International Arbitration
Recognition and Enforcement of Foreign Awards
Article 116 of the Colombian Constitution makes provisions for parties involved in a dispute to submit the dispute to arbitration.
Under the existing legislation only disputes capable of being settled may be submitted to arbitration. Arbitrability has thus become a major issue in Colombia, particularly in light of certain decisions made by the Council of State and the Constitutional Court, which have restricted arbitration in contracts with public entities.
An agreement to arbitrate may be contained in an arbitration clause (made before the dispute arises) or in a compromise to arbitrate (made once there is a dispute). Such an agreement must be made in writing.
Law 446/1998 provides for three different types of arbitration in Colombia depending on the applicable rules of procedure. An arbitration can be:
- independent, when the parties decide on the applicable procedures;
- institutional, when the parties agree to submit to the rules of an arbitration centre; and
- legal, when there is no agreement between the parties regarding the procedural rules, in which case the rules of procedure contained in the Civil Procedure Code will apply.
The law thus provides that legal arbitration applies in the absence of an agreement as to the applicable rules.
Some legal commentators and practitioners have taken the view that the provisions of the Code of Civil Procedure should apply to all arbitrations, and that neither the parties nor the arbitration centres may agree on or issue rules other than those contained in the Colombian procedural statute. According to this theory, the parties' choice would be limited to selecting one of the types of arbitral proceedings provided for in the Code of Civil Procedure. However, there is nothing in Law 446/1998 or in any other provision related to arbitration that supports this theory. Moreover, such interpretation suggests that there is no difference between the three types of arbitration provided for in the law.
When the arbitration is institutional, the parties are free to elect either the rules of a Colombian arbitration centre or those of an international arbitration centre. Unfortunately, no Colombian arbitration centre has yet adopted its own rules of procedure.
The law requires an odd number of arbitrators. In practice, there is either a sole arbitrator or a panel of three. The parties may appoint the arbitrators by mutual agreement or defer the appointment to a third party (chambers of commerce are usually appointed as nominating authorities). The law provides that in the absence of an agreement, the appointment shall be made by an arbitration centre in the defendant's domicile.
The request for arbitration must be filed with the arbitration centre agreed upon by the parties. In the absence of such an agreement, the request is filed with an arbitration centre in the defendant's domicile. For several years the Chamber of Commerce of Bogotá, the leading arbitration institution in Colombia, held that if an objection was filed against the arbitration centre's decision to admit the request for arbitration, this objection must be decided by the arbitrators appointed by the given centre. The reasoning behind this was that the arbitration centre is only an administrator and cannot make decisions on objections that only arbitrators are allowed to take. However, the Constitutional Court has now ruled that arbitral institutions have full authority to resolve such objections,(1) and that not to do so violates both the guarantee of due process and the right of defence independently of whether jurisdictional powers are exercised by arbitral institutions.
The term in which to conclude an arbitration may not exceed six months from the first procedural hearing when the arbitrators decide on their jurisdiction. The parties may extend this term by an additional six months. In government contracts subject to Law 80/1993, the arbitrators may ex officio extend the term for three additional months when they consider it necessary to issue the award.
Given the debate as to whether all arbitrations must follow the rules of the Code of Civil Procedure and the resulting fear that an award may be invalid if these rules are violated, arbitration hearings tend to be extremely formal and full of recourses and pleadings, resembling an ordinary litigation more than a true arbitration.
An award issued in a local arbitration may be set aside through an extraordinary recourse filed before a superior tribunal or the Council of State. The grounds to set aside an award refer to due process and to procedural matters. The judge cannot review the merits of the award. Both the award and the decision to set it aside may be the subject matter of a final review for specific cases provided for in the law, mostly related to due process and criminal offences.
The Administrative Tribunal of Cundinamarca (a first-tier court for administrative matters) has ruled that an action to set aside suspends the effects of the award and therefore, there is no obligation to comply with the award until the action to set aside is decided. Even though this decision was appealed and never became final, and even though other courts have held that there is no suspension of the award, the attorney general and several government entities have held that there is no obligation to pay sums resulting from awards until the action to set aside is finally decided. As a result, several awards against government entities remain unpaid pending a decision on actions to set aside.
At present, there is no legal provision in Colombia that expressly or implicitly indicates that an action to set aside an arbitral award suspends the effects of the award. On the contrary, the powers of the court in an action to set aside are limited to the matters expressly provided for by law. As in other extraordinary recourses, in an action to set aside the court is not authorized to review the merits of the case. This, of course, means that the action to set aside is not second tier. Moreover, in the Colombian procedural system, unless otherwise expressly provided for, extraordinary recourses filed against a decision do not suspend the effects of the decision and therefore, in the absence of an express provision, the presumption of legality of the award must be respected.
International Arbitration
Colombia partially adopted the United Nations Commission on International Trade Model Law by incorporating, with some amendments, its first four articles in Law 315/1996, which deals with international arbitration.
Law 315/1996 provides that an arbitration shall be international, when the parties have so agreed, in any of the following situations:
- The parties are domiciled in different countries;
- The essential obligations under the agreement entered into between the parties are performed in the territory of a different state;
- The place of the arbitration is located in a country other than that in which the parties are domiciled, as long as the arbitral clause foresees this;(2)
- The subject matter of arbitration is of interest for several countries and the parties have so indicated; or
- The arbitral decision is considered to affect the interests of international trade.
Given the unclear drafting of Law 315/1996, it has been held that for an arbitration to be international the arbitration agreement must expressly indicate that this is the parties' intent. However, this is an example of form prevailing over substance; if the elements in the clause suggest that the parties have agreed on international arbitration, the absence of an express statement should not affect the parties' intent.
In international arbitration the parties are free to agree on the location, language, applicable proceedings and the law applicable to the merits.
Recognition and Enforcement of Foreign Awards
The recognition and enforcement of a foreign arbitral award is granted by the Supreme Court of Justice following the rules of the Code of Civil procedure and applying the pertinent international conventions. Colombia is a signatory to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) and to the Inter-American Convention on International Commercial Arbitration (Panama, 1975).
For further information on this topic please contact Eduardo Zuleta at Zuleta, Garrido, Suarez, Araque & Jaramillo Abogados by telephone (+571 310 6614) or by fax (+571 310 6286) or by email ([email protected]).
Endnotes
(1) Eduardo Zuleta: "Special Constitution Action to Preserve International Arbitration", Journal of International Arbitration, volume 18, number 4, August 2001, Klumer Law International.
(2) The Constitutional Court of Colombia considered that this situation is subject to the condition that at least one of the parties is domiciled outside of Colombia.
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