Contributed By Jana & Gil Dispute Resolution
Given the extensive development of domestic arbitration in Chile, in most cases, both with respect to foreign companies that incorporate companies in Chile and Chilean companies, parties use domestic arbitration rather than international arbitration. As such, domestic arbitration is more widely used than international arbitration, and it is rare for domestic parties to resort to international arbitration in Chile (see 1.3 Arbitral Institutions).
Notwithstanding the above, there has been a tendency in the case of agencies of foreign companies to opt for international arbitration, mostly when the seat of arbitration is Santiago de Chile.
Chile is currently undergoing a constitution-making process that will most likely replace the constitution that has been in force since 1980. The new draft of the constitution will be subject to a vote on 17 December 2023; arbitration is not expressly regulated in the preliminary draft.
Industries With Increased International Arbitration Activity
There are no statistics on international arbitration activity during 2022–23. However, new cases have risen as an effect of the measures taken due to the COVID-19 pandemic. For example, the execution of many public concession contracts and infrastructure contracts, among others, has been affected, leading to disputes between the parties. Hence, there has been an increase in construction and mining disputes, linked to the discussion of whether those measures have generated a fortuitous event in these contracts to distribute the risk. Moreover, measures affecting the retirement system and the health sector have sparked controversy among investors who have initiated consultation processes previous to international investment arbitration.
Industries With Decreased International Arbitration Activity
There is not enough information to conclude which industries are experiencing a decrease in international arbitration activity, but in general there has not been a decrease in any industry.
By far the most widely used arbitration institution for international arbitration cases in Chile is the International Court for Arbitration of the International Chamber of Commerce. Since 2017, the International Chamber of Commerce (ICC) has had a national committee in Santiago, joining forces with CAM Santiago to administer mediations and arbitrations in Chile under the ICC Rules of Arbitration (the “ICC Rules”).
Furthermore, it should be noted that CAM Santiago administers both domestic and international arbitrations. The CAM Rules for International Arbitration (the “CAM Rules”) have been in force since 1 June 2006.
However, due to practices adopted by some lawyers, parties in Chile have continued including the domestic arbitration model clause in contracts that qualify as international arbitration under Law No 19,971 on International Commercial Arbitration (ICAL). As a result, CAM Santiago has over the last few years administered various international arbitrations governed by the ICAL, but under its domestic arbitration rules. Notwithstanding the above, the general trend is to conduct arbitration under international arbitration rules.
There have not been any new arbitral institutions established in Chile in 2022–23.
National courts may hear disputes related to domestic arbitrations in matters involving:
The challenges against arbitral awards rendered by domestic arbitrators are heard by the Court of Appeal of the place of arbitration and the Supreme Court. Moreover, the decision of the Court of Appeals or the second-instance arbitral tribunal “in law” that reviewed the arbitral award by the arbitrator “in law” in appeal can be set aside on specific grounds by the Supreme Court.
In this regard, in Chile, the waiver of challenges against arbitral awards rendered by domestic arbitrators is allowed and is the general rule. However, for reasons of public policy there are two challenges that cannot be waived: (i) el recurso de queja and (ii) el recurso de casación en la forma on the grounds of lack of jurisdiction and ultra petita.
Moreover, whether the parties wish to appoint a single- or multi-member tribunal, if no agreement can be reached on the name(s) of the arbitrator(s), a national court will appoint a single arbitrator by default (Article 232 of the Code of Judicial Organisation).
Regarding preliminary relief, if the arbitral tribunal has not yet been constituted, parties must request the preliminary relief before a national court (see 6.2 Role of Courts).
Parties can request national courts to order the enforcement of an arbitral award. Moreover, national courts may also aid domestic arbitrators or parties in the taking of evidence.
National courts may hear disputes related to international arbitrations in matters involving the following.
International commercial arbitration in Chile is ruled by Law No 19,971 on International Commercial Arbitration, in force since 2004. This law was drafted based on the UNCITRAL Model Law and has no relevant deviations from it.
As the history of the ICAL shows, the Chilean legislature deemed it necessary to maintain the original law proposed by UNCITRAL as much as possible in order to promote the development of international arbitration in Chile. Therefore, the modifications made to the ICAL in respect of the Model Law are minimal and specifically related to the jurisdiction of the local courts. In this regard, the intervention of the local courts was limited to specifically regulated cases, such as the appointment of arbitrators on behalf of the parties (Article 11 of the ICAL), challenge (Article 13 of the ICAL), removal (Article 14 of the ICAL), issues of jurisdiction (Article 16 of the ICAL) and the request for annulment (Article 34 of the ICAL).
Domestic arbitration in Chile is ruled by the Code of Civil Procedure (CCP) and the Code of Judicial Organisation (CJO). There have not been significant changes in these rules because domestic arbitration works well in Chile. Although there is pending legislation to reform the CCP, the bill does not include relevant changes to domestic arbitration.
