IS ARBITRATION ALWAYS APPROPRIATE FOR
RESOLVING DISPUTES?
A LATIN AMERICAN POINT OF VIEW
Presentation by Osvaldo J. Marzorati
Allende & Brea
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Arbitration in Latin America
A) Countries that follow the Model Law:
Chile, Peru, Paraguay, Panamá
B) Countries that have arbitration laws adjusted to
recent times:
Brazil, Colombia, Mexico, Ecuador
C) Countries that keep Arbitration as part of their
Procedural Codes or Subject to Judicial Scrutinity:
Argentina, Uruguay, Venezuela
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Existence of Arbitration Centres
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Almost all countries have arbitration centres based on
specific “Chambers” or “Cámaras” or,
The Chamber/s of Commerce in every jurisdiction have
an Arbitration Centre or
There is legislation on mandatory conciliation, mediation
and arbitration procedures
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Agency is subject to specific laws in Colombia and some
other countries like Paraguay or Panamá and most of
Central America
Recourse to arbitration is not popular for agency
agreements-commercial concessions. Only Brazil enacted
car automotive concessions.
Court jurisdictions have pre-empted the market in such
areas
An average 90% of disputes laid into Courts, 10% go for to
arbitration
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Arbitration is very frequently used in Distribution disputes
as well as in Master Franchise Agreement. On average:
Court system 60%, Arbitration 40%
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However Developing Agreements and Single Unit
Franchise Agreements are increasingly referred to
Arbitration for the latter petty cases
50% Mediation Arbitration, 50% Court cases
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A)
B)
C)
D)
Traditional merchants prefer to litigate against arbitrators,
main reason they believe that big and and solid importers like
factories can press or carry some stronger weight if the case
is litigated.
In case of unit franchising, the fast track arbitration
procedures in Argentina reduces time and cost.
In case of distribution between middle size distributors the
recourse to arbitration ensures some savings as to judicial
costs, plus a faster process.
Developers or their part prefer local arbitration procedures,
they feel they have more bargaining power than foreign main
Franchisors.
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Contradictory patterns
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In favor of litigation:
A)
Distrust of arbitration, there is little culture and length
of challenges to arbitrators.
B)
Need to recourse to Court before or during arbitration
procedures (kompetenz-kompetenz).
C)
In significant cases institutional procedures are not that
fast (Stock Exchange Arbitration Court).
D)
Dislike that a foreign arbitrator be selected by the
Authority of appointment in local cases (ICC).
E)
Enforcement of arbitration is always subject to Court
procedures.
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Why arbitration is favoured in Development
Agreements

I)
II)
III)
Developer is a real partner, he cannot sub-franchise.
He has a big territory and he controls all of the stores.
He has more bargaining power than a master
franchise.
Normally, he accepts arbitration based on country of
performance under law of performance.
Real developers like to play local.
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Why unit franchisees and some franchisors
prefer arbitration

I)
II)
III)
IV)
V)
VI)
Administrative costs of Tribunal are cut to 50% of similar
arbitration institutional tribunals.
Minor cases not to exceed U$S30.000 can be subject to
arbitration abbreviated proceedings.
The arbitration is institutional and the arbitrator is always
selected by the Appointing Institution.
Claim, answer to the claim, counterclaim and answer and
exceptions: 60 days.
Trial period and final briefs: 60 days.
Time involved is six months including award 60 days.
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Conclusion: DIVERSITY
I)
II)
III)
IV)
Argentina and Uruguay do not have the same attitude to
arbitration like other South American countries, which
clearly favor arbitration (Peru, Panama and Chile).
Distrust in arbitration has to do with archaic laws which
does not accept kompetenz vs. Kompetenz (Nidera).
Tribunals have suspended arbitration procedures before
and during arbitration in public cases (Yaciretá).
Tribunals have reserved rights to revise arbitration awards
extensively (Cartellone).
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Case Law Arbitration – Distribution; Development
1- Distribution agreement related to restaurants based on an unit agreement for
five years with three automatic renewals, based on binding letters of intent
granted to owners of distributors
2 – Contract rescinded after six months by principal on grounds of bad
performance and unpaid amounts
3 – Distributors went to Argentin Courts, but before getting any decisions,
principal called for ICC arbitration “provided under the agreement an appointed
party arbitrator”
4 – Distributor appointed and changed two party arbitrator on his own and
distribution company which only got one unit restaurant under the contract went
bankrupt
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Case Law Arbitration – Distribution; Development
5 – Party arbitrators did not meet and consequently did not appoint the third
arbitrator. Principal started litigation in the US claiming jurisdiction of US Courts
based on binding letter of intent signed by owners of distribution company.
6 – Before going to bankrupcy, distributor named his third party arbitrator who
met with principal party arbitrator who claimed that he did not recalled the case
because three years have elapsed since he received the original instructions. He
did not informed to who ever have instructed him
7 – Party arbitrator appointed by distributor assumed the role of sole arbitrator
under a contractual provision allowing a party to do so in case of failure of the
othe party of appointing his arbitrator
8 – The new self proclaimed arbitrator received a claimed from distributor for US
$ 197 M and asked principal his views. Principal objected resignation and asked
to remit papers and designation to ICC since it was an ICC arbitration
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(C1006ACT) Buenos Aires, Argentina
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