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( Source of the document: ICC Digital Library )
Associate at Wagemann y Cia - Lawyers and Engineers, Chile.
A Chilean case brought before the Santiago Court of Appeals in 2015 made the headlines announcing a suit against an Argentine-Brazilian sole arbitrator acting in an ICC arbitration, initiated by the parties to the arbitration. The present note analyzes the decision rendered on 20 July 2017 within the framework of the Chilean legal system.
The petitioners filed a so-called ‘recourse of complaint’ (‘recurso de queja’) against a sole arbitrator who had rendered an award in an ICC arbitration seated in Chile (application C-13472-2015, Santiago Court of Appeals, see e.g. ‘Chilean Investors Sue Arbitrator After $5M Solar Defeat‘, available at www.law360.com). Petitioners argued that such recourse was admissible as the arbitration was ‘domestic’; the parties to the arbitration agreement were all Chilean and domiciled in Chile, and the place of the arbitration and the place of execution and performance of the contract were in Chile.
The petitioners contended that they had initially been surprised with the appointment by ICC of a foreign arbitrator in this ‘domestic’ case and further surprised with the arbitrator’s acceptance despite not being versed in Chilean law. Following the procedure established by the Chilean Code of Judicial Organization, the Court of Appeals served the arbitrator, Valeria Galíndez, and requested the submission of a report explaining her standpoint. In her report, Ms Galíndez gave her opinion as to why the proceedings were to be deemed international, and therefore, why the recourse of complaint against her should be dismissed. Ms Galíndez highlighted that the petitioners were well aware of the internationality of the case as they had accepted her appointment as foreign lawyer and had not objected to treating the proceedings as international throughout the arbitration.
The Chilean legislator has taken a dualistic approach to arbitration. On the one hand, domestic arbitration is regulated by the Chilean Code of Judicial Organization and the Code of Civil Procedure, and arbitrators that perform domestic arbitration are considered part of the judiciary of the State. On the other hand, international arbitration is regulated by Law no. 19.971 of 29 September 2004, which is an almost exact copy of the UNCITRAL Model Law.
Losing parties in international arbitrations try to conflate domestic and international procedures, as the domestic arbitration regime leaves more room for judicial review. The weapon of choice for this battle is a ‘recourse of complaint’ – a form of disciplinary oversight undertaken by superior courts applied to judges as well as to arbitrators in domestic arbitration (Articles 545 and following of the Chilean Code of Judicial Organization).
In domestic proceedings, a ‘recourse of complaint’ can be filed against an arbitrator for alleged severe faults or abuses if no other recourse against the award is available. If the recourse is granted, a Court of Appeal may annul the award and apply disciplinary measures to the arbitrator such as admonitions or a suspension of the license to appear before courts – although there is no record that this sanction ever applied to an arbitrator.
During parliamentary discussions of the Law no. 19.971, objections were raised against Article 5, which held that ‘[i]n matters governed by this Law, no court shall intervene except where so provided in this Law’, was temporarily deleted from the bill and then reinstated following an ex ante analysis of the constitutionality of the bill by the Constitutional Tribunal according to which: ‘Article 5 of the draft has to leave intact the authority given [to the Supreme Court] … to enforce directive, correctional and economic oversight of all the tribunals of the nation’ (25 August 2004, Bulletin 3252-10, available at www.camara.cl).
This analysis created doubts as to whether an international arbitral tribunal was to be deemed a ‘tribunal of the nation’. It appeared that the Constitutional Tribunal had taken that stance when the bill was discussed, in tune with the territoriality principle of Law no. 19.971 that defines its scope of application to arbitrations seated within national borders.
Chilean courts have taken that approach and have clarified that a ‘recourse of complaint’ cannot be filed against an international arbitrator (Santiago Court of Appeals, no. 2363-2010, 23 July 2010; Santiago Court of Appeals, no. 4902-2012, 24 July 2012). The Chilean Supreme Court also decided that a ‘recourse of complaint’ is inadmissible when filed against judges of the Court of Appeal following a dismissal of the requests for annulment (Chilean Supreme Court no. 7701-2012; 29 January 2013, no. 6648-2013; 9 September 2013; no. 7341-2013, 16 December 2013). On those occasions, the Supreme Court highlighted that, under Article 34 of the Law no. 19.971, the request to set aside ‘is the only way available for a challenge of an arbitral award’.
The issue at hand was whether the arbitration was national or international. If internationality were to be confirmed, the Santiago Court of Appeals could have easily deferred to consolidated case law and dismiss the recourse of complaint.
The Santiago Court of Appeals’ decision dismissing the ‘recourse for complaint’ is succinct and does not explicitly rely on Law no. 19.971. However, the Court declared the ‘recourse of complaint’ inadmissible and ruled that the arbitration proceedings at hand could not be considered as domestic for the following reasons:
[T]he judge [meaning here ‘arbitrator’] is a foreigner … the arbitration was held in English and submitted to the rules of the International Arbitration Court, all of which was expressly accepted by the petitioner, who followed the rules of those proceedings, appearing at each of its stages, and therefore, cannot now deny its efficacy.
It is worth noting that foreign arbitrators sitting in Chile and facing a ‘recourse of complaint’ will unfortunately have to invest in resources for the preparation of the report requested by the Court of Appeals. However, as no liability is attached to the recourse of complaint, arbitrators could not be held liable for alleged damages in that process.
Considering the nature of a ‘recourse of complaint’ – a disciplinary oversight of local justice administrators when there is no other recourse available – it is highly unlikely that the courts will apply those measures to foreign arbitrators. This case against Ms Galíndez sets an important and positive precedent, which will hopefully shape the praxis and discourage future similar applications.