Notwithstanding the above, there have been several attempts to reform the domestic arbitration regulation. The first came at the beginning of the 1990s with the introduction of a formalistic bill aimed at maintaining the procedural focus on arbitration, instead of granting greater scope to the autonomy of the will of the parties. The bill was not successful and was withdrawn in 2002.
In other efforts to change the domestic arbitration law, there have been discussions at government level since 2013 to present a new reform bill that may change the arbitration landscape in Chile, but it has not yet materialised. It is a new and comprehensive draft bill that regulates domestic arbitration activity both in its functional and organic aspects. The most relevant change contained in this bill is that the current dualist system is left behind. Under the current system two models coexist, one for international commercial arbitration that is flexible and deformalised, and another for domestic arbitration that is more rigid and formalist. By making the rules for domestic arbitration and international arbitration more alike, the need for normative coherence will be satisfied, and domestic arbitration will be guided by modern and more flexible principles.
For international arbitration, Article 7(1) of the ICAL (see 2.1 Governing Legislation) determines that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. Article 7(2) establishes that the agreement must be in writing. Under such provision, an agreement is considered to be written when 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 denied by another”.
Chilean law prohibits arbitration for:
Disputes arising under the Labour Code are also excluded from arbitration, due to public policy aspects of labour issues and the prohibition on waiving labour rights. The Labour Code does, however, allow for arbitrations related to the collective bargaining process, in the form established by the Labour Code.
Reluctance or Refusal to Enforce Arbitration Clauses
Although not addressed by the Chilean legislation or judiciary to date, Chilean courts might be reluctant to enforce an arbitration clause with respect to self-executing instruments such as securities, cheques or promissory notes.
In addition, Chilean courts might refuse to enforce an arbitration clause relating to environmental issues, the registration of intellectual property rights or civil responsibility for violations of anti-trust or competition law because such matters are part of Chilean public policy.
However, since 2014, NIC Chile, an institution dependent on the Universidad de Chile, which is responsible for the registrations of “.cl” domain names that identify Chile on the internet, has been submitting disputes arising from the “.cl” domain to arbitration.
In addition, in 2018 the Chilean Institute of Industrial Property (Instituto Nacional de Propiedad Industrial) signed a memorandum with the World International Intellectual Property Organization to promote alternative dispute resolution procedures.
Accordingly, Article 1(5) of the ICAL specifically states that the law does not change the domestic regulations on non-arbitrable matters. Furthermore, the legislative history of the ICAL (see 2.1 Governing Legislation) indicates that matters related to public policy, such as labour, family or consumer rights, cannot be subject to international arbitration.
The ICAL (see 2.1 Governing Legislation) does not define which law should govern the arbitration agreement. Since it is not expressly established, it has been understood that the parties are free to determine the law or laws by which the arbitration agreement shall be governed. In the absence of such a decision, the implicit will of the parties must be sought among the provisions of the agreement regarding rights and obligations arising out of such provisions. If this is not possible, the Chilean law, as the law of the host state, shall apply.
In this regard, in one case, the Supreme Court considered only Law No 19,971 as the applicable law to revise an arbitration agreement (Almendra y Miel S.A. v G.L.G., Supreme Court, Case No 82,442-2016).
In another case, the Supreme Court, when reviewing an arbitration clause in a contract governed by the laws of the state of Minnesota, used the rules of the Chilean Civil Code to interpret it (Medtronic USA Inc. v Med Implant y Compañía Limitada, Supreme Court, Case No 9,248-2013).
In general, national courts have been inclined to enforce arbitration agreements (see 5.6 Breach of Arbitration Agreement).
The doctrine of separability of the arbitration clause is expressly acknowledged in the ICAL (see 2.1 Governing Legislation), which, following the UNCITRAL Model Law, states that “an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract” for the purposes of establishing the tribunal’s jurisdiction (Article 16(1) of the ICAL).
Therefore, under the ICAL, the invalidity of a contract may not affect the validity of its arbitration clause. This has been recognised by the Santiago Court of Appeal (Tampico Beverages, Inc. v Productos Naturales de la Sabana SA Alquería, Santiago Court of Appeal, Case No 6,975-2012).
The ICAL (see 2.1 Governing Legislation) specifically establishes that nationality shall not be a barrier to the appointment of an arbitrator (Article 11(1) of the ICAL). Therefore, unless otherwise agreed by the parties, a person’s nationality will not be an obstacle for them to act as an arbitrator (Article 11(1) of the ICAL).
