre, myself and Juan Pablo Argentato, Counsel in the Latin American and Iberian team at the Secretariat, shared ICC activities and novelties and interesting issues of practice in the region with the members of the Group who engaged in very dynamic discussions. The parallel sessions followed and were then summarized during a plenary session. In my capacity of Secretary of the Group, I would like to express my sincere thanks to all members for their active participation in this 15th Meeting of ICC Arbitration Latin American Group.

Opportunities and risks of ICC Arbitration involving states and state entities in Latin America

Julieta Ovalle Piedra, Partner at Bufete Ovalle Favela, S.C., Mexico

Discussing the risks and opportunities of ICC Arbitration involving states and state entities in Latin America is not an easy task. The topic includes both commercial and investment arbitration, and it refers to a region that not only comprises the countries below the Río Bravo, but also Spain and Portugal. A rich and lively discussion was chaired by Eduardo Zuleta (Zuleta Abogados Asociados, Colombia; Vice-President of the ICC Court) and moderated by Álvaro Galindo (International Counsel, Dechert LLP, USA; Alternate Member of the ICC Court) and Mónica Jiménez (Secretary General at Ecopetrol, Colombia; Alternate Member of the ICC Court).

One common problem in Latin America is the bipolarity of companies totally or partially owned by the state. While they are businesses trying to compete with others in their branch of activity, they are strongly regulated and strictly supervised by control bodies. Even though these control bodies are not parties to the arbitration agreement, they may intensely intervene in the proceedings, and even be a counterpart in parallel procedures. Providing more information on the arbitration to the control bodies could help lessen their concerns and involvement.

The appointment of arbitrators is crucial for states, so they tend to overregulate it. In Colombia state entities must ask the National Agency for the Legal Defense of the State and the Presidency to approve prospective arbitrators. Time limits for this process may extend beyond those provided for in the ICC Rules of Arbitration regarding the appointment of arbitrators. Regulations of this sort do not sort any of the concerns mentioned, and create complications and hazards for Latin American states and public entities involved in an arbitration.

When a state or a state entity is a party to the arbitration, the ICC Court has discretion to directly appoint a sole arbitrator or the president of an arbitral tribunal, rather than requesting a proposal from an ICC National Committee. However, the question of who (within the Court) chooses the arbitrator, and how the appointment is made, remains unclear. It was said that state parties would benefit from more clarity on the process. The use of other appointment mechanisms, such as the list strike and ranking, could be considered in cases involving states or state entities.

Finally, the discussion turned to the use of the ICC Rules in investment arbitration. ICC Arbitration was initially created for the businesses. Although the ICC Rules were revised in 2012 in order to manifestly include investment arbitration within its scope,1 there are still some concerns from the perspective of states and state entities. For instance, states may have a negative perception if the ICC Court sessions include members of law firms that represent private interests against public entities. It was also stated that the ICC Rules could still be further adapted to meet the needs in investment arbitration.

Specificities of Evidence Production in Latin America

Debora Visconte, Partner, Visconte Advogados, Brazil

The discussion chaired by Deva Villanúa (Arbitrator, Armestos & Asociados, Spain), and moderated by Alfredo Bullard (Partner, Bullard Falla Ezcurra +, Peru) and Cecilia Flores (FloresRueda Abogados, Mexico) focused on the use of technology in document production, early submission of evidence and the effects of the denial to produce evidence.

With regard to the use of technology for managing document production, it was reported that tools that assist the process of searching for, organizing and producing electronic documents are a common practice in Latin America. In complex construction cases, technology has also been used in hearings with 4D project-managing tools. There is an increasing awareness of the use of metadata (electronically stored data) as valuable and material evidence in the region.2

The request for the production of non-urgent evidence i) before the filling of the request for arbitration or ii) immediately after the constitution of the arbitral tribunal was also brought to the debate. In the first hypothesis, the party can be ‘fishing’ for documents. There is no underlying dispute yet and therefore the main obligation arising out of the contract between the arbitrators and the parties – to settle the dispute – cannot be fulfilled. ICC Arbitration Rules does not foresee a mechanism for such request. The emergency arbitrator, Appendix V of the ICC Arbitration Rules, is not an option as, according to Article 1(3) of Appendix V,3 the party needs to describe, amongst other information, the emergency measures sought and the reason why the applicant needs the measure and cannot wait the constitution of the arbitral tribunal. In the second hypothesis, where the request for document production is made at the outset of the arbitration, the concerns were whether the arbitral tribunal is in a position to decide on such requests and whether the process is cost-efficient. Early requests for document production were attested to be a fact in international arbitration. In a reported case, a party requested the production of a document before the signing of the terms of reference. The solution in this case was to have a round of submissions specifically on this issue, prior to the decision of the tribunal. The tendency, however, is to wait for the signature of the terms of reference in order to decide.

The last topic that was addressed was the use of negative inference as authorized by Article 9(5) of the IBA Rules on the Taking of Evidence in International Arbitration - when a party fails to produce documents requested without a satisfactory explanation. The importance of drawing the inference was weighed against the need to avoid giving the uncooperative party a pretext to vacate the award based on the fact there is no automatic duty to disclose documents or right to request or obtain document production in international arbitration. The consensus of the session was that the use negative inference should be agreed, exceptional and used with caution.

Fifteen Years of Legislative and Jurisprudential Developments in Latin America

Daniel Garcia-Barragan L., Senior Associate at Garcia Barragan Abogados, S.C., Mexico and ICC YAF Representative for Latin America

2018 marked the 15th year anniversary of the ICC Arbitration Latin American Group, allowing for an opportunity to look back on the advancements and setbacks that arbitration has had in the region ever since the first meeting of the Group, as well as the current challenges that Latin America faces to become one of the main arbitration hubs around the world.

