i Structure of the law
Argentina is a federal republic, with both federal and provincial levels of political organisation. While substantial provisions (such as civil and commercial law) are enacted by the Federal Congress and are applicable to the whole nation, rules of procedure are passed by the legislative branch of each province.2
Until 2015, arbitration proceedings were exclusively governed by the procedural codes of each jurisdiction. The National Code of Civil and Commercial Procedure (NCCCP)3 governed arbitration proceedings seated in the city of Buenos Aires, and several provincial procedural codes contained similar provisions to that regulation.
In 2015, the National Civil and Commercial Code (NCCC)4 entered into force: since then, it regulates arbitration agreements whose provisions are applicable to all jurisdictions.
On 4 July 2018, Law No. 27,449 on International Commercial Arbitration (ICAL) was enacted. The ICAL mostly adopts the UNCITRAL Model Law on International Commercial Arbitration (UNCITRAL Model Law), as amended in 2006, and regulates the international commercial arbitration proceedings.
Thus, while at a domestic level arbitration proceedings are regulated by the NCCC (as a unique set of substantial rules applicable to all jurisdictions) and the procedural codes (for procedural matters) of each jurisdiction, international commercial arbitration proceedings are exclusively regulated by the ICAL.
Neither the NCCC nor the ICAL are applicable to disputes to which the state is a party. Hence, this matter is left to special laws, international treaties and conventions.
Finally, Argentina is a party to:
- the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards;5
- the 1965 Washington Convention on the Settlement of Investment Disputes Between States and National of Other States;6
- the 1975 Inter-American Convention on International Commercial Arbitration;7 and
- the 1979 Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards.8
ii Structure of the judicial courts
Due to the federal political organisation established in the Argentine Constitution, the judicial system in Argentina is divided into federal and provincial courts. Generally, both judicial systems have lower courts, courts of appeal and a supreme court. The Federal Supreme Court of Justice of Argentina is the highest judicial authority.
There are no specialised judicial courts for arbitration matters. Regarding proceedings related to commercial arbitration, both local and federal courts have jurisdiction over their respective fields.
According to the ICAL, assistance in arbitral proceedings will be provided by lower courts, while decisions on annulment applications will be rendered by the court of appeals on commercial matters of the arbitration seat.9
iii Local institutions
The main local arbitral institutions are the General Arbitral Tribunal of the Buenos Aires Stock Exchange, the Centre for Mediation and Commercial Arbitration of the Argentine Chamber of Commerce, the Arbitral Chamber of the Buenos Aires Cereal Exchange and the Business Centre for Mediation and Arbitration (CEMA).
The General Arbitral Tribunal of the Buenos Aires Stock Exchange's Rules on Arbitration have been in force since 1993, and deal with both domestic and international arbitrations. The General Arbitral Tribunal is composed of three permanent arbitrators who are appointed by the board of the institution.10
The Centre for Mediation and Commercial Arbitration of the Argentine Chamber of Commerce offers both mediation and arbitration services, specialising in business matters. It provides a list of arbitrators who have significant expertise in both the business and arbitration field.11 However, parties can appoint arbitrators out of the list provided by the Centre.12
The Arbitral Chamber of the Buenos Aires Cereal Exchange provides conciliation, mediation and arbitration services with permanent arbitrators that solve disputes concerning the grain trade and other agricultural products.13
The CEMA was established in 1997 and provides both mediation and arbitration services.14 The CEMA adopted the UNCITRAL Arbitration Rules (as revised in 2010).15 Unless otherwise agreed by the parties, the arbitral tribunal shall be composed of three members (one designated by each party and the third by the two chosen arbitrators). Although the CEMA has its own list of arbitrators, the parties may appoint arbitrators out of it.