Although discussions have arisen as to whether arbitrators need to be lawyers under Article 526 of the CJO in the case of international arbitration, part of the doctrine considers that such a conclusion would be erroneous. This can be corroborated by the history of the ICAL: when this discussion was raised, it was noted that there was consensus that, in the field of international commercial arbitration, the parties themselves are called upon to decide the quality of the arbitrator or arbitrators who will hear and resolve a dispute. It was considered that, if the parties decide that it should be a lawyer or other professional, the principle of autonomy should be respected. In addition, it was also considered that for disputes related to essentially technical aspects, it may be more appropriate to appoint an engineering arbitrator, a possibility that the law should not limit.
According to national law, judges cannot be appointed as arbitrators (Articles 226 and 317 of the CJO) and, even though this is self-evident, parties to the dispute cannot be appointed as arbitrators in their own case (Article 226 of the CJO).
The ICAL poses no restrictions on who may act as arbitrator, but since Articles 226 and 317 of the CJO are considered to relate to public policy, they necessarily act as a limitation on the appointment of arbitrators in international arbitrations that take place in Chile.
In international arbitrations with a sole arbitrator, where the parties have not agreed on an appointment procedure and cannot reach agreement on the appointment of the arbitrator, the appointment will be made by the President of the respective Court of Appeals.
In the case of a three-member tribunal, each party will name a co-arbitrator and the co-arbitrators will together nominate the President. Where the co-arbitrators cannot reach agreement, or where one of the parties fails to name a co-arbitrator, any party may request the President of the respective Court of Appeals to make the appointment (Article 11(3) of the ICAL).
The President shall make the appointment with due regard to “any qualifications required of the arbitrator by the agreement of the parties and to such considerations as are likely to secure the appointment of an independent and impartial arbitrator and, in the case of a sole or third arbitrator, shall take into account as well the advisability of appointing an arbitrator of a nationality other than those of the parties” (Article 11(5) of the ICAL).
There is no appeal available against the appointment of an arbitrator by the President of the Court of Appeals.
There are no provisions in international arbitration law for multiparty arbitrations. Parties may choose to incorporate the same arbitration clause in various related contracts or appoint the same arbitrator for related disputes.
In multiparty cases under the ICAL, if the president of the Court of Appeal is called to assist in the appointment of arbitrators, they may choose to consolidate the various disputes before tribunals of the same composition.
Although there is little if any published guidance, there is no reason why the multiparty solutions suggested in Article 10 of the ICC Rules, Article 8 of the London Court of International Arbitration (LCIA) Rules and Article 3(7) of the Rules of the International Centre for Dispute Resolution could not be applied.
To a greater extent, Article 14 of the CAM Rules for International Arbitration (2006) provides that where multiple claimants or respondents cannot agree on the appointment of their respective arbitrator, that arbitrator will be appointed by CAM Santiago.
For sole arbitrator cases, the president of the Court of Appeals will be entitled to intervene and designate the arbitrator when the parties fail to reach an agreement. This designation mechanism is activated upon party request (see 4.2 Default Procedures).
In the case of a three-member tribunal, where the co-arbitrators cannot reach an agreement on the appointment of the president, or where one of the parties fails to name a co-arbitrator, any party may request the president of the respective Court of Appeals to make the appointment (see 4.2 Default Procedures).
In addition, the president of the Court of Appeals is also entitled to intervene in the arbitrators’ appointment:
Regarding the limitations, the ICAL provides some guidance to select the arbitrator. However, there is no appeal available against the appointment of an arbitrator by the president of the Court of Appeals.
Under ICAL 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 to by the parties. A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made” (Article 12(2) of the ICAL).
Unless the challenged arbitrator withdraws or the other party agrees on the challenge, the tribunal will decide on the challenge (Article 13(2) of the ICAL). If the tribunal rejects the challenge, the challenging party may request the president of the respective Court of Appeals to decide on the challenge within 30 days of receiving notice of the decision of the tribunal.
The decision of the president of the Court of Appeals is not subject to appeal, and the arbitral tribunal may in the meantime continue the proceeding and even issue its award (Article 13(3) of the ICAL). Recent Chilean Court of Appeals’ case law does not show an increase in the number of challenges against arbitrators under the rules of the ICAL.
Parties arbitrating under the CAM Rules for International Arbitration must be aware that CAM Santiago will decide on the challenge without having to state reasons for its decision. However, if the challenge is rejected, Article 13(3) of the ICAL applies, and the party that requested the challenge may “appeal” the decision by requesting the president of the Court of Appeals to decide on the challenge.
The ICAL specifically requires a potential arbitrator before confirmation and throughout the proceeding to “disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence” (Article 12(1) of the ICAL).
Regarding arbitral institutions, the ICC Rules require that a prospective arbitrator sign a statement of acceptance, availability, impartiality and independence in which they shall disclose any facts or circumstances which might be of such a nature as to call into question the arbitrator’s independence in the eyes of the parties, as well as any circumstances that could give rise to reasonable doubts as to the arbitrator’s impartiality (Article 12(2) of the ICAL).
