Arbitration in Latin America

Fall 2007

International Disputes Quarterly
Focus on Arbitration in Latin America
In This Issue...
Introduction: Latin American Arbitration in Comparative Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Evolution of Dispute Resolution in Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investment Arbitration in Latin America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Commercial Arbitration in Latin America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Editors’ Note

Tips on Drafting Arbitration Clauses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Welcome to the first issue of
International Disputes Quarterly (IDQ),
a publication by the White & Case llp
International Arbitration Group. For two
decades, White & Case has published
an arbitration newsletter for clients
and colleagues, highlighting the latest
developments in the field and our
practice. IDQ builds upon this history.
IDQ combines a new format (including
electronic and web-based distribution)
with a substantive focus on specific
industries and geographic regions. In this
first issue, we focus on commercial and
investment arbitration related to Latin
America. We welcome your comments.

Client Alerts: Recent Developments in International Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
What Our Practitioners Are Saying . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Practitioner Appointments, Practitioner Recognition and Selected White & Case
International Arbitration Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Introduction: Latin American Arbitration
in Comparative Perspective
This issue of White & Case llp ’s
International Disputes Quarterly focuses
on developments in commercial and
investment treaty arbitration related to
Latin America.
After a history of hostility toward arbitration,
Latin American countries have transformed
the legal framework for arbitration in the
region over the past decade or so. With
respect to commercial arbitration, numerous
countries have modernized their arbitration
laws, usually based on the UNCITRAL
Model Law on International Commercial
Arbitration. Most countries have ratified
the 1958 United Nations Convention on
Recognition and Enforcement of Foreign
Arbitral Awards (“New York Convention”)
and the 1975 Inter-American Convention
on International Commercial Arbitration
(“Panama Convention”).
With respect to investment arbitration, most
Latin American countries have ratified the
Convention on the Settlement of Disputes
between States and Nationals of Others
States (“ICSID Convention”) and many have
concluded multiple bilateral investment

treaties (“BITs”), free trade agreements or
multilateral conventions allowing investment
disputes with host states to be submitted
to arbitration. Among the latter, the
North American Free Trade Agreement
(NAFTA) and the Free Trade Agreement
between the United States, the Dominican
Republic and Central America (DR-CAFTA)
are noteworthy.
Reflecting this trend, we provide a
“Compendium of Latin Arbitration Law,”
developed by White & Case lawyers
over a number of years, which summarizes
the arbitral framework across each
Latin American jurisdiction, both with
respect to commercial and investment
arbitration. Regarding commercial arbitration,
the Compendium notes whether each
country has ratified the New York and Panama
Conventions and the year of ratification
and notes the year in which each country’s
current arbitration law was passed. Regarding
investment arbitration, the Compendium
notes whether each country has ratified the
ICSID Convention and lists the number of
BITs and free trade agreements ratified by
each country that provide for international
arbitration of investment disputes.

Contributing Authors:
Jonathan C. Hamilton
Sabina Sacco
Stephen Ostrowski
Mairée Uran-Bidegain
Mónica C. Fernández-Fonseca
Javier Ferrero
Rafael Llano Oddone
Rima Al-Mokarrab
Johan Berg
Editors:
Rafael Llano Oddone
Sophie East

“International Arbitration
Team of the Year“
—Chambers USA Awards 2007
White & Case
1155 Avenue of the Americas
New York, NY 10036
+ 1 212 819 8200
www.whitecase.com

www.whitecase.com

International Disputes Quarterly—Focus on Arbitration in Latin America

White & Case:
A Recognized
Leader in Latin
American
Arbitration
White & Case’s
International
Arbitration Group
has decades of
experience advising
on Latin American
disputes.

Compendium of Latin American Arbitration Law
Commercial Arbitration
New York
Convention

Entry into force

Panama
Convention

Investment Arbitration

Arbitration
Laws/
Entry into force Amendments

ICSID
Convention

Entry into force

Year adopted

Bilateral
Invest.
Treaties

Free Trade
Agreements
In force

In force

Argentina
Bolivia

1989
1995

1995
1999

1967/81
1997

1994
1995 – 2007

54
18

0
1

Brazil
Chile
Colombia
Costa Rica
Dominican Republic
Ecuador

2002
1975
1979
1988
2002
1962

1995
1976
1987
1978
No
1991

1996
2004
1989/91/96/98
1998
1987
1997/2005/06

No
1991
1997
1993
No
1986

0
39
1
13
6
24

0
8
1
5
3
0

El Salvador
Guatemala

1998
1984

1980
1986

2002
1995

1984
2003

20
13

5
4

Honduras
Mexico
Nicaragua
Panama
Paraguay
Peru
Uruguay

2001
1971
2003
1985
1998
1988
1983

1979
1978
2003
1976
1977
1989
1977

2000
1993
2005
1999/2006
2002
1996
1988

1989
No
1995
1996
1983
1993
2000

8
22
14
17
21
30
26

3
12
3
3
0
0
1

Venezuela

1995

1985

1998

1995

22

0

Updated as of August 15, 2007. © 2001 – 2007 White & Case LLP. This document is based on an analysis of primary and secondary sources and may only be reproduced or translated with credit.



FALL 2007

The transformation of the region’s arbitral
framework has led to the increase in the inclusion of
arbitration clauses in commercial contracts and an
increase in the number of investment arbitrations
involving Latin American parties. The evolution of
the framework continues. See “Central America:
Investor-State Dispute Resolution under DR-CAFTA”;
and “Colombia, Panama and Peru: Status of US
Trade Promotion Agreements.�
”
The ICC reported that Latin American parties were
involved in 83 ICC arbitrations during the year 2000.
This number grew to 151 in 2006. During the same
timeframe, the numbers grew over 50 percent for
Mexico and increased six-fold for Brazil.
In the case of ICSID arbitration, Latin American
states were respondents in 26 percent of the total
concluded cases and 50 percent of the cases which
remain pending.
The growth of arbitration in Latin America and
corresponding tensions, are evident in the
comparative developments reported in this
issue of IDQ. Across Latin America, courts are
grappling with the application of arbitration laws.
See “Brazil: Enforcement of Arbitral Awards”;
“Peru: Constitutional Court Rules on Arbitral
Jurisdiction”; and “Mexico: Supreme Court Rules
on the Principle of Kompetenz-Kompetenz.��
”�
In addition, in some countries, concerns have
arisen regarding the availability of arbitration to
resolve disputes—whether commercial or
investment—involving states and state-owned
entities. See “Colombia: Recent Developments
in the Applicability of International Arbitration to
State Contracts.������������������������������������
”�����������������������������������
Others, like Bolivia, Ecuador and
Venezuela have taken or threatened to take steps
to curb recourse to investor-State arbitration. See
infra “Treaty Developments in Bolivia, Ecuador
and Venezuela”; “Bolivia: Investor-State Dispute
Resolution Mechanisms Under Bolivian BITs.��������
”�������
These
developments will shape the ongoing evolution of
arbitration across the region.

Latin American Parties From Selected Jurisdictions
Involved in ICC Arbitrations
2002

2003

2004

2005

Argentina

30

33

30

9

2006
13

Brazil

18

22

30

1

67

Chile

0

1

8

4

8

Colombia

4

5

8

2

1

Mexico

34

27

37

50

45

Panama

9

9

3

7

5

Venezuela

17

17

3

4

2

Source: ICC Bulletin

Percentage of ICSID Cases Against Latin American States
Concluded

25.56%
Pending

50%
Source: ICSID

ICSID Cases Against Latin American States

Argentina
Bolivia
Chile
Costa Rica
Ecuador
El Salvador
Guatemala
Honduras
Mexico
Nicaragua
Panama
Paraguay
Peru
Venezuela
Total

Concluded

Pending

11
1
2
1
3
1
–
1
8
1
–
1
1
3
34

33
1
1
1
6
–
1
–
5
–
1
1
4
4
58

A Multilingual Team
Our Group
encompasses more
than 120 lawyers,
30 of them partners,
including more than
two dozen lawyers
fluent in Spanish
or Portuguese
and partners and
associates with
extensive experience
living and working
in Latin America.
Our Latin American
arbitration experience
spans multiple
White & Case
offices, including
Washington, DC,
New York, London,
Paris, Miami, Mexico
City, São Paulo
and others.

Source: ICSID



International Disputes Quarterly—Focus on Arbitration in Latin America

The Evolution of Dispute Resolution in Latin America
A Q&A Discussion With White & Case’s
Jonathan C. Hamilton
Jonathan C. Hamilton

Political, legal and economic changes over the
last decade have transformed the mechanisms
for cross-border disputes involving Latin America.
In this Q&A, Washington, DC-based partner
Jonathan C. Hamilton comments on the latest
developments in the region.

tracked these changes for years is by maintaining
a compendium of Latin American arbitration law
including information relevant to both commercial
arbitration and investment arbitration. We draw
on primary and secondary sources, government
officials and lawyers in our offices and local firms
across Latin America, including with respect to the
latest cases in the region.

Q: Why are dispute resolution options
important to clients doing business into
and out of Latin America?

Q: Did these legal changes pave the
way for more commercial arbitration
in Latin America?

The availability of reliable dispute resolution
mechanisms minimizes the risks of doing business
across borders in Latin America and beyond.
Historically, Latin America was perceived as a hostile
environment for international dispute resolution due
to unreliable courts, a cultural disdain for arbitration
and the difficulty of enforcing judgments. The lack
of reliable dispute resolution mechanisms was
an impediment to economic growth. It remains a
challenge today.

Yes. The changes in the legal framework created
the foundation for a significant increase in the
volume of commercial arbitration in Latin America.
At the international level, billion-dollar commercial
arbitrations are no longer out of the ordinary (such as
an oil and gas sector arbitration that White & Case
is handling). In 2000, 83 ICC cases involved parties
from Latin America; in 2006, there were 151 cases.
There is a similar spread of interest in mediation
reflected in organizations such as the Mexican
Mediation Institute, which we have assisted in
developing programs for training mediators.

Q: How has the legal framework for
dispute resolution in Latin America
changed in the past decade, particularly
with respect to arbitration?
Starting in the 1990s, most Latin American countries
adopted a host of legal and policy changes aimed
at promoting free markets. At the same time,
they gradually changed their policies with respect
to arbitration. To facilitate commercial arbitration,
many countries changed their domestic arbitration
laws, and those that had not ratified the New York
and Panama Conventions did so. In addition, most
countries ratified the ICSID Convention, numerous
bilateral investment treaties (BITs) and free trade
agreements with investment protection chapters.
Collectively, Latin American states are now parties
to almost 300 investment treaties.
The legal framework for arbitration has remained
in flux as different countries have adopted laws
and ratified treaties over time. One way I have



Q: What are some of the comparative
advantages and disadvantages of
arbitration and litigation in Latin America?
Enforcement is an important issue, since dispute
resolution ultimately depends on enforcement,
whether you are attempting to enforce an arbitration
award or a judgment by a domestic or foreign
court. If one party does not have confidence in an
opposing party’s capacity to enforce an award or
judgment, it is less likely to comply. There are no
treaties governing, for instance, the enforcement
of a New York judgment in Latin American courts.
In contrast, the New York and Panama Conventions
encourage enforcement of arbitration awards. While
some Latin American courts have made and will
make spectacularly bad decisions that appear to
undermine arbitration, many courts are “getting it
right.” We also have to keep in mind that the same
trend of mostly successful enforcement (with some

FALL 2007

aberrations) remains true even in pro-arbitration
jurisdictions like the United States. Outlying cases
should not be taken as a sign that arbitration in
Latin America will or has failed.

