The Peruvian legal system is based on civil law, since it has been built on the basis of systematised and codified laws. Despite this, in the last decades some principles of different systems – mainly common law – have been assimilated and extrapolated to certain specialised areas of Peruvian law (such as family, commercial, intellectual property, labour and criminal law).
Thus, labour and criminal processes are, currently, regulated by procedural laws and regulations that establish orality in the trial, while the written system is being maintained in the other phases.
Although the Constitution recognises the independence of each judge to rule, recently it has been seeking to standardise jurisprudential criteria through the issuance of decisions contained in documents called "jurisdictional plenary", which serve as a source of law for judges.
The Peruvian judicial system is led by a Supreme Court and is composed of 29 superior courts, distributed throughout the country, that operate by subject matter, and which decide most of the processes. However, there is an exceptional appeal that allows the dispute to be brought to the level of the Supreme Court of the Republic – this is comprised of six specialised rooms in constitutional, criminal and civil matters.
The processes of constitutional law and human rights can be ultimately decided by the Constitutional Court. This judgment concludes the local stage and, if applicable, enables supervision before international jurisdictional instances in human rights.
Judicial processes are public, except in family or criminal affairs during the investigation phase. In most processes, the parties can follow up the status of the process through consultation of the judiciary's website.
The trial hearings are public, allowing free public and press assistance without restrictions – the most important cases are even transmitted live by diverse mass media and by the television channel of the judicial power.
The defence in any type of process is only carried out by a lawyer who must necessarily have a valid registration before a professional bar association (Article 132 Code of Civil Procedure). A foreign lawyer cannot represent or defend cases before the Peruvian judicial system.
In the first document that is filed before the judge, the lawyer or law firm that assumes the defence has to be appointed. This designation may be changed at any time. The designated lawyer has general representation, if authorised by the client (articles 74 and 80 Code of Civil Procedure).
In certain family processes (Article 424.11 Code of Civil of Procedure) and constitutional processes (habeas corpus or habeas data), the advice of a lawyer is not required (articles 26 and 65 Constitutional Code).
There is no restriction in this matter. The parties are free to agree on the conditions under which the litigation funding works, provided that it does not violate the Peruvian public policy.
All processes can be funded by third parties.
Both the plaintiff and the defendant, who is the subject of the claim, can be funded.
It is subject to the free decision of the parties to agree to this financing.
Types of costs can include attorneys' fees, experts' fees and the legal expenses that arise from the litigation.
Any contingency and/or success fee may also be considered within the financing of a process.
There is no restriction regarding time.
The Peruvian Code of Civil Procedure establishes that the conciliation of interests can take place before there is a second instance judgment (Article 323) and can be carried out with the judge or directly by the parties. It is not possible to conciliate facts that constitute crimes.
Law 26872 establishes the request for conciliation, as a mandatory step, before filing disputes of an economic nature or that deal with rights available by the parties and for family disputes that address food issues, visitation regimes, tenure of children, liquidation of a partnership between spouses, among others. In these cases, the extra-judicial conciliation hearing is held in a private conciliation centre, which is registered and regulated by the Ministry of Justice.
The conciliation request is mandatory, but the assistance of the invited part is not mandatory. The absence of the latter does not generate any legal presumption. When a lawsuit is filed, the judge verifies if the request for conciliation was fulfilled, as it is a requirement of the judicial process.
It must be noted that the prior conciliation procedure is not mandatory in the case of arbitration, unless the parties have agreed otherwise.
The statute of limitations for civil claims are determined by the nature of the obligation and begin as from the day the right is enforceable. They are only interrupted when:
The legal terms of the statute of limitations, established in the Civil Code (Article 2001), are:
Also, there are several cases in which the term of the statute of limitations can be suspended.
The rules that regulate the process are common for both plaintiffs and defendants and are based on the type of process: civil, labour, administrative, and constitutional.
The initial document is the lawsuit itself and it must contain the following elements:
If the claim is governed by the rules of the written process, the following must be attached: copies of the identity documents and powers of the representatives or lawyers (if acting on request), and copies of the conciliation request.
Once the lawsuit is filed, the judge proceeds to its qualification and analysis, being subject to the following possible outcomes: (i) an “initial rejection” declaration which proceeds when it is immediately considered that there is no basis for the procedural process; or (ii) inadmissibility, indicating which are the specific claims that do not meet the legal requirements to initiate a judicial process and confers a period to regularise.
