The International Arbitration Review: Argentina
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 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 (NY Convention);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.
The year in review
The year 2020 was a singular one for arbitration in Argentina, mainly impacted – as in the rest of the world – by the consequences of the covid-19 pandemic.
After years of relevant legislative innovations (such as the entry into force of the NCCC in 2015 and the enactment of the ICAL in 2018) and relevant judicial decisions related to international arbitration, there were no legislative developments in arbitral matters during 2020 and the judicial courts issued few decisions related to arbitration because of the fact that they were inactive for several months as a result of the mandatory lockdown ordered by the national government.
Nevertheless, there have been some Argentine court decisions that are worth mentioning.
i Arbitration developments in local courts
Judicial review of arbitral awards
On 18 July 2019, the court of appeals on commercial matters seated in the city of Buenos Aires rendered a decision in the Pott case,16 in which it confirmed the restrictive criterion adopted by the referred court17 – as well as by the Federal Supreme Court18 – concerning the scope and extent of the judicial review of arbitral awards.
In this case, in which three defendants in an international arbitration proceeding challenged a partial award on jurisdiction, the court of appeals stated that annulment is limited to the specific grounds set forth under the applicable law and must not be treated as an appeal, in equivalent terms as those used by the Federal Supreme Court of Justice in two relevant precedents from 2017 and 2018.19
The decision of the court of appeals is particularly relevant because it ratifies: (1) the restrictive interpretation that must be made in assessing the admissibility of a request for annulment; and (2) the fact that the courts cannot review the merits of a dispute.
Annulment of an arbitral award for failing to address an arbitrator challenge
On 3 June 2020, the court of appeals on commercial matters seated in the city of Buenos Aires rendered a decision in the Llorente case,20 regarding the annulment of an arbitral award.
In the case, the parties had intervened in an arbitration administered by the CEMA in which the arbitral tribunal issued a majority award. The dissenting arbitrator had refused to sign the award on the grounds that the other two arbitrators had not allowed him to deliberate.
The party affected by the award filed a set aside application before the court of appeals on commercial matters stating, in substance, that the award was not valid because (1) the necessary deliberation among the arbitrators had not taken place and (2) there were numerous irregularities in the process, including the existence of a challenge of one of the arbitrators that had not been resolved.
While the court of appeals rejected the first ground of the challenge, it set aside the award based on the second ground, noting that, despite having challenged one of the arbitrators who was part of the majority, the arbitral tribunal never substantiated or resolved such challenge. In the court's view, this failure constituted an essential procedural default that justified the annulment of the arbitral award.
Recognition and enforcement of foreign arbitral awards
On 24 September 2019, the Federal Supreme Court issued a relevant decision with respect to the recognition and enforcement of foreign arbitral awards in the Deutsche Rückversicherung AG case.21
After obtaining a favourable award against Caja Nacional de Ahorro y Seguro en liquidación (Caja Nacional) in an international arbitration proceeding seated in New York, Deutsche Rückversicherung AG (DRAG) requested a federal judge seated in Buenos Aires, Argentina, the recognition and enforcement of said award. Although the federal judge rejected the recognition and enforcement of the award considering that it was contrary to the Argentinian public order – because it did not comply with the consolidation of public debts regime stablished by Laws No. 23.892 and No. 25.565 – the federal court of appeals in civil and commercial matters revoked that decision and granted the recognition and enforcement of the arbitral award.
To reach this decision, the court of appeals considered that even when the award was contrary to the consolidation of public debts regime and, therefore, to the Argentine public order, it did not prevent the granting of the recognition and enforcement of the award subject to its adaptation to the referred consolidation regime, in accordance to Articles III and V of the NY Convention.
Caja Nacional (a state-owned company under liquidation proceedings) appealed this decision before the Federal Supreme Court of Justice alleging, among other circumstances, that the arbitral award could not be recognised nor enforced because it was contrary to the Argentine public order. In a unanimous decision, the Supreme Court rejected Caja Nacional's appeal stating that the existence of any of the grounds set forth in Article V of the NY Convention to refuse the recognition and enforcement of a foreign arbitral award was not proven. In addition, the Supreme Court expressed that in this kind of proceeding, the judges cannot review the merits of the dispute nor modify the foreign award, as they only have limited jurisdiction to decide about its recognition and enforcement.
Separability of the arbitration clause principle
On 30 August 2019, the court of appeals in commercial matters seated in the city of Buenos Aires rendered a decision in the Abre SRL case,22 reaffirming a relevant interpretation of the separability of the arbitration clause principle.
