In Uruguay, domestic parties do not resort on a regular basis to the use of international arbitration as the main tool to resolve disputes. The situations that domestic parties refer to arbitration or, eventually, local courts depend on the sophistication or complexity of the dispute.

Uruguay has a longstanding tradition of respect for the rule of law, which has been cemented in the independence and quality of its judges, and this tradition explains a certain underdevelopment in its arbitration practice, both local and international.

The main local arbitration institution is the Centro de Conciliación y Arbitraje (CCA) created by the Bolsa de Comercio de Uruguay in 1997. The CCA is a member of the International Chamber of Commerce (ICC), the Inter-American Commission of Commercial Arbitration and the Ibero-American Centre of Arbitration.

That said, international arbitration is prevalent with respect to disputes involving the Uruguayan state (or state-owned companies), in particular against foreign investors. International arbitration is also significantly used for disputes between local and foreign construction companies involved in large construction projects. Disputes related to distribution agreements and concessions are also referred to arbitration on a regular basis.

The enforcement of foreign arbitral awards is regularly allowed by local courts as long as those awards comply with the local regulations and/or treaties ratified by Uruguay. In this respect, Uruguay ratified the first and the second Montevideo Procedural Law Treaties in 1899 and 1940 respectively (“1899 MPLT” and “1940 MPLT”), which allow the enforcement of foreign arbitral awards. Uruguay has also ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC) by means of Law-Decree No 15.229 of 11 December 1981. Therefore, under the NYC, Uruguayan courts are bound to recognise and enforce foreign awards.

Construction is one industry that has seen an increase in the number of disputes that have been referred to arbitration. During the pandemic, the construction industry was the first to resume economic activity. However, there were problems with the supply chain that altered the timelines of construction projects and created potential claims between construction companies and clients. 

For international arbitration, the ICC is the most used arbitral institution. For local arbitration, the CCA is the most prominent. No new arbitral institution was established this year.

There are no specific courts with particular jurisdiction to hear disputes related to international arbitration. Disputes related to international arbitration commonly fall first within the jurisdiction of the civil courts. As regards enforcement of arbitral awards, the Supreme Court of Justice holds exclusive jurisdiction.

In recent times, the Uruguayan government has started to promote Uruguay as a main seat for international arbitration in Latin America. This ambition is grounded in solid respect for the institutions and a new legal framework established by Act on International Commercial Arbitration No 19.636 of 13 July 2018 (AICA). The AICA is based on the UNCITRAL Model Law and represents a legislative milestone for Uruguayan dispute resolution practice, as it is fully aligned with international legal standards. The AICA does not deviate in any significant way from the UNCITRAL Model Law.

After the enactment of the AICA in 2018, there has been no significant change in the arbitration legislation.

In order to be valid, the arbitration agreement must be in writing and take the form of an arbitration clause included in a contract or take the form of a separate agreement. According to the AICA, the agreement is considered written when it is reflected in a document signed by the parties or in an exchange of letters, communications or means of electronic communication that can evidence the existence of the agreement. In addition, a reference made in a contract to a document containing an arbitration clause constitutes an arbitration agreement as long as the contract is in writing and the reference implies that said clause is part of the contract.

According to Article 476 of the Civil Procedural Code (CPC), matters that may not be referred to arbitration are those that relate to rights that cannot be settled or waived by a party. In light of the legal definition, case law has interpreted criminal and family law claims as excluded from arbitration, and also, although this has been a source of recent debate, labour disputes. A recent ruling from the Supreme Court of Justice found that there is no reason to exclude labour disputes from local or international arbitration. However, Labour Courts of Appeal have rejected the possibility of arbitrating labour disputes, arguing that an employee cannot waive in favour of their employer a most favourable forum and legal frame. Moreover, the Labour Courts of Appeal understand that the employee cannot agree to arbitrate a labour dispute because the employee is not free to negotiate the terms and conditions of the agreement.

As per Article 28.1 of the AICA, the arbitral tribunal shall decide the dispute in accordance with the rules of the law chosen by the parties as applicable to the merits of the dispute. Any indication of the law or legal system of a particular state shall be understood to refer, unless otherwise stated, to the substantive law of that state and not to its rules on the conflict of laws.

In a case where the parties have failed to agree on a certain “applicable law”, the court will apply the substantive law it deems most adequate to the dispute; in addition, the court will apply to the dispute the contract terms and the uses and customs of international trade that are applicable to the case. Although this legal provision does not diverge from the various arbitration regulations, in this connection, Article 28 No 2 of the UNCITRAL Model Law establishes that, “failing any designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable”. In Uruguayan law, the arbitral tribunal is entitled to apply the substantive law as it sees fit. 