With respect to institutional arbitrations for international disputes, the most frequently used arbitral institution and rules are those of the International Chamber of Commerce.
iv Arbitration statistics
There are no general statistics available on the number of arbitrations promoted in Argentina. Nevertheless, arbitration as a dispute resolution mechanism has become more common in the past few decades and has been increasingly used in recent years as a mechanism of dispute settlement.
ii THE YEAR IN REVIEW
During the past year there have been significant developments in the field of international arbitration in Argentina, including the enactment of the ICAL, and some relevant decisions rendered by the Argentine judicial courts are worth mentioning.
i Developments related to international arbitration
One of the most significant developments concerning international arbitration was the enactment of the ICAL, which follows the UNCITRAL Model Law with some minor differences (most of them of a non-substantial nature).
Scope of application
The ICAL regulates international commercial arbitration exclusively, without prejudice to any multilateral or bilateral treaty executed by Argentina.16 It applies when a city of Argentina is the seat of arbitration with the following exceptions:17 the obligation of the courts to refer the dispute to arbitration if there is an arbitration agreement, unless it is null and void, inoperative or incapable of being performed;18 interim measures;19 and the recognition and enforcement of arbitral awards.20
For an arbitration to be considered international, the ICAL adopts the general criteria set forth in Article 1(3) of the UNCITRAL Model Law, although excluding its Item (c), according to which 'the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country'.21
Accordingly, an arbitration is considered international under the ICAL when the parties to an arbitration agreement have, at the time of the execution of that agreement, their places of business in different states, or 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 most closely connected, is situated outside the state in which the parties have their places of business.22
The parties' autonomy restriction is explained by the need to adapt the ICAL to the NCCC's mandatory regulation on prorogatio fori, which states that the parties are authorised to extend jurisdiction on pecuniary and international matters to judges or arbitrators outside of Argentina, except for cases in which the Argentine courts have exclusive jurisdiction or when the extension of jurisdiction has been prohibited by law.23
Notwithstanding the latter restriction, the ICAL endorses a broad interpretation of the commercial nature of the arbitration, considering as commercial any relationship, contractual or not, completely or mostly governed by private law. It further states that, in cases of doubt, the commercial characterisation of the relationship should prevail.24
Articles 14 to 20 of the ICAL regulate the formal aspects of the arbitration agreement. Under these provisions, the arbitration agreement must be executed in writing,25 which includes cases when:
- it is made by an electronic communication between the parties;26
- it is contained in an exchange of statements of claim and defence in which the existence of the agreement is alleged to by one party and not denied by the other;27 or
- consists of a reference made in a contract to any document containing an arbitration clause, whenever the reference is such as to make that clause part of the contract.28
Article 5 of the ICAL reproduces Article 1(5) of the UNCITRAL Model Law; thus, it refers the arbitrability provisions to those established under Argentine law.
Articles 1649 and 1651 of the NCCC and Article 737 of the NCCCP state which matters can be submitted to arbitration.
In accordance with the NCCCP, a dispute can be submitted to arbitration provided that it relates to a transactional matter. Further, the NCCCP provisions on arbitration agreements will be applicable to disputes in which no public policy is compromised.29
Further, pursuant to the NCCC, the following are non-arbitrable matters:
- disputes that refer to the civil status or capacity of persons;
- family affairs;
- disputes involving the rights of users and consumers;
- adhesion contracts; and
- labour relationships.
Regarding subjective arbitrability, the NCCC does not have any special regulation. Consequently, general civil law regulations will be applicable to determine the legal capacity needed to enter into an arbitration agreement.
Generally, any person is legally capable under the law to hold rights and to assert his or her rights on his or her behalf, except for the limitations that the law imposes or when a judicial decision imposes any incapacity.30 In particular, parties to an arbitration agreement must have reached – at least – the age of 18, and enjoy the full exercise of their civil rights.
Arbitration with the state
Concerning arbitration with the state, the NCCC expressly excludes the application of its provisions to disputes to which the state, local states or state entities are parties.31 Hence, the matter is left to special laws and the applicable international treaties and conventions.
