In Colombia arbitral awards can be vacated through an extraordinary recourse, which may be filed before the Council of State in the case of arbitral disputes over government contracts. (For further information please see "Overview (March 2002)".) A question arose as to whether filing such a recourse would lead to the immediate suspension of the award until a decision is reached.

This question arose when a private contractor attempted to enforce, in a special executive action, an award ordering a government entity to pay certain monies. The Administrative Tribunal of Cundinamarca refused the enforcement, reasoning that an action to set aside had been filed by the government entity and therefore the effects of the award had been suspended. The tribunal's decision was appealed by the private contractor. However, the Council of State ratified the tribunal's position and ruled that the extraordinary recourse does indeed suspend the effects of the arbitral award until a final decision on the matter is reached.

The Council of State decision defines the action to set aside not as an ordinary or extraordinary recourse, but as a restricted form of appeal.

However, the interpretation used by the Administrative Tribunal and the Council of State contradicts the legislative and judicial tradition in Colombia regarding arbitration. With the exception of a brief period of time - when Law 23/1991 indicated that the effects of an award could be suspended as long as a security was provided - the legal provisions in Colombia have considered arbitral proceedings as one-tier proceedings and the action to set aside as an extraordinary recourse.

There are no legal provisions in Colombia that expressly or implicitly indicate that an action to set aside an arbitral award suspends the award's effects. On the contrary, the court's powers in an action to set aside are limited to the matters expressly provided for in Article 163 of Law 1818/1998. As in other extraordinary recourses, in an action to set aside the court is not authorized to review the merits of the case. This means that the action to set aside is not second tier. Further, in the Colombian procedural system extraordinary recourses filed against a decision do not suspend the effects of the decision unless otherwise expressly provided for. Therefore, in the absence of an express provision the award is presumed to be legal.

However, this was not the Council of State's opinion. Its decision not only effectively suspends the award, but also creates a new category of recourse, which does not fit within the ordinary and extraordinary types set out in the law.

As a consequence of this new interpretation various practical difficulties have arisen, for example whether delayed interests must be paid as a result of the award's suspension. Pursuant to the Council of State decision, it seems that when an action to set aside is filed there is no obligation to pay interest.

The decision could allow the losing party in an arbitration to file an action to set aside the award at minimal legal or financial risk, rather than pay the award. This strategy gives rise to serious legal concerns and is an example of the many interpretative problems that will arise from this precedent, contributing to existing legal insecurity over arbitral awards.

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]).

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