Arbitration agreements are favoured by local courts and regularly enforced in application of Article 494 of the CPC. However, as case law has concluded that arbitration is an exception to the ordinary jurisdiction of the local courts, rulings have established that the subject matter of the dispute should be clearly included in the arbitration agreement. This is to say that if the arbitration agreement is not clearly written, local courts would feel inclined to assume jurisdiction.

The AICA establishes in Article 16 that even if the contract into which the arbitration clause or agreement is inserted is considered null and void, this does not determine that the arbitration clause or agreement will be considered invalid. Therefore, the principle of separability is applied to arbitration clauses in Uruguay. Similar considerations should be made in connection with local arbitration regulated under the CPC.

The parties are free to determine the number of arbitrators and respective qualifications of the arbitral tribunal to be appointed. However, once someone is approached by a party to become an arbitrator, they have a duty to disclose any circumstance that could give rise to a challenge to their impartiality or independence. In cases where they disclose a circumstance that impairs them from accepting the appointment, parties should appoint a replacement arbitrator.

Arbitrators may be challenged by the parties on the grounds that their impartiality or independence could be compromised. It is possible to also challenge the appointment of an arbitrator if they lack sufficient credentials in accordance with the qualifications agreed by the parties. In addition, it is not possible for a party to challenge an arbitrator appointed by the same party unless the grounds for such a challenge were only known by the appointing party after the appointment. The parties are not allowed to challenge an arbitrator by reason of nationality or background. Finally, in arbitrations in which a state or a public entity is a party, the status as a public official of an arbitrator appointed by that party does not necessarily constitute grounds for challenge.

Parties are free to choose the method for selecting arbitrators. Nevertheless, if the parties fail to establish such a method of appointment, the AICA provides a default procedure. In the case of an arbitration proceeding with three arbitrators, each party shall appoint an arbitrator and the two arbitrators so appointed shall appoint the third one. If a party fails to appoint the arbitrator within 30 days of the written request from the other party to do so, or if the two arbitrators fail to agree on the third arbitrator within 30 days of their appointment, the appointment will be made, at the request of one of the parties, by the competent court without delay. In arbitration proceedings with a sole arbitrator, if the parties cannot agree on the appointment of the arbitrator, the arbitrator will be appointed, at the request of any of the parties, by the competent court.

When in an appointment procedure previously agreed by the parties, (i) a party does not act in accordance with the provisions of the arbitration agreement, or (ii) the parties or two arbitrators cannot reach an agreement in accordance with the aforementioned procedure, or (iii) a third party, including an arbitral institution, fails to comply with the function conferred in said procedure, either party may request the competent court to take the necessary measures to enforce the procedure.

Any decision on these issues by the competent court shall be final.

When appointing an arbitrator, the competent court shall take due account of the conditions required for an arbitrator by the agreement between the parties and take the necessary measures to guarantee the appointment of an independent and impartial arbitrator. In the case of sole arbitrator proceedings, the court will also take into account the convenience of appointing an arbitrator of a nationality different from the parties’ nationality.

A party that wishes to challenge an arbitrator shall send to the arbitral tribunal a notification within 15 days following the day on which it becomes aware of the constitution of the arbitral tribunal or of any of the circumstances that give rise to the challenge. As stated in 4.1 Limits on Selection, challenges of arbitrators may be based on the absence of impartiality or independence. An additional ground to challenge an arbitrator is the lack of qualifications agreed by the parties in the arbitration agreement or separate document. The challenge shall state in writing the reasons for that challenge. Unless the challenged arbitrator resigns or the other party accepts the challenge, it will be for the arbitral tribunal to decide on the challenge.

If the challenge initiated is not successful because the arbitral tribunal rejects the request, the challenging party may request the court to review that decision within 30 days following the receipt of notification of that decision. The court will have a maximum of 60 days to rule, and its decision will be final. While that request is pending, the arbitral tribunal will suspend its proceedings, which will resume once the challenge is resolved or 60 days after its initiation.

Arbitrators are subject to the same independence and impartiality standards applicable to local judges (Article 485.3 CPC). Arbitrators are obliged to disclose any prior relationship (of any kind) maintained with any of the parties that could affect their impartiality. Although there is no statute or specific regulation in this respect, the IBA Guidelines on Conflicts of Interest in International Arbitration are a source of reference for scholarly opinions and rulings.

