Arbitration expert Andrés Jana speaks about the “new paradigm” of International Arbitration in Latin America
Ending his second visit to UT Law, Andrés Jana, the Chilean delegate before the United Nations Commission on International Trade Law (UNCITRAL), and a member of the of the ICC’s Arbitration Committee, spoke recently about the new trend toward international arbitration in the region and the challenges ahead.
“International arbitration represents one of the most incredible legal developments in the last decades, representing even a form of a new paradigm,” said Jana, adding that the adoption of global principles of International Arbitration in the region “has permitted the emergence of a global arbitration culture.” Indeed, 20 countries in Latin America amended or passed new arbitration legislation in the last two decades, the majority of them taken from UNCITRAL Model Law, and all of the countries in Latin America have ratified the New York Convention, most of them opting to also ratify New York’s counterpart in the region, the Panama Convention.
This convergence of procedural “soft law” and substantive arbitration law has produced a proliferation of arbitral institutions in Latin America (Brazil alone has 150 arbitral institutions) and, as Jana put it, “more trade, more economic relationships, more contracts, more disputes, and more enforcements.” The full effect of these reforms has yet to be felt in some nations; the Dominican Republic and Peru passed arbitration laws in 2008, Costa Rica in 2011, and Colombia only a few months ago. Meanwhile, other nations still have very outdated legislation regarding arbitration (Argentina and Ecuador), and still others are outright unfriendly to international arbitration (Brazil and Venezuela). But Mr. Jana presented a cautiously positive take on the region’s adoption of what experts call the “normative architecture” of international commercial arbitration. At the very least, this adoption of the normative rules of arbitration has helped get investors to take arbitration in the region more seriously; more and more parties are choosing to resolve their disputes in Lima and Santiago over Paris and Geneva.
This flourishing of international arbitration in the region does not, however, come without its challenges, as Jana made clear. Effective arbitration requires that judges limit their intervention. Such restraint, Jana explained, can often be difficult to achieve in the legal culture of Latin American civil law, which bestows upon judges great jurisdictional power. Latin American judges are presented with a clash of legal cultures: “on one hand, international commercial arbitration requires huge restraint by local courts, allowing them to intervene only with express authorizations in limited occasions. On the other hand, it relies heavily on local courts for its enforceability and its effectiveness. The real challenge is to see how local courts will react to this new paradigm that has been imposed on them.”
As in all legal developments, some countries serve as a positive example for others to follow. “Chile, Colombia, Brazil, Mexico, and Peru are heading the right direction with their arbitration laws,” said Jana. In those countries “enforcement of foreign awards is consistently granted and public policy is not a door to get into the merits or local practices.” But for other nations, perhaps the biggest difficulty posed by the new arbitration paradigm occurs when commercial arbitration involves state entities and interests. In countries with highly nationalized industries, such as Venezuela and Ecuador, judges tend to impose national policies and local goals on the arbitration process. In those places, a strong opposition to investment arbitration often limits the number of cases brought to the court in those jurisdictions. “When you attack arbitration as a means of resolving dispute,” said Jana, “this also has an impact on how people perceive the institution overall. So the number of cases in all of these countries is much lower than in the countries that favor investment arbitration.” A nationalist agenda, and judges’ willingness to intervene in disputes, it seems, draws cases away from courts in Caracas and Quito, and towards their counterparts Santiago, México, and Lima.