The development of international arbitration in Chile reached a major milestone in 2014 with the 10th anniversary of the International Commercial Arbitration Act (for further information please see "Ten years of International Commercial Arbitration Act"). The most positive development during this decade has been the pro-arbitration approach adopted by the courts in cases governed by the act, especially in matters concerning the annulment of arbitral awards rendered in Chile or the recognition of arbitral awards rendered abroad. One of these cases – EGI-VSR v Río Bonito, issued by the Santiago Court of Appeals in September 2013 – is examined in detail below.
The dispute involved the shareholders' agreement of Viña San Rafael, a Chilean vineyard. The agreement was signed between EGI-VSR, a minority shareholder incorporated under the laws of Delaware, and several Chilean companies and natural persons that owned a controlling interest in the vineyard. The claimant requested the specific performance of the agreement, which established a put option in its favour obliging the defendants to buy its shares at a fixed price. In their counterclaim, the defendants requested the annulment of the agreement on the basis that it contained some matters that were mandatorily governed by the vineyard's bylaws. The arbitrator, seated in Chile, upheld the claimants' lawsuit and rejected the defendants' counterclaim.
Some of the defendants considered that the arbitral award had been rendered in breach of Article 34 of the act (which closely follows Article 34 of the United Nations Commission on International Trade Law Model Law) and filed an application before the Santiago Court of Appeals to set aside the award. The court concluded that the award was not in breach of Article 34 and stated that the defendants' allegations were not covered by the scope of the act. It therefore rejected the petition for setting aside the award.
The court carried out a complete analysis of the act's background, including:
- commentaries from its drafters;
- discussions in Parliament; and
- Supreme Court and Constitutional Tribunal revisions.
Regardless of its veiled criticism of the enactment process, the court confirmed the specific nature of the act, its coherence with the most uniform and extended statute of international commercial arbitration and its aim to transform Chile into a relevant seat of arbitration in Latin America. The court also underlined the principle of minimal intervention contained in Article 5 of the act, which recognises the autonomy of international arbitration and the freedom of the parties to tailor the proceeding according to their needs and expectations.
The court also analysed the public policy objection alleged by the defendants, drawing a clear distinction between international and domestic public policy. According to the court, Article 34 of the act comprises an international dimension of public policy, which does not encompass all mandatory rules of the lex fori (ie, the laws of the jurisdiction in which the action is brought), but only the fundamental principles of justice that are generally recognised in civilised jurisdictions. This means that the annulment of an arbitral award on the basis of a public policy objection is restricted to extremely grave violations, whether procedural or substantive (eg, the absence of a fair trial, the corruption of the arbitral tribunal or the commission of fraud or abuse between the parties). Therefore, an application to set aside does not involve a revision of the merits of the case, but rather of its legitimacy and integrity. The court considered that the defendants' objections were not only ineffective, but also based on an incorrect understanding of public policy.
Although the court's decision does not constitute binding precedent, it should play a persuasive role in future cases involving the application of the act. The court confirmed that the act has an autonomous nature and that the role of local judges is not to control every stage of the arbitral proceeding, but to supervise it in limited circumstances.
For further information on this topic please contact Francisco Gonzalez Hoch or Andrés Germain at Barros Letelier & González by telephone (+56 2 431 2700) or email (firstname.lastname@example.org or email@example.com). The Barros Letelier & González website can be accessed at www.blg.cl.
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