New International Commercial Arbitration Law in Argentina

On July 4, 2018 the House of Representatives gave a final sanction to the draft Law on International Arbitration, which had already been approved by the Senate on September 7, 2017, thus creating a new legal framework for the resolution of international commercial conflicts in Argentina. The bill was approved by 141 votes in favor, none against and 71 abstentions.

The Law is essentially based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration as amended in 2006, with some significant modifications.

Background of a ‘key milestone’ in the arbitration legal framework of Argentina

The UNCITRAL Model Law is a legislative guide created by said body of the United Nations, with the aim of harmonizing and improving national laws in line with global ones. The text is not mandatory and is addressed to the legislators of each State, who will decide on the convenience of incorporating it into the internal law on matters of arbitration, in whole, in part or with modifications. As specified in its Explanatory Note, the Model Law was developed "to address considerable disparities in national laws on arbitration" in the interest of those who resort to international commercial arbitration as a method of conflict resolution, fundamentally foreign parties and their lawyers.

Prior to the enactment of this new International Commercial Arbitration Law, many other similar bills were proposed in Argentina that also tried to incorporate the Model Law into our legal system – either for local or international arbitrations. However, for different reasons, these legislative drafts did not move forward in their legislative treatment and did not reach Congress.

This scenario was radically altered as from the political decision of the current Government to modernize Argentine legislation, with the aim of including Argentina in global trade and fostering a pro-business climate for investors in the country. As established by the recitals of the bill proposed by the Argentine Executive Branch, the International Commercial Arbitration Law constitutes a determining step in that direction, as "it will place the country [Argentina] within the countries that respect rule-of-law, which will also allow foreign investors to have a fundamental tool with which they can, in their case, assert their rights, giving priority to the principle of party autonomy".

The background of the International Commercial Arbitration Law goes back to 2016, the year of creation of the "Justice 2020" Program promoted by the Argentine Ministry of Justice and Human Rights with the purpose of "achieving a complete transformation of the institutions of Justice". This program is a tool to fulfill the institutional goals included in the New Global Agenda for Sustainable Development that the United Nations (UN) adopted in 2015. Within this framework, a working group was formed, comprising prominent academics, judges, lawyers, arbitrators and citizens to discuss the incorporation of the new regulation on arbitration in Argentine legislation.

Since its first version issued in 1985, more than 75 States have based their arbitration legislation on the UNCITRAL Model Law. This extensive list includes leading nations in the development of arbitration as a mechanism for resolving conflicts, such as Germany, the United Kingdom, and includes several jurisdictions in the United States and Canada. In Latin America, all the main countries of the region already had arbitration laws inspired on the Model Law, with the exception of Argentina and Uruguay, which is also moving forward in adopting. However, only Peru and Costa Rica had taken the Model Law in its 2006 version, a select group which Argentina is now part of.

 

Outstanding provisions

The International Commercial Arbitration Law adopts the main principles in modern comparative legislation that regulate international arbitration. Throughout its 110 articles, the law regulates – among other aspects –the arbitration agreement, its form and autonomy, the constitution and competence of the arbitral tribunal, the issuance of precautionary measures and preliminary orders, the arbitration procedure, interaction with the judicial courts in evidentiary issues, the rendering of the arbitral award, requests for correction and interpretation of the award, termination of the proceedings, recourses against the arbitral award, and the provisions applicable to its recognition and enforcement.

In accordance with Sections 1 to 3, the scope of application of the Law will be limited to those international commercial arbitrations whose arbitral seat is located within the territory of the Argentine Republic. In this way, domestic arbitration will continue to be governed by local procedural rules – the Argentine Civil and Commercial Procedure Code, in the City of Buenos Aires and the federal jurisdiction of the rest of the country - and the provisions of the Argentine Civil and Commercial Code that regulate the Arbitration Contract, in force since 2015.

The International Commercial Arbitration Law establishes that an arbitration will be considered as “international” if:

1. the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; or
2. the place of arbitration or any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is more closely connected, are outside the State in which the parties are located.

These provisions on the scope of application of the new Law provide a substantial difference in the text of the UNCITRAL Model Law that allows assigning an international status to arbitration if "the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country".