For that purpose, the notes to parties and arbitral tribunals on the conduct of arbitration establishes a list of potentially relevant circumstances regarding arbitrators’ independence and impartiality. Furthermore, CAM Santiago does not specifically define conflicts of interest for arbitrators under its rules of international arbitration and has not yet issued a code of ethics for arbitrators under its framework.
The CAM Rules for International Arbitration do require, however, that a candidate arbitrator sign a written declaration confirming their independence and impartiality in the specific case (Article 11 of the Rules of International Arbitration).
To a greater extent, if the arbitrator is Chilean, the Chilean Bar Association, to which membership is optional, has a code of ethics providing guidelines regarding the counsel–client relationship, counsel’s confidentiality duty and conflict of interest. For arbitrators, it provides restrictions to avoid conflicts of interest and also regulates the determination of arbitration fees.
See 3.2 Arbitrability.
The ICAL recognises the principle of competence-competence, stating in Article 16(1) that the arbitral tribunal may decide on its own jurisdiction, even if exceptions arise concerning the existence or validity of the arbitration agreement.
This recognition of the principle of jurisdiction comes from domestic arbitration. In domestic arbitration law, there is no explicit provision that confirms the competence-competence of an arbitral tribunal. Nonetheless, Chilean courts acknowledge that arbitral tribunals, just like local courts, are entitled to decide issues related to their own jurisdiction. Consequently, where a party commences an arbitral proceeding in apparent breach of an arbitration agreement, the matter shall be submitted to the decision of the arbitral tribunal, since such tribunal is the authority entitled by law to rule on its own jurisdiction.
Jurisdiction of an Arbitral Tribunal
If, as a preliminary matter, the arbitral tribunal declares itself to have jurisdiction (see 5.1 Matters Excluded From Arbitration), either party, within 30 days of receipt of notice of such decision, may request the president of the respective Court of Appeals to resolve the matter, and the decision of this court shall be final. This rule does not apply in cases where the arbitral tribunal, as a preliminary matter, declares that it has no jurisdiction.
In general, Courts of Appeals are reluctant to intervene in jurisdiction matters (see 5.2 Challenges to Jurisdiction).
Negative Rulings on Jurisdiction
The respective Court of Appeals could address issues of jurisdiction of an international arbitral tribunal if a party asks for an international arbitral award to be set aside. Nonetheless, there are no cases in which a Court of Appeals has reviewed a negative ruling on jurisdiction by an arbitral tribunal.
In international arbitrations, objections to jurisdiction must be raised in advance of or together with the statement of defence.
A plea that the arbitral tribunal exceeds the scope of its authority must be raised as soon as the matter that is allegedly beyond the scope of the tribunal is raised during the arbitral proceedings. In either case, the tribunal may admit a later plea if it considers the delay justified (Article 16(2) of the ICAL).
Once the award is rendered by the arbitral tribunal, parties can challenge the jurisdiction of the arbitral tribunal before the respective Court of Appeals.
See 11.1 Grounds for Appeal.
In cases where a party commences court proceedings in breach of an international arbitration agreement, the courts’ approach is to refer parties to arbitration, unless the agreement is null and void, inoperative or incapable of being performed. There is therefore a general reluctance of national courts to allow such proceedings.
There are no specific rules in Chilean domestic or international arbitration law on the effects of the assignment of an agreement that contains an arbitration clause to a third party. Parties to an assignment are therefore well advised to specifically agree that the arbitration clause will also be part of the assignment.
Regarding Chilean law, the general rule is that third parties or non-signatories to an arbitration agreement or to the contract that contains the arbitration agreement are not bound by such agreement or by the award issued in the arbitration proceeding.
A third party may only be part of an arbitration following its consent and the consent of the actual parties to the agreement.
However, there are some exceptions to this rule. A third party may be bound by an arbitration agreement that has been assigned to it by law, as occurs in legal subrogation and succession cases.
The ICAL allows parties to request interim measures from the arbitral tribunal as well as from the domestic courts (Article 9 of the ICAL). The Chilean ICAL is based on the UNCITRAL Model Law of 1985, without the 2006 amendments that regulate in more detail interim measures and preliminary orders.
Under Article 17 of the ICAL, unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order such interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute. Therefore, the interim relief of the arbitral tribunal is binding.
In this regard, it is possible for the arbitrator to order the issuance of a bank guarantee or attachments. The arbitral tribunal may also require the relevant party to provide appropriate security.
Local courts may also grant interim measures while the constitution of the arbitral tribunal is still pending. When the interim relief is granted by a local court, the Code of Civil Procedure shall apply (see 6.2 Role of Courts).
