For the last two decades, Chile has been one of Latin America’s best performing economies and has managed to maintain this position by strengthening ties with important trading partners, including the USA, Europe, China and Japan. A sound economy, a stable political and legal system and a reputation for openness have contributed to the development of arbitration in the country.

Chile has a longstanding tradition in using arbitration widely in commercial disputes, to the point that certain disputes may only be settled through arbitration. Chile was also one of the first countries in Latin America to ratify the New York Convention, and it did so with no reservations. More recently, in 2004 Chile enacted verbatim the UNCITRAL Model Law on Commercial Arbitration for international arbitral proceedings.

Scope of application
Chile has a dual arbitration system: domestic and international arbitration are governed by different sets of legal provisions.

Within domestic arbitration, procedures are governed mainly by the rules of the Code of Civil Procedure and the role of arbitrators (in their capacity as extraordinary judges) is regulated mainly by the rules of the Chilean Courts Statute. With regard to international arbitration, the principal sources are the Chilean International Commercial Arbitration Act (Law No. 19,971, based on the UNCITRAL Model Law on Commercial Arbitration and enacted on September 2004, which applies to both ad hoc and institutional arbitration proceedings seated in Chile) and various international treaties and conventions signed by Chile, which include inter alia the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), the Convention on the Settlement of Investment Disputes between States and Nationals of other States (the ICSID Convention), several free trade agreements – including those with USA, the European Union, China, Canada and Japan –, economic complementation agreements (Chile is an associate member to MERCOSUR) and over 40 bilateral treaties which provide for arbitration as a dispute resolution system.

Subject matter of arbitration
Commercial matters may be subject to arbitration by agreement of the parties and in certain matters Chilean law provides for mandatory arbitration (including liquidations of companies and estates and disputes between stockholders or partners in companies related by business).

For domestic arbitrations, Chilean law provides for two different arbitration agreements:

• (i) an arbitration clause; and
• (ii) a submission agreement.

An arbitration clause is a clause in a larger agreement where the parties agree to submit to arbitration any dispute arising out of the performance of such agreement. The arbitration clause must be in writing. If the parties do not agree on the name of the arbitrator or appointing authority, the tribunal will be appointed by the competent national court. A submission agreement, on the other hand, is an agreement where the parties to an existing dispute consent to such dispute being resolved by way of arbitration. The arbitration agreement must be in writing and contain the name of the arbitrator(s), the name of the parties and the specific dispute to be decided by the arbitrator(s).

For international arbitration the International Commercial Arbitration Act only requires the arbitration agreement to be in writing. An agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not contested by the other. The reference in a contract to a document containing an arbitration clause also constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract.

Constitution of the arbitral tribunal
In domestic arbitration, the parties are free to determine the number of the arbitrators. If the parties fail to agree on the number and the name of the arbitrators, a sole arbitrator will be appointed by the competent court, at the request of one of the parties to the arbitration agreement. The court will summon all of the interested parties to a hearing where the court will encourage the parties to reach an agreement on the name of the arbitrator. If no arrangement is reached, the arbitrator will be appointed by the court.

Domestic arbitrators must fulfil two types of requirements: (a) those related to qualifications; and (b) those related to impartiality and independence. Qualification requirements are:

• (i) being of legal age;
• (ii) being of sound mind;
• (iii) being able to read and write; and
• (iv) in case of arbitration at law (as opposed to arbitration ex aequo et bono), they must be lawyers authorised to practice law in Chile.

As to impartiality and independence, domestic arbitrators are subject to the same rules that are applicable to ordinary judges.

In international arbitration, the parties are also free to determine the number of the arbitrators. However, if they fail in such determination, the number of the arbitrators shall be three. The parties may agree on a procedure to appoint the arbitrator or arbitrators. Failing such agreement: (a) in an arbitration with three arbitrators, each party shall appoint one arbitrator and the two arbitrators appointed shall appoint the third arbitrator; failing which the appointment shall be made, upon the request of a party, by the President of the Court of Appeals at the seat of the arbitration; or (b) in an arbitration with a sole arbitrator, if the parties are unable to agree on the arbitrator, he shall be appointed, upon request of a party, by the President of the Court of Appeals at the seat of the arbitration.

Unless otherwise agreed by the parties, no person shall be precluded by reason of his nationality to act as an arbitrator.

The challenge of arbitrators
As previously stated, domestic arbitrators are subject to the same rules on impartiality and independence applicable to ordinary judges.