The claimant filed a lawsuit against Telecom Personal SA (Telecom) seeking damages for the alleged breach of the contract executed by the parties and stating that several contractual clauses – including the arbitration agreement – were null and void because they were imposed by Telecom abusing of its dominant position. In its statement of defence, Telecom opposed the lack of jurisdiction of the judicial courts by invoking the arbitration clause contained in the agreement between the parties. In response to this defence, the claimant insisted that the arbitration clause was null and void, because it was imposed by Telecom in an adhesion contract and disputes related to this kind of agreements were excluded from arbitration according to Article 1651 of the NCCC.23
In its decision, the court of appeals confirmed the lower court's finding (which had admitted the defence opposed by Telecom) and, thus, referred the parties to arbitration. The court expressly based its decision on the separability of the arbitration clause principle highlighting that, although claimant questioned the validity of several contractual clauses, it had to evaluate only the validity of the arbitration agreement, because it was independent from the underlying contract between the parties. According to the court of appeals, the factual circumstances of the case showed that the claimant knew the existence of the arbitration agreement before the execution of the contract with Telecom and could not allege that it was imposed by Telecom abusing of its dominant position. For this reason, the court concluded that the arbitration agreement was valid and, therefore, that parties had to submit their dispute to arbitration.
On 12 July 2019, the federal court of appeals in administrative matters rendered a relevant decision regarding a provisional measure requested by the Argentine state in relation to the enforcement of an arbitral award.24
Papel del Tucumán SA (PTSA), a bankrupt company, obtained a favourable award against the Argentine state in an international arbitration administrated by the International Chamber of Commerce Court, in which the Argentine Republic was condemned to around US$67 million plus interest. The state filed an application to have the award set aside before the federal court and requested an interim measure to prevent the execution of the award until a decision on its application to set aside was rendered.
The court of appeals admitted the interim measure requested by the Argentine Republic, stating that there was an imminent and actual risk of prejudice against the public interest because the judge in charge of the PTSA's bankruptcy proceedings ordered the state to pay the amount established in the arbitral award and this amount revealed the relevance of the dispute between the parties. The court of appeals also expressed that, in light of the factual circumstances of the case, it seemed that the Argentine Republic did not express validly its consent to arbitration.
This decision has been criticised for its negative impact on the arbitrations with the state, as well as for the basis on which it relied for the admission of the interim measure requested by the Argentine Republic.
Regarding arbitrability issues, in the previously cited Abre SRL case and in the Vanger SRL case,25 the court of appeals in commercial matters seated in the city of Buenos Aires confirmed the validity of the arbitration clause contained in adhesion contracts, even though Article 1651 of the NCCC expressly forbids arbitration in disputes related to this kind of agreements.
As explained before, in Abre SRL the court of appeals decided to declare the lack of jurisdiction of the judicial courts to hear the case by confirming the validity of the arbitration clause included in the contract executed by the parties, despite it being an adhesion contract, because the claimant knew the arbitration agreement before the execution of the contract and could not allege that Telecom imposed it by abusing of its dominant position.
In the Vanger SRL case, the court of appeals rendered a similar decision declaring that the prohibition set forth in Article 1651 of the NCCC was intended to prevent any possible abuse of bargaining power, protecting the adherent party, but it does not apply to adhesion contracts executed between parties of equal or similar bargaining power.
In the case at hand, the court of appeals stated that both companies were specialised in the same activities and endowed with sufficient importance, concluding that the arbitration agreement was valid even if it was part of an adhesion contract.
Through these decisions, the court of appeals confirmed the criterion adopted during 2018 in the Servicios Santamaria case,26 clearly favourable to arbitration.
Nevertheless, on 27 August 2019, the court of appeals on commercial matters rendered a decision in the Travel27 case, rejecting the respondent's request to refer the parties to arbitration based on the prohibition set forth in Article 1651 of the NCCC.
In this case, the parties were bound by a franchise contract that contained an arbitration clause and after a dispute arose between them, the franchisee decided to initiate a claim against the franchisor before the judicial courts on commercial matters. The franchisor (Samsonite Argentina SA) requested to the commercial court to refer the parties to arbitration in accordance with the arbitration clause contained in the franchise contract. Although the lower court decided to admit the respondent's request, the court of appeals decided to revoke this decision and reject the request made by the franchisor. To ground this decision, the court considered that the franchise contract is – by definition – an adhesion contract and, despite having the burden of proof, the respondent failed to prove that the parties negotiated the terms of the contract on equal terms, having only presented elements that would prove the existence of a negotiation on the arbitration clause. In addition, the court of appeals emphasised that even if the parties would have negotiated the arbitration clause, the contract should still be qualified as one of adhesion and, as a consequence, arbitration would still be prohibited by virtue of Article 1651 of the NCCC.
ii 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 publicly available information, during 2020, eight investment arbitrations brought against Argentina were pending. Seven of them were administrated by the International Centre for Settlement of Investment Disputes while only one was brought before the Permanent Court of Arbitration (PCA) under the UNCITRAL Rules.28
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, the Argentina–Spain BIT, the Argentina–Netherlands BIT and the Argentina–Austria BIT.