Q: Have there been any “anti-arbitration”
developments in the region?
Reports of the demise of arbitration are overstated
because the reality is more nuanced. Particularly in
the area of investment arbitration, developments over
the past couple of years have prompted warnings of
the return of the Calvo Doctrine, the century-old
doctrine which in effect holds that foreigners should
submit to local courts to resolve disputes. ICSID
cases against Latin American states constitute only
20 percent of concluded cases but 60 percent
of pending cases, prompting concern by some
governments. Last year, the Venezuelan Minister of
Energy stated that “Arbitration is over” (“Se acabo
el arbitraje”). This year, Bolivia denounced the ICSID
Convention, and Ecuador commenced a review of its
investment treaty program.
The pro-arbitration legal framework put into place
over many years otherwise remains in place.
Troubling developments in one or two markets have
not stopped the ratification of additional investment
treaties or the growth of commercial arbitration
across the region.

Q: Does dispute resolution in
Latin America require parties to
confront a civil law/common law divide?
This divide must be bridged in nearly every case,
because most disputes are multi-faceted. They
require consideration and assessment of public
international law, civil law and common law issues,
all in more than one language. They also involve
consideration of industry practices and trade usages.
And they often require coordination with public
officials in more than one jurisdiction.

Q: What characterizes
White & Case’s presence in
Latin American dispute resolution?
White & Case has been active in Latin American
dispute resolution for decades. We have approached
arbitration in the region by focusing first on our

substantive capacity and experience as a pioneer
in international arbitration, as well as on our cultural
and linguistic capacity. These qualifications must
go hand-in-hand; language skills without the
substantive focus does not serve clients well.
This approach has helped us experience strong,
uninterrupted annual growth in Latin American
arbitration and dispute resolution.
We rely on the Firm’s 120 arbitration lawyers
including dozens of lawyers fluent in Spanish and
Portuguese; our network of offices including in
Brazil and Mexico; and other lawyers throughout
our network whose practice focuses on
Latin America. We advise on some of the most
complex cases in the region, including at present
the largest investment treaty arbitration in the
region, one of the largest commercial arbitrations
in the region and numerous other litigation and
arbitration matters.

Experience Across
the Americas
White & Case
has advised on
dozens of cases
across virtually all
Latin American
jurisdictions,
including matters
involving more than
a dozen jurisdictions
during 2007.

Q: In summary, how would
you characterize the future of
Latin American dispute resolution?
Overall, Latin America has become a legal
environment in which arbitration is part of a toolbox
of dispute resolution mechanisms that may include
commercial arbitration, treaty disputes, litigation,
enforcement proceedings, workouts, negotiations
and settlements—sometimes all at once. Arbitration
is now a critical, viable option for the resolution
of disputes related to Latin America. It is not a
panacea, because enforcement issues persist and
different dispute mechanisms are more suitable
or reliable than others depending on the nature of
the dispute, the relevant industry sector and the
enforcement strategy.
Jonathan C. Hamilton is an international arbitration
and litigation partner based in the Washington, DC,
office of White & Case. After commencing his career
in the Firm’s New York office, he spent several years
in its Mexico City office. He also worked as a foreign
associate with a leading firm in Lima, Peru. He has
focused on Latin American dispute resolution for a
decade and advised on matters involving more than
15 jurisdictions across Latin America.



International Disputes Quarterly—Focus on Arbitration in Latin America

Award-Winning
Work
Our leading presence
in Latin America
contributed to
the selection of
our Group as the
Chambers USA’s
2007 International
Arbitration Team
of the Year.
The Chambers
guides have
recognized
our “extensive
experience” and
“solid reputation” in
Latin America and
our “lawyers who
practice in Spanish.”



Investment Arbitration in Latin America

Contributing Authors: Jonathan C. Hamilton, Sabina Sacco, Stephen Ostrowski,
Mairée Uran-Bidegain, Monica Fernández-Fonseca, Javier Ferrero and Rafael Llano Oddone.

Treaty Developments Related to Bolivia,
Ecuador and Venezuela
Recent developments involving Bolivia, Ecuador and
Venezuela may affect the protections available to
foreign investors in these countries.
Bolivia formally denounced the Convention on
the Settlement of Disputes between States and
Nationals of Other States (the “ICSID Convention”),
thus withdrawing from the World Bank’s dispute
resolution facility for investment disputes between
foreign investors and host states. This withdrawal
comes at a time when Bolivia is in the process of
nationalizing key sectors of its economy. Bolivia
has further announced that it is undertaking a
review of its BITs, reportedly targeting the following
concerns: (i) limiting the definition of investment
to investments that “truly generate value for
the country,” (ii) inclusion of domestic input
requirements and rules for transfers of technology
and (iii) dispute resolution.
This is the first time that a member state has
withdrawn from the ICSID system. In accordance
with Article 71 of the ICSID Convention, Bolivia’s
withdrawal from ICSID will take effect six months
after the receipt of the notice of denunciation,
that is, on November 3, 2007. Pursuant to Article
72 of the ICSID Convention, denunciation of
the Convention by a contracting state does not
affect that state’s rights or obligations under the
Convention “arising out of consent to the jurisdiction
of the Centre” given by such state before receipt
of the notice of denunciation. The question is
whether the provisions contemplating ICSID
arbitration in Bolivia’s bilateral investment treaties
(“BITs”) constitute pre-denunciation “consent to
the jurisdiction of the Centre,” (and allow investors

to bring claims while the BITs remain in effect),
or whether such consent exists only when both
parties (i.e., the state and the investor) have
consented to ICSID arbitration before the notice of
denunciation was received. Commentators disagree
as to implications of Bolivia’s denouncement for
investors and whether investors are now or will
after six months be able to avail themselves
of Bolivia’s consent to ICSID jurisdiction under
Bolivia’s bilateral investment treaties (18 of which
are currently in effect (see chart ar right)).
Ecuador, in contrast to Bolivia, has not denounced
the ICSID Convention, but threatened in early
May that it would not renew its BIT with the
United States. Ecuador later announced that it
instead will reassess each of its 23 existing bilateral
investment treaties. Ecuador has assigned this task
to a special commission charged with proposing
changes to the BITs for future renegotiations.
Ecuador has informed certain countries (including
the United States and Switzerland) that it intends
to renegotiate their BITs. The government is
also preparing a model for this review, which
reportedly will focus on three main issues: fair and
equitable relationships, respect of sovereignty and
a predictable framework to ensure legal certainty
for investors. The Ecuadorian Minister of Foreign
Affairs has added that Ecuador will welcome
socially and environmentally responsible foreign
direct investment that promotes development and
employment. The existing US-Ecuador BIT allows
recourse to ICSID arbitration, ad-hoc arbitration
under UNCITRAL Rules, or arbitration before any
other institution or in accordance with any other
rules mutually agreed by the parties.

FALL 2007

Venezuelan President Hugo Chavez announced
earlier this year that his country would withdraw
from the World Bank and the International Monetary
Fund (IMF). President Chavez also proposed the
creation of a South American equivalent of the
World Bank, “Banco del Sur.” These announcements
coincide with Venezuela’s negotiations with major
multinationals for control of the oil industry in the
Orinoco Belt. To date, however, Venezuela has not

formalized its withdrawal from the World Bank or
the IMF, or denounced the ICSID Convention or any
BITs. Meanwhile, Venezuela continues to participate
in ongoing ICSID arbitrations. President Chavez has
been recently quoted as stating that Venezuela’s
decision is final but not immediate and that a
technical committee has been put in place to analyze
the consequences of such withdrawal.

Dispute Resolution Fora Under 18 Bilateral Investment Treaties Ratified by Bolivia
Local Courts
Argentina

•

Austria
Belgium-Luxembourg

ICSID

UNCITRAL

•

•

•

•

•

•

(And Additional
Facility Rules)

Chile

•

China

•

Denmark

(ICC or Stockholm
Chamber of Commerce)

•
•
•

•

•

•

France

•

•

Germany

•

Ecuador

•

Ad hoc/Others

Italy

•

•

Korea

•

•

•
•

Netherlands

•

•

Peru

•

•

Spain

•

•

(And Additional
Facility Rules)

Sweden
Switzerland
UK

USA

Cutting-Edge Cases
White & Case is
advising on some of
the largest pending
cases involving Latin
America. As indicated
in the American
Lawyer Scorecard
2007, White & Case
is advising on the
largest investment
arbitration and
one of the two
largest commercial
arbitrations involving
Latin American
parties.

•
•

•

•

•

•

•

•

(And Additional
Facility Rules)
(And Additional
Facility Rules)

•

(Ad hoc and ICC)

•



International Disputes Quarterly—Focus on Arbitration in Latin America

Breadth Across
Industries
Our lawyers have
handled cases
across all major
industry sectors
in Latin America.
Selected recent
matters include
disputes related to
sovereign bonds
issued by Argentina,
a duty-free business
in Argentina,
the electricity
sector in Peru,
a hydro-electric
project in the Andes,
an oil refinery in
Mexico, an airport
in Central America,
a power plant in
Brazil and diverse
investments in
other sectors and
countries across
Latin America.



Central America: Investor-State Dispute Resolution
Under DR-CAFTA
The Free Trade Agreement between the
United States, the Dominican Republic and
several Central American States (“DR-CAFTA”)
creates a new free trade zone in the Americas and
aims to encourage investment among ratifying
countries by providing substantive and procedural
protections to investors.

giving rise to the claim, but not more than three
years from that date (Articles 10.16(3) and 10.18(1)).
An investor may bring claims for breach by the
host state of the substantive protections afforded
in the treaty itself, breach of an investment
authorization, or breach of an investment agreement
(Article 10.16(1)).

Signed in 2004 by the US, the Dominican Republic,
Costa Rica, El Salvador, Guatemala, Honduras
and Nicaragua, DR-CAFTA has entered into force
in all but one of the signatory countries. Only Costa
Rica is still in the process of ratifying DR-CAFTA
and is scheduled to hold a binding referendum later
this year.

Under Article 10.16(3), the investor may select from
three different sets of arbitration rules to file its claim:
(a) the Convention on the Settlement of Investment
Disputes between States and Nationals of Other
States (the “ICSID Convention”), provided that the
investor’s home state and the respondent state are
both parties to the ICSID Convention; (b) the ICSID
Additional Facility Rules, if the investor’s home state
or the respondent state is not a party to the ICSID
Convention or (c) the UNCITRAL Arbitration Rules.
As of today, all DR-CAFTA contracting states, with
the sole exception of the Dominican Republic, are
parties to the ICSID Convention.

