Background

The Uruguayan General Code of Procedure regulates domestic arbitration, while no local law existed for international commercial arbitration. The courts however increasingly and progressively adopted arbitration-friendly decisions,1 as the country sought to improve its international competitiveness by removing legal obstacles to international trade.

On 26 July 2018, the Parliament enacted Law 19.636 as the International Commercial Arbitration law (the ‘Uruguayan International Arbitration Law’).2 Uruguay has thus joined the path of more than 80 jurisdictions that have already enacted the UNCITRAL Model Law, including a large list of Latin American jurisdictions, sometimes with minor modifications (such as Argentina,3 Chile,4 Costa Rica,5 Guatemala,6 Colombia,7 Honduras,8 Mexico,9 Nicaragua,10 Ecuador,11 Paraguay,12 Peru,13 Bolivia,14 Brazil,15 Venezuela16).

The new regime

1) Parties’ autonomy: The Uruguayan International Arbitration Law has recognized party autonomy to decide on the law applicable to international contracts. It is to be noted that Uruguay is a party to some of the most important international commercial arbitration conventions and has traditionally been a respectful country as to arbitration.17 Uruguay has ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the 1975 Inter-American Convention on International Commercial Arbitration (‘the Panama Convention’), and the 1998 Mercosur International Commercial Arbitration Agreement. Contrary to the situation in domestic arbitration in Uruguay,18 these Conventions set forth the rule that the Arbitral Tribunal will decide the dispute according to the law agreed upon by the parties.19 Accordingly, none of the Conventions includes ‘application of the wrong law by an Arbitral Tribunal’ in the list of grounds for setting aside an award. Uruguayan Courts have consistently applied this rule for several years,20 although scholars did not unanimously accept party autonomy.21 Under the new Uruguayan International Arbitration Law the solution is straightforward, as provided by Article 28:

The arbitral tribunal shall decide the dispute in accordance with such rules of law chosen by the parties as applicable to the substance of the dispute.

2. Dual regime for domestic and international arbitration: The legal regime for international commercial arbitration is separate and different from the General Code of Procedure regime applicable to domestic arbitration. Accordingly, the new law defines the criteria for an arbitration to be considered commercial and international and has, on this point, gone further than the UNCITRAL Model Law. Under the UNCITRAL Model Law, an arbitration is international when it is seated in a different state than that of the parties’ respective place of business. Furthermore, it deems the arbitration as international whenever ‘the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country’. The Uruguayan International Arbitration Law follows the same objective criteria, but however specifies that the parties cannot voluntarily decide whether an arbitration is international. Furthermore, whereas the UNCITRAL Model Law provides the meaning of ‘commercial’ arbitration in a footnote to Article 1, the Uruguayan International Arbitration Law includes said definition in the main body of the article. This departure ends discussions concerning the legal status of the footnote.

3. Courts’ assistance in arbitration proceedings: The Uruguayan International Arbitration Law gives the Civil Courts of Appeals jurisdiction to assist arbitration proceedings. By means of this provision, the Civil Courts of Appeals can assist in the appointment of arbitrators as well as in the issuance of precautionary measures. These Courts are also entitled to perform a prima facie analysis of the Arbitral Tribunal’s competence when required – a process which does not suspend the arbitral proceedings. Finally, Civil Courts of Appeals have jurisdiction to annul awards rendered in Uruguay as the seat of arbitration. It is to be noted that the Supreme Court of Justice holds exclusive jurisdiction over the enforcement of international awards,

4. The arbitration agreement: The new law recognizes the validity and effect of both commitment by the parties to submit to arbitration an existing dispute (‘compromiso’) and a future dispute (‘clause compromissoire’). In domestic arbitration, an arbitration clause does not have full effect until the parties execute an arbitration agreement (‘compromiso’) by means of a public document. The Uruguayan International Arbitration Law has provided that ‘the arbitration agreement shall be in writing’, in ‘the form of an arbitration clause in a contract or in the form of a separate agreement’. The law has open-endedly provided for several means by which the arbitration agreement can be concluded,22 but adopted the old version of Article 7 of the UNCITRAL Model Law of 1985, recognizing only arbitration agreements in writing. In this matter Uruguay did not follow the international trend to broaden the range of arbitration ‘agreements’.

5. Recognition of the kompetenz-kompetenz principle (Article II.3 of the New York Convention): The Uruguayan International Arbitration Law provides that arbitral tribunals have the authority to decide on their own jurisdiction. The new law has also set forth the principle of separability of the arbitration agreement from the main contract, allowing arbitrators to decide the dispute even when the main contract is null and void and acknowledging that the invalidity does not affect the arbitration agreement itself.

6. Recognition and enforcement of awards (‘exequatur’): The new law states that the same rules apply to all arbitration awards, regardless of whether they are rendered in the country of enforcement or abroad. It is to be noted that the grounds for setting aside an award under the Uruguayan International Arbitration Law (following the UNCITRAL Model Law) are almost identical to the grounds on which recognition and enforcement may be refused under Article V of the New York Convention. The new Uruguayan law has specifically referred to the violation of ‘international public policy’ as a ground for non-recognition of an award, while the UNCITRAL Model Law only refers to public policy. Uruguay has thus followed most scholars, court decisions and the conventions it has ratified.