If the arbitral tribunal has not yet been constituted (see 6.1 Types of Relief), parties must request the preliminary relief before a national court, while proceeding with the constitution of the arbitral tribunal. Once the preliminary relief has been granted, the party must submit its request for arbitration within ten days (which can be extended to 30 days). By the moment of presenting its claim, the party must also request the continuation of the measure. If it fails to do so, or if the request is rejected, the party that had requested the preliminary relief in the first place will be considered liable for any damages and will be presumed to have acted with malice (Article 280 of the CCP).
The ten-day (or extended 30-day) period for presentation of the request for arbitration may be problematic if the preliminary relief had been issued by a local court, pending the constitution of the arbitral tribunal, since the tribunal may not yet have been constituted during this period. Legal practice has established that, in this case, the continuation of the preliminary relief may be requested before the same court that had issued it.
Regarding interim relief in aid of foreign-seated arbitrations, the Chilean courts have ruled in favour of its admissibility, affirming the jurisdiction of Chilean local courts to order it based on Article 9 of the ICAL and affirming the non-necessity of exequatur for this type of judicial proceedings. Thus, in Case No 5468-2009, Western Technology Services International Inc. v Cauchos Industriales S.A., the Supreme Court, rejecting a request for exequatur from an international arbitral tribunal constituted in Dallas, aimed at guaranteeing the effective compliance with the obligation not to compete that fell on the other party, resolved that “an interim and extendable relief, according to the arbitral tribunal, does not comply with the standard for requesting exequatur, so that it must be filed directly before the ordinary Chilean courts, according to Article 9 of the ICAL”.
Emergency arbitrator relief is not provided for in the ICAL. Thus, if the arbitral tribunal has not yet been constituted, the only alternative to the party seeking interim relief is to resort to the ordinary jurisdiction, as stated in Article 9 of the ICAL. In such cases, the interim measure’s requirement will be regulated under the rules of the Chilean CCP.
However, if the parties agree to conduct the arbitration under the ICC Rules, which do mention the figure of the emergency arbitrator, the appointment of an emergency arbitrator will be valid.
The ICAL does not specifically provide for the security for costs. Article 17 of the ICAL allows the arbitral tribunal to order preliminary relief in respect of the subject matter of the dispute (see 6.1 Types of Relief).
However, the wording of Article 17 of the ICAL and the preliminary relief regulation are wide enough to allow for security for costs as a relief, especially considering they refer to an arbitration proceeding and not to a proceeding before a national court. There have been no known cases regarding security for costs.
The procedure is regulated in Law No 19,971 on International Commercial Arbitration.
ICAL does not order any particular procedural steps for arbitral proceedings. Nevertheless, the requirement to comply with certain procedural steps required in domestic arbitration in the case of international arbitration, such as the call for conciliation or the need for an order of proof, was discussed before the Santiago Court of Appeals.
This discussion arose in connection with requests for annulment based on the lack of these essential procedural steps requested in domestic arbitration law. It was decided that it was not necessary to comply with these procedural steps in international arbitration and the nullity actions were rejected.
The arbitral tribunal is empowered to:
An arbitrator must:
To a greater extent, in case of failure to act in accordance with their duties, under national criminal law, the arbitrator may be criminally prosecuted for the crime of prevarication (Articles 223–225 of the Criminal Code).
See 4.1 Limits on Selection.
Under Article 19(2) of the ICAL, unless parties can reach an agreement, the arbitral tribunal may direct the arbitration in the way it considers appropriate, having the power to determine the admissibility, relevance and weight of the evidence. However, in international arbitration procedures, parties tend to apply the IBA Rules on the Taking of Evidence.
The procedure will depend on the rules applicable to the arbitration, ie, whether the ICC or CAM Rules apply. In the case of the ICC Rules, the arbitral tribunal may:
In the case of the CAM Rules, the parties shall attach to their pleadings all documents they deem relevant or refer to the documents or evidence to be submitted at a later date, and the tribunal may request a summary of the documents and evidence, request the delivery of additional exhibits and evidence and also decide whether or not to hold evidentiary hearings (Articles 24–25 of the CAM Rules for International Arbitration).
Also, under Article 27 of the ICAL, the arbitral tribunal and the parties may apply to the local courts for assistance in the taking of evidence. The requested local court may execute the request within its jurisdiction and according to its rules on the taking of evidence.
To review the rules of international arbitration, see 8.1 Collection and Submission of Evidence. These rules are different from the ones that apply to domestic arbitration.
Arbitral tribunals may request that all parties, including third parties, appear to testify. In the event of refusal, the arbitral tribunal shall request the assistance of the corresponding national court to carry out the proceeding. The courts of law may entrust this proceeding to the arbitrator, assisted by a minister of faith.