Chapter 10 of DR-CAFTA contains the substantive
protections afforded to investors of the member
states. These protections are similar to those
available in other free trade agreements signed
by the US and include national treatment,
most-favored nation treatment, minimum standard
of treatment in accordance with customary
international law (including fair and equitable
treatment and full protection and security) and
the guarantee of no expropriation without prompt,
adequate and effective compensation. Extensive
annexes detail the scope of these protections.
In addition, Chapter 10 establishes a dispute
resolution mechanism for investors who consider
that one of the state parties has not respected the
investment guarantees and protections granted
by the treaty. This multi-tiered process begins
with a requirement that the state and the investor
“seek to resolve the dispute through consultation
or negotiation” (Article 10.15). The investor may
commence arbitration against the host state after
sending a written notice of its intention to submit
its claim to arbitration at least 90 days before
such submission (Article 10.16(2)). Claims may be
submitted to arbitration six months after the events

Investors intending to submit a claim to arbitration
should pay particular attention to the fork-in-theroad provisions contained in Article 10.18(2) and
Annex 10-E. First, the notice of arbitration must be
accompanied by written waivers “of any right to
initiate or continue before any administrative tribunal
or court under the law of any party, or other dispute
settlement procedures, any proceeding with respect
to any measure alleged to constitute a breach” under
the treaty. Second, the claim may not be submitted
to arbitration if domestic court proceedings have
been initiated by the investor when the claim involves
the alleged breach of an investment authorization or
an investment agreement (but not when the claim
is based on a breach of the substantive guarantees
established in Section A of Chapter 10). This provision
does not apply to investors of the United States;
if they choose to submit claims for breaches of
obligations under Section A to domestic courts in
Central America or the Dominican Republic, that

FALL 2007

election shall be definitive (Annex 10-E). Investors
may, however, initiate parallel court actions that
seek interim injunctive relief and do not involve the
payment of monetary damages, without affecting
their right to submit to arbitration under CAFTA
(Article 10.18(3)).
Chapter 10 also contains detailed rules on the
conduct of arbitration proceedings, selection of
arbitrators, production of evidence, consolidation
of claims, rendering of awards and service of
documents. Article 10.20(4) offers the respondent
state the opportunity to make preliminary
objections on the basis that “as a matter of law,
a claim submitted is not a claim for which an
award in favor of the claimant may be made under
Article 10.26.” Article 10.21 contains rules to ensure
the transparency of arbitral proceedings, providing
that arbitral hearings shall be public and that the
respondent state has a duty to make available to the
public the submissions filed and decisions rendered
in the arbitration. In addition, Article 10.20(3) grants
the tribunal authority to accept and consider amicus
curiae submissions from non-disputing parties.
A novel feature of DR-CAFTA’s dispute resolution
system is the parties’ commitment to the creation
of an appellate body tasked to review awards
rendered by arbitral tribunals under Chapter 10.
Annex 10-F provides that within three months
from the entry into force of the treaty, the Free
Trade Commission created under the treaty
shall establish a negotiating group to develop an
appellate body or similar mechanism “to provide
coherence to the interpretation of investment

provisions in the Agreement.” This appellate body
shall be implemented through an amendment to
the agreement. Some free trade agreements and
trade promotion agreements recently negotiated
by the United States (such as those with Colombia,
Singapore, Chile, Peru and Panama) provide that
the parties will discuss at a later stage whether
to establish an appellate body to review arbitral
awards rendered under those treaties, but
DR-CAFTA is distinctive in requiring the creation of
an appellate body.
At least two disputes have so far arisen under
the scope of DR-CAFTA, against Guatemala
and the Dominican Republic. In the first case,
US-based Railroad Development Corporation, Inc.
(“RDC”) and its Guatemalan subsidiary Compañía
Desarrolladora Ferroviaria, have registered with
ICSID a request for arbitration asserting a number
of claims under CAFTA against the Guatemalan
government arising from the annulment of a
railroad concession contract. In the second case,
Spanish-owned Unión Fenosa alleges several
breaches by the government of the Dominican
Republic of DR-CAFTA’s investment protection
provisions, which Unión Fenosa claims have
adversely affected its investments in the energy
sector in that country. According to press reports, a
letter of intention to arbitrate has already been filed
with the government of the Dominican Republic.
With respect to such disputes, DR-CAFTA includes
not only substantive investment protection and
guarantees, but also a dispute resolution mechanism
that includes certain novel provisions.



International Disputes Quarterly—Focus on Arbitration in Latin America

Colombia, Panama and Peru: Status of US Trade
Promotion Agreements
The United States is currently in the process
of ratifying new Trade Promotion Agreements
(“TPAs”) with three Latin American countries:
Colombia, Peru and Panama. These TPAs not only
seek to increase trade between the United States
and these countries by eliminating tariffs and
other barriers to trade, they also aim to promote
investment between the parties by providing certain
substantive protections to investments made in
one state party by investors of the other state
party, and establishing special dispute settlement
mechanisms for investment disputes.
Specifically, these TPAs allow investors to settle
investment disputes with the host state through
international arbitration through the International
Center for the Settlement of Investment Disputes
between States and Nationals of Other States
(ICSID) (either under the ICSID Convention and the
ICSID Arbitration Rules, if both states are parties
to the ICSID Convention, or through the ICSID
Additional Facility Rules, if only one of the states
involved is a party to the ICSID Convention), or
through ad hoc arbitration under the arbitration rules
of the United Nations Commission on International
Trade Law (UNCITRAL).

10

The final texts of the TPAs have already been
signed by the US Trade Representative and the
governments of the respective countries, and are
currently being submitted to the US Congress for
its approval. These final texts incorporate certain
requirements of the bipartisan agreement on
trade policy reached by the US administration
and congressional leadership on May 10, 2007
(the “Bipartisan Trade Agreement”). In compliance
with the Bipartisan Trade Agreement, the
TPAs now include core international labor
standards and certain environmental protection
standards, as well as new provisions on
investment, government procurement, intellectual
property and port security.
The US Congress is continuing to consider the Peru
and Panama TPAs. The outlook for Colombia may
be less optimistic. Colombia recently agreed to
incorporate the standards set forth in the Bipartisan
Trade Agreement, but some in Congress have
raised concerns about Colombia’s alleged history of
violence against trade union members.

FALL 2007

El Salvador: Inceysa Vallisoletana S.L. v. Republic
of El Salvador: No Jurisdiction Where Investment
Not Established “In Accordance With Law”
The ICSID Tribunal in Inceysa Vallisoletana
S.L. v. Republic of El Salvador declined jurisdiction
to hear claims of breach of contract and
expropriation asserted by a Spanish company,
Inceysa Vallisoletana, S.L. (“Inceysa”), against the
Republic of El Salvador.1 The Tribunal concluded
that it lacked jurisdiction where Inceysa’s underlying
investment was not made “in accordance with law.��
”�
Inceysa commenced arbitration in July 2003
following the decision of El Salvador’s Ministry of
the Environment and Natural Resources (“MARN”)
not to proceed with a November 2000 concession
contract for the operation of vehicle inspection
services. Despite previously awarding the concession
to Inceysa, MARN subsequently retained two other
companies to provide similar services and ultimately
moved to terminate the contract in the Salvadoran
courts. According to Inceysa, MARN’s actions
breached the concession contract and El Salvador’s
national investment law and violated a 1995 bilateral
investment treaty between Spain and El Salvador
(the “BIT” or the “Treaty”).2 Inceysa sought more
than $120 million in damages.
El Salvador contended that the “Investment Treaty
by its terms and intent extend[ed] protection only
to investments made in El Salvador in accordance
with its laws,” and that its national investment
law similarly excluded “fraudulent investments”
from the scope of its protections.3 El Salvador’s
jurisdictional objection centered on the allegation
that Inceysa obtained the concession by defrauding

the state during the public bidding process, including
through submission of false financial documentation,
intentional misrepresentation of its qualifications
and concealment of its relationship with another
bidder. According to El Salvador, where its consent
to ICSID jurisdiction was expressly limited to
“disputes involving investments otherwise entitled
to protection under the Treaty, i.e., investments
made in accordance with Salvadoran law,” Inceysa
could not invoke its protections.4
The tribunal agreed, finding that “because Inceysa’s
investment was made in a manner that was clearly
illegal, it [wa]s not included within the scope of
consent expressed by Spain and the Republic of
El Salvador in the BIT,” and thus “the disputes
arising from it [we]re not subject to the jurisdiction
of the Centre.”5 In order to arrive at this conclusion,
the Tribunal undertook a two-part analysis, first
considering whether El Salvador had limited
its consent in the BIT to disputes concerning
investments made legally and if so, whether
Inceysa’s investment was made in accordance with
Salvadoran law.
The tribunal assessed El Salvador’s written
consent to ICSID jurisdiction in the BIT, which,
flowing from Article 25(1) of the ICSID Convention,
the tribunal recognized a fortiori did not constitute
a limitless agreement to arbitrate any dispute
purportedly falling within the Treaty’s terms.
Rather, the tribunal determined that it was bound
to examine whether the particular dispute was

1 Inceysa Vallisoletana S.L. v. Republic of El Salvador, Award dated August 2, 2006 (ICSID Case No. ARB/03/26).
2 Agreement for the Reciprocal Promotion and Protection of Investments signed between the Republic of El Salvador
and the Kingdom of Spain (Feb. 1995).
3 Inceysa at ¶¶ 45 – 52 (emphasis added).
4 Id. at ¶ 141.
5 Id. at ¶ 257.

11

International Disputes Quarterly—Focus on Arbitration in Latin America

within the scope of El Salvador’s consent, giving
effect to both the will of the contracting states as
well as the principle of good faith.
After noting that so-called “accordance with law”
clauses were among the most common mechanisms
employed by states to limit the scope of investment
protection obligations, the tribunal examined the
express language of the Treaty itself. Here, although
the clause did not appear in the Treaty’s definition of
investment, the parties included such a qualification
in two other articles regulating the “Protection” and
“Promotion and Admission” of that investment.
Moreover, the Treaty’s travaux préparatoires made
clear the parties’ mutual intent that compliance
with local law be a precondition to an investment’s
protection under the Treaty. The tribunal noted
that the diplomatic exchanges between Spain
and El Salvador firmly established, “without any
doubt,… the will of the parties to the BIT… to exclude
from the scope of application and protection of the
agreement disputes originating from investments
which were not made in accordance with the laws
of the host state.”6

On the facts, the tribunal concluded that El Salvador
had substantiated its allegations that Inceysa
acted fraudulently during the bidding process and
that consequently Inceysa’s investment failed to
comply with Salvadoran law. The tribunal held that
Inceysa’s actions violated the principle of good
faith underlying El Salvador’s consent to ICSID
jurisdiction, a principle found applicable under the
BIT and the Salvadoran Constitution. The tribunal
likewise concluded that upholding jurisdiction under
the BIT could not be squared with international
public policy barring parties from benefiting from
their own fraud, declaring that Inceysa could not
“seek to benefit from an investment effectuated
by means of one or several illegal acts and,
consequently, enjoy the protection granted by the
host state.”7
For the same reasons, the tribunal held Inceysa’s
actions barred it from accepting the unilateral offer
to arbitrate disputes before ICSID contained in
El Salvador’s national investment law. Finally, the
tribunal ruled that it had no jurisdiction to hear
Inceysa’s breach of contract claims as the provisions
in the concession contract did not meet the standards
set forth in Article 25 of the ICSID Convention for
consent to jurisdiction.