Article 1 of the NCCCP authorises the prorogatio fori in favour of foreign arbitral tribunals or state courts exclusively on pecuniary international matters, regardless of whether the parties consented to jurisdiction before or after a dispute arose. In addition to those requirements, Argentine courts should not have exclusive jurisdiction over the matter at issue,32 and the extension of jurisdiction in the case shall not be prohibited by law.33
The ICAL follows the basic principles of international arbitration present in modern legislation and in the main regulations of the most well-recognised arbitration institutions, such as the Kompetenz-Kompetenz principle,34 parties' autonomy,35 separability of the arbitration clause and equality of arms.
Interim measures and preliminary orders
Articles 38 to 55 of the ICAL regulate the power of the arbitral tribunal to order interim measures.36
The ICAL partially modifies Article 17.G of the UNCITRAL Model Law, establishing that the party requesting an interim measure or applying for a preliminary order shall be liable for any costs and damage caused by the measure or the order to any party if the arbitral tribunal later determines that, in said circumstances, the measure or the order should not have been requested (instead of granted).37
The ICAL also contains specific provisions on the recognition and enforcement of interim measures.38
The judicial court competent for the recognition and enforcement of interim measures is the court of appeals on commercial matters in the seat of the arbitration.
Recourse against an award
The ICAL sets forth a 30-day term to submit a request to set aside an award.39 This provision departs from Article 759 of the NPCCC and similar provisions contained in other provincial procedural codes, according to which annulment applications should be filed within five days as from the date of notification of the arbitral award.
Under the ICAL, an arbitration award can only be challenged before a judicial court by means of a set aside application.40 Article 99 of the ICAL reproduces the grounds for annulment established in Article 34(2) of the UNCITRAL Model Law.
At domestic level, the NCCCP states that de jure arbitral awards may be appealed on the merits before a court of appeals,41 while amiable composition or ex aequo et bono awards can only be set aside through an annulment request filed before a lower court.42
Appeals on the merits against de jure awards may be validly waived by the parties if so agreed in the arbitration agreement or in any other agreement. Annulment (set aside) remedies are not waivable under Argentine law. Grounds for annulment are:
- essential procedural errors;
- an award rendered outwith the term established;
- an award that includes decisions on issues that were not submitted to the arbitrators; and
- the award is inconsistent and contains contradictory decisions.43
Grounds for annulment requests against an amiable composition or ex aequo et bono award are limited to those identified as (b) and (c).44
Further, Article 1656 of the NCCC provides that parties, through their arbitration agreement, cannot waive their right to challenge a final award when it contradicts the applicable law. However, in the past few years, the Federal Supreme Court of Justice and the lower courts shed some light on this issue, stating that Article 1656 of the NCCC only refers to annulment remedies and not appeals, which may be validly waived by the parties.45
ii Arbitration developments in local courts
Several court decisions issued in 2018 are comment-worthy.
Judicial review of arbitral awards
On 6 November 2018, the Federal Supreme Court issued a significant ruling on a judicial review of arbitral awards in the EN – Procuración del Tesoro Nacional c/ (nulidad del laudo del 20–III–09) s/ recurso directo case,46 stating in a dispute to which the state was a party that annulment is limited to the specific grounds set forth under the applicable law and must not be treated as an appeal. Further, grounds for annulment should be interpreted restrictively.
The Federal Supreme Court of Justice ruling was issued in the context of a claim submitted by Propyme Transitory Union of Companies (Propyme) against Argentina for the compensation of damage suffered as a result of the unilateral termination of a contract.
In a first arbitration, the sole arbitrator admitted Propyme's claim. However, the award was annulled by the federal court of appeals on contentious administrative matters due to essential procedural errors that were found.47
As a result, Propyme started a new arbitration in which its claim was partially admitted by another sole arbitrator. The state submitted a request for annulment against the second award in accordance with Articles 760 and 761 of the NCCCP and the doctrine of the Federal Supreme Court of Justice established in the Cartellone case.48 The federal court of appeals partially rejected the state's submission.