Criminal investigations or other matters excluded from arbitration should be referred to the competent criminal or ordinary courts (Article 493 CPC). See 3.2 Arbitrability for more details.

In Uruguay, the arbitral tribunal is entitled to rule on its own jurisdiction; the competence-competence principle is consistently applied by local courts in international and local arbitration. According to Article 475.2 of the CPC, the arbitral tribunal is competent to rule on all matters related to the validity and effectiveness of the arbitration clause or agreement. In addition, according to Article 16 of the AICA, the arbitral tribunal shall be empowered to decide on its own jurisdiction, including on objections relating to the existence or validity of the arbitration clause or agreement.

A defence based on absence of jurisdiction must be filed at the latest jointly with the response to the complaint. The parties will not be prevented from filing an absence of jurisdiction defence due to the fact that they have already appointed an arbitrator or participated in their appointment. An objection based on the argument that the arbitral tribunal has exceeded its mandate must be made as soon as the matter that allegedly exceeds its mandate arises during the arbitral proceedings. The arbitral tribunal may, in any case, examine an objection filed after the term elapses if it considers the delay to be justified.

The arbitral tribunal may rule on the absence of jurisdiction defence as a preliminary procedural matter or in the final award.

If the arbitral tribunal decides that it has jurisdiction over the dispute, any of the parties, within 30 days following the notification of that decision, may request the competent court to review the matter within a maximum period of 60 days and the decision of this court will be final. During that time, the arbitral tribunal may continue its proceedings and issue an award.

Courts in Uruguay have shown a general reluctance to intervene in disputes that are subject to an arbitration agreement. In fact, case law tends to confirm the jurisdiction of the arbitral tribunal. In this connection, it is worth mentioning that the Supreme Court of Justice ruled that there is no reason to exclude labour disputes from the arbitral jurisdiction (Ruling No 596/2017). Although the ruling of the Supreme Court of Justice was not unanimous, and there are recent conflicting decisions issued by the Labour Courts of Appeal, it reveals that Uruguayan courts favour arbitration as an alternative method to resolve disputes. The reverse side of this judicial policy is the severe analysis conducted by the local courts into those matters that are excluded from arbitration or matters other than the specific matters the parties have agreed to be arbitrated in the arbitration agreement.

See 5.2 Challenges to Jurisdiction.

The standard of judicial review is a de novo analysis. Higher courts act as if they were considering the question for the first time, affording no deference to the decisions of the lower courts.

Parties subject to an arbitration agreement are not prevented from pursuing an action with local courts. Local courts do not raise absence of jurisdiction ex officio; the defendant must raise the existence of an arbitration agreement and request a declaration of absence of jurisdiction. According to Article 475 of the CPC, in a local arbitration, if the party fails to raise the absence of jurisdiction at the time of answering the complaint, it will be interpreted that the party has waived the arbitration clause. However, for international arbitration under the AICA, the court to which a dispute over a matter that is the subject of an arbitration agreement is submitted shall refer the dispute to arbitration if so requested by any of the parties, at the latest, at the time of filing the first brief on the merits. The only exception is when it is proven that the said agreement is null, ineffective or impossible to enforce.

The fact that a party has commenced litigation with local courts does not suspend or prevent the initiation or continuation of the arbitration proceedings.

There are no specific regulations that allow a third party to join an existing arbitration. Given that local courts consider arbitration an exceptional jurisdiction, the absence of participation in the arbitration agreement will preclude a third party from participating in the proceedings. Participation of third parties is limited to the effect of interim measures and mandatory gathering of evidence. The only possibility for a third party to participate in an existing arbitration would be the explicit acceptance from the claimant and defendant in the course of the arbitration proceeding.

Arbitral tribunals are allowed to award interim relief or preliminary measures. However, it is customary that the parties pursue interim relief with local courts. The practice of pursuing interim relief prior to arbitration with local courts is based on their powers to enforce the decision in a more expeditious manner. The lack of arbitrators’ power to enforce the decision as a consequence of the absence of coercive powers (so-called imperium) limits the ability to request interim measures from the arbitral tribunal.

Having said that, according to Article 17 of the AICA, unless otherwise agreed by the parties, the arbitral tribunal may, at the request of one of them, order the adoption of precautionary measures that it deems necessary with respect to the subject matter of the dispute. The arbitral tribunal may require the applicant to provide a performance bond to cover potential damages.