6 Id. at ¶ 195.
7 Id. at ¶¶ 242, 252.

12

FALL 2007

Commercial Arbitration in Latin America

Contributing Authors: Jonathan C. Hamilton, Sabina Sacco, Mairée Uran-Bidegain
and Monica Fernández-Fonseca.

Brazil: Enforcement of Arbitral Awards
Several developments in the past decade
have contributed to increased legal certainty for
arbitration in Brazil, as reflected in a series of rulings
by Brazilian courts.
In 2001, the Brazilian Federal Supreme Court
upheld the constitutionality of Brazil’s 1996 Lei de
Arbitragem (“Arbitration Law”) (MBV Commercial
and Export Management Establishment v. Resil
Industria e Comércio Ltda., Kingdom of Spain,
December �����������
12,��������
2001 (“MBV Commercial ”)).
The Arbitration Law, Law 9307, was based
on the Spanish arbitration law of 1988 and
the UNCITRAL-Model Law on International
Commercial Arbitration. It made it considerably
easier to enforce an arbitration agreement
and the resulting arbitral award by eliminating
certain burdensome requirements. For example,
before the enactment of the Arbitration Law,
Brazilian law required the so-called “double
exequatur”—i.e., court recognition of foreign
awards by the courts of the forum and by Brazilian
courts—and precluded the enforcement of a
pre-dispute arbitration agreement. In addition,
Brazil ratified the United Nations Convention for
the Recognition of Foreign Arbitration Awards
(the “the New York Convention”) in 2002. In
this context, Brazilian courts have faced various
recognition and enforcement issues. Following
are some of the more noteworthy decisions in
this field.
n

Arbitration agreements have been given effect
over procedural formalities:
– The Superior Court of Justice, which is
charged with considering the recognition
of foreign arbitral awards under a 2004
constitutional amendment, held that the

respondent, by participating in the arbitration
without challenging the jurisdiction of the arbitral
tribunal, had tacitly recognized the existence of
an arbitration clause (L’Aiglon S/A v. Têxtil União
S/A, May 18,������
���������
2005)
n

Disputes arising from administrative contracts
have been held subject to arbitration:
– Several Brazilian courts have held that the
primary public interest, which is non-negotiable
and subject to the sole jurisdiction of the
courts, is distinct from the interests of the
public administration, which can be subject to
arbitration. Thus, state-owned companies may
be parties to arbitration proceedings relating
to negotiable rights (Companhia Paranense
de Gás (Compagás) v. Consórcio CariocaPassarelli, June 15,�������
����������
2004; AES Uruguaina
v. Companhia Estadual de Energia Eléctrica
(CEEE), October 25,�����������
��������������
2005; and Nuclebrás
Equipamentos Pesados SA (NUCLEP) v. TMC
Terminal Multimodal de Coroa Grande SPE SA,
December 7,������
��������
2005)
– The Supreme Court has concluded that
it is legal for an arbitral tribunal to decide
disputes involving private and public joint
stock companies (“sociedades de economia
mista”) when they have entered into an
arbitration agreement. (União v. TMC Terminal
Multimodal de Cora Grande SPE S.A.,
September ����������������������������������
27,�������������������������������
2006) The Court reasoned that
these private-public companies are on equal
footing with private companies when they
conduct ordinary commercial transactions and
are therefore not subject to restrictions on their
ability to enter into arbitration agreements.

13

International Disputes Quarterly—Focus on Arbitration in Latin America

– There is, however, one case pending
where a court in the State of Paraná has
granted an anti-arbitration injunction based
mainly on the argument that the claimant was
a corporation controlled by the government
of the State of Paraná (Companhia de Energia
Eléctrica do Paraná (COPEL) v. UEG Araucária,
July 5,
��������
2004)
�����
n

The Superior Court of Justice has tempered
the procedural hurdles on enforcement, holding,
among other things, that:
– Foreign arbitral awards or judicial decisions may
produce effects in Brazil while an application for
ratification is pending (Article 4.3, Resolution
No. 9 of May 4,������
��������
2005)
– Injunctions may be granted in applications
for the ratification of foreign arbitral awards
or judicial decisions (Article 4.3, Resolution
No. 9 of May 4,������
��������
2005)
– The existence of a pending action to set aside
an arbitral award does not impede its
recognition (First Brands do Brasil Ltda. & STP
do Brasil Ltd. v. STP Petroplus Produtos
Automoviles S/A & Petroplus Sul Comercio
Exterior S/A, November ���������
23,������
2006)

n

The Supreme Court has acknowledged that it may
refuse to enforce foreign arbitral awards only on
limited grounds, including:
– Upon determination that the award fails to
comply with certain formal requirements
(Tremond Alloys and Metals Corp v. Metaltubos
Indústria e Comércio de Metais, June 19,������
���������
2006)
– When the award is contrary to public policy or
national sovereignty (Id.; Oleaginosa Moreno
Hermanos Sociedad Comercial Industrial
Financiera Immobiliaria y Agropecuaria v. Minho
Paulist Ltda., May 17,������
���������
2006)8
– When there is a violation of the right to counsel
or to legal defense (Grain Partners SPA v.
Oito Exportação e Importação de Cereais
e Defensivos Agrícolas Ltda. & Cooperativa
dos Produtores e Trabalhadores Urbanos e
Rurais de Sorriso Ltda.—COOPERGRÃO,
October 18,������
���������
2006)

Although the Supreme Court has not upheld all arbitral
awards submitted for recognition (e.g., Oleaginosa
Moreno Hermanos Sociedad Anónima Comercial
Industrial Financiera Inmobiliaria y Agropoecuaria v.
Moinho Paulista Ltda., May �������������������������
17, 2006),
���������������������
the decisions
cited above suggest a trend that appears to follow
the precedent set by MBV Commercial in confirming
the constitutionality of the Arbitration Law and the
effectiveness of arbitration.

8 But see Tips on Drafting Arbitration Clauses, discussing the scope of public policy in the Oleaginosa decision.

14

FALL 2007

Colombia: Constitutional Court Rulings on the Applicability
of International Arbitration to State Contracts
The Colombian Constitutional Court has upheld
the arbitrability of a contract dispute involving a
State entity, el Departamento del Valle del Cauca,
suggesting that parties are free to choose the
procedural rules applicable to arbitrations involving
state contracts. The Valle del Cauca decision
contrasts with the TermoRío opinion of the Council
of State (Consejo de Estado), Colombia’s highest
administrative court, holding that an arbitration
agreement contained in a state contract providing
for ICC procedural rules violated Colombian law.
The Valle del Cauca decision (sentencia de
unificación), rendered by the Constitutional Court
on March 14, 2007, sets forth certain factors
applicable to the arbitrability of contractual disputes
involving a state entity, including the choice of
procedural rules. (Corte Constitucional, Sentencia
SU-174/07, Exp. T-980611, March 14, 2007). The
case related to a concession agreement for the
construction, operation and maintenance of a public
road between Concesiones de Infrastructura S.A.
(“CISA”) and the Departamento del Valle del Cauca
(“Valle del Cauca”). A dispute over the application
of certain contractual terms was resolved by
an arbitral award rendered in favor of CISA.
The award was challenged before the Council of
State and was upheld. Not satisfied with the
outcome, Valle del Cauca filed a constitutional
protection claim (acción de tutela) before the
Constitutional Court, alleging violation of due
process. On March 22, 2006, the Constitutional
Court annulled both the award and the decision
of the Council of State (Corte Constitucional,
Sentencia T-481-2005, March 22, 2006). A year later,
on March 14, 2007, the Court overturned its own
decision, declaring that (i) a constitutional protection
claim could not be used to challenge the validity of
arbitral awards and annulment proceedings and
(ii) in any event, neither the arbitral tribunal nor the
Council of State had violated Valle del Cauca’s due

process rights because the subject matter of the
dispute was arbitrable.
Valle del Cauca had argued, inter alia, that the
unilateral declaration of the termination of the
concession agreement could not be subject to
arbitration as it was a prerogative of the state.
On this issue, the Constitutional Court set out
certain factors relevant to the interpretation of the
arbitrability of administrative acts. It distinguished
between the economic aspects of a dispute arising
in connection with an administrative act, which
can be subject to arbitration and the review of the
validity and legality of administrative acts, which it
identified as the exclusive prerogative of the state.
The Constitutional Court held that (i) arbitration is an
alternative voluntary method of dispute resolution
that is constitutionally guaranteed and protected
and “constitutes the manifestation of a democratic
and participative regime”; (ii) all arbitral awards are
final and binding, differing from a judicial decision
only in that they are not subject to appeal (with the
exception of certain limited remedies established
by law) and (iii) given the contractual and voluntary
nature of arbitration guaranteed by Colombian law,
parties may freely choose the rules governing
arbitration proceedings.
The decision of the Constitutional Court in the Valle
del Cauca case contrasts with a previous opinion of
the Council of state setting aside an arbitral award
involving a state-owned entity, holding that an
arbitration agreement providing for arbitration under
the ICC Rules violated Colombian law. (Electrificadora
del Atlántico S.A. c. TermoRío S.A. E.S.P., Consejo
de Estado, Sala de lo Contencioso Administrativo,
Sección Tercera, Sentencia de 1 de agosto de 2002).
In the TermoRío case, the parties had concluded
a power purchase agreement governed by
Colombian law referring all disputes to ICC
arbitration. The Council of State vacated the award,

15

International Disputes Quarterly—Focus on Arbitration in Latin America

holding that the arbitration agreement violated
Colombian law because (i) the arbitration was
domestic in nature, as the conditions established
by Law 315 of 1996 for international arbitrations
had not been met and (ii) under Decree 2279 of
1989 (in force at the time of the agreement), the
parties did not have “either the freedom or the
authorization” to choose the rules to govern the
arbitral proceedings.
Subsequentlty, TermoRío and one of its shareholders
filed suit before the US District Court for the
District of Columbia, seeking to enforce the award.
On May 25, 2007, the DC Circuit Court of Appeals
affirmed the decision of the district court, applying
the New York Convention and refused to enforce
the award (TermoRío S.A. E.S.P. v. Electrificadora
del Atlántico S.A. E.S.P., 421 F. Supp. 2d 87
(D.D.C. 2006)). The appellate court held that “the
arbitration award was lawfully nullified by the
country in which the award was made,” and
therefore TermoRío could not “seek enforcement
of the award under the Federal Arbitration Act or
the New York Convention.” It further held that to
enforce an arbitration award lawfully set aside by
a competent authority in the state in which the
award was made “would seriously undermine
a precept of the New York Convention.” The
Court clarified that “[b]ecause the Consejo de
Estado is undisputedly a ‘competent authority’
in Colombia and there is nothing in the record
indicating that the proceedings before the Consejo
de Estado were tainted… appellants have no cause
of action” pursuant to the New York Convention,
Art. V(1)(e). (TermoRío, S.A. & Lease Group, LLC
v. Electrificadora del Atlántico S.A.,-No. 06-7058,
F.3d, 2007 WL 1515069 (DC Cir, May 25, 2007)).
Under the TermoRío decision, domestic arbitration
had to be governed by the Colombian Code of Civil
Procedure. In contrast, the Valle del Cauca decision
allows parties to choose freely the procedural
rules applicable for the resolution of a dispute.
The Council of State had nevertheless, already
begun moving in this direction when it ruled on a
case involving an arbitration with a seat outside
Colombia. In that case, Empresa Colombiana de Vías
Ferreras (Ferrovías) v. Drummond Ltd. (decisions of