The state filed an appeal against this court of appeals decision, which was rejected by the Federal Supreme Court of Justice, which stated that the state had accepted that disputes arising out of the contract executed with Propyme should be settled through arbitration. Further, it pointed out that an award can only be challenged on the grounds set forth in Article 760 of the NCCCP, so such restrictive criterion on the judicial review of arbitral awards was applicable to the case.
Quoting the precedents in Provincia de Buenos Aires v. Otto, Frank49 and López v. Gemabiotech SA,50 in which the Federal Supreme Court of Justice refused to review the merits of the case on the same grounds, the Federal Supreme Court of Justice understood that this restrictive criterion was still applicable to cases to which the state is a party.
The decision of the Federal Supreme Court of Justice is particularly relevant because it ratifies:
- the restrictive interpretation that must be made in assessing the admissibility of a request for annulment;
- the fact that the courts cannot review the merits of a dispute; and
- the favourable path to arbitration after many years of uncertainty due to the contradictory precedents of the Federal Supreme Court of Justice, such as the Cartellone decision.
On 10 August 2018, the court of appeals on commercial matters seated in the city of Buenos Aires rendered a decision in the Landmark Investors case,51 reaffirming a relevant interpretation of the Kompetenz-Kompetenz principle.
The claimant filed a petition for the constitution of an arbitral tribunal before the court, invoking the arbitration clause contained in the agreement between the parties. The respondent opposed the claimant's petition based on the fact that the claim exceeded the contract.
The lower court admitted the claimant's petition, declaring that the arbitration clause was sufficiently broad and included any dispute concerning the interpretation, compliance or non-compliance of the contract; therefore, it ordered the constitution of the arbitral tribunal.52
This decision, which was favourable to arbitration, was upheld by the court of appeals on commercial matters, which asserted that 'the broad scope of the arbitration clause justifies the reasoning made by the lower court'. Therefore, the court of appeals found no reason to depart from Article 1654 of the NCCC, which enshrined the Kompetenz-Kompetenz principle.
Again in 2018, the court of appeals on civil matters seated in the city of Buenos Aires rendered a favourable decision on the jurisdiction of arbitral tribunals when a previous interim measure had been requested before judicial courts.
The decision was issued in the Fideicomiso Llerena Studio Aparts case53 on 11 October 2018, in the context of a claim submitted by Fideicomiso Llerena in relation to disputes that arose from a trust agreement executed with Bouwers SA.
The court of appeals revoked a decision of the lower court, which had considered that a prior request for interim measures before the court amounted to a tacit waiver to the jurisdiction of the arbitral tribunal as agreed in the contract, stating that the request for an interim measure made before a judicial court does not imply a waiver of the parties' consent to submit their dispute to arbitration.54
Regarding arbitrability issues, a recent decision rendered on 24 May 2018 by the court of appeals on commercial matters seated in the city of Buenos Aires in the Servicios Santamaría case55 has confirmed the validity of the arbitration clause contained in an adhesion contract.
Indeed, Article 1651 of the NCCC provides that adhesion contracts are not subject to arbitration. This provision is intended to prevent any possible abuse of bargaining power, protecting the adherent party. There is a presumption in the law that the adherent party is always in a weak position with respect to its counter-party. However, this presumption has been challenged in cases of adhesion contracts executed between parties of equal or similar bargaining power.
In the case at hand, the court of appeals stated that unless any abuse has been proven or public policy issues are involved, an arbitration agreement is valid even if it is contained in an adhesion contract, in particular when the contract was executed between businesspeople with equivalent bargaining power.
iii Investor–state disputes
Argentina ratified the 1965 Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States on 19 October 1994, which entered into force in Argentina on 18 November 1994. Argentina has also approved more than 60 bilateral investment treaties (BITs).
