Latin Lawyer
27.04.2018
Por – Christina Mckeon Frutuoso
lSpeakers at the Latin Lawyer-GAR Live 2nd Annual Arbitration Summit – held yesterday in Miami – agreed that arbitration courts should regulate the role of parties who have not consented to arbitration on a case-by-case basis, and that international statues could not provide an answer.
César Coronel Jones, Gerardo Lozano Alarcón and Agustin Sanz
“It is practically impossible to have a general regulation,” said Gerardo Lozano Alarcón, partner at DLA Piper LLP. “Dealing with non-signatories is something that has to be reviewed by institutions on a case-by-case basis.”
César Coronel Jones, founding partner at Coronel & Pérez in Ecuador, noted the need to consider the judicial culture of different countries involved in an international dispute. “The jurisprudence is completely different in Chile compared to in Colombia, for example,” he said. “I think each country should decide, rather than there being a general ruling for the whole region.”
Determining who is bound by arbitration is a hot topic for arbitrators and lawyers. A panel moderated by Agustin Sanz of Three Crowns in Washington, DC, disagreed over the extent to which substance trumps form when it comes to evidence of consent to arbitration.
Coronel highlighted the crux of the non-signatory debate. “Only parties are bound to a contract, and this can be either an absolute connection or some relative connection to the contract. Yes, parties are bound, but the question remains: who is considered a party?” he asked.
Coronel said good faith plays an important role in determining who constitutes a party. “There needs to be a prevalence of reality over appearance,” he said. “Substance should prevail, meaning that in certain circumstances, a party who has not signed can and should be considered a real party.”
Some said that good faith is one of various factors. “The cornerstone of arbitration is consent, and the cornerstone of consent is whether a party has undertaken obligations and has signed an instrument,” White & Case LLP’s head of Latin American arbitration, professor at the University of Miami and co-chair of the summit Jonathan Hamilton noted in comments focused on the issue of signatories to contracts. “It’s not the role of arbitrators to substitute themselves for those who are negotiating the contracts; at the end of the day, the success of all the billions of dollars of contracts in the region all depends on a contract meaning what it says.”
Even if the tribunal says a non-signatory is obliged, to what extent it must participate in the arbitration raises its own issues, noted Adriana Braghetta, co-chair of the summit and partner and co-head of the arbitration practice at Brazil’s L O Baptista Advogados. For some, the uncertainty is twofold. “We need to consider that this uncertainty can increase arbitration costs, as well as potentially deter investors from investing in projects,” said Ian Meredith, partner at K&L Gates.
The nature of certain transactions can further muddy how the role of non-signatories is perceived. In the case of multi-party and multi-contract transactions, José Martínez de Hoz, partner at Martínez de Hoz & Rueda in Buenos Aires, underlines the need to consider if arbitration clauses are identical across different contracts. “In this situation, you have to establish whether there is a common agreement that they can all be arbitrated together, with some sort of common contractual relation,” he said.
The binding of non-signatories is notably ambiguous in disputes involving state-owned companies. Martínez de Hoz noted several factors to consider in such a situation, using oil and gas contracts as an example. “You will need to establish whether, under the laws of the host country, does the state own the reserves? Also consider whether the state called the public tender offer for the contract under dispute,” he posed. Other factors to observe include whether negotiations took place in government buildings; whether state officials partook in negotiations; and whether the contract includes protections that only a state can give, such as tax or export duty exemptions.
States can be hesitant to get involved in arbitral proceedings. “We need to consider that governments are reluctant to give room to private persons to rule on issues that are politically sensitive,” Coronel highlighted.
Whether a contract involves private or state-owned companies, lawyers can help clarify the position of non-signatories in their clients’ arbitration clauses. Martínez de Hoz suggests one way to help in the early stages of contract negotiation. “Giving express authority to the tribunal [in the arbitration clause] to allow it to decide which parties are involved can be greatly effective,” he suggested.
Latin Lawyer will continue to cover the arbitration summit in upcoming briefings.
- Practice area :
- Arbitration
- Country :
- International