In Peru, the justice service is free and notification to the parties of the lawsuit and other resolutions issued in the process are the responsibility of the court. For the first notification or summons to the process, the following rules apply:
The defendant is obliged to indicate a real procedural address in the area of the court or an electronic address, which will be used for notification purposes. In matters that allow orality, only judicial decisions are communicated to the electronic address indicated.
If the defendant has been validly notified to the address in which the claim is filed, and does not respond within the timeframe legally granted, the process continues and those items of the suit that are duly supported are deemed accepted – that is, the procedural breach is declared (Article 458 Code of Civil Procedure). Under this scenario, the final decision will be notified by the newspaper.
However, the process rules allow that the defendant may appear in any phase of the process, asserting their rights as from that moment; should the suit be filed against various defendants, and only one answers then the acts of defence are valid only for this sole person, unless the facts and the applicable law allow otherwise (Article 462 Code of Civil Procedure).
In Peru, the defence of diffuse interests (those whose title does not fall on a determined person or group) proceed only for defence of certain environmental rights, specifically the right for a balanced and adequate environment for the development of life (Section I of Article 23 Code of Constitutional Procedure). Non-profit organisations or legitimate entities such as indigenous or peasant communities may file protection claims, as established by the general environmental law (Article 82 Code of Civil Procedure).
On the other hand, the defence of collective interests is not expressly regulated in Peruvian legislation, except for claims regarding collective interests derived from consumer protection regulations that can only be initiated by the Peruvian Competition and Antitrust Authority (INDECOPI), or a non-profit association, aimed to claim the restitution of rights or compensation for the damages caused (Article 131 Consumer Protection Code).
Although the justice service is free, throughout the process the parties involved have to pay administrative fees for certain procedural acts; these are based upon the amount claimed, and are regulated by the Executive Council of the Judiciary on an annual basis.
Professional fees are freely agreed by each party with its lawyers, whether this is a fixed amount, a success fee, or a mixture of both criteria.
In accordance with Peruvian Law (Article 636 Code of Civil Procedures), the plaintiff may request that precautionary measures (ie, liens, seizure of property, etc) be issued before the main judicial process is initiated, in order to ensure compliance with a future favourable judgment, under the condition that the party requesting the measure submits its claim within ten days after the execution of said measure. The judge who issues this precautionary measure will be the same who will be responsible for the direction of the main proceedings.
The judge may order the early trial of the process (Article 473 Code of Civil Procedures) and issue a judgment without admitting additional procedure, but the oral hearing of the parties’ attorneys, in the following cases:
This early trial is not a right of the parties but an exclusive prerogative of the judge, although the parties, by evidencing that some of the above assumptions are met, may request it.
Pursuant to Peruvian law, there are no dispositive motions that must be followed before the trial, except for the obligation to submit a request for conciliation before a specialised centre in the matter. If an agreement was not reached in said procedure, only then the judicial process would be enabled to resolve the dispute.
Furthermore, the existence of a non-judicial transaction, or prior conciliatory agreement, qualify as events that would determine the inadmissibility of the suit, in regard to those claims formerly regulated in such agreements.
The parties not initially considered in a lawsuit are entitled to request their incorporation into the process, both as plaintiffs or defendants, even during the course of the second instance. Thus, according to Article 98 of the Code of Civil Procedures, whoever considers themselves to be the holder of a substantial legal relationship to which the effects of a sentence must be extended, and that for such reason are entitled to sue or be sued in a judicial process, may intervene as a joint-plaintiff or joint-defendant, with the same powers as those.
Moreover, the omission of a necessary defendant in a judicial process (called "passive necessary part") determines the existence of an annulment defect in said process. Even, in the case of civil proceedings, regarding available rights, the plaintiff has the duty to invite to an extrajudicial conciliation, prior to the filing of the claim, said necessary parties. In that sense, the necessary passive party (defendant), which has been omitted in a lawsuit may request the judge of the process to be included as a party and demand that the claim be notified in order to answer it and exercise its right of defence.
Unlike the omitted defendants, in the case that a person considers themselves entitled to act as a plaintiff in a judicial process, he or she may request his or her intervention from the judge, in the state in which the process is found.