16

October 24, 2003 and April 22, 2004), the
Council held that it lacked jurisdiction to set aside
an ICC award rendered in Paris pursuant to
French procedural law and which related
to a contractual dispute between Ferrrovías, a
Colombian state-owned entity and Drummond,
a private company. Attempting to follow the
TermoRío precedent, Ferrovías had argued that
contractual disputes between the parties could not
be governed by international rules, as had been
provided in the arbitration clause, as they involved
a public entity, the contract was to be performed in
Colombia and it was governed by Colombian law.
The Council rejected this argument and held that
under the applicable Colombian law, state contracts
may be submitted to international arbitration.
The Court further reasoned that, pursuant to
the United Nations Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (the
“New York Convention”), which prevailed in this
case over the Code of Civil Procedure, only the
competent authority of the country in which the
award was rendered, i.e., the French courts, could
annul the award. (Empresa Colombiana de Vias
Férreas c. Drummond Ltd., Consejo de Estado, Sala
de lo Contencioso Administrativo, Sección Tercera,
October 24, 2003 and April 22, 2004).
Notwithstanding the Valle del Cauca and Ferrovías
decisions, it is not clear whether international
arbitration is available for all state contracts.
In a decision rendered on November 22, 2006
(C-961/2006), the Constitutional Court confirmed
the constitutionality of provisions of the Investment
Stability Law (Law 963/2005), pursuant to
which investors may submit disputes to domestic
arbitration governed by Colombian law, but not
to arbitration under international rules. The Court
held that legal stability agreements are a type of
administrative contract concluded to guarantee a
stable application of Colombian law to investors.
The Court further noted that because any dispute
would relate to the application of Colombian
law, it is “reasonable” and “proportional” for the
arbitration proceedings to be domestic and governed
by Colombian law. (Corte Constitucional
Sala Plena, Sentencia C-961/2006, Exp. D-6304,
November 22, 2006).

FALL 2007

Mexico: Supreme Court Rules on the
Principle of Kompetenz-Kompetenz
The Mexican Supreme Court has settled
a contradiction between the rulings of two federal
courts relating to the applicability of the principle
of kompetenz-kompetenz, according to which an
arbitral tribunal is the judge of its own jurisdiction.
See Contradicción de Tesis 51/2005-PS, Tesis de
Jurisprudencia 25/2006. With this decision, the
Supreme Court attempted to reconcile diverging
interpretations of two seemingly inconsistent
provisions of the Mexican Commercial Code on the
question of whether the validity of an arbitration
agreement should be decided by the arbitral tribunal
or the judge.
The debate centered on the interpretation of two
articles of the Mexican Commercial Code that
appear to provoke contradictory results when
applied to concrete cases. Article 1424 mirrors the
language of Article 8 of the UNCITRAL Model Law
on International Arbitration (the “Model Law”) and
Article II.3 of the United Nations Convention on
Recognition and Enforcement of Foreign Arbitral
Awards, or “New York Convention.” It provides that
judges shall refer the parties to arbitration when
their dispute is subject to an arbitration agreement,
unless such agreement is found to be null and void,
inoperative or incapable of being performed. In turn,
Article 1432 of the Commercial Code tracks Article
16 of the Model Law and provides that an arbitral
tribunal shall decide on its own jurisdiction, including
objections related to the existence or validity of the
arbitration agreement.
On January 11, 2006, the Mexican Supreme Court
held that parties are free to refer contractual disputes
to arbitration and affirmed the applicability of the
principle of kompetenz-kompetenz, stating that the
general rule is that arbitral tribunals have jurisdiction
to intervene, hear and decide on the existence or
validity of both the underlying contract and the
arbitration agreement.

The Supreme Court also affirmed the parties’ rights
under paragraph 2 of Article 1424 to commence
or continue arbitration proceedings while the
issue of validity of the arbitration agreement is
pending before a judge, even when the subject
of the arbitration is the existence or validity of the
underlying contract, over which the arbitral tribunal
retains exclusive jurisdiction.
At the same time, however, the Supreme Court
carved out an exception for disputes brought before
the courts where the submitting party claims that
the arbitration agreement is null and void, inoperative
or incapable of being performed. The Supreme
Court reasoned that the existence of due judicial
control over arbitration should not be disregarded
and that given that the jurisdiction of an arbitral
tribunal emanates from the free will of the parties,
if the arbitration agreement is affected by a defect
of consent, the annulment action should be resolved
previously by the Court. The Supreme Court decision
may have implications for arbitration matters that fall
within the exception carved out by the Court.
The Supreme Court in effect adopted language
that is already set forth in two of the leading
international instruments relating to arbitration: the
Model Law and the New York Convention. The
risk is that the exception established by the Court
will nonetheless provide an opening for parties
to interfere with arbitration proceedings by resort
to Mexican courts. Unless that risk is realized, it
may be hyperbole to suggest that the exception
constitutes an erosion of Mexico’s comparatively
strong pro-arbitration tradition.

17

International Disputes Quarterly—Focus on Arbitration in Latin America

Peru: Constitutional Court Rules on Arbitral Jurisdiction
A decision by the Peruvian Constitutional Court
reaffirms Peru’s commitment to arbitration as
an effective means of dispute resolution, further
consolidating a legal framework developed over
the past two decades. The court examined
the constitutional basis for arbitral jurisdiction
and explicitly recognized the autonomy and
independence of arbitral tribunals, holding that
arbitral jurisdiction is an essential element of the
Peruvian constitutional public order. Fernando
Cantuarias Salaverry, Decision of the Peruvian
Constitutional Court, February 28, 2006, EXP No.
6167-2005-PHC/TC, Part IV §1.
The petitioner, Mr. Cantuarias, was a member of
an arbitral tribunal in a dispute between two private
mining companies. He was challenged by one
of the parties to the arbitration and later charged
criminally for procedural fraud and related offenses
in connection with his functions as arbitrator.
Mr. Cantuarias filed a writ of habeas corpus that
was ultimately rejected by the Constitutional
Court. The court noted, however, that the criminal
proceedings instituted against Mr. Cantuarias
should not be used as an excuse to examine the
underlying claim submitted to arbitration, over
which the arbitral tribunal had jurisdiction.

18

The court also examined the role of arbitration in
the Peruvian legal system and recognized
that arbitration is an essential part of Peruvian
constitutional order. Arbitration is expressly
recognized by Article 139 of the 1993 Peruvian
Constitution and according to Article 63 of the
Constitution, the Peruvian State and its legal
entities are authorized to participate in arbitration
proceedings. The court also upheld the authority of
the arbitral tribunal by confirming the full applicability
of the principle of kompetenz-kompetenz and the
principle of non-interference.
The court sustained the independence of the
arbitral tribunal, holding that control of arbitral
decisions by judicial authorities should be
exercised exclusively ex-post, through the appeal
and annulment proceedings provided in the
General Arbitration Law, enacted in January 1996
(Law No. 26572). The court observed that
constitutional review of an award is not excluded
but should be limited to determining arbitrators’
potential disregard of constitutional jurisprudence
or procedural guarantees.

FALL 2007

Chile: Chilean Appellate Court Rules on Applicability
of International Arbitration Law
The Santiago Court of Appeals has upheld
the applicability of Chile’s law on international
commercial arbitration (Law No. 19,971,
the “International Arbitration Law”). Relying on
an analysis of retroactivity rules, the court held
that the International Arbitration Law (enacted in
September 2004 and based on the UNCITRAL
Model Law on International Arbitration) governs
the procedure of disputes arising from contracts
executed prior to its enactment, confirming at the
same time the limited role of judicial courts in the
conduct of arbitral proceedings. See D’Arcy Masius
Benton & Bowles Inc. (Chile) Ltda. c. Otero Lathrop
Miguel, Recurso de Hecho, Rol No. 865-2000,
Corte de Apelaciones de Santiago, Primera Sala,
May ���������
25, �����
2006.
The parties had entered into a share purchase
and shareholders agreement on May 12, 1996.
The agreement contained an arbitration clause
and sometime after the enactment of International
Arbitration Law, the parties submitted a dispute to
arbitration. On December 26, 2005, the arbitrator
ruled that, given that one of the parties was
domiciled in Paris, France (both at the time of the
contract and at the time of the dispute), the arbitral
procedure should be governed by the International
Arbitration Law. D’Arcy Masius Benton & Bowles
Inc. (Chile) Ltda. (“DMB&B”) requested the arbitrator
to reconsider and filed alternatively for an appeal.
The arbitrator denied both petitions and DMB&B
challenged that denial before the Santiago Court
of Appeals.
DMB&B argued that pursuant to the law on the
Retroactive Effect of the Laws (Ley de Efecto
Retroactivo de las Leyes, or “Retroactivity Law”),
legal provisions effective at the time of execution
of a contract should be deemed to be incorporated
in such contract. Thus, reasoned DMB&B, the

arbitration should be governed by the laws in
force at the time of execution of the agreement.
However, the Santiago Court of Appeals upheld
the arbitrator’s decision, pointing out that the
very same Retroactivity Law provided that laws
related to the filing of claims or to the conduct
of judicial proceedings are effective immediately
and are excepted from the rule cited by DMB&B
(although procedural deadlines and judicial acts
already commenced are subject to the laws in force
at the time of their commencement). In the court’s
view, only substantive legal provisions should be
deemed incorporated to contracts and should prevail
over laws enacted after the contract’s execution;
procedural laws, on the other hand, should not be
deemed incorporated to contracts and therefore
new laws governing procedure should prevail. The
court held that the International Arbitration Law is
procedural in nature and therefore it should apply
to all international arbitration proceedings from the
date of its entry into force.
The court also confirmed that the role of
domestic courts in international arbitration
proceedings is limited. Citing Article 5 of the
International Arbitration Law (which mirrors
Article 5 of the UNCITRAL Model Law), the
court emphasized that regarding matters governed
by the International Arbitration Law, court
intervention in arbitral proceedings is limited to
the situations specifically provided in that law.
Accordingly, the court held that the decision issued
by the arbitrator was not subject to appeal and
therefore the challenge brought by DMB&B should
be rejected.
The court’s unequivocal decision suggests that
Chilean courts may be likely to uphold Chile’s
new international arbitration framework when their
intervention is sought in arbitral proceedings.

19

International Disputes Quarterly—Focus on Arbitration in Latin America

Tips on Drafting Arbitration Clauses
Arbitration Clauses for Cross-Border Contracts
With Latin American Parties
Rafael Llano Oddone

There are three key considerations relevant to
drafting an arbitration clause for a cross-border
contract with a Latin American party. First, account
for procedural differences in relevant jurisdictions.
Failure to do so may ultimately impair access
to arbitration or frustrate procedural expectations.
Second, select a place of arbitration that will pose
the fewest obstacles to the proceedings and the
enforceability of the award. Finally, where the
contract will constitute a foreign investment for
purposes of investment treaties, the transaction
should be structured to ensure access to the
protections of such treaties.