The Latin American Group Meeting looked into the legislative advancements, as well as relevant case law generated in the region during the last fifteen years, as a means to understand the goals that the arbitration community has achieved, but also the challenges that remain to date. This interesting discussion was chaired by Eduardo Damiao Gonçalves (Partner, Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados, Brazil; Vice-President of the ICC Court) and moderated by Sandra Gonzalez (Partner and Co-Head of the Litigation and Arbitration team, Ferrere Abogados, Uruguay; Alternate Members of the ICC Court) and Santiago Soria (Partner Marval, O’Farrell & Mairal, Argentina/USA).

Ecuador is one of the most significant examples of how political currents have affected a country’s approach towards arbitration. During the administration of President Correa, Ecuador witnesses an anti-arbitration whiplash which abolished part of its Arbitration and Mediation Law that allowed for the direct enforcement of international arbitration awards. This temporary setback was later remedied by the new administration’s Organic Law for the Productive Development Act, which made the original articles of the Arbitration and Mediation Law mandatory once again. Furthermore, the Faisal Misle v. Martinez case allowed the Constitutional Court to highlight the importance of the right to arbitral justice by establishing a direct due process violation whenever a case with a valid arbitration agreement is not resolved through arbitration. Also, this case allowed for the Constitutional Court to establish the indubio pro arbitri principle, which shall be applied by all levels of the Judiciary branch whenever in the presence of an arbitration agreement.

Brazil has become in the past years into one of the most active countries in terms of number of cases, leading to the recent opening of an ICC office in Sao Paulo for the administration of Brazilian related cases. The Brazilian experience with arbitration has led to favorable and arbitration friendly case law on subjects such as efficiency of the arbitration agreement, kompetez-kompetenz, arbitrability, interim measures, or recognition and enforcement of foreign arbitral awards. Furthermore, the 2015 reform to Brazil’s Arbitration Act clarified the ability of the public administration to enter into arbitration agreements, making clear that Brazilian state entities do not harm public interests when negotiating and executing arbitration agreements.

While Brazil is a notable exception to the list of contracting states of the Convention on the Settlement of Investment Disputes Between States and National of Other States (the ‘Washington Convention’), it has not deterred investments in the country in the past fifteen years, mainly through the previously mentioned arbitration agreements with public entities, but also through Investment Facilitation Agreements.

In the case of Argentina and Uruguay, the discussion focused on their recent adoption of the UNCITRAL Model Law on International Commercial Arbitration.4 In the case of Argentina, the new law was a political effort to modernize its commercial legislation, and attract new foreign investments after a long period of economic and political crisis. Nevertheless, in both jurisdictions, the new law shall only apply to international arbitrations, whereas domestic arbitrations shall continue to be decided under the local commerce and civil code.

Panama also enacted an arbitration statute in 2013 following the UNCITRAL Model Law, which - among other things - has successfully established the annulment recourse as the only action against an arbitral award, as opposed to Amparo lawsuits which were used to attack the validity of such awards under the prior regulation, and even allowed for the suspension of ongoing proceedings. Between 2014 and 2017, a favorable interpretation of such annulment proceeding by Panama’s judiciary has resulted in only five annulment decisions.

Chile has also witnessed a significant development in its arbitration legislation in the past fifteen years. Its International Commercial Arbitration Law, which entered into force in 2004, implemented a clear and sole body of arbitration rules. Before 2004, no specific regulation existed for arbitration, which generated the partial application of international treaties on the subject.

In Colombia, the publication of the 2012 Arbitration Law allowed for a new pro-arbitration approach to the system, including the implementation of the New York Convention. In this vein, the Colombian Judiciary has played a pivotal role in the consolidation of the country as arbitration friendly, despite the dual regime currently in place. One major progress arising from the 2012 Arbitration Law was the abrogation of the former Code of Civil Procedure’s provisions which ordered judges to follow a strict exequatur procedure to foreign arbitral awards.

With regard to Mexico, the developments which gathered the most attention had to do with the country’s ratification of the Washington Convention, in light of the political juncture and the resulting existing uncertainty about the NAFTA negotiations, and specifically its Chapter 11. With the ratification of said instrument, Mexico took a further and much awaited step towards providing foreign investors with one of the most comprehensive legal instruments for protection, especially on the cusp of a change of administration which creates uncertainty towards foreign investments.

Latin America has seen its arbitral landscape be reshaped in the last fifteen years, becoming one of the most prominent and arbitration friendly regions around the world. Congratulations to the Latin American Arbitration Group for taking part in this process, and striving towards the facilitation of international commerce, through the use of international arbitration.

See the Report of the ICC Commission on Arbitration and ADR on ‘States, State Entities and ICC Arbitration’ at https://iccwbo.org/publication/icc-arbitration-commission-report-on-arbitration-involving-states-and-state-entities-under-the-icc-rules-of-arbitration/ and in the ICC Digital Library http://library.iccwbo.org/dr-commissionreports.htm.

On the use of IT in arbitration and document production, see also the Reports of the ICC Commission on Arbitration and ADR, ‘Information Technology in International Arbitration’ (2017) https://iccwbo.org/publication/information-technology-international-arbitration-report-icc-commission-arbitration-adr/ and ‘Techniques for Managing Electronic Document Production When it is Permitted or Required in International Arbitration’ (2011) http://library.iccwbo.org/dr-commissionreports.htm.

Article 1(3): ‘The application [for Emergency Measures] shall contain the following information: … d) a statement of the Emergency Measures sought; e) the reasons why the applicant needs urgent interim or conservatory measures that cannot await the constitution of an arbitral tribunal …’.

Argentina adopted the UNCITRAL Model Law on International Commercial Arbitration on 4 July 2018, while Uruguay did so on 3 July 2018.