Peruvian law also enables the person who considers themselves the holder of a right discussed in a judicial process (main exclusionary intervention), to ask the judge for his or her intervention in it, formulating for that purpose his or her demand against the plaintiff and the defendant (Article 99 Code of Civil Procedures). The main exclusionary intervention is only admissible before the issuance of the judgment of first instance and the processing of the request does not suspend the process, but the issuance of the sentence. The intervening party is considered as one more party in the process and has the same probative powers as the original parties.
Likewise, the defendant who considers that another person, in addition to him or her, or in his or her place, has some obligation or responsibility in the right discussed in the process, may request their incorporation into the process as a civil defendant (articles 102 and 103 of the Code of Civil Procedures).
Both the defendant and the plaintiff have the right that, in the event of being winners in a trial, the judge orders that the other party reimburse their defence costs. The possibility of establishing a precautionary measure or bond of some kind, at the beginning of the process, is not contemplated to guarantee the reimbursement of said defence costs. However, once the sentence is passed and the award of costs has been established by the judge, it is possible to request a precautionary measure to ensure its payment.
In the specific case of the precautionary measures, one of the requirements established for its granting is that the applicant grant a “counter-caution” to guarantee the damages that the defendant could suffer, which is not limited to defence costs.
Likewise, it is important to point out that, in the case of contentious-administrative processes, public administration entities are exempt, by law, from the assumption of costs and defence costs of the counterparty.
Interim applications/motions costs are regulated annually by a table of fees approved by the judiciary, which are fixed according to the subject and amount of controversy. The entities of the Peruvian state are exempt from the payment of said fees.
The Peruvian legal system does not establish a specific timeframe for the ruling of a request for precautionary measure, its resolution speed depending on the procedural burden of the court and the type of process in which said request is made.
It is not possible to request discovery, either in civil cases or in any judicial process. The evidence is limited to that offered by the parties, or to evidence that the judge decides ex officio, expressly and precisely, and it is not possible for the counterpart to request the generic display of documents.
It is not possible to obtain a discovery from third parties’ outside the process. Third parties are only required to display specific documents that belong or clearly concern or refer to any of the parties (Article 259 Code of Civil Procedures).
As indicated, it is not possible in court proceedings to request a discovery. However, this is allowed in the arbitration by agreement of the parties or if the arbitration court so provides.
As a general rule, the evidence is expressly stated in the suit and in the answer to the complaint. However, it is possible that the claimant may request the performance of an anticipated test at the beginning of the process, justifying the need and the reason why it is required to have this evidence prematurely (ie, danger of disappearance of the evidence).
Likewise, the judge may order the presentation of a certain evidence, whenever it considers necessary, before issuing a judgment.
The Peruvian Constitution recognises the fundamental right of every person to keep professional secrecy. It is by virtue of this constitutional mandate that the attorney-client privilege, and the confidentiality of the information accessed by a lawyer in the exercise of sponsorship, are protected by the legal system. Indeed, the Organic Law of the Judiciary imposes as a duty of the sponsoring lawyer the rigorous fulfilment of professional secrecy, since the criminal legislation establishes that the infraction of said obligation constitutes a crime (Article 165 Criminal Code).
On the other hand, there is no distinction in the scope of professional secrecy regarding in-house and external lawyers.
In civil proceedings, the only rule for displaying documents, other than discovery, is that the requested evidence does not relate to the object of the process. Additionally, a party may refuse to present a specific evidence in cases where such an exhibition may affect the constitutional rights of the party.
In Peru, precautionary measures can be granted in any type of process, in order to guarantee compliance with the final decision, provided that the applicant certifies that the requested measure meets the following three requirements:
Likewise, in civil proceedings, the applicant is required to grant a real or personal counter-caution, in order to assure the affected party with the precautionary measure of the damages and losses caused by the execution of the same. In the case of the constitutional process of amparo there is no counter-caution, due to the conflict of the violation of fundamental constitutional rights.
It is important to note that in the Peruvian system all precautionary measures are granted without knowledge of the counterpart executed.
However, regarding the types of precautionary measures, these can be classified as:
The lien consists in the affectation of a good or right of the obligated party, even when it is in the possession of a third party. Among the types of lien that exist are: (i) lien in the form of withholding, in which case the money withheld is deposited in the National Bank by the person obligated to pay or frozen by the financial institution; and (ii) seizure in the form of registration, in which case the seizure falls on goods registered in public records, whose registration is accredited through registration in the same records.
