CHILE: An Introduction to Dispute Resolution: Arbitration
Modern Approaches in Arbitration Regulation: The Dualistic Framework in Chile
The widespread acknowledgment of arbitration as an alternative method for conflict resolution has propelled the modernisation of the norms overseeing arbitration, with a specific focus on international arbitration. This regulatory refinement has prompted a nuanced differentiation between monistic and dualistic approaches as predominant models of arbitral regulation. This article briefly explores the reasons behind the modern trend towards monistic regulation and then delves into the dualistic system that governs arbitration in Chile. Arbitration regulation is broadly classified into monistic and dualistic frameworks. The former entails the regulation of both domestic and international arbitration within a singular legal corpus, while the latter maintains separate regulatory structures for domestic and international arbitration.
In recent times, there has been a global discernible shift towards monistic regulation of arbitration. Among the advantages of adopting a consolidated legal framework are the simplification of arbitration procedures, increased ease and certainty for the parties in applying such procedures, greater predictability in awards, the cultivation of a favourable environment for both domestic and international arbitration participants, and an emblematic demonstration of jurisdictions’ dedication to fostering a propitious arbitration environment.
Despite recognising the global trend towards monistic regulation, Chile maintains a dualistic system, whereby arbitration regulation is mainly governed by two statutes for domestic arbitration – ie, the Organic Code of Courts (COT) (passed in 1875) and the Code of Civil Procedure (CPC) (passed in 1902) – and a different one for international arbitration, the International Commercial Arbitration Law (LACI) (passed in 2004). The dualistic system in Chile is based on the desire to address the specific needs and characteristics of both domestic and international arbitration.
On one hand, the COT and the CPC provide a comprehensive framework for domestic arbitration, ensuring that local disputes are adjudicated in accordance with the legal principles of Chilean arbitration. On the other hand, the LACI aligns Chile with international standards for the resolution of cross-border disputes, incorporating elements from the UNCITRAL Model Law and also from the international treaties signed and ratified by Chile – namely, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”), the Inter-American Convention on International Commercial Arbitration (the “Panama Convention”), and the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID).
This dualistic system has prevailed owing to the fact that the legislation for domestic arbitration (deeply ingrained in the legal history and juridical culture of the nation) remains robust and has consistently fulfilled its objective. As expected, this regulatory separation between domestic and international arbitration in Chile leads to differences between them in various aspects of arbitration. This article will briefly address some of these distinctions.
Types of arbitration
When it comes to the matters subject to arbitration, domestic arbitration in Chile is categorised into three types: voluntary, prohibited, and mandatory. Voluntary arbitration is initiated by the mutual consent of the involved parties, providing a flexible and consensual alternative to judicial litigation and is the general rule in private law. Prohibited arbitration pertains to matters that are inherently precluded by law from arbitration, ensuring the exclusive jurisdiction of courts over certain issues attending their nature. Mandatory arbitration is imposed by law and is applicable to specific disputes expressly excluded from the jurisdiction of ordinary courts.
In international arbitration, the LACI aligns with global standards, promoting a voluntary and consensual approach to resolving cross-border disputes. It allows flexibility in the selection of arbitrators, ensuring that parties can choose individuals with the necessary expertise to adjudicate complex international matters. There are no matters subject to mandatory arbitration and the only reference to prohibited arbitration pertains to the enforcement of an award contrary to Chilean public policy or where the subject matter of the dispute is not susceptible to arbitration under Chilean laws.
Types of arbitrators
Concerning the applicable rules, domestic arbitration in Chile contemplates various possibilities based on a classification of arbitrators. First, law arbitrators must subordinate both arbitration procedure and the award to the rules established for ordinary courts by the law. Second, ex aequo et bono arbitrators conduct the procedure according to the rules established by the parties in the arbitration agreement and, in its absence, to the minimum rules established for this matter in the CPC. Ex aequo et bono arbitrators must render the award based on equity and justice. Finally, mixed arbitrators must adhere in the procedure to the rules set for ex aequo et bono arbitrators and – when rendering the award – to the rules set for law arbitrators.
On the other hand, the LACI (which does not make any distinction, nor defines what should be understood as an arbitrator) subjects the procedure to the rules agreed upon by the parties and, in the absence of an agreement, by those established by the arbitrator. As regards the award, it must be rendered according to the rules of law agreed upon by the parties and, in default, by the law applicable according to the rules of private international law.
The LACI also allows the parties to submit the resolution of the conflict to an arbitrator acting as an amicus curiae or ex aequo et bono.
Arbitration agreements
Both domestic and international regulations share the requirement for a written agreement for arbitration. However, the latter defines “arbitration agreement” in broader terms, recognising that there are various forms of arbitration agreement, but always requiring that it be in writing.
Ad hoc and institutional arbitration
Both domestic and international arbitration regulations in Chile recognise the possibility of organising arbitration in an ad hoc or institutional manner. In the former, parties nominally appoint the arbitrator or establish guidelines for appointing them, which they must do in the respective arbitration agreement. In the latter, parties submit the appointment of the arbitrator and arbitration itself to an entity dedicated to administering arbitrations and its by-laws.
In Chile, the predominant entity for these purposes – both in the case of domestic and international arbitration – is the Santiago Arbitration and Mediation Centre (CAM Santiago) of the Santiago Chamber of Commerce. In line with the dualistic system, the CAM Santiago contemplates different rules for each of these arbitrations.
Notwithstanding the referred disparities between domestic and international arbitration, statistics demonstrate that both regulations effectively fulfil their objective in conflict resolution, and both are duly recognised and respected by ordinary courts. In the case of domestic arbitration, 95% of the complaints filed against arbitral awards have been rejected. Meanwhile, in the case of international arbitration, no award has been annulled by the Chilean Appeal Courts. In fact, all annulment petitions have been rejected.
In sum, the well-established regulation of domestic arbitration in Chile – deeply ingrained in its legal history – complements the more recent and globally aligned legal framework for international arbitration. This dualistic system aims to balance the specific needs of domestic and international disputes, providing a comprehensive and tailored approach to arbitration in Chile. As the global arbitration landscape continues to evolve, Chile’s dual model presents an intriguing case study on balancing tradition with modernity in dispute resolution.