In international arbitration an arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed by the parties. A party may challenge an arbitrator appointed by him only for reasons he did not know of at the time of the appointment. The parties are free to agree on a procedure to challenge an arbitrator. Failing such agreement, a party which intends to challenge an arbitrator shall, within 15 days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance that gives rise to justifiable doubts as to an arbitrator’s impartiality or independence, send a written statement of the reasons for the challenge to the arbitral tribunal. Unless the challenged arbitrator withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. If the challenge is not successful, the challenging party may request, within 30 days after having received notice of the decision rejecting the challenge, that the President of the Court of Appeals at the seat of the arbitration should decide on the challenge.

Appointing a substitute arbitrator
If the mandate of an arbitrator terminates before the termination of the arbitration proceedings, a substitute arbitrator shall be appointed in accordance with the rules that were applicable to the appointment of the arbitrator being replaced.

Arbitrators’ fees, expenses and liability
Chilean law has no provisions regarding the fees and expenses of arbitrators. In institutional arbitration proceedings the fees are set by the fee schedule of the arbitral institution. In ad hoc arbitration proceedings the fees are determined based on the agreement of the parties and the arbitrators.

According to the Chilean Constitution, judges are personally liable for any bribery or breach of the procedural rules as well as, more generally, for any malfeasance whilst in office or miscarriage of justice. Arbitrators are liable in the same circumstances.

Arbitrators are likewise subject to criminal liability for any offences they commit; tort liability for any fraudulent or negligent acts that cause harm to the parties; administrative liability for any breaches or abuses they commit; and civil contractual liability for their breach of any obligation imposed by the arbitration agreement. Only the first three affect the arbitrator by operation of law; the fourth affects him as a party to the arbitration agreement.

Competence to rule on its own jurisdiction
There are no express provisions governing this issue in the context of domestic arbitration. However, there are several decisions of the Chilean Supreme Court confirming the principles of “Kompetenz-Kompetenz” and separability of the arbitration agreement.

For international arbitration, the International Commercial Arbitration Act expressly authorises the arbitrators to decide on their own jurisdiction and com­petence. If any party considers that the arbitrator has no jurisdiction, he may ask the President of the Court of Appeals at the seat of the arbitration to review the arbitrator’s decision and render a final ruling.

Power to order interim measures
In general, before the arbitration is commenced, national courts will have the power to grant interim measures or conservatory relief. After the arbitral tribunal is set up, interim measures shall be granted by the arbitrator(s) and in appropriate circumstances by the national courts.

In domestic arbitration, unless otherwise agreed by the parties, the arbitrator will be an arbitrator at law who will apply the law to decide the merits of the dispute and conduct the proceedings according to the same rules applicable to the ordinary courts. However, the parties may agree:

• (i) that the arbitrators conduct the proceedings according to the rules freely determined by the parties and the arbitrator; and/or
• (ii) that the arbitrators decide the case in equity (ex aequo et bono) instead of in accordance with the law.

However, there are certain mandatory procedural rules that every arbitrator must follow:

• (i) he must hear both parties;
• (ii) he must attach to the file the documents submitted by the parties; and
• (iii) he should ensure that he has all the evidence required to decide the case.

The International Commercial Arbitration Act provides that arbitration proceedings shall be conducted according to the rules agreed by the parties and, in the absence of agreement between the parties, by the rules deemed appropriate by the arbitrators.

Commencement of arbitration
In domestic arbitration, there are no legal provisions regarding the commencement of arbitration proceedings. The general rule applicable to proceedings before national courts is that proceedings commence with the service of the claim.

In international arbitration, unless otherwise agreed by the parties, the arbitral proceedings shall commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.

Procedural powers of the tribunal
As mentioned above, in domestic arbitration, unless the parties agree otherwise, the arbitrators shall apply the law to decide the merits of the dispute and conduct the proceedings in accordance with the procedural rules applicable to national court proceedings.

For international arbitration, the International Commercial Arbitration Act provides that the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. Failing such agreement, the arbitral tribunal may, subject to the provisions of this law, conduct the arbitration in such manner as it considers appropriate. The powers conferred upon the arbitral tribunal include the power to determine the admissibility, relevance, materiality and weight of any evidence.

Place and language of arbitration
The parties are free to agree on the place of arbitration. Failing such agreement, the rules are different in domestic and international arbitration.