On the basis of the publicly available information, during 2018 six investment arbitrations brought against Argentina were pending and none was initiated. Five of them were administrated by ICSID while just one arbitration was brought before the Permanent Court of Arbitration (PCA) under the UNCITRAL Rules.56
The BITs invoked in these recent cases were the Argentina–United States of America BIT (three cases), the Argentina–United Kingdom BIT, the Argentina–Italy BIT and the Argentina–Austria BIT.
iii OUTLOOK AND CONCLUSIONS
The enactment of the ICAL has brought about important changes that have long been desired in the Argentine arbitration community. It finally gives Argentina a specific regulation on international commercial arbitration following the UNCITRAL Model Law, creating a more favourable environment for the use of arbitration as a dispute resolution mechanism.
Furthermore, during the past year, the Federal Supreme Court of Justice and the courts of appeals have rendered important decisions favourable to arbitration, such as the restrictive interpretation of the grounds for challenging arbitral awards and the interpretation of the non-arbitrable matters as established in Article 1651 of the NCCC.
Regarding this last issue, it is worth mentioning that a bill has been submitted before the Federal Congress to make certain amendments to the NCCC. In particular, the bill proposes replacing the NCCC's list of non-arbitrable matters with a general rule confirming the arbitrability of all disputes involving freely transferable rights.
1 Federico Campolieti is a partner and Santiago Peña is a senior associate at Bomchil.
2 See Articles 5, 75, Subsections 12, 121 and 123 of the Argentine Constitution.
3 The National Code of Civil and Commercial Procedure, enacted through Law No. 17,454 of 19 September 1967 was amended, inter alia, by Law No. 22,434 of 16 March 1981 and Law No. 25,488 of 22 November 2001.
4 The National Civil and Commercial Code, enacted by Law No. 26,994.
5 Approved by Law No. 23,619 of 28 September 1988.
6 Approved by Law No. 24,353 of 28 July 1994.
7 Approved by Law No. 24,322 of 11 May 1994.
8 Approved by Law No. 22,921 of 21 September 1983.
9 Article 13 of the ICAAL.
12 The Centre has two sets of rules for arbitration proceedings (2005 and 2017 versions), which are available in Spanish and English (an official translation is available in the Centre's website).
15 The appointing authority is the President of the Executive Committee of the CEMA.
16 Article 1 of the ICAL.
17 See Article 2 of the ICAL.
18 Title II, Chapter 2 of the ICAL.
19 Title II, Chapter 3 and Title V, Chapter 4 and 5 of the ICAL.
20 Title IX, Chapter 1 and 2 of the ICAL.
21 See Article 3(c) of the UNCITRAL Model Law.
22 See Article 3 of the ICAL.
23 See Article 2605 of the NCCC. Article 1 of the NCCCP has a similar provision.
24 See Article 6 of the ICAL.
25 See Article 15 of the ICAL.
26 See Article 16 of the ICAL.
27 See Article 17 of the ICAL.
28 See Article 18 of the ICAL.
29 Under Argentine law, public policy is currently considered to be a synonym of mandatory rules and principles whose application cannot be waived by the parties.
30 See Articles 22 to 27 of the NCCC.
31 See Article 1651 of the NCCC.
32 See Articles 2609 and 2635 of the NCCC, and the Federal Supreme Court of Justice, 8 August 2007, Techint Compañía Técnica Internacional SACE e I c Empresa Nuclear Argentina de Centrales Eléctricas en liquidación y Nucleoeléctrica Argentina SA.
33 Article 2598 of the NCCC.
34 Title IV, Chapter 1 of the ICAL.
35 As per the UNCITRAL Model Law, the ICAL is based on the parties' autonomy. By virtue of this principle, the parties may determine the nature and extent of the disputes to be submitted to arbitration, the number and procedure for the appointment of the arbitrators, the language and place of arbitration, among other relevant aspects of the arbitration proceedings.