Such precautionary measures ordered by an arbitral tribunal will be considered as binding between the parties. If the party subject to an interim measure does not comply with the arbitral tribunal interim award, it can be enforced by the competent local court.

As per the AICA, a precautionary measure would be a temporary measure, granted in the form of an award, whereby, at any time prior to the issuance of the final award, the court orders one of the parties to:

• maintain the status quo pending settlement of the dispute;
• take steps to prevent any actual or imminent damage or impairment of the arbitral proceedings, or to refrain from certain acts that are likely to cause such damage or impairment of the arbitral proceedings;
• provide some means to preserve assets that will allow the award issued to be enforced; and/or
• preserve evidence that could be relevant and pertinent to the dispute.

The precautionary measure will be granted by the arbitral tribunal when necessary for the protection of a right and whenever there is potential irreversible damage in light of the duration of the process. This decision of the arbitral tribunal will not be considered as a prejudgment regarding the main subject of the dispute.

Local courts have a relevant role in international arbitration in cases to ensure that the preliminary or interim measure is pursued by one of the parties prior to the initiation of the arbitral proceedings. In this case, the arbitral proceedings should be started within 30 days counted from the date the measure takes effect.

If the interim measure is decided by the arbitral tribunal in the course of an arbitration proceeding, the arbitral tribunal may also request the assistance of a local court to enforce the measure against a party in breach.

To that end, the local court will have the same jurisdiction to issue precautionary measures as the arbitration proceeding, regardless of whether or not the arbitration is seated in Uruguay. For purposes of deciding on the issuance of an interim or precautionary measure, the local court should take into account the principles of international arbitration and the particularities of the dispute. Regarding the types of measures that could be granted by local courts, see 6.1 Types of Relief.

Although the role of an emergency arbitrator has not been established in the AICA, local arbitral institutions such as the CCA have ruled that an emergency arbitrator may issue interim and precautionary measures. According to the CCA rules, the emergency arbitrator’s competence would be limited to precautionary measures to secure evidence or anticipated evidence which due to its nature or circumstances should be received prior to the appointment of the arbitral tribunal.

A party that wishes to request the intervention of an emergency arbitrator should file its request with the CCA in writing. The prior appointment of an emergency arbitrator does not prevent the local courts from assuming jurisdiction at the request of one of the parties or for the enforcement of the interim or precautionary measure.

Uruguayan law does not allow the local courts or the arbitral tribunal to ask security for costs only from the claimant. Costs for the arbitration are requested in advance from both parties equally.

Parties are free to establish the arbitral procedure in the arbitration agreement or after the dispute started. If the parties fail to establish the arbitral procedure, the arbitral tribunal is entitled to decide the procedure that is most adequate for the dispute. Such a procedure would also regulate the admissibility and assessment of evidence.

There are no particular steps that are required prior to pursuing an international arbitration. However, if one of the parties refuses to enter into the arbitration and, consequently, to honour the procedure established by the AICA, the other party is entitled to pursue the judicial enforcement of the arbitration agreement with the local courts. In this case, the local court would, on behalf of the breaching party, enforce the arbitration agreement, appoint the arbitrator, set the procedure and indicate the matters that must be subject to decision by the arbitral tribunal.

Arbitrators’ powers over the arbitration procedure are equal to the ones held by a local judge, but without the imperium, that is to say, coercion powers. Arbitrators are entitled to collect their fees and have a duty to exercise their analysis with independence and impartiality. Arbitrators’ main duties are to issue their decision within the agreed term but limited to the matters subject to arbitration.

There are no particular qualifications or other requirements for legal representatives to appear in an international arbitration.

The arbitral tribunal, or any of the parties with the prior authorisation of the arbitral tribunal, may request the assistance of a competent local court for the gathering of evidence or enforcing a request for evidence. The court may grant the request in accordance with the applicable rules of evidence.

Since the parties are free to establish the procedure, this choice also includes rules regarding evidence and its assessment. The same applies to the domestic procedure. As explained, if parties fail to set the rules of procedure, the arbitral tribunal in an international arbitration would establish rules that are appropriate to the dispute. In the case of a domestic arbitration, if the parties fail to set the rules of procedure, the CPC will apply. However, the set of procedural rules established by the parties or by the international tribunal must respect the due process of law.

The arbitral tribunal has no compulsion powers regarding the production of evidence. The power to compel the production of evidence is exercised through the assistance of the local courts within the limits of the local regulations. This means that if a document is requested by the arbitral tribunal, but according to local rules such document would be deemed to be secret or confidential, it is likely that the local court would refuse to order the production of the document. On the other hand, in a case where a party refuses to co-operate with the production of evidence, the arbitral tribunal may issue the award on the basis of the evidence already produced, taking into consideration such absence of co-operation.