Procedural Issues
Tip 1: Account for national laws requiring
mandatory submission agreements
Parties arbitrating in either Argentina or Brazil should
account for the requirement of a “compromiso”
(or post-dispute agreement to arbitrate).
In Argentina, the compromiso is mandatory in all
cases and cannot be waived, even if the parties
have a pre-dispute arbitration clause. Parties that
provide for ICC arbitration satisfy the requirement
of a compromiso through the Terms of Reference
envisaged in ICC procedure,9 but courts have
retained the ultimate authority to determine the
content of this document in case of disagreement
between the parties.10 The risk of judicial intervention
is therefore inevitable on extreme cases, but the risk

of procedural delays is diminished by agreeing to ICC
arbitration, which sets forth specific timeframes to
establish the Terms of Reference.
In Brazil, the compromiso is required only when
the constitution of the tribunal is not regulated
in a pre-dispute arbitration clause.11 To avoid this
requirement, parties should either provide for
a mechanism to appoint the tribunal in their
arbitration clause, or refer to institutional rules that
establish a default method for constitution.
Tip 2: Provide for application of the IBA Rules on
the Taking of Evidence
A provision requiring arbitrators to apply the IBA
Rules on the Taking of Evidence in International
Commercial Arbitration (1999) (“IBA Rules”)
is one way to overcome different assumptions
of parties regarding discovery. Procedural laws
in Latin American countries typically do not allow
for the common law practices of document
discovery and cross-examination of witnesses,
except under very limited conditions. In addition,
Latin American arbitrators are usually not agreeable
to strictly enforce a contractual provision for
US-style discovery or rules of evidence. The
IBA Rules provide for document production
(with certain limitations) and cross-examination, but
have nonetheless gained widespread acceptance
among Latin American arbitrators. They are
regarded as offering satisfactory solutions for both

9 See Article 18 of the Rules of Arbitration of the International Chamber of Commerce.
10 This rule was applied in the 2004 Yacyreta case, where a Buenos Aires district court determined that the Terms of Reference in an international
ICC arbitration comprised the requisite compromiso���������������������������������������������������������������������������������������������
�������������������������������������������������������������������������������������������������������
and stayed the proceedings, (seated in Buenos Aires), pending a decision on the merits of a
disagreement by the Argentine party as to the content of the Terms of Reference and various arbitrator challenges. See Entidad Binacional Yacyretá
v. Eriday et al., Case 26.444/04, Federal District Court of Buenos Aires, Decision of September 27, 2004.
11 See João Bosco Lee, Brazil, in N. Blackaby et al. (eds.), International Arbitration in Latin America (2002), pp. 70 – 72 (citing the 1999 decision by
the São Paulo Court of Justice in Renault do Brasil S.A. v. Carlos Alberto de Oliveira Andrade); Horacio Grigera Naón, Arbitration and Latin America:
Progress and Setbacks (2004 Freshfields Lecture), 21 Arb. Int’l 126, 150 – 51 (2005).

20

FALL 2007

civil and common law practitioners12 and have been
increasingly applied in arbitrations in the region.
Parties from common law jurisdictions interested
in preserving their rights to access documents
held by the other side and/or to cross-examine
witnesses, should therefore provide for the
application of the IBA Rules in their arbitration
clauses, particularly when they foresee that the
tribunal in a potential dispute will likely include
Latin American (civil law) arbitrators.

Seat of Arbitration
Central and South American countries remain largely
untested as places to hold major cross-border
arbitrations and their selection is not advisable for
non-Latin American parties. Despite the rise in the
number of Latin American arbitrations, statistics
reflect that parties engaged in complex deals in the
region still prefer to seat their arbitrations in one of the
established centers (e.g., New York, Miami, London
or Paris). The ICC, for example, heard approximately
110 Latin American cases annually between 2000
and 2005 and approximately 12 percent of its 2005
docket featured Latin American parties, but only
about 20 cases per year had a Latin American place
of arbitration. Of these, most were seated in Mexico
City, Buenos Aires and São Paulo.
Latin American Jurisdictions
Designated as Seats of
Arbitration, 2004 – 05
ICC

ICDR

Argentina

Brazil

Bolivia

Ecuador

Brazil

Mexico

Chile

Panama

Colombia

Paraguay

Costa Rica

El Salvador

Guatemala
Mexico
Uruguay
Venezuela

As the following set of tips will show, if a Latin
American forum will be selected, the main aspect
to consider is the attitude of the courts toward
arbitration in the selected jurisdiction, both as to
their intervention during the arbitration and the
enforcement of awards. Parties should, of course,
also factor in the location of assets of the other side
for purposes of enforcement, as well as their own
convenience, the location of potential witnesses
and documents and the availability of facilities (e.g.,
hotels, translators and stenographers).
Tip 3: Avoid, where possible, jurisdictions
with a record of judicial interference during
the proceedings
Judicial interference inevitably leads to added costs
of local litigation and jurisdictional battles and poses
a disadvantage for these jurisdictions as places
of arbitration. The principal form of intervention
in Latin America has occurred when courts,
rather than arbitrators, decided on the validity of
arbitration clauses. Most Latin American arbitration
laws recognize the power of arbitral tribunals to
rule on such issues (i.e., kompetenz-kompetenz),
but courts in certain countries, including Brazil and
Venezuela, have nevertheless stepped into the
jurisdiction of arbitrators.
Within Brazil, courts in the States of Paraná and
Rio Grande do Sul have displayed higher levels of
intervention, particularly in relation to arbitrations
against state entities. Two recent cases in Paraná
involving the electric utility Copel began with
injunctions against arbitrations held in Paris and
Brazil, respectively.13 The first case is pending before
an appellate court in that state and the second
injunction was reversed by that same court.14 Two
other arbitrations against the Paraná gas utility,

Source: ICC, ICDR

12 See, e.g., Michael Bühler and Carroll Dorgan, Witness Testimony Pursuant to the 1999 IBA Rules of Evidence in International Commercial
Arbitration—Novel or Tested Standards?, 17 J. Int’l Arb. 3, 3 – 4 (2000).
13 See Companhia Paranaense de Energia (COPEL) v. UEG Araucária Ltda., Third Court of Public Finances of Curitiba, Decision of March 15, 2004;
Companhia Paranaense de Energia (COPEL) v. Energetica Rio Pedrinho S.A., Second Lower Treasury Court of the State of Paraná, discussed
in Mauricio Gomm Ferreira dos Santos, Overview of and Update on Recent Developments and Trends in Arbitration in Brazil, in International
Arbitration 2007, Practising Law Institute (2007), at Vol. 1, pp. 377 – 80.
14 Companhia Paranaense de Energia (COPEL) v. Energetica Rio Pedrinho S.A., Court of Appeals of the State of Paraná, Decision of May 10, 2005.

21

International Disputes Quarterly—Focus on Arbitration in Latin America

Compagas and the Rio Grande do Sul electric
company CEEE, were initially enjoined by courts in
these states, but the stays were later overturned
at the appellate level.15 By contrast, courts in the
States of São Paulo and Rio de Janeiro have displayed
a pro-arbitration stance, making these locales
preferred places in which to hold an arbitration
in Brazil.
In Venezuela, the Supreme Court enjoined ICC
proceedings conducted in Miami in the 2004
Four Seasons case. It held that parties could
seek constitutional protection from the courts by
challenging the validity of the arbitration clause,
notwithstanding that the Venezuelan arbitration law
codifies the kompetenz-kompetenz principle and that
an arbitral tribunal had already ruled it had jurisdiction
over the dispute.16
Other instances of intervention have stemmed from
parties’ disagreements as to the manner in which
arbitrators or institutions managed the proceedings.
Such was the case with the 2004 Yacyreta decision
by an Argentine district court, which stayed an
international ICC arbitration seated in Buenos Aires
and opened the door to extensive litigation.17 The
court found jurisdiction to decide on whether the
Terms of Reference included all the necessary points
of the dispute and whether the ICC had properly
ruled on the respondent’s challenges against the
three members of the tribunal. Similarly, in July 2007,
an Argentine appellate court ordered the suspension
of an ICSID-administered ad hoc investment
arbitration brought by National Grid Transco against

Argentina and found jurisdiction to hear a dispute
concerning a challenge against an arbitrator.18
Tip 4: Avoid jurisdictions offering non-waivable
means of recourse
The principal treaties on enforcement of
arbitral awards, adopted almost without exception
in Latin America,19 permit denial of enforcement
where the award has been annulled or set aside in
the country of issuance. Parties should therefore
seek to limit the opportunities of challenge against
their awards and select a place of arbitration where
appeals and other means of recourse, are either not
afforded or may be waived. This does not apply to
the right to request the annulment of arbitral awards
(as distinct from challenges to the award on the
merits), because this right is typically not subject to
waiver, either in or outside Latin America.
As has been observed recently, non-waivable
challenges can bog down the enforcement of
awards for years in court litigation. For example,
Mexican law, which follows the UNCITRAL Model
Law, formally allows only annulment actions, but
a practice has developed whereby parties resort
to “amparo” proceedings, seeking constitutional
protection against adverse court rulings in such
annulment cases. This practice has resulted in
considerable extensions of post-award litigation.20
By contrast, both Colombian and Venezuelan courts
have held that constitutional actions may not be
used to challenge arbitral awards.21

15 See Gomm Ferreira dos Santos, supra note 5, at 377 – 80.
16 See Grigera Naón, supra note 3, at 153.
17 See Entidad Binacional Yacyretá v. Eriday et al., Case 26.444/04, Federal District Court of Buenos Aires, Decision of September 27, 2004.
18 See Investment Treaty News (July 31, 2007), available at http://www.iisd.org/investment/itn.
19 The 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), the principal instrument utilized
in cross-border enforcement of awards, has been ratified by every country in the American continent. Other treaties on the subject include the
1975 Inter-American Convention on International Commercial Arbitration (“Panama Convention”), ratified by all except four countries in the region
(Cuba, Dominican Republic, Haiti and Nicaragua) and sub-regional instruments, such as the MERCOSUR Protocol on Jurisdictional Cooperation and
Assistance in Civil, Commercial, Labor and Administrative Matters (“Las Leñas Protocol”), signed in 1992.
20 Claus von Wobeser, Mexico, in N. Blackaby et al. (eds.), International Arbitration in Latin America (2002), p. 188.
21 Regarding Colombia, see Corte Constitucional, Sentencia SU-174/07, Exp. T-980611, March 14, 2007 (discussed elsewhere in this issue).
As to Venezuela, see Grupo Inmensa C.A. et al. v. Soficrédito Banco de Inversión, C.A., Tribunal Superior de Justicia, Decision of May 23, 2001.
But see Grigera Naón, supra note 3, at 152 – 53 (suggesting that Venezuela has departed from its pro-arbitration attitude).

