THE AUTHORS:
Ignacio Arriagada, Associate at Clyde & Co
Sofia Nievas, Associate at Clyde & Co
Clyde & Co’s Young Arbitration Group provides a unique insight into international arbitration issues through the lens of young international arbitration practitioners working across different jurisdictions. In this series with Daily Jus, Clyde & Co explores the evolving landscape of arbitration reforms, analyzing recent developments, legislative changes, and their impact on dispute resolution worldwide.
Chile’s establishment as a key hub for arbitration in the Latin American region is largely explained by its strong local arbitral institutions, its modern legal framework and its arbitration-friendly courts. The country’s proclivity towards arbitration is clear in the data: by December 2023, the Centro de Arbitraje y Mediación of the Santiago Chamber of Commerce (the “CAM Santiago”), Chile’s largest arbitration centre, had handled around 5,767 arbitration cases, making it one of the busiest centres in the Latin American region, excluding Brazil. As this article is being published, their official alliance with the Centro Internacional de Arbitraje de Madrid – Centro Iberoamericano de Arbitraje (“CIAM-CIAR”) is being announced.
This article will aim to discuss the statutory framework for arbitral proceedings in Chile, along with recent attempts to reform it and the areas for potential future improvement.
Main Statutory Framework
The arbitration regulation in Chile is shaped by two main systems: one for international arbitration and another for domestic/national arbitration. Although both share key principles, while regulation of international arbitration is characterized by flexibility and minimal formalities, domestic arbitration remains more rigid.
- Domestic arbitration in Chile is governed by provisions within the Chilean Code of Civil Procedure and the Judicial Organization Code, statutes that have never been majorly changed. While there is still a pending civil procedure reform being discussed, the proposed bill does not introduce significant alterations to the arbitration provisions.
- For international commercial arbitration, Chile adopted the International Commercial Arbitration Act (Law No. 19,971) in 2004 (the “ICAA”), which is closely aligned with the UNCITRAL (United Nations Commission On International Trade Law) Model Law on International Commercial Arbitration (1985) (“UNCITRAL Model Law”). Prior to it, the domestic arbitration rules were applied to international arbitrations. The ICAA applies only to international commercial arbitration, without affecting the international treaties ratified and in force in Chile, whether multilateral or bilateral, if the seat of the arbitration is in the territory of Chile, except in specific cases.
The Chilean legislature considered it important to preserve the original UNCITRAL Model Law as much as possible, and thus the changes made to it were minimal and primarily address the jurisdiction of local courts. In this context, the involvement of local courts is limited to specific cases that are clearly outlined, such as the appointment of arbitrators on behalf of the parties (Article 11 of the ICAA), challenges (Article 13 of the ICAA), removals (Article 14 of the ICAA), jurisdictional issues (Article 16 of the ICAA), and requests for annulment (Article 34 of the ICAA)
Chile is also signatory of several key international agreements, including the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the “New York Convention”)and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965) (the “ICSID Convention”). Additionally, most of the Free Trade Agreements (“FTA”) that Chile has entered into include specific arbitration mechanisms to settle disputes with foreign investors.
Finally, local arbitration institutions like the CAM Santiago have also produced their own rules for the domestic and international arbitrations they handle.
Recent Changes and Noteworthy Attempts
As mentioned, neither the domestic nor the international arbitration regulations have ever been reformed significantly, though there have been some noteworthy exceptions and attempts, as we will see below.
First Regulation on Emergency Arbitration
In August of 2023 CAM Santiago introduced new emergency arbitration rules to its National Arbitration Rules, marking a significant shift in how interim measures can be handled before an arbitral tribunal is constituted. Even though these rules are to be applied initially to the arbitrations handled by the CAM Santiago, they are widely known among practitioners and are used as a reference even in arbitration occurring outside of this institution.
Before these changes, neither its national nor international arbitration rules provided for emergency arbitration. If a party needed urgent interim relief before the tribunal was formed, they had to present their request before the courts and rely on provisions from the Code of Civil Procedure governing pre-trial interim measures. Under the new rules, arbitration proceedings may now be initiated through a request for pre-trial interim measures, filed either before the courts or directly before the CAM Santiago via emergency arbitration.
This emergency arbitration system takes inspiration from similar frameworks adopted by other national and international arbitration institutions but has been tailored to fit Chile’s specific legal context. One notable distinction is the ability to grant interim measures ex parte.
Proposed Restriction on SME Arbitration Agreements
In December 2022, a parliamentary proposal aimed at prohibiting arbitration in disputes between Micro, Small, and Medium-sized Enterprises (“MSMEs”) and large companies was presented by members of the Chamber of Deputies (“Cámara de Diputados”). The bill is currently in its initial discussion stage.
The bill recognizes the difficulties posed to MSMEs, one of them being the mandatory arbitration clauses imposed in contracts with large corporations. Because arbitration involves significant costs, MSMEs, which typically have limited financial resources, are placed at a disadvantage when forced into arbitration against wealthier, well-resourced large corporations.
Consequently, the bill aims to modify the Judicial Organization Code, prohibiting arbitration between SMEs and companies with an annual income that surpasses 100,000 Unidades de Fomento.
It is worth noting that this criterion aligns with what is already established in other local statutes, by which parties perceived as ‘weaker’ are allowed to withdraw from arbitration. This is the case, for example, of insurance disputes that do not surpass 10,000 Unidades de Fomento; or disputes under the Chilean Consumer Law (Law No. 19.496), by which consumers are always entitled to present their claim before the courts.
Conclusion: Areas for Potential Future Improvement
As it stands, the stability of the local arbitration framework has been a contributor to the growth of the arbitral practice in Chile: the rules are known and have remain unchanged for years. Though many deem it unnecessary to update a system that already works well in practice, some academics and practitioners have voiced concern that the market has become complacent, ignoring areas where further improvement would be need.
Particular attention is given to the country’s current regulation of domestic arbitration in the Code of Civil Procedure and the Judicial Organization Code, two statutes enacted during the first half of the 20th century, which offer an incomplete treatment of the matter: the Judicial Organization Code regulates the arbitrator and the Code of Civil Procedure deals with the arbitration procedure, but there are scarce provisions addressing the arbitration agreement, arbitrability, and, in general, the criteria that should govern arbitration.
Though there is not an overall consensus on the need to reform these rules, some believe that the pending civil procedure reform, which is still being discussed in Congress, gives a step in this direction. Though the bill currently does not provide a detailed regulation of arbitration, its accompanying ‘Message’ (“Mensaje”) clarifies that this was not an oversight: it acknowledges that the regulation of the matter should be contained in an independent and complementary law, within the framework of alternative dispute resolution mechanisms, just as international arbitration was regulated in a separate law, the ICAA, twenty years ago.
ABOUT THE AUTHORS
Ignacio Arriagada is an associate based in Clyde & Co’s Santiago office. He is a qualified solicitor in Chile specializing on litigation before Chilean Courts and arbitration. He has experience representing clients from a variety of industries, including insurance, aviation, healthcare and construction, in complex dispute matters.
Sofia Nievas is an associate based in Clyde & Co’s London office. She specializes in handling complex international disputes in the energy, engineering and construction sectors, including for insurers and reinsurers in respect of policy coverage and subrogated recoveries. Before joining the London team, she was a senior associate at Clyde & Co.’s Santiago office.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