7. Provisions on the constitution, functioning and powers of the arbitral tribunal: The Uruguayan International Arbitration Law has adopted the UNCITRAL Model Law rules on the composition of the Arbitral Tribunal, its power to grant different types of awards as well as precautionary measures, the legal framework for a fair and effective proceeding, experts’ appointment, the seat and language of the arbitration, and rules on the Arbitral Tribunal´s fees.

Concluding remarks

The Uruguayan International Arbitration Law is an essential piece in Uruguay’s attempts to become an attractive place of arbitration in the Latin American region. The new law adds to Uruguay’s geographical positioning, neutrality and transparent legal culture.

Another example of such intention is Uruguay’s recent signature of an agreement with the Permanent Court of Arbitration on 12 June 2018, by which the latter will set-up an administration centre for Latin America in the country. 23


1
See for instance the 2012 Public-Private Partnership Law, providing for arbitration as the mandatory dispute resolution forum, Law No. 17.703, providing mandatory arbitration proceedings for disputes within Financial Trusts. See also 2nd Civil Court of Appeals Judgements SEI-0008-000022/2014 of 28 April 2014, providing that the arbitral jurisdiction is the centre of gravity for every related issue in dispute, and 164/2017 of 11 October 2017, stating that the pro arbitri principle must be observed when deciding on the application of an arbitration clause.

2
The Law applies to arbitration clauses entered into as of 5 August 2018, i.e. ten days from its publication in the Official Gazette. See ‘Report of the International Affairs Commission to the Senate, Explanatory Note’, 10 May 2018, p. 46, available at https://legislativo.parlamento.gub.uy/temporales/aresuelveref.aspx?REPARTIDO,S/2018/05/0642/00//PDF

3
Law No. 27.449 of 25 July 2018.

4
Law No. 19.971 of 2004.

5
Law No. 8937 of 27 April 2011.

6
Decree No. 67-95 (Arbitration Act).

7
Law No. 1563 of 2012.

8
Decree 161-2000 (Arbitration and Conciliation Act).

9
Mexican Commercial Code, Title 4 – Commercial Arbitration. Articles 1415-1500. Last amended on 27August 2009.

10
Act N. 540 of 25 May 2005. Mediation and Arbitration Law.

11
Law N. 000. RO/ 145 of 4 September 1997.

12
Law N. 1.879 of 2002 (Arbitration and Mediation Act).

13
Legislative Decree N. 1071 of 1 September 2008. In Peru, it is mandatory for parties to public contracts to submit all disputes arising from those contracts to arbitration. As from 2014, an amendment also grants the possibility to submit those matters to dispute boards.

14
Law No. 708 of 25 June 2015.

15
Law 9307/96, amended by the Law 13129/2015.

16
Official Gazette N. 36.430 of 7 April 1998. Commercial Arbitration Act.

17
See Judgement i74/2011 of the Uruguayan 1st Civil Court of Appeals of 23 February 2011 admitting party autonomy in agreeing on the applicable law in arbitration. On the same issue, 7th Civil Court of Appeals Judgement 106/2007 of 16 May 2007. See also 2nd Civil Court of Appeals Judgement SEI-0008-000022/2014 of 28 April 2014, and 2nd Civil Court of Appeals Judgement 164/2017 of 11 October 2017.

18
Article 2403 of the Uruguayan Civil Code prohibits the parties´ agreement on the applicable law but rather provides that the lex causae of the contract will be determined by the laws of conflict. Hence, if these laws determine the Uruguayan law to be applicable, no discretion is granted to the parties.

19
Article 5.1(a) of the NYC, Article 5.1(a) of the Panama Convention, Article 10 of the Mercosur International Commercial Arbitration Agreement. See also for international practice, S. Díaz, ‘Disputes resolution in infrastructure contracts: arbitration and experts’ appointment’ (2017) Vol. 32, Journal of Law and Tribunals, p. 97. See also P. Fouchard, E. Gaillard B. Goldman, International Commercial Arbitration (Kluwer Law International, 1999) at 969. See also Macmillan v Bishopsgate Investment Trust plc; see also Golden Ocean Group v Salgocar Mining Ltd.

20
As explained by scholar and practitioner Soledad Díaz, ‘When ruling on requests of exequatur as well as annulment of awards, Courts of Appeals do not analyse the law applied by the Arbitral Tribunal neither whether the selection of law was correct or even allowed´. See S. Díaz, ‘Disputes resolution in infrastructure contracts: arbitration and experts’ appointment’ (2017) Volume N° 32, Journal of Law and Tribunals, p. 103. See also Civil Court of Appeals Judgement i74/2011, supra note 17; 7th Civil Court of Appeals Judgement 106/2007 of 16 May 2007; 6th Civil Court of Appeals Judgement 188/2010 of 26 August 2010.

21
See C. Fresnedo, La Autonomía de la Voluntad en la Contratación Internacional (Montevideo, Fundación de Cultura Universitaria, 1991) at 328 et. seq.

22
E. g., electronic communications, data message, reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is such as to make that clause part of the contract.

23
Official press release, 12 June 2018 available at: https://www.presidencia.gub.uy/comunicacion/comunicacionnoticias/mrree-nin-novoa-corte-permanente-arbitraje-acuerdo-montevideo-sede.