In domestic arbitration the Chilean Courts Statute provides that the venue of the arbitration will be the place where the arbitration agreement was signed. The language of the arbitration shall be Spanish.

For international arbitration the International Commercial Arbitration Act provides that if the parties do not agree on the seat of the arbitration the decision will be made by the arbitrators, who must bear in mind the specific circumstances of each case. Arbitrators are also authorised to convene anywhere if such place is considered adequate to deliberate and hear evidence, unless the parties agree otherwise. The arbitrators must also decide upon the language of the arbitration if the parties have not agreed on this issue.

Submissions
In domestic arbitration, submissions vary depending on the type of arbitration: in arbitration at law the general rules of the Code of Civil Procedure are applicable; in all other cases, the rules applicable to submissions will be determined by the parties or the arbitrator(s).

In international arbitration, unless otherwise agreed by the parties, the claimant shall state the facts supporting his claim, the points at issue and the relief sought within the period of time agreed by the parties or determined by the arbitral tribunal. The respondent shall then state his defence in respect of the claim. The parties may submit all documents they consider to be relevant with their written submissions or may add a reference to the documents or other evidence that they intend to submit. Unless otherwise agreed by the parties, either party may amend or supplement its claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate.

Oral hearing and written proceedings, default by the parties
As previously stated, in domestic arbitration, the proceedings may vary depending upon whether the parties have chosen arbitration at law (in which case the general rules of the Code of Civil Procedure shall be applied – basically a written procedure) or another type of arbitration (in which case the procedure shall be determined by the parties or the arbitrator).

In international arbitration proceedings, the International Commercial Arbitration Act provides that the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral arguments, or whether the proceedings shall be conducted on the basis of documents and other materials. However, unless the parties have agreed that no oral hearing shall be held, the arbitral tribunal shall hold such a hearing at an appropriate stage of the proceedings, if so requested by a party. The parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of goods, other property or documents. All statements, documents or other information supplied to the arbitral tribunal by one party shall be communicated to the other party. Also, any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision must be communicated to the parties.

With respect to a defaulting party, as a general rule, arbitration proceedings may be conducted even in the absence of one of the parties. However, if the claimant does not file its suit within the term agreed by the parties or determined by the arbitrators, the case shall be closed.

Confidentiality
Chilean law does not contain a general rule requiring arbitration proceedings to remain confidential, and there is no relevant case law on this issue. Therefore, the confidentiality (or otherwise) of the arbitration proceedings depends largely upon the agreement of the parties (e.g. the parties can enter into a separate confidentiality agreement). Nevertheless, in practice, arbitrators tend to keep the arbitration procedure, as well as the parties’ arguments and documents, confidential.

Evidence
In Chilean law, there is a procedural principle according to which the gathering, production and tendering of evidence is left to the parties’ discretion. As a general rule, both ordinary judges and arbitrators lack the power to obtain evidence other than that requested by the parties. The exception to this rule is the judges’ authority to order, ex officio, the inclusion of certain evidence after the closing of the proceedings and prior to the rendering of the award.

It is notable that, in the case of arbitration conducted ex aequo et bono, the law authorises the arbitrators to take whatever steps they deem necessary to establish the facts of the case.

Chilean procedural law does not provide for discovery as in other jurisdictions. Chilean law only provides for mandatory production of specific documents in the possession of the other party or of a third party, which are directly related to the dispute and are not confidential.

With regard to the pleading stage of the proceedings, the parties are not required to produce evidence, but they are entitled to submit all documents they consider relevant, or to refer to any documents or other evidence that they intend to submit at a later stage in the proceedings. This rule applies both to domestic and international arbitration.

The types of evidence that can be adduced by the parties include documentary evidence (e.g. contracts and correspondence between the parties), witness statements, ex parte confessions, reports of inspections conducted by the tribunal, expert reports and inferences. The parties to the arbitration may agree to limit the types of evidence that will be admissible in the proceedings.

As regards the weight to be attributed to evidence, there is a difference between arbitration at law and ex aequo et bono. In the former case, the rules of evidence provided by the Code of Civil Procedure for ordinary judges apply, whereas in the latter case it is the arbitrator(s) who weighs the evidence in equity, using his own good judgment.

With regard to international arbitration, unless the parties agree otherwise, the tribunal has the power to determine the admissibility, relevance, materiality and weight of the evidence.