In Peruvian legislation there are no precautionary measures that limit the development of a parallel process since, in that case, if there are related processes, one of the processes can be accumulated or suspended until the other is resolved.
All precautionary requests have as a requirement the danger of delay, which implies that they are urgent per se. In that sense, the courts grant a preferential treatment for evaluation and granting. However, the granting of this depends on the procedural burden of the court before which it has been requested.
As indicated previously, all precautionary measures are granted without knowledge of the executed counterpart (ex parte basis), because the processes are basically written.
As indicated previously, in the civil proceedings the requesting party of a precautionary measure is obliged to grant a real counter-caution (deposit granted before the National Bank) or personal (personal bond), which serves to insure the affected for the damages and losses generated by the precautionary measure. In that sense, the counterclaim offered would proceed in two cases: (i) that the Superior Chamber revoke the precautionary measure granted by the court; or (ii) that having declared the claim unfounded, the executed party does not renew the execution of the counterclaim.
It is important to keep in mind that the counterclaim offered by the performer can be graduated, modified or even changed by the judge, in order to guarantee the damages that the execution of the precautionary measure could cause.
The precautionary measures have certain limits, established in Article 648 of the Civil Procedure Code. In accordance with this norm, the following are non-attachable assets:
The precautionary measure of attachment is in the form of registration against the property registered in the name of a third party, but only when the applicant has proven that the property belongs to the debtor, but is in the name of a third party.
As indicated before, all precautionary requests are granted without knowledge of the executed party, so it is not necessary to perform any act of execution by the executed party.
The processes in Peru are eminently written. Orality is recognised as an exception to this rule in the case of labour and criminal proceedings. Notwithstanding the foregoing, judicial proceedings admit the performance of oral proceedings such as:
Timing of oral intervention of the parties and their lawyers in the process, as well as witnesses and experts, is determined discretionally by the judge, taking into consideration the complexity or size of the case.
In the Peruvian legal system, jury trials for civil cases are not regulated.
The general rule is that the evidence must be offered in the postulatory briefs: (i) claim and its answer, and (ii) counterclaim and its response. Subsequently, it is only possible for parties to present evidence for new facts linked to the dispute. Additionally, the judge has the power to request and act ex officio evidence.
The participation of the experts in the process is done through the presentation of a written expertise which can be requested by one of the parties or also ordered by the ex officio judge. The expert opinions are given by the experts at the time of the hearing of evidence, being able by exception, when the complexity of the case merits it, to order the realisation of a special hearing for the exposition of the experts (Article 265 Code of Civil Procedures).
The only oral proceedings with access to the public in the civil process are the oral report hearings of the parties' attorneys, in which case the statements made are not transcribed. In this sense, some of these public oral actions may in certain cases be broadcast on television.
On the other hand, the other oral actions carried out in the process (expert report, etc) are not public, and the oral intervention of the actors must be transcribed at the time of the diligence.
Exceptionally, the parties may request of the judge that the oral reports of lawyers be held without the presence of the public – this would be in those cases in which their participation could affect the rights of third parties (eg, hearings in cases of minors).
Third parties may have access to the judicial file once the process has been completed and its archiving has been ordered.
According to Peruvian national legislation, the judge is the “chairman of the process” and, as such, administers all proceedings. In that sense, he or she is competent to define the dates for the performance of the different actions to be carried out in the judicial process, direct the hearings, require the performance of ex officio evidence, and cross-examine the parties, witnesses, experts and lawyers.
As a general rule, in the civil process, the final decision of the judge is issued after the oral reports hearing of the parties' lawyers has been carried out. However, exceptionally in the criminal and labour field, some decisions may be issued in the oral hearing. Thus, in the investigation stage – within the criminal process – decisions may be issued at the end of the respective oral hearing. Also, in the labour process the final sentence may also be issued at the end of the hearing of the parties.
The Peruvian national legislation establishes maximum deadlines for the resolution and conclusion of legal proceedings (Article 124 Code of Civil Procedures). However, in practice, given the procedural burden of the different jurisdictional bodies, these deadlines are usually exceeded.
In the event that a settlement occurs within a judicial process, there will always be a control of legality and provenance by the judge before approving the agreement – ie, about available rights, which do not affect public order and benefits are granted reciprocals. There can be several assumptions:
Finally, keep in mind that in Peru it is valid to carry out extra-judicial settlement (outside a judicial process) without the approval of any judge being necessary. In this case, the settlement also acquires the quality of sentence.