The AICA does not regulate confidentiality, so the parties are the ones that should establish the confidentiality rules applicable to the international arbitration (including disclosure in subsequent proceedings).

The award shall be made in writing and in the language agreed by the parties. In order to be valid, the award should be signed by the majority of the members of the arbitral tribunal, provided that the reasons for the lack of one or more signatures are set out in the award. The date and place of issuance should be clearly stated.

The award should be grounded in the applicable law and contracts selected by the parties.

Parties are free to determine the term in which the arbitral award should be rendered. In the case of local arbitrations, if the parties do not determine the term for the issuance of the award, the term to produce the award will be 90 days counted from the date of the first procedural act by the arbitral tribunal.

The limits on the types of remedies an arbitral tribunal may impose are determined by the applicable law selected by the parties and the terms and conditions of the contract which gave rise to the dispute.

According to Article 34 of the AICA, the parties are free to establish whether legal costs are reimbursed to the winning party. Unless the parties have decided otherwise in the arbitration agreement, the arbitral tribunal shall allow the winning party to recover the legal costs. However, regarding the legal fees, a costs-sharing approach is normally followed. In cases where the losing party has not co-operated with the arbitral tribunal in the production of evidence or where the procedural conduct of the losing party has not met good faith standards, fees and costs are imposed on the losing party.

The award may only be appealed before a court by petition for annulment. In order to succeed, the party pursuing annulment should demonstrate one or more of the following:

• that one of the parties to the arbitration agreement was affected by some incapacity, or that said agreement is not valid;
• that it has not been duly notified of the appointment of an arbitrator or the arbitration proceedings have breached the due process of law;
• that the award refers to a dispute not provided for in the arbitration agreement or contains decisions that exceed the scope of the arbitration agreement;
• that the members of the arbitral tribunal or the arbitral procedure have not followed the arbitration agreement in place;
• that, according to the law of the Republic, the subject matter of the controversy is not subject to arbitration; or
• that the award is contrary to the international public order of Uruguay.

The annulment petition must be filed within three months after the date of the last notification of the award.

Parties cannot agree to exclude or expand the scope of the appeal or challenge under national law.

The judicial review on the merits of the case is a de novo standard.

Uruguay has ratified the NYC without reservations.

An arbitral award, regardless of the country in which it was issued, shall be recognised as binding in Uruguay upon filing of a written request to the competent court. The party that invokes an award or requests its enforcement must file the original award or a duly certified copy along with the original of the arbitration agreement. If the award or agreement is not written in Spanish, the party must file a sworn translation of the documents. Even where the arbitral award has been set aside by the courts in the seat of arbitration, enforcement before the local courts would be admissible. A new analysis would be performed by the local court.

Regarding sovereign immunity at the enforcement stage, case law has supported the thesis that rejects the general immunity of states. The national rulings are aligned with the international regulations on this matter, allowing enforcement in cases where the assets or activities in question were not related to an official purpose.

This is to say that assets such as embassies are excluded from enforcement; nevertheless, commercial assets can by subject to enforcement. In summary, case law suggests that immunity of the state will not be applied if the enforcing party demonstrates that the assets are intended for a commercial activity.

International public order should be construed as the basic set of common principles on which a state grounds its legal individuality. Therefore, to reject the recognition of a foreign award, such an award must infringe in a concrete and serious manner the essence of our international public order principles. It should be borne in mind that in order to reject the recognition of an award based on the public order exception, the public order to be considered is international public order, not internal public order. Therefore, the approach of local courts regarding recognition of foreign arbitral awards is more favourable than the one established in the UNCITRAL Model Law, which also includes the exception of internal public order.

Uruguay does not regulate class-action or group arbitration claims.

The only ethical code applicable to the legal profession is the Uruguayan Bar Code of Ethics. However, the code would only apply to Uruguayan practitioners who are members of the Uruguayan Bar. In Uruguay, it is not mandatory for a legal practitioner to become a member of the local Bar.

Uruguay has no restrictions regarding third-party funders.

An arbitral tribunal would only be entitled to consolidate separate agreements upon the acceptance of all parties involved in the dispute.

A third party cannot be bound by an arbitration award issued in a proceeding in which it did not actively participate. National courts would not bind a third party to an arbitration proceeding if such party did not participate.