Choice of law
In domestic arbitration, the arbitrators shall base their decision on Chilean law, unless the parties have authorised them to decide ex aequo et bono.

In international arbitration, the arbitrators shall decide the dispute in accordance with such rules of law chosen by the parties. Any designation of law or legal system of a given State shall be construed, unless otherwise expressed, as directly referring to the substantive law of the State and not to its conflict of laws rules. In the absence of any express choice by the parties, the applicable law shall be determined in accordance with the relevant conflict of laws rules. The arbitrators shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorised them to do so.

Decisionmaking by the tribunal
If the parties have not agreed on a shorter period, arbitrators in domestic arbitration proceedings shall render their decision within two years from the commencement of the arbitration.

The International Commercial Arbitration Act does not stipulate an express time limit within which the tribunal shall issue its decision in the context of international arbitration proceedings, but it is implied that the arbitral tribunal should do so as soon as possible.

Form, content and effect of the award
In the case of domestic arbitration, a distinction must be made. If the arbitrator has to decide the dispute based on Chilean law, he will be subject to the general procedural rules provided by Chilean law and the award must comply with all the formal and substantive requirements applicable to final judgments issued by national courts.

In the case of arbitrators ex aequo et bono, the law requires that the award be made in writing, contain the date and place of issue, the arbitrator’s signature, and a certification by a notary or two witnesses. The award shall include the names of the parties, their respective arguments and the decision of the tribunal on the issues in dispute.

For international arbitration, the International Commercial Arbitration Act provides that the award must be in writing, signed by the arbitrators, and state the reasons for the decision unless otherwise agreed. It must also record the date of issue of the award and the place at which it was rendered.

All final and binding arbitration awards have the same legal effect as a final court judgment and may be enforced with the assistance of national courts.

Settlement
The proceedings will terminate if the parties settle their dispute. The arbitral tribunal shall record the settlement in the form of an award if so requested by the parties, provided that the arbitral tribunal deems the settlement to be legally valid. An award by agreement has the same effect as any other award made by an arbitral tribunal.

In domestic arbitration proceedings conducted at law, the arbitrators are obliged to summon the parties to a hearing where the arbitrators shall propose the basis for a settlement agreement. Termination of proceedings

Domestic arbitration proceedings terminate in accordance with the general rules applicable to national courts. It is also notable that the powers of an arbitrator expire two years after his appointment.

The International Commercial Arbitration Act states that the arbitral proceedings are terminated by a final award or by an order of the arbitral tribunal in the following cases:

• (i) if the claimant withdraws his claim, unless the respondent objects thereto and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute;
• (ii) if the parties agree on the termination of the proceedings; or
• (iii) the arbitral tribunal finds that the continuation of the proceedings has become unnecessary or impossible.

Costs
Costs are divided into procedural costs (i.e. those related to the process) and personal costs (i.e. the fees of each party’s lawyers), and are enforceable at the same time and in the same proceedings as for the enforcement of the award. In accordance with the general provisions of Chilean law, the arbitrators have the power to order the losing party to pay all the costs of the proceedings (including the other party’s personal costs), but only if they decide that such party did not have a valid basis for bringing or defending the proceedings. It is common practice for each party to pay its own personal fees and 50% of the procedural fees.

Correction and interpretation of the award
In both domestic and international arbitration, the parties may request the arbitrators to correct any typographical, computational or other similar mistakes in the award. Arbitrators are also entitled to make such corrections ex officio. The parties may also ask for clarification of any issue in the award.

Moreover, the parties to international arbitration proceedings may ask the arbitral tribunal to issue a new award in relation to claims included in the arbitration pleadings that were not addressed in the award. The time limit for filing such a petition is 30 days from receipt of the award. The time limit for issuing a new award, if the court deems such an award necessary, is 60 days from the date of the petition.

The jurisdiction of the courts
The national courts are generally precluded from exercising jurisdiction over a dispute that is subject to a valid and binding arbitration agreement concluded between the parties. Courts may only intervene during an arbitration in order to:

• (i) appoint an arbitrator where the parties have not agreed thereon;
• (ii) assist the arbitration to enforce its orders (e.g. obtaining the deposition of a witness who is in contempt of an order of the arbitral tribunal) or to enforce the award; and
• (iii) review the arbitrator’s award if challenged by one of the parties.

The court can also revise the award in certain circumstances in domestic and international arbitration proceedings, as further explained below.

