THE ROLE OF ARBITRATION AND INTERNATIONAL, REGIONAL, SUBREGIONAL AND BILATERIAL TREATIES IN LATIN AMERICA
| Jurisdiction | United States |
(Feb 2002)
THE ROLE OF ARBITRATION AND INTERNATIONAL, REGIONAL, SUBREGIONAL AND BILATERIAL TREATIES IN LATIN AMERICA
M. & Bomchil
Buenos Aires, Argentina
Court proceedings in Latin America
Latin American legal tradition has been strongly influenced by the European continental system. In spite of the XIX century's independence declarations and wars, the strength with which certain legal institutions have been established-due to the long period of colonialism-projects its influence up to date, specially in matters related to judicial practice and procedural law.1
Therefore, although there have been some important changes, civil and commercial procedures before the courts follow in Latin American countries, basically, similar rules and principles.
In these procedures, formal aspects, referred by some authors as the formal legality rule (regla de legalidad de las formas), prevail since the law requires that the different acts conforming the process follow certain solemnities. Therefore, legal proceedings are regulated in detail2 and parties are not entitled to freely agree on the way, time and place to which procedural acts should be subject to, since those aspects are already predetermined by the law.3 Such characteristic imply a substantial difference with arbitration due to the fact that, being the latter a more flexible institution, allows the parties to adapt the proceedings to the way that better adjusts to their interests.
Formal requirements rule the structure of the judicial process, the way the parties are expected to proceed, the limit of the court powers, the nature of elements considered as evidence, the way they should be presented and incorporated to the process and their effectiveness, the scope of the judicial review, the rules to be followed on considering the evidence obtained and the way to present the findings, reasons and conclusions in the award.
Complying with such rules become of extreme importance as in the case essential formalities are not followed in the process or the award, such defect could provide grounds for annulment. Nevertheless, in those cases in which a too strict application of this rule
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could produce useless or harmful results, or unnecessary delays, courts usually have shown some flexibility in order to avoid the effects of an exaggerated application of formalities.4
Most of civil and commercial proceedings in Latin American countries are carried out in writing. Oral proceedings take place only in certain exceptional stages of the process, such as witnesses and parties testimony and in some conciliation hearings.
Another important principle on which the structure of the civil and commercial procedures is based, is the rule known as dispositive principle (principle dispositive), by means of which the impulse of the proceedings as well as the recollection of evidence bear on the parties and not the courts. A natural consequence of this principle is that civil and commercial processes can only be initiated at a party's request5 and, likewise, once the process is initiated, the court is bound by the parties assesments and evidence produced.
Said principle rests on the belief that, in those matters where only a private interest is involved, those who exercise public powers are unable to act in excess of the parties to the process. Therefore, the initiative and impulse of a judicial process bears in the parties, as well as the availability of the substantive law and the evidence. The court, therefore, cannot render an award in excess of what has been claimed by the parties (principio de congruencia) and the effects of the award (res judicata) reaches only those who where parties in the case.
Another outstanding characteristic of the civil and commercial proceedings is that courts limit their jurisdiction to the parties assessments and evidence, being them the only basis for the award. Therefore, they base their decision in what is called the formal truth (verdad formal) instead of the material truth (verdad material) that prevails in criminal and administrative proceedings.
Other particular aspect of the judicial process is its regulation in stages, specifically determined and regulated in detail. Due to a principle widely known as "procedural preclusion" (preclusion procesal),6 each party is required to comply with every act required by law at the specific time provided in the statute and, therefore, omitted acts cannot be be fulfilled in subsequent stages. It means that the proceedings should fulfill a strict consecutive order since, otherwise, the right to act would be automatically lost.7
The Crisis of Court Practice in Latin America
Due to several reasons, court practice and proceedings have been widely considered in a critical condition in Latin America for decades. Throughout the years, the system has
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become bureaucratic and inefficient.8 The proceedings take a long time to be resolved even in those cases where the legal matters involved are not complex.9
Although it is frequently stated that late justice is not justice, long proceedings and ineffective solutions are too common. To the fact that proceedings are not solved in a prompt manner, it must added the lack of direct relationship between the lawyers, the parties and the judges. Due to the amount of work accumulated in the courts, hearings and
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depositions are frequently carried out by court employees instead of judges,10 notwithstanding the existence of legal rules that establish that they could only be carried by the judges. This situation turns even more serious in those unfortunately too frequent cases in which it is not the judge who drafts the final award but his assistants, in some cases not even lawyers.
Likewise, it is a common practice, and not exceptional, to appeal the district courts' awards not only to the circuit courts but even to the Supreme Court. Therefore, higher courts are often overloaded with cases to deal, waiting for a fair solution. Appeal procedures could therefore last, in some cases, up to 4 or 5 years.11
The Increasing Importance of Arbitration
As a result of such events, the arbitration practice, partially unknown for many lawyers in a. great number of developing countries, has turned into an attractive system, especially in certain professional areas.12
Notwithstanding some of the advantages of commercial arbitration opposed to litigation (choice and continuity of tribunal; neutral forum; flexibility of procedures; confidentiality and finality),13 several reasons have, however, contributed to a slower evolution of this institution in some countries.
First, lawyers natural resistance to change and their conservative spirit have become obstacles for the development of alternative dispute resolution (ADR) mechanisms in the professional daily practice.14 As lawyers invest time and effort to learn court practice, in some cases they find no reason or interest in change.
Besides, when seeking to solve conflicts, lawyers usually think of a court ruling or a formal proceeding, instead of ADR proceedings. As well, there is still a strong perception that it is the State's duty to solve, through the courts, conflicts between private parties.
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In the case of international arbitration, some countries' geographical location and culture, the limited size of their economies and other domestic factors have acted as barriers for international trade that the current process of globalization is tearing down, bringing together with them arbitration as an increasingly-important alternative for dispute resolutions.15
Latin America has certainly been one of the regions in the world more reluctant to accept ADR proceedings.
The poor progress of arbitration in the region-where most regulations do not difference between domestic and international arbitration16 -can be explained by the traditional resistance of some of its main countries to ratify international treaties or to accept arbitration as a method to solve disputes, difficulties to enforce foreign awards before local courts, the adoption of the Calvo Doctrine in different Latin American constitutions and legislations, the non-acceptance of the arbitrators' power to decide on its own jurisdiction (Kompetenz-Kompetenz principle),17 the frequent interference by local courts in arbitrations, the adoption of rigid procedures more typical of court proceedings than of arbitration proceedings18 and the limitations existing in some domestic legislations requiring arbitrators to be nationals of such countries or attorneys graduated in local universities, that appointment of arbitrators should be approved by local courts or restricting the arbitrators powers to issue precautionary measures, among other provisions. Due to such facts, there is no doubt that those countries as Mexico that have adopted UNCITRAL Model Law have a comparative advantage over other Latin-American countries.19
Nevertheless, several elements are helping to reverse this situation. The foreign direct investments (FDD inflow seen in the region during the '90s has been accompanied by the execution of relevant agreements (NAFTA,20 BITs,21 etc.) that provide for arbitration proceedings, in most cases before ICSID22 or an ad hoc tribunal under UNCITRAL23 arbitration rules.24 Although regional integration processes25 5 have not produced yet a relevant
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number of arbitrations, the trend seems to be changing significantly in the last years, as it is evidenced by the NAFTA experience.
The evolution experienced in most Latin American countries in the past few years followed, with slight changes, international arbitration transformations. As it has been explained,26 there is evidence that the growing trend for new national legislation is to conform to generally-accepted international standards.27
Furthermore...
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