There is no confidentiality rule applicable to international arbitrations and therefore the arbitration file is public. Given the existence of a request for annulment, which is heard by the Court of Appeals, and given the nature of this request, the court will necessarily have knowledge of the arbitration file, which is eminently public.
If the parties prefer the arbitration not to be public, it will be necessary for them to agree this by means of an express agreement and, only in the case of highly confidential parts of the file, will it be necessary to request the itemisation and exclusion of those parts of the file before the award is rendered or just after this, so those sections are not made public.
Furthermore, in the case of the ICC Rules, the arbitration will be public as a general rule, but, upon the request of any party, the arbitral tribunal may make orders concerning the confidentiality of the arbitration proceedings or of any other matters in connection with the arbitration and may take measures for the protection of trade secrets and confidential information (Article 22.3 of the ICC Rules).
Lastly, in the case of international arbitrations subject to CAM Rules, a rule of confidentiality of the award is established, except when its disclosure is necessary for a proceeding to challenge, comply with or enforce the award, when disclosure is required by law or any other judicial authority, or when the parties by mutual agreement agree to its non-confidentiality. Even so, CAM Santiago, while safeguarding the identity of the parties, may publish the awards (Article 33.8 of the CAM Rules for International Arbitration).
According to the ICAL, the arbitral award shall state the reasons on which it is based unless the parties have agreed otherwise. The ICAL does not set a time limit for rendering the award.
The limits are set by the type of arbitrator involved and public policy. If it is an arbitrator of law, they must decide in accordance with the law, according to which they are empowered to grant to a party in their award effective damage, loss of profit and moral damages. The latter applies even in cases of breach of contract as the national case law has evolved in this matter during the last few decades.
Monetary awards may include interest. The arbitral tribunal may also order the specific performance or termination of a contract, in both cases with damages (Article 1489 of the Chilean Civil Code). However, the arbitrators may not grant punitive damages, since they are not recognised under Chilean law.
Parties are entitled to recover interest and legal costs. In this regard, there are several cases of international arbitration in Chile in which different rules of costs have been applied. The application depends mostly on the composition of the arbitral tribunal. If the arbitral tribunal is composed of Chilean arbitrators, there is a tendency to follow the “costs sharing approach” rule as it is the default rule applied by almost all courts and in almost all cases in Chile. Conversely, if the arbitral tribunal is composed of foreign arbitrators, there is a tendency to apply the approach generally used at international level of “costs follow the event”.
For example, in the case Constructora EMEX Limitada v European Organisation for Astronomical Research in the Southern Hemisphere, the arbitral tribunal made a distribution of costs different from the above-mentioned approaches, which was later challenged through the nullity of the award. Ultimately, the Court of Appeals rejected the request for annulment determining that there was no violation of public policy and that the court ruled reasonably and in use of its powers (Case No 9211-2012, Court of Appeals of Santiago).
The ICAL establishes the request for annulment as the only means of challenging the arbitral award, which may be based on the grounds specifically set forth in Article 34 (the same as those established in the New York Convention). Article 34 also regulates the procedural aspects of this recourse, such as the time limit for its filing, the power of suspension granted to the court, as well as its preference for hearing and ruling.
As for the legal nature of the petition for annulment, although the ICAL defines it as a remedy, part of the jurisprudence has qualified it as an action that would give rise to a new and independent proceeding from the previous arbitration proceeding. Thus, it can be concluded that, unlike domestic arbitration, the ICAL recognises the petition for annulment as the only action against arbitral awards.
In addition, this petition, which will be heard by the Court of Appeals, is structured “on the basis of specific grounds that point to the examination or external review of the award and not to the merits or content of the decision on the merits”, which is undoubtedly consistent with a modern arbitration institute.
Regarding the request for annulment, the Court of Appeals has ruled that it is an extraordinary recourse, of strict law and in accordance with the grounds established by law, granting jurisdiction to the Court to examine compliance with the forms of the arbitration trial, especially with regard to the formal guarantees that the law itself establishes in an imperative manner (Court of Appeals of Santiago, Case No 9134-2007 dated 4 August 2009).
In turn, the Supreme Court has ruled that a request for annulment is the only means of challenging an arbitration award, rejecting a complaint against the judges who ruled on the request for annulment (Supreme Court, Case No 7701-2012 dated 29 January 2012 and in Case No 7341-2013 dated 16 November 2013). It has also been held that parties may waive the possibility of challenging an award in advance (Supreme Court, Case No 7854-2013 dated 21 April 2016).
Varying Recourse Based on Principles of Free Will and Good Faith
In 2020, in a completely exceptional decision, the Supreme Court ruled allowing the parties to vary the recourse regime based on the principles of free will and good faith. Thus, the parties had agreed in their Arbitration Agreement that appeals and cassation appeals would be allowed against the final judgment. The Court of Appeals rejected the appeal against the arbitration award to which, according to the latter, the rules of the ICAL were applicable, and therefore, only the request for annulment could be filed against the award.
