Supreme Court's new take on international arbitration clauses

Introduction
Facts
Supreme Court decision
Comment

Introduction

In Chile, international arbitration is governed by Law 19.971 on International Commercial Arbitration, which was enacted in 2004 and is almost identical to the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration 1985. On the other hand, domestic arbitration is regulated by outdated laws (ie, the Code of Court Organisation and the Code of Civil Procedure).

For more than 15 years, the Santiago Court of Appeals has confirmed that parties' only recourse against an international arbitral award is the set-aside procedure established under Article 34 of Law 19.971. The court has also confirmed, on several occasions, the non-applicability of domestic forms of recourse, including those that cannot be renounced under Chilean law, such as an appeal of complaint for abuse and acts of misconduct.(1)

However, the Supreme Court recently established that parties' intentions as expressed in an arbitration clause cannot be dismissed when analysing the available forms of recourse against the arbitration award.

Facts

In Sudamericana SPA v Farmacéutica de Inversiones SA (Case 12.017-2019), the Santiago Court of Appeals dismissed an appeal on the merits filed against an international arbitral award, declaring its inadmissibility in accordance with Law 19.971. The particularity of this case was that the parties had previously agreed in the arbitration clause as to its availability, which was subsequently confirmed in the procedural orders issued by the arbitrator.(2)

The appeals court's decision was challenged by means of an appeal of complaint before the Supreme Court, which has historically sustained the non-applicability of domestic recourse against international arbitral awards.(3)

Supreme Court decision

In September 2020 the Supreme Court rejected the appeal of complaint (Case 19.568-2020).(4) In a new take on international arbitration clauses and recourse, the court invalidated the Santiago Court of Appeals' decision ex officio, arguing that although the parties had expressly agreed the international nature of the arbitration clause, domestic recourse could be available against the arbitral award if the outcome of such award was consistent with the parties' intentions as expressed in the arbitration clause.

Consequently, the Supreme Court decided that an appeal on the merits was valid recourse against the arbitral award if so provided for by the arbitration agreement.

Comment

Although the Supreme Court's new take on international arbitration clauses may raise doubts about the set-aside procedure being the only form of recourse available to challenge an international arbitral award, it should be seen as a decision that emphasises the contractual nature of arbitration and the importance of the parties' intentions when determining the effects of an arbitration agreement.

Consequently, the set-aside procedure has been confirmed as the only available form of recourse to challenge international arbitral awards, unless the parties have expressly provided for other forms of recourse in their arbitration agreement.

For further information on this topic please contact Sebastián Yanine or Carlos Hafemann at Bofill Escobar Silva Abogados by telephone (+56 2 2483 9000) or email (syanine@bofillescobar.cl or chafemann@beslegal.cl). The Bofill Escobar Silva Abogados website can be accessed at www.beslegal.cl.

Endnote

(1) Some of the latest decisions on this appeal ground are Fundación Chile v Galindez Valeria Juez Árbitro (Case 13.472-2015, 2017), Administradora Rio Claro SA v Juez Arbitro Señor Andres Jana Linetzky (Case 3.390-2017, 2017) and Gym SA v SJA Felipe Ossa Guzmán (Case 613-2019, 2019).

(2) The Santiago Court of Appeals considered the arbitration to be international since the parties had expressly elected Mexico as their domicile and agreed Chile as the seat of arbitration (Case 12.017-2019). The decision was issued on 16 January 2020.

(3) Some of the latest decisions on this appeal ground are Constructora Emex Limitada v Organización Europea para la Investigación Astronómica en el Hemisferio Sur (Case 8.699-2014, 2014), Arce Holding Corporation v Lyon Puelma Juez Árbitro (Case 55.038-2016, 2016) and Gym SA – Gym Chile SPA – v SJA Felipe Ossa Guzmán (Case 11.139-2020, 2020).

(4) Supreme Court decision, 14 September 2020, Case 19.568-2020.