22

FALL 2007

Another example exists in Argentina, where
procedural law allows for waivers of appeals in
the compromiso, but the extent to which such
waivers will be upheld has become unclear. In its
June 2004 Cartellone decision, the Argentine
Supreme Court held that waivers were invalid when
issues of public policy are at stake.22 More recently,
in the 2006 Cacchione case, the high court affirmed
a waiver clause,23 but the survival of the public policy
exception remains uncertain.
Tip 5: Avoid jurisdictions prone to annul or overturn
arbitral awards
One of the most frequently used bases for
the annulment of awards is the violation of public
policy. To safeguard the integrity of their awards,
parties should avoid jurisdictions where the
concept of public policy is interpreted expansively,
or where the standards for vacatur are comparatively
easy to meet.
In Brazil, the highest civil court refused to enforce
an award in an international arbitration seated in
Brazil, finding that the absence of a written arbitral
agreement is contrary to Brazilian public policy.24
As mentioned above, São Paulo and Rio de Janeiro
courts have generally demonstrated a stronger
commitment to arbitration. Among other cases,
a São Paulo court refused to set aside an arbitral
award issued in New York in the CAOA case
and a Rio de Janeiro court dismissed annulment
proceedings based on the alleged failure of the
parties to agree on the limits of arbitral jurisdiction in
the arbitration clause (Doux case).25

In Argentina, the Cartellone decision appears
to have expanded the bases to vacate awards in
this jurisdiction. There, the Supreme Court stated
that an arbitral award may be overturned if found
to be “contrary to public policy, unconstitutional,
illegal or unreasonable.”26 This broad scope of review
was coupled with the Court’s invalidation, noted
above, of the parties’ waiver of appeals on public
policy grounds.

Investment Protection
Tip 6: Structure investments so as to gain access to
the arbitral jurisdiction established by international
investment treaties
Where a transaction will constitute a foreign
investment under bilateral or multilateral investment
treaties signed by the host state, investors should
structure the transaction (and their dispute resolution
provisions) to avail themselves of the rights offered
by those treaties. Most investment treaties, for
example, provide investors access to arbitration
venues to resolve disputes with host states,
including the International Centre for Settlement of
Investment Disputes (“ICSID”), ad hoc arbitration
(e.g., under UNCITRAL rules) or private institutions.
To gain access to treaty jurisdiction, investors must
be located in a state that has signed an investment
treaty with the host state, granting investors such
access. Companies from countries that have signed
few or no investment protection treaties (such
as Brazil and Colombia) may obtain protection of
their investments in other Latin American states or
elsewhere by structuring their investments through
other countries with which the host state signed
such a treaty. If a contract is entered into with the

22 See José Cartellone Construcciones Civiles S.A., Corte Suprema de Justicia Nacional, Decision of June 1, 2004. See also Grigera Naón,
supra note 3, at 161.
23 See Cacchione, Ricardo C. v. Urbaser Argentina S.A., Corte Suprema de Justicia Nacional, Decision of August 24, 2006.
24 See Oleaginosa Moreno Hermanos S.A. v/ Moinho Paulista Ltda., Superior Tribunal de Justiça, Decision of May 17, 2006. Commentators have
suggested that a broader concept of public policy may exist in Latin America regarding the enforcement of awards, so that the potential bases
for challenging enforcement of the award are increased. E.g., Carlos J. Bianchi, The Enforcement of Foreign Arbitral Awards in Latin America,
International Arbitration in Latin America Conference, April 25, 2007.
25 See Sergio Bermudes & Fabiano Robalinho Cavalcanti, Brazil: An Arbitration-Friendly Jurisdiction, LatinLawyer Online, posted on March 6, 2007.
26 See Cartellone, supra note 13. See also Grigera Naón, supra note 3, at 163-64 (suggesting that, on the facts of the dispute, the Court could have
reached the same conclusion on annulment grounds).

23

International Disputes Quarterly—Focus on Arbitration in Latin America

host state or state-owned entity, the arbitration
clause should preferably give the investor the option
to refer disputes to arbitration under the relevant
treaty or to an alternative arbitration forum. This will
clarify at the outset that the parties did not intend
to foreclose investment treaty arbitration in their
dispute resolution clause.
If the investor wishes to gain access specifically to
ICSID jurisdiction, it must either meet the location
requirement mentioned above, or sign a contract
with the host state (or state-owned entity) providing
for ICSID arbitration. In the latter case, the parties
should preferably also establish an alternative
arbitration forum, in case ICSID jurisdiction is denied,
which can happen if the parties do not meet other
jurisdictional hurdles under the ICSID Convention
(e.g., the definition of “investment”). The parties

may establish that the specific consideration to be
provided by the investor is deemed an investment for
purposes of the ICSID Convention. Such a provision
is advisable, but will not guarantee jurisdiction.
Host states that are not parties to the ICSID
Convention may still consent to ICSID jurisdiction
under the ICSID Additional Facility Rules, either in
a treaty or by contract with the investor. Two of the
main Latin American economies, Brazil and Mexico,
are not parties to the ICSID Convention and Bolivia
has recently announced its withdrawal.27 Arbitration
clauses in investment contracts with these countries
should refer to the Additional Facility Rules as well as
an additional default forum and may provide that the
ICSID Convention will apply if adopted by the host
state after the contract is signed.

Client Alerts: Recent Developments
in International Arbitration
§1782 Discovery in Aid of International Arbitral Proceedings
Rima Al-Mokarrab

On April 2, 2007, the US District Court for
the District of New Jersey granted discovery
under 28 U.S.C. §1782 in aid of an international
arbitration. Other circuit courts have held that
§1782 does not apply to private arbitrations.
The New Jersey court interpreted prior rulings
narrowly and permitted a party to a foreign
investor-state arbitration to obtain testimony and
documents from a non-party. 28 Taken with other
recent developments, §1782 may increasingly
permit parties to import US-style discovery into
international arbitral proceedings.

Discovery Under 28 U.S.C. §1782
§1782 gives federal courts discretion29 to
grant discovery “for use in a proceeding in a
foreign or international tribunal” if, among other
requirements, the target of discovery “resides or
is found” in the US district in which the application
for discovery is made and the request for discovery
is made by the foreign or international tribunal or
“any interested person.”
Historically, §1782 was not often invoked in
aid of international arbitration. The Second and
Fifth Circuits have ruled that a private international

27 Other non-parties are Suriname, Belize, Dominican Republic and Haiti.
28 In re Oxus Gold plc, MISC No. 06-82-GEB, 2007 WL 1037387 (D.N.J. Apr. 2, 2007).
29 Intel Corp. v. Advanced Micro Devices Inc., 124 S.Ct. 2466, 2483 (2004) (emphasizing that application of § 1782 is discretionary and listing four factors
to be considered in exercising this discretion).

24

FALL 2007

commercial arbitral tribunal is not a “tribunal”
under §1782. 30 In its 2004 Intel Corp. decision,
the US Supreme Court’s broad interpretation
of “tribunal” laid the groundwork for change. 31
The Court found that the European Commission is
a “tribunal” under §1782 because the EC Director
General for Competition acts as a first-instance
decision maker and resembles an adjudicatory
administrative agency.

Discovery for Use in Public
International Arbitration
The dispute in Oxus 32 arose between Oxus Gold,
PLC, an international mining group based in the UK
and the Kyrgyz Republic. The Kyrgyz government
had granted a license for the development of
a gold deposit in Kyrgyzstan to a joint venture
company created by affiliates of Oxus Gold and
the Kyrgyz state. Upon cancellation of the license,
Oxus Gold initiated an arbitration against Kyrgyzstan
for unlawful and discriminatory conduct in violation
of the UK-Kyrgyz BIT. Oxus Gold also filed an
ex parte application with the New Jersey district
court, seeking documents and testimony from
Mr. Jack A. Barbanel, a non-party to the arbitration
who likely possessed important evidence and
who was “found” in New Jersey within the meaning
of §1782. 33
The New Jersey district court upheld an order
permitting Oxus Gold to obtain discovery from
Mr. Barbanel. The court did not specifically
invoke Intel Corp.’s reasoning, based on firstinstance decision making and resemblance to

an adjudicatory administrative agency. Instead,
the court distinguished Oxus, involving a public
international arbitration, from Second and Fifth
Circuit jurisprudence, which addressed private
arbitrations. 34 The Oxus arbitration was administered
by a tribunal constituted under UNCITRAL rules and
conducted pursuant to the UK-Kyrgyz BIT. This
BIT “specifically mandates that disputes between
nationals of the two countries would be resolved
by arbitration governed by international law… [and
the arbitration] is thus being conducted within
a framework defined by two nations.”35 In this
context and given the Supreme Court’s broad
interpretation of “tribunal” in Intel Corp., the court
found that the UNCITRAL tribunal in Oxus was a
“tribunal” under §1782.
The court did not address whether §1782 applies to
private arbitrations. The question remains open in
the Third Circuit.

Discovery for Use in Private International
Commercial Arbitration
The Eleventh Circuit is poised to review Roz
Trading,36 in which a Georgia district court upheld
an order granting discovery for use in a private
international commercial arbitration. Roz Trading
followed the Intel Corp. and Oxus approach of
interpreting “tribunal” broadly, but went even
further than Oxus. The court interpreted Intel
Corp. to invalidate prior Second and Fifth Circuit
jurisprudence and to mandate a broad interpretation
of §1782. 37

30 See Nat’l Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999) (legislative history of § 1782 did not contemplate that it would apply to
private international arbitral tribunals); Republic of Khazakstan v. Beidermann Int’l, 168 F.3d 880 (5th Cir. 1999) (§ 1782 was not intended to apply to
private international arbitral tribunals).
31 Intel Corp., 124 S.Ct. at 2479 (the Court cited an article by Hans Smit stating that “the term tribunal … includes … administrative and arbitral
tribunals …”) (emphasis added) (citations omitted).
32 In re Oxus Gold plc, 2007 WL 1037387, at *1.
33 Id. at *4 (Barbanel resides in Moscow but leases an apartment in New Jersey and travels there regularly).
34 See supra note 3.
35 In re Oxus Gold plc, 2007 WL 1037387, at *5.
36 In re Roz Trading Ltd., 469 F.Supp.2d 1221 (N.D.Ga. Dec 19, 2006).
37 Id. at *1 n.1 (the court explicitly rejects any interpretation of Oxus that might preserve a distinction between public and private arbitral tribunals,
a distinction which is not found in the text of § 1782).

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International Disputes Quarterly—Focus on Arbitration in Latin America

If other US circuits follow Oxus and Roz Trading,
assuming the latter is affirmed on appeal, parties to
foreign international arbitrations may have access
to broad US-style discovery. Such access raises
concerns of party autonomy, especially where US
discovery is imported into arbitrations that have
no connection to US law. Restraint in the use
of §1782 in international arbitral proceedings will

ultimately depend on US courts. Even in the Third
and Eleventh circuits, Oxus and Roz Trading will
not guarantee discovery in all instances, since the
application of §1782 is discretionary.38 However,
in the face of uncertainty, it is likely that §1782
applications will increase, as will forum shopping
for arbitration-friendly venues.