36 Articles 40 and 41 of the ICAL.
37 Article 55 of the ICAL.
38 Title V, Chapter 4 of the ICAL.
39 Article 100 of the ICAL.
40 Article 98 of the ICAL.
41 Article 758 of the NCCCP.
42 Article 771 of the NCCCP.
43 Article 760 and 761 of the NCCCP.
44 Article 771 of the NCCCP.
45 See the Federal Supreme Court of Justice, 5 September 2017, Ricardo Agustín López, Marcelo Gustavo Daelli, Juan Manuel Flo Díaz, Jorge Zorzópulos c/ Gemabiotech SA s/ organismos externos, Fallos, 340:1226 and 6 November 2018, EN – Procuración del Tesoro Nacional c/ (nulidad del laudo del 20–III–09) s/ recurso directo, Expediente Nº CAF 12732/2009/CS1; the Court of Appeals on Commercial Matters, Sala D, 20 March 2018, Emaco SA c/ Finesterre SA s/ Organismos externos; id., Pan American Energy LLC (Sucursal Argentina) c/ Metrogas SA (Chile) s/ Organismos externos, Thomson Reuters Online: AR/JUR/99210/2017; id., Sala E, 22 December 2015, Olam Argentina SA c/ Cubero, Alberto Martín y otros s/ Recurso de queja.
46 Federal Supreme Court of Justice, 6 November 2018, EN – Procuración del Tesoro Nacional c/ (nulidad del laudo del 20–III–09) s/ recurso directo.
47 Regarding essential procedural errors in the proceedings, the Argentine doctrine is peaceful in pointing out that it supposes a serious and unequivocal breach of the constitutional guarantee of due process.
48 In this case, the Federal Supreme Court of Justice annulled partially an arbitral award, highlighting that it cannot be construed that the waiver to appeal an award applies to cases in which public policy is contravened. In addition, the highest court held that arbitration awards might be reviewed on the grounds of unconstitutionality, illegality or unreasonableness.
49 Federal Supreme Court of Justice, 18 August 1922, Provincia de Buenos Aires c/ Otto Frank y Compañía s/ nulidad de un laudo arbitral, Fallos, 137:33.
50 Federal Supreme Court of Justice, 5 September 2017, Ricardo Agustín López, Marcelo Gustavo Daelli, Juan Manuel Flo Díaz, Jorge Zorzópulos c/ Gemabiotech SA s/ organismos externos, Fallos, 340:1226.
51 Court of Appeals on Commercial Matters, 10 August 2018, Landmark Investors SRL c/ Emprendimientos Inmobiliarios Arenales SA s/ ordinario.
52 Commercial Lower Court No. 7, Secretaría 13, 21 February 2018, Landmark Investors SRL c/ Emprendimientos Inmobiliarios Arenales SA s/ Ordinario.
53 Court of Appeals on Civil Matters, Sala B, 10 December 2018, Fideicomiso Llerena Studio Aparts c/ Bouwers' SA s/ Restitución de bienes.
54 The court of appeals based its decision on Article 1655 of the NCCC, which states:
Unless stated otherwise, the arbitration agreement attributes to the arbitrators the power to adopt, at the request of any of the parties, any interim measures deemed to be necessary with respect to the subject matter of the dispute. The arbitrators may require security for costs from the requesting party. Interim measures and, as the case may be, any preliminary measures must be executed by a judicial court. The parties may also request a judge to adopt such measures, without this being considered as a breach of the arbitration agreement or as a waiver of the jurisdiction of the arbitral tribunal; it also does not exclude any of the powers of the arbitrators. The interim measures adopted by the arbitrators according to the stipulations of the present Article may be challenged before a judicial court when they violate constitutional rights or are unreasonable.
55 Court of Appeals on Commercial Matters, 24 May 2018, Servicios Santamaría SA c/ Energía de Argentina SA s/ ordinario.
56 ICSID cases No. ARB/17/17; ARB/15/39; ARB/14/32; ARB/03/27; and ARB/02/17 and PCA case No. 2010-9.