Stay of court proceedings
The agreement to refer a dispute to arbitration in principle excludes the jurisdiction of the national courts. However, the lack of jurisdiction of the national courts cannot be declared ex officio by the judge in domestic arbitration, i.e. it must be invoked by a party.

The International Commercial Arbitration Act provides that where an action is brought in a matter which is subject to an arbitration agreement the court shall, if a party so requests no later than when submitting his first statement on the merits of the dispute, refer the parties to arbitration unless it finds that the agreement is null or void, inoperative or incapable of being performed.

As previously stated, the award may be reviewed by the courts on certain limited grounds in domestic and international arbitration proceedings:

In domestic arbitration, the parties have the right to agree on the scope of review of the award ranging from a complete review on the merits of the dispute to no review at all. However: (a) an award rendered ex aequo et bono will generally not be subject to review; and (b) an award will always be subject to (i) a Recurso de Casación en la Forma if the award addresses more (or different) issues from those included in the claim or if certain basic procedural steps were not observed; and (ii) a Recurso de Queja if the arbitrator’s decision is abusive.

In addition, an appeal may be filed against the final award unless the parties have renounced the right to do so. A party may appeal the award if (i) any of its claims were not granted by the arbitrator(s); and (ii) the arbitrator(s) erred in determining the facts or in the application of the law to those facts. The decision of the Court of Appeals is the only possible appeal on the factual merits of the case. Further recourse to the Supreme Court is only available to seek invalidation of the award on the basis that the law was wrongful applied by the arbitrator(s) (Recurso de Casación en el Fondo) or if there were serious procedural defects (Recurso de Casación en la Forma).

In international arbitration, an arbitral award can be challenged by a party before the competent Court of Appeals requesting that the award be set aside on one or more of the grounds included in the New York Convention for refusing enforcement, namely: lack of capacity of the parties to execute an arbitration agreement; lack of notice of the appointment of an arbitrator or of the arbitral proceedings or inability of a party to present his case; awards dealing with matters not covered by the arbitration agreement; composition of arbitral tribunal or conduct of arbitral proceedings contrary to the agreement of parties or the applicable legal provisions; and non-arbitrability of the subject matter of the dispute or violation of public policy, which would include serious departures from fundamental notions of procedural justice.

Foreign and domestic arbitration awards have the same force and effect as a final judgment pronounced by a Chilean court.

However, the enforcement of foreign arbitral awards is subject to leave from the Supreme Court through the process of exequatur. An exequatur encompasses the following steps:

1. filing of a request for the enforcement of the foreign arbitration award before the Chilean Supreme Court;
2. service of process on the party against whom enforcement is sought and granting a time limit (typically 15 days) within which such party may oppose enforcement;
3. delivery of the request to the Fiscal (a lawyer who watches over the public interest in certain matters heard before the Supreme Court) so that he or she can report to the Supreme Court on whether the granting of enforcement is advisable or not; and
4. rendering a decision granting or refusing enforcement.

In order to decide whether a foreign arbitration award shall be enforced in Chile, the Supreme Court shall apply the provisions of the New York Convention, which contains only limited grounds upon which enforcement can be refused.

After exequatur has been completed, the final step is to seek the actual enforcement of the award, which must be undertaken by the Chilean court that would have decided the matter had the dispute not been the subject of an arbitration agreement.

In Chile, arbitration has a long tradition and is increasingly becoming the most popular means of dispute resolution. It has been gaining in relevance lately as a result of an increase in major business disputes, the opening of the Chilean economy to international trade, and the adoption of the UNCITRAL Model Law on Commercial Arbitration. In addition, Chile now has all the ingredients to become a well-respected venue for international arbitral cases: an adequate legal framework, sophisticated counsel, a sound economy and a stable institutional environment. Moreover, following the enactment of the Model Law, Chilean courts have rendered a number of encouraging decisions, which help bring Chile closer to its goal of becoming a leading international arbitration venue.

CMS Bureau Francis Lefebvre
Marcelo T. de Alvear 612 Piso 1
C1058AAH Capital Federal
Buenos Aires, Argentina


Marcelo Cippitelli
T +54 11 43 11 10 08
F +54 11 43 11 80 88
E mcippitelli@cms-bfl.com.ar


Patrick Patelin
T +54 11 43 11 10 08
F +54 11 43 11 80 88
E ppatelin@cms-bfl.com.ar