Revised Arbitration Rules of the Arbitration Institute
of the Stockholm Chamber of Commerce

Johan Berg

The Arbitration Institute of the Stockholm
Chamber of Commerce (“the SCC Institute”) has
adopted new arbitration rules, which entered into
force on January 1, 2007 and will be applied to
any arbitration commenced on or after January 1,
2007, unless otherwise agreed by the parties. The
new rules update the former version (adopted in
1999), with the intention of making the rules more
accessible to international users.
A number of the changes to the Rules are of
a structural or linguistic character, for example,
changing ”Place of Arbitration” to the more technical
”Seat of Arbitration.” One of the most important
substantial changes, is the new Article 11, which
now includes a provision on consolidation. Upon the
submission of a Request for Arbitration concerning
a legal relationship in respect of which an arbitration
between the same parties is already pending under
the Rules, the Board of the SCC Institute may, at
the request of a party, decide to include the claims
contained in the Request for Arbitration in the
pending proceedings. Such decision will, however,
only be made after consulting the parties and the
Arbitral Tribunal. The former Rules do not contain
any such provision on consolidation.

the former Rules stated that, if the Arbitral Tribunal
consisted of a sole arbitrator, he should be appointed
by the SCC Institute, the new Rules state that the
parties are given 30 days within which they have
the opportunity to jointly appoint the arbitrator. If
the parties fail to make the appointment within the
aforementioned time period, the arbitrator shall
be appointed by the Board of the SCC Institute. It
should also be noted that the parties are free to
agree on a different procedure for the appointment
of the Arbitral Tribunal than that provided for
under the Rules (Article 13(1)).
Another significant change of the provisions
on appointment of arbitrators is in cases where
there are multiple claimants or respondents and
the Arbitral Tribunal is to consist of more than one
arbitrator. If so, the multiple claimants, jointly and
the multiple respondents, jointly, shall appoint an
equal number of arbitrators. This was also the case
with the former Rules. However, in contrast to the
former Rules, if either side fails to make such joint
appointment, the Board of the SCC Institute shall
appoint the entire Arbitral Tribunal (Article 13(4)).
The reason for this change is to avoid the risk that
a national court should consider the appointment of
arbitrators as unfair and quash the award.

The revision of the Rules has also led to changes
regarding the appointment of arbitrators. Whereas

38 E.g., courts may consider factors such as whether the movant sought permission first from the arbitral tribunal.

26

FALL 2007

Pursuant to the revised Rules, in the case of
a challenged arbitrator, the arbitrator shall
resign if the other party agrees to the challenge
(Article 15(4)). The procedure under the former
Rules (i.e., decision by the Board of the SCC
Institute) shall be applied in all other cases. Another
new feature is the provisional timetable, intended
to increase the efficiency of the proceedings
(Article 23). After the referral of the case to the
Arbitral Tribunal, the Arbitral Tribunal shall promptly
consult with the parties in order to establish a
provisional timetable for the proceedings.
Additionally, various provisions on evidence have
been rewritten. The new Rules expressly state
that the admissibility, relevance, materiality
and weight of evidence shall be for the Arbitral
Tribunal to determine. It is also stated that, at the
request of a party, the Arbitral Tribunal may order a
party to produce any documents or other evidence
which may be deemed relevant to the outcome of
the case.
There is also a new provision which provides
that the Arbitral Tribunal may, at the request of a
party, grant any interim measures that it deems

appropriate (Article 32). An interim measure may
take the form of an order or an award. This should
also be in line with UNCITRAL’s Model Rules on
interim measures.
The Swedish Arbitration Act does not include
any basic rules on the confidential nature of the
proceedings and the Swedish Supreme Court
recently ruled that the parties do not incur any duty
of confidentiality sanctioned by liability in damages.
Nor are the parties’ legal representatives or the
arbitrators under any legal obligation to maintain
secrecy concerning the dispute according to the
Swedish Arbitration Act, although the consensus
view is that arbitrators shall observe discretion
about the arbitral proceedings. The new Rules,
however, stipulate that the SCC Institute and
the Arbitral Tribunal, appointed under the Rules,
shall maintain the confidentiality of the arbitration
and the award, unless otherwise agreed by the
parties (Article 46).
The revision of the Rules is hoped to further
strengthen the SCC Institute and Stockholm as
an attractive location for future domestic and
international arbitration proceedings.

What Our Practitioners Are Saying
Paul Friedland, New York,
on Most-Favored-Nation Clauses
and the Energy Charter Treaty
On May 18,��
�����
2007, Paul Friedland, Partner,
New York, spoke at the Conference on Investment
Protection and the Energy Charter Treaty (ECT)
in Washington, DC. In a session focused on
selected standards of treatment under the ECT
(moderated by Charles N. Brower and co-paneled
by Christoph H. Schreuer and William W. Park),
Friedland discussed the application of the MostFavored-Nation (MFN) standard of treatment
to disputes arising under BITs and the ECT. In
examining whether more favorable dispute
resolution arrangements in a treaty between the
state and a third party can be imported into

the treaty between the state and the arbitration
claimant via the MFN clause, Friedland identified
two distinct approaches adopted by arbitral
tribunals: the “Maffezini Approach” and the “Salini/
Plama Approach.” Friedland suggested that, in
considering these different approaches, drafting
distinctions account for some, but not all, of
the outcomes of the awards. Rather, Friedland
proposed that, where the measure sought to be
imported into the basic treaty, touches upon the
admissibility of the claim (where, e.g., the basic
treaty contains a pre-condition that the investor
submit its claim to local courts for a certain period
of time before resorting to arbitration and the more
favorable treaty contains no such pre-condition),
the more favorable treaty’s provision will fall within

27

International Disputes Quarterly—Focus on Arbitration in Latin America

the scope of the MFN clause. Where, however,
the measure sought to be imported into the basic
treaty touches upon the issue of jurisdiction (i.e.,
where, e.g., the basic treaty contains no reference
to ICSID and the more favorable treaty does), the
more favorable treaty’s provision will not fall within
the scope of the MFN clause.
Following an examination of the MFN treatment
standard as incorporated in various provisions of
the ECT, Friedland concluded that, although the
issue of importing more favorable dispute resolution
mechanisms via MFN clauses is much alive in
investment treaty arbitration, given the investorfriendly nature of the dispute resolution provisions
in the ECT, it is unlikely that an investor will seek to
import the benefits of some other dispute resolution
arrangement into the ECT.

Thomas Heather, Mexico City,
on Cross-Border Insolvency
Arbitration in Latin America
Thomas Heather, Partner, Mexico City, was
appointed as a delegate by the International
Insolvency Institute and participated in the working
group sessions of the United Nations Commission on
International Trade Law (UNCITRAL). The sessions
were held at the UN Headquarters in New York from
May 14 to May 16, 2007. Heather discussed the
possible use of arbitration as a means to address
cross-border insolvencies and argued this could be
particularly effective in Latin America, given a lack of
specialization in national courts.

28

Andrew McDougall, Paris,
on Parallel Arbitration Proceedings
Andrew McDougall, Partner, Paris, spoke on
“Parallel arbitral proceedings in related matters:
their impact on the arbitral proceedings” at a Young
Arbitration Practitioner’s conference in Brussels on
May ��������������������������������������������
4, �����������������������������������������
2007. This speech dealt with two or more
overlapping arbitrations in related matters, noting
that the same issues arise where two or more
arbitrations do not overlap, but concern related
matters. Real-life examples were given to show
six different ways in which such arbitrations can
arise: (1) horizontal disputes; (2) vertical disputes;
(3) same groups of companies, different contracts;
(4) same parties, different contracts; (5) same
parties, same contract and (6) investment disputes.
The impact on the arbitral proceedings was discussed
in the context of jurisdictional, substantive and case
management issues. In particular, lis pendens and
res judicata were discussed, as were the 2006
Reports of the International Law Association’s
International Commercial Arbitration Committee on
these two subjects. The increasing complexity of
contractual arrangements and legal rights and, thus,
the increasing complexity of disputes were among
the reasons given for more parallel proceedings. The
advantages of considering the issues arising from
parallel arbitrations in advance and being prepared
for different eventualities were highlighted.

FALL 2007

Practitioner Appointments, Practitioner Recognition and
Selected White & Case International Arbitration Events
Practitioner Appointments
Ank Santens (New York) has been appointed to the
International Commercial Disputes Committee of
the New York City Bar.
Eckhard Hellbeck (Washington, DC) has been
appointed to Corresponding Editor to International
Legal Materials, a bi-monthly publication of
The American Society of International Law.
Alexander Lütgendorf (London) has been appointed
to the ICC Commission on Arbitration Task Force
on National Rules of Procedure for Recognition and
Enforcement of Foreign Awards.

Practitioner Recognition
White & Case was named International Arbitration
Team of the Year at the Chambers USA
Awards 2007 and was ranked Tier One by
The American Lawyer 2007, Chambers USA 2007
and Legal 500 USA 2007. PLC Which Lawyer? 2007
gives White & Case a “Highly Recommended” rating
nationally and in New York and Washington, DC
for Dispute Resolution/Arbitration.
White & Case recently achieved a major victory
for the Republic of the Phillippines in Fraport AG
Frankfurt Airport Services Worldwide v. Republic of
the Philippines (ICSID Case No. ARB/03/25). The
Tribunal dismissed the case for lack of jurisdiction.
Stephen Bond (Paris) and Christopher Seppälä
(Paris) were named as leading arbitration counsel by
Chambers Europe 2007. Stephen Bond, Christopher
Seppälä and Michael Polkinghorne (Paris) were
individually noted in the Legal 500 EMEA 2007.

Carolyn Lamm (Washington, DC) has been named
by The National Law Journal as one of the 50 Most
Influential Women Lawyers in the US (2007).
Paul Friedland (New York) has recently published
the second edition of his book, Arbitration Clauses
for International Contracts (Juris Publishing).

A Selection of White & Case
International Arbitration Events
Michael Polkinghorne, Paris, gave a three-day
seminar on upstream oil and gas agreements,
organized by UNI (Universal Network Intelligence) in
Cairo from August 28 to August 30, 2007.
Christopher Seppälä, Paris, participated in a panel
on August 31, 2007, discussing “Best Practices
in International Construction Contracts” at a
conference on International Construction Projects
organized by the International Bar Association in
Rio de Janeiro, Brazil.
Jonathan C. Hamilton, Washington, DC, is chairing a
panel on “The Efficacy of Latin American Investment
Arbitration” at the New York State Bar Association
International Law and Practice Section Conference,
September 24 to September 29, 2007, in Lima, Peru.
Abby Cohen Smutny, Washington, DC, will speak at
the ICC Annual Conference entitled “International
Commercial Arbitration in Latin America: The ICC
Perspective.” The Conference is being held in
Miami from November 4 to November 6, 2007.
Christopher Seppälä, Paris, will chair the first day
of an ICC/FIDIC Conference on January 24, 2008
addressing “International Construction Disputes”
being organized by the ICC in Monte Carlo.

29

International Disputes Quarterly—Focus on Arbitration in Latin America

White & Case—Worldwide
If you have any comments or questions regarding this newsletter or any of the matters discussed herein,
please contact any of the following members of the International Dispute Resolution Group:

New York
Paul D. Friedland
John S. Willems

Washington, DC
Jonathan C. Hamilton
Carolyn B. Lamm
Darryl Lew
Abby Cohen Smutny
Frank Vasquez

Paris
Stephen R. Bond
Andrew de Lotbinière McDougall
Michael Polkinghorne
Philippe C. Sarrailhé
Christopher R. Seppälä

London
Ellis Baker
John Bellhouse
Alistair Graham
John Higham QC
Kathleen Paisley
Aloke Ray
Jason Yardley

Stockholm
Bengt Åke Johnsson
Olof Ragmark
Anders Relden
Claes Zettermarck

Moscow
Igor Ostapets

Hong Kong
Kim M. Rooney

Mexico City
Thomas S. Heather

30

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FALL 2007

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