Outlook and conclusions
During the past year, Argentina was shaken – as was the rest of the world – by the covid-19 pandemic. As a consequence of the lockdown and other restrictive measures adopted by the national government, there were no relevant legislative developments in the field of international arbitration.
However, during the last year, two important judicial decisions have been issued. The first decision addressed the prohibition to arbitrate disputes arising from adhesion contracts, as stated in Article 1651 of the NCCC. Through the second decision, the court of appeals on commercial matters annulled an arbitral award for failing to resolve a previous arbitrator's challenge.
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 ICAL.
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 Court of Appeals on Commercial Matters, 18 July 2019, Pott, Alfredo Carlos c/ Patagonia Financial Holdings LLC y otros s/ recurso de queja.
17 See Court of Appeals on Commercial Matters, 11 July 2013, Seven Group SA c ADT Security Services SA s/ nulidad de laudo arbitral; íd, 12 April 2016, Amarilla Automotores SA c BMW Argentina SA s/ recurso de queja; íd, 12 April 2017, Díaz, Rubén H c/Techint Cía Técnica Internacional SACEI s/Recurso de Queja; íd, 19 December 2017, Pan American Energy LLC (Sucursal Argentina) c Metrogas S.A. (Chile); íd, 20 March 2018, Emaco SA c/Finisterre SA s/Organismos Externos.
18 See Federal Supreme Court, 17 November 1994, Color SA c/ Max Factor Sucursal Argentina s/laudo arbitral s/pedido de nulidad de laudo; íd, 24 August 2005, Pestarino de Alfani, Mónica Amalia c/ Urbaser Argentina SA; íd, 5 September 2017, Ricardo Agustín López, Marcelo Gustavo Daelli, Juan Manuel Flo Díaz, Jorge Zorzópulos el Gemabiotech SA si organismos externos; íd, 6 November 2018, EN – Procuración del Tesoro Nacional c/(nulidad del laudo del 20-111-09) s/ recurso directo.
19 The relevant precedents in which the Federal Supreme Court of Justice adopted the restrictive criterion in the judicial review of arbitral awards are the Ricardo López y otros c/ Gemabiotech SA s/ organismos externos case (decided on 5 September 2017) and EN – Procuración del Tesoro Nacional c/ (nulidad del laudo del 20–III–09) s/ recurso directo case (decided on 6 November 2018).
20 Court of Appeals on Commercial Matters, 3 June 2020, Llorente y Villarruel Contenidos SA c/ Telefé Federal SA s/ organismos externos.
21 Federal Supreme Court, 24 September 2019, Deutsche Rückversicherung AG c/ Caja Nacional de Ahorro y Seguro en liquidac y otros s/ proceso de ejecución.
22 Court of Appeals in Commercial Matters, 30 August 2019, Abre SRL c/ Telecom Personal SA s/ ordinario.
23 Article 1651 of the NCCC establishes a detailed list of non-arbitrable matters, some of them similar to those excluded from arbitration in comparative legislation. According to this disposition, the following matters cannot be submitted to arbitration: (1) matters referred to civil status or capacity of persons, (2) family matters, (3) disputes related to rights of users and consumers, (4) disputes related to adhesion contracts, whatever their purpose could be, and (5) disputes related to labour relations.
24 Federal Court of Appeals in Administrative Matters, 12 July 2019, EN-Procuración del Tesoro de la Nación c/s/Recurso Directo de Organismo Externo.
25 Court of Appeals in Commercial Matters, 6 June 2019, Vanger SRL c/ Minera Don Nicolás SA s/ ordinario.
26 Court of Appeals in Commercial Matters, 24 May 2018, Servicios Santamaría SA c/ Energía de Argentina SA s/ Ordinario.
27 Court of Appeals on Commercial Matters, 27 August 2019 Travel Cba SRL C/ Samsonite Argentina SA S/Ordinario.
28 ICSID Cases Nos ARB/17/17; ARB/15/39; ARB/14/32; ARB/03/27; ARB/02/17, ARB/19/25; and ARB/19/11; and PCA Case No. 2010-9.