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Argentina fosters international arbitration

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03 August 2018

Modernisation package, that included reform of PPP contracts and dispute resolution, offers greater stability to foreign investors

The new Argentine arbitration law is based on the United Nations Commission on International Trade Law's Model Law (the Model Law) and applies to international commercial arbitration. The entry into force of the Arbitration Law, together with other modernisations discussed below, reflects the Government's intention to increase legal certainty for foreign investors in Argentina and to position the country as an attractive seat of arbitration in Latin America.

The new arbitration law was published in the Argentine Official Gazette and entered into force on 26 July 2018 (the Arbitration Law), following its approval by the Upper House and the House of Deputies in December 2017.

Overview of the modernisation package

Prior to the enactment of the Arbitration Law, all arbitrations seated in Argentina – whether they were international or domestic in nature – were governed by the National Civil and Commercial Code (the CCC) and the applicable provincial procedural codes of the Argentine province where the arbitration was seated. The set of rules governing arbitration in Argentina was, therefore, complex and particularly unsuited for international commercial arbitration, where at least one of the parties was likely to be unfamiliar with the peculiarities of Argentine provincial procedural law. Because Argentina lacked of a modern arbitration law it was not viewed favourably as a seat of arbitration in Latin America.

In the past couple of years, however, the Government has focused on reforming the Argentine arbitration framework. In 2015, Argentina enacted a new CCC, including substantive provisions on arbitration and, in 2017, passed a law on Public-Private Partnership Contracts expressly providing for arbitration as a method of dispute resolution for such contracts. The enactment of the Arbitration Law thus completes a modernisation process that brings the law governing Argentine-seated international arbitrations broadly into line with international best practice.

The enactment of the Arbitration Law is a response to the recent increase in the use of arbitration in Argentina and the Government's intention to stimulate foreign investment by providing a more efficient avenue for resolving international commercial disputes. With the Arbitration Law, Argentina has become the sixth country in Latin America to incorporate the Model Law, following Venezuela, Paraguay, Chile, Peru and Uruguay. There has also been a drive by the Argentine courts to issue rulings generally favourable to arbitration and judges have played an active role in the drafting of the Arbitration Law.

Key features of the Arbitration Law

Based on the Model Law, the Arbitration Law applies only to international commercial arbitrations seated in Argentina. An arbitration will be deemed international if:

the parties to the arbitration agreement have, at the time of the conclusion of that agreement, their respective places of business in different States; or

one of the following places is situated outside the State in which the parties have their places of business: 

o the place of arbitration if determined in, or pursuant to, the arbitration agreement;

o any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected (Article 3 of the Arbitration Law).

It is to be noted, however, that the parties cannot provide in their agreement that an arbitration is to be considered international (Article 1(3)(c) of the Model Law has not been included). The underlying rationale is to prevent parties to purely domestic transactions from opting out of the rules that govern domestic arbitration in Argentina.

Importantly, the Arbitration Law expressly recognises the core principle that arbitral tribunals are competent to rule on their own jurisdiction (Article 35) and closely follows the provisions of the Model Law. While the Arbitration Law does depart from the Model Law in some respects, the points of divergence are relatively minor. These include:

a shorter timeframe for applications to set aside an award (30 days instead of the 3 months, as provided in the Model Law); 

a requirement for the arbitration agreement to be in writing (where the Model Law also permits agreements to be "recorded orally, by conduct or by other means"); 

a prohibition on the parties agreeing that the arbitral tribunal can render an award without stating reasons (something the Model Law permits); 

a provision that failure to comply with Argentina's international public policy is a ground to refuse the recognition and enforcement of a foreign award (which is in line with the Convention on the Recognition and Enforcement of Foreign Arbitration Awards) but not as a ground for setting aside an award rendered by an Argentine-seated arbitral tribunal.

The Arbitration Law thus provides a legal framework for the resolution of international commercial disputes in line with international arbitration practice and may, as familiarity with it grows, increase Argentina's attractiveness as a seat of arbitration. The Arbitration Law represents a significant step forward in the development of international arbitration in Argentina. It is one to be welcomed by the international arbitration community although time will tell how it will be applied in practice.