Likewise, any legal relationship, whether contractual or not, that is private or predominantly governed by Argentine private law, must be deemed commercial; the interpretation is broad and in case of doubt, it must be judged that it is a commercial relationship.

Among the main provisions of the International Arbitration Law, the following should be highlighted:
 

• The arbitration agreement, through which the parties decide to submit to arbitration some or all disputes regarding a certain legal relationship, may take the form of an arbitration clause included in a contract or form an independent agreement.
• In addition, the agreement must be in writing. Said formal requirement is deemed fulfilled when the content of the agreement is recorded in any way, even by means of an electronic communication if the information entered in it is accessible for further consultation. However, unlike the UNCITRAL Model Law, the International Commercial Arbitration Law does not provide that the arbitration agreement may be recorded "orally, by conduct, or by other means."
• The parties may freely determine the number of arbitrators and the procedure for their appointment. In the case of no comment, the arbitral tribunal must be constituted of three arbitrators appointed in accordance with the procedure established in the Law.
• Pursuant to the well-known "kompetenz-kompetenz" principle, the arbitrators will decide on their own competence, “even on the exceptions relating to the existence or validity of the arbitration agreement". Likewise, the Law also establishes the autonomy of the arbitration clause, by which the nullity of the contract will not entail ipso iure the nullity of the arbitration clause contained therein.
• The arbitration procedure may be freely determined by the parties, although maintaining the guarantees of equality of the parties and their full opportunity to assert their rights.
• The arbitration award must be motivated, in writing and signed by the arbitrator or the intervening arbitrators. The possibility provided by the Model Law regarding the award being documented orally, by the conduct of the parties or by other means is not foreseen.
• The arbitral award may only be challenged through a "request for annulment" based on any of the grounds provided in Section 99 and 100 of the Law. Such request must be submitted within 30 days from the date of receipt of the award. This provision constitutes a substantial difference with respect to the provisions of the Argentine Civil and Commercial Procedural Code, where Section 759 provides that the remedy of nullity against the award must be filed within a much shorter period of 5 days. Even so, the term provided by the new International Commercial Arbitration Law is shorter than that of the Model Law, which provides that "an application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the award."
• Regarding the recognition and enforcement of the award, the Law provides that an arbitral award, regardless of the country in which it was issued, will be enforceable and recognized as binding, unless one of the grounds for denying recognition of the award, provided by the Law itself, is verified.

Finally, the International Commercial Arbitration Law also provides for the repeal of Section 519 bis of the Argentine Code of Civil and Commercial Procedure, which used to regulate the local execution of awards pronounced by foreign arbitral tribunals.

 

Preliminary conclusions

The enactment of International Commercial Arbitration Law constitutes a turning point in this matter for Argentina. Until a few years ago, arbitration in Argentina was only legislated by long-standing and largely out-of-date local procedural codes.

This new legislation should not be analyzed in isolation, but within the framework of several initiatives aimed at strengthening the development of arbitration in Argentina as a means of resolving commercial disputes, initiated with the enactment of the Argentine Civil and Commercial Code in 2015 that, for the first time, provided rules on arbitration within a code of substance with national scope. Arbitration, as a mechanism for resolving conflicts, in special regimes, such as the Renewable Energy Regime (created by Decree No. 882/2016) and the Public-Private Participation Contract Regime (created by the Law No. 27,328 and Decree No. 118/2017) should also be mentioned. Moreover, other legislative projects are being considered to improve the regulations on arbitration established in the above mentioned Argentine Civil and Commercial Code and in the Argentine Civil and Commercial Procedure Code.

According to the Argentine Minister of Justice and Human Rights, Dr. Germán Garavano, the Law represents "a fundamental milestone in strengthening institutionality, predictability and resolution of disputes quickly and at a low cost" that will contribute to "progress of society and economic and social development". This initiative has also received praise from the President of the International Court of Arbitration of the International Chamber of Commerce (ICC), Alexis Mourre, who described the Law as "very important for the development of arbitration in Latin America."

In the context of increasing globalization and international commercial contracting, arbitration provides a method of conflict resolution that offers rule-of-law, a key tool for attracting foreign investments. The International Commercial Arbitration Law js a key advance in that matter which benefits the development of arbitration and contributes to the positioning of Argentina as a venue for international disputes.