The requesting party filed a complaint appeal, which was dismissed by the Supreme Court. However, the Supreme Court invalidated the decision of the Court of Appeals by stating that due to the autonomy of the will and good faith, the parties may vary the recourse regime (Supreme Court, Case No 19,568-2020 dated 14 September 2020).
Although it is not a developed discussion, according to the new jurisprudential twist adopted by the Supreme Court (see 11.1 Grounds for Appeal), just as it is recognised that the parties may vary the system of remedies on the basis of free will and good faith, they may also agree to exclude or expand the scope of appeal or challenge under the national law based on the above principles.
As mentioned in 11.1 Grounds for Appeal, the motion for annulment is structured on the basis of specific grounds that point to the examination or external review of the award and not to the merits or content of the decision on the merits, which is undoubtedly consistent with a modern arbitration institute.
Chile was one of the first Latin American states to ratify the New York Convention in 1975, which, in Chile, applies to all foreign arbitral awards without omission, given that Chile did not formulate the reciprocity reservation contained in Article I(3) of the Convention.
The enforcement of international arbitral awards based in Chile is regulated in Articles 35 and 36 of the ICAL. Under Article 35 of the ICAL an arbitral award shall be considered as binding, irrespective of the country in which such award was issued.
The execution is requested before the civil court with jurisdiction and the executed party may raise the exceptions contained in Article 36 of the ICAL, which set the standards for the recognition or enforcement of international arbitral awards. For example, in case of incapacities or lack of validity of the arbitration agreement, lack of notification of the executed party, exceeding the provisions of the arbitration agreement, when the subject matter of the dispute is not susceptible to arbitration or when the execution would be contrary to Chilean public policy.
One of the grounds recognised by the ICAL for refusing recognition or enforcement of an international arbitration award is that the award has been annulled or suspended by a court of the country in which, or under the law of which, it was rendered (Article 36(v) of the ICAL).
The suspension of the arbitral award by a court of the country in which, or under the law of which, the award was rendered constitutes an exception to refuse enforcement of the award (Article 36(v) of the ICAL).
Also, in the case of a nullity action pending abroad, the Supreme Court has ruled that the award is not binding on the parties. Citing Article 28 No 6 of the Rules of Arbitration of 1998 of the International Chamber of Commerce, it has stated that the award rendered by such court is unreformable in the system provided by such rules, so that the appeal filed before such court does not suspend the effects of the award, which remains in force, and it is possible to enforce it as long as there is no contrary resolution (Supreme Court, Case No 5228-2008 and Case No 7854-2012).
Immunity From Execution
As a general rule, the Chilean state and its entities are subject to immunity from execution. Nevertheless, the state and its entities may waive such immunity in some cases. Specifically, Decree Law No 2,349, which regulates the international contracts for the public sector, states in Article 2 that the state and its organisations, institutions and companies may renounce their immunity from execution. It must be noted that this has a restricted scope since it will be limited to the execution of awards rendered in proceedings directly related to the international contracts that contain such renouncement.
Recognition and Enforcement of Arbitral Awards
The national courts have adopted the general approach of recognising and mostly accepting the enforcement of arbitral awards, regardless of the country in which they were rendered and as long as they comply with the legal requirements. For example, regarding the enforcement of a foreign arbitral award, the Supreme Court’s case law accepts the exequatur as opposed to a minority that rejects it.
Thus, in the case Klion S.R.L. v Pesquera Villa Alegre S.A., Case No 41,841-2017 dated 26 July 2018, the Supreme Court states “that it has become evident that, in the case of the enforcement of an arbitral award, according to the wording of Law 19.971, regardless of the country in which it was issued, it is recognised as binding in Chile if it complies with the requirements of Articles 35 and 36 of that Law, which otherwise constitutes a repetition of the relevant provisions of the New York Convention”.
In another case the Supreme Court accepted a request for the execution of an award issued in an international commercial arbitration, ruling that it is not relevant for its recognition in another country that reciprocity exists between the country in which it was rendered and Chile. According to the Court, whenever the requirements of Law No 19,971 on International Commercial Arbitration are complied with, national legislation recognises its binding character as it is an international arbitration (I. Schroeder KG (GmbH & Co) v Exportadora Las Tinajas Limitada, Supreme Court, Case No 104,262-2020 dated 19 July 2021).
