Colombia, the fourth largest economy in Latin America and the third largest in South America, is the second largest Spanish speaking country in the world, trailing Mexico. Famous for producing some of the finest coffee and flowers, it also boasts bountiful resources of emeralds, coal, and oil. Now, Colombia seeks to add something else to the list: the most modern and attractive destination for conducting international arbitrations in Latin America. An important first step toward this distinction was completed when Colombia’s Congress enacted a new National and International Arbitration Statute, known as Law 1563 of 2012, on July 12, 2012. (“Law 1563/12”)
This new law, in force after three months of its enactment, has unified not only the previously dispersed arbitration laws, but also the relevant court decisions on the matter.
Following case law of the Colombian Constitutional Court, Article 62 of Law 1563/12 establishes that the parties can only agree on an international arbitration if: (i) they have their domiciles in different states at the time of agreeing to the arbitration clause; or (ii) the place of performance of the substantial part of the obligations relating directly to the subject matter of the litigation is outside the states where the parties have their main domiciles; or (iii) the dispute referred to arbitration affects the interests of international commerce. If none of these situations are present, the new law provides that the parties cannot agree on an international arbitration.
Article 62 of Law 1563/12 also clearly resolves any issue of the state, or an enterprise controlled by it, to rely on its own law to contest its capacity to be a party in the arbitration. The new law provides that a state or state-owned entity cannot rely on restrictions in its own law to avoid being subject to an arbitration agreement to which it had freely agreed.
The ability of local courts to assist the arbitral process by enforcing interim measures has also been granted under Law 1563/12. Local courts may now order the production of evidence, subjective arbitrability, restrictions to the arbitor’s nationality, action for annulment against arbitral award, and may ease enforcement of foreign arbitral awards, among others.
Article 71 of Law 1563/12 provides authority to tribunals in granting interim relief at the start of the proceedings. In litigation, provisional measures are very powerful tools to preserve and ensure the usefulness of the arbitration.
Nationality and Residence of Arbitrators.
Prior to Law 1563/12, Colombia’s international arbitration law did not contain any provision as to the nationality or residence of arbitrators. That has changed. Article 73 states that “[n]o person shall be precluded by reason of his nationality from acting as an arbitrator.” Unlike the UNCITRAL Model Law Article 11 that makes provision for the parties to agree otherwise, Article 73 of 1563/12 is mandatory. A violation would likely render the remaining arbitration agreement void because it stands or falls as a whole.
Waiver of Rights and Voiding Awards.
Article 107 allows the parties to waive their rights, or limit the grounds for annulment, within the arbitration agreement or within a subsequent express written agreement. The action of annulment monitors compliance with legal safeguards without reviewing the merits of the dispute. Article 107 makes it clear that any such waiver would have to be assumed only if the parties to the agreement were clearly making reference to the legal remedy to be waived and explicitly state such waiver. The law also points to certain grounds under which the award may be voided, which are as follows:
- If the arbitration agreement does not exist, or is null, void or ineffective;
- If one of the parties has not been duly notified of the appointment of an arbitrator or the arbitral proceedings or was unable to assert their rights for any other reason;
- If the composition of the arbitral tribunal or the arbitral proceedings have not been adjusted to the agreement between the parties or the applicable arbitral rules, unless such agreement or arrangement be in conflict with a provision of legislative decree that the parties cannot derogate, or failing such agreement or regulation that was not in accordance with the provisions of this law;
- The arbitral tribunal has ruled on matters not submitted to their decision;
- The subject of the dispute is not capable of arbitration, or the award is contrary to international public order, such in the case of international arbitration according to the laws of the Republic of Colombia.
New York Convention.
Article 111 closely mirrors the New York Convention and establishes that any international arbitral award granted by a tribunal sitting in Colombia is treated as a national award. Consequently, it does not require recognition for enforcement. An international award from a tribunal seated outside Colombia would simply require a petition before the Civil Appeals section of the Supreme Court of Justice, but grounds for opposing recognition are limited to those established in the New York Convention.
Challenges to the Petition.
Finally, Article 115 establishes a shortened, non-appealable procedure of 10 days to challenge the petition, followed by a 20-day decision-making period.
Passage of this comprehensive legislation, intended to create a modern international arbitration legal regime for Colombia, is certainly a step in the right direction. However, the verdict is still out. Perhaps most significant caveat is the passage of time as we wait and see whether or not local courts will apply the new provisions correctly. If they do, then surely Colombia has the opportunity to be the most promising Latin American arbitration venue.