The Court of Appeals of Santiago recently issued a judgement that clarifies two important matters in relation to arbitration: (i) the rendering of an award after the two-year period prescribed by law has lapsed, and (ii) the determination of the arbitrator's compensation.
The partners in a partnership had agreed on an arbitrator in the articles of incorporation. The arbitrator was requested to intervene in a dispute between them, but did not render an award until after the two-year time limit established by law had expired. Also, the arbitrator fixed his own compensation in the award. One of the parties filed an appeal against the award on the grounds of misconduct and ultra vires acts.
The Court of Appeals stated that the term of two years in which all arbitrators must render a decision can be extended not only expressly but also tacitly by the parties. The fact that the parties continued acting in the procedure without complaining of the expiration of the term was considered by the court as evidence of the tacit intention to extend the term. In other words, an arbitrator who renders a decision after the two-year period established for the arbitration is not guilty of misconduct nor of performing ultra vires acts if it is clear that the parties have extended the original term, either expressly or tacitly.
However, the court agreed with the appealing party on the issue of the arbitrator's fees. The court declared that arbitrators cannot fix their own compensation in the award. Even though the compensation of arbitrators and officers are judicial costs, the court stated that arbitrators have no jurisdiction to determine the amount they are paid. To allow them to do so would violate the principle that 'no man ought to be a judge in its own cause'.
For further information on this topic please contact Marcelo Armas at Philippi, Yrarrazaval, Pulido & Brunner by telephone (+56 2 364 3700) or by fax (+56 2 364 3796) or by e-mail ([email protected]).
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