This has been executed in a number of cases allowing the enforcement of foreign arbitral awards, including:
Refusal to Recognise
Regarding the refusal to recognise or enforce an arbitral award on the grounds of public policy in general, it is understood that this should be applied restrictively and limited only to the infringement of basic and fundamental rules of the Chilean state, avoiding limiting the enforcement of international awards in Chile by simply invoking local public policy (Court of Appeals of Santiago, Case No 9,134-2007 dated 4 August 2009, rejecting ground No 2(b)(ii) of Article 34 of the ICAL). Therefore, in relation to ground No 2(b)(ii) relating to public policy, the Court of Appeals has understood that it must point to the infringement of the most basic and essential rules of the Chilean state, the simple invocation of local public policy not being sufficient.
Similarly, in relation to the concept of public policy, this implies distinguishing between national public policy and international public policy. The latter is applicable in matters of international commercial arbitration, which would not include all local rules, but only those that respond to the most essential legal principles of the legal system. As such, those allegations that refer to formalities provided for in the codes of civil procedure or organic codes of courts must be rejected, except in cases where they relate to the most fundamental principles of Chile’s legal system (see Court of Appeals of Santiago, Case No 9,134-2007 dated 4 August 2009; Court of Appeals of Santiago, Case No 1,971-2012 dated 9 September 2013; and Court of Appeals of Santiago, Case No 11,466-2015 dated 28 June 2016; among others).
Chile does not provide for class action arbitration or class arbitration.
The Code of Professional Ethics of the Chilean Bar Association, in force since 1 August 2011, applies in the case of affiliates. In the case of non-affiliates, since 2012 it has been possible to find Supreme Court rulings defending the theory that the 2011 Code of Professional Ethics applies to all lawyers in Chile.
Chilean law does not provide any rules or restrictions for third-party financiers.
The ICAL does not provide a specific regulation in this regard. Notwithstanding the foregoing, in view of the power granted to the arbitral tribunal to decide the arbitration in the manner it deems appropriate, in the absence of agreement of the parties (Article 19 of the ICAL), it may be understood that it would be possible to consolidate separate proceedings for the purpose of efficiency.
Regarding arbitral institutions, the ICC Rules specifically regulate this subject matter. Thus, Article 10 provides that the court may, at the request of a party, consolidate two or more arbitrations pending under the Rules into a single arbitration, where the parties have agreed to consolidation or all of the claims in the arbitrations are made under the same arbitration agreement or agreements or the claims in the arbitrations are not made under the same arbitration agreement or agreements, but the arbitrations are between same parties and the disputes in the arbitrations arise in connection with the same legal relationship, and the court finds the arbitration agreements to be compatible.
Furthermore, it is possible to identify a similar rule in the CAM Rules, which recognise the power of the arbitral tribunal to adopt all relevant measures for the valid, effective and prompt conduct of the arbitration (Article 19 of the CAM Rules for National Arbitration) in order to avoid unnecessary delays and to ensure efficient and fair means to resolve the dispute (Article 21 of the CAM Rules for International Arbitration), which also could include this faculty if it is efficient and if the parties have not agreed otherwise.
Binding Third Parties to Arbitration Agreements or Awards
The general rule under Chilean law is that third parties or non-signatories to an arbitration agreement or to the contract that contains the arbitration agreement are not bound by such agreement or by the award issued in the arbitration proceeding. A third party may only be part of arbitration prior to its consent and the consent of the actual parties to the agreement. However, there are some exceptions to this rule. A third party may be bound by an arbitration agreement that has been assigned to it by law, as occurs in legal subrogation and succession cases. Other exceptions are cases where the corporate veil or alter ego theory is applicable.
Both comparative law and national jurisprudence have extended the application of the arbitration clause to non-signatory third parties under certain assumptions related to:
In these cases, there would not properly be a violation of pacta sunt servanda or of the relative effect of contracts, since they assume that those who are affected by an arbitration clause have consented to it in some way.
The jurisprudence of the Supreme Court has been mainly in line with the general rule in Chile of not extending the arbitration agreement or the award to third parties, mainly on the basis of the relative effect of the contracts (Supreme Court, Case No 29,699-2014).
However, some recent Chilean jurisprudence leads to the conclusion that it is possible to impose the arbitration agreement on a non-signatory party in view of the circumstances of the case, with substantive elements prevailing over the formal element of the absence of the non-signatory party. For example, in relation to the application of the arbitration clause to a non-signatory that participated in a bidding process but did not sign the arbitration clause, the Court of Appeals has ruled to reject the legality of the argument of disregarding it, since, at the time of participating in the process, it accepted the existence of the clause and consented to it (Court of Appeals of Santiago, Case No 1886-2011).
Nevertheless, there is also jurisprudence of the Supreme Court in the sense of not extending the arbitration clause to third parties because it would otherwise be an infringement of the relative effect of the contracts (Supreme Court, Case No 29,699-2014).
No special rule has been found in Chilean law regarding the capacity of the national court to bind foreign third parties.