Individuals may agree to keep certain facts or agreements confidential and determine the penalties in case of non-compliance; however, in a judicial dispute, the judge may request the display of the agreement.
The private agreement is considered a title of execution and, if the agreement is given before a judge, it has the character of a sentence. This implies that it is feasible to resort to the judge to execute the various ends of the agreement.
The execution process is regulated by articles 688.8 and 690.D of the Code of Civil Procedure, namely that:
The settlement being a mutual agreement, the parties may voluntarily agree to its termination and, unilaterally, are only able to ask for its enforceability. In exception, the court can declare the settlement void or ineffective (ie, when it affects disposable rights.
Through the sentence, the judge resolves the dispute and concludes the process, issuing a ruling for that purpose (express, precise and reasoned decision), which may contain the following, according to the merits of the dispute:
In Peru's legal system, a claim for compensation for damages is followed in accordance with the general rules of civil liability established in the Civil Code, since such liability in turn may have a contractual or torts origin.
In both regimes, the damages are:
With regard to the limitation of liability, it can only be exonerated or limited in cases of slight fault; consequently, exemptions or limitations of liability in case of wilful misconduct or gross negligence are considered as null and void agreements.
In the Peruvian system there is no punitive damages, nor consequential or indirect damages. However, parties may agree on liquidated damages.
The rules for the accrual of taxes are the same, regardless of whether or not there is a judicial process; therefore, those do not distinguish between the different stages of it (before or after the trial). The interest rates applicable in Peru are as follows:
The maximum compensatory tax and default tax rates are established by the Central Reserve Bank, except for financial institutions, for which there is no limit.
National judgments have the status of executive title and are executed through a single enforcement process, in accordance with the provisions of Article 688 and following of the Civil Procedure Code.
In this case, it is sufficient that the performer presents the title and that it contains a certain obligation, express and enforceable; if it is an obligation to add money, this amount is liquid or liquidable. Consequently, the judge rules an execution mandate, which can only be contradicted by the following: (i) compliance with the obligation, and (ii) the termination of the obligation. Notwithstanding the limited assumptions to contradict the execution of a sentence, this process can be evaluated even in the Supreme Court.
Before requesting the execution of a foreign judgment, it is necessary that it be previously recognised by Peru's legal system. For this, the applicant requires recognition before a judge, through a non-contentious process, in which there is a presumption of reciprocity for its execution, unless the executed proves otherwise.
Once the sentence is recognised as such, its execution proceeds as a national sentence.
The Political Constitution of Peru establishes as an essential guarantee of effective judicial protection and due process the plurality of instances in the processing of judicial proceedings. Along these lines, any judicial process contemplates the possibility of challenging the appeal issued by the court of first instance via appeal.
In those judicial proceedings in which the second instance is in charge of a higher court of justice, it is also possible to lodge an appeal for the purpose of having the Supreme Court of the Republic review the existence of violations of due process and the application of the right during the process.
In the constitutional proceedings, against the second instance ruling issued by the constitutional superior court, it is possible that only the plaintiff will file a constitutional grievance appeal that will be resolved by the Constitutional Court.
Likewise, it is possible to appeal the resolutions issued by the judge, other than the judgments, by means of the following mechanisms (Article 121 Code of Civil Procedures): (i) replacement that is brought against the decrees (resolutions that drive the process); and (ii) appeal that is filed against the “court orders”, which resolve relevant procedural issues outside the merits of the dispute.
As a general rule, the appeal is filed before the same court that issued the judgment or resolution so that it qualifies its admissibility and elevates it to the corresponding superior court. In general terms, the admissibility and provenance requirements for filing an appeal, according to the process, are:
The civil process in Peru is mainly written, so that the filing of the appeal is made once the “affected” party receives notification of the decision to appeal. From that moment the deadline to file the appeal is calculated, which must also be formulated in writing. As indicated, the deadline for submitting the appeal may vary by virtue of the process in which it is processed, as well as the act subject to appeal.
The second instance can only rule on those matters that have been the object of express challenge by the appellant. In the case of judgments, the higher instance becomes aware of the case under appeal by reviewing the facts and the right argued by the parties, as well as the evidential means offered, in the first instance, being able to make an oral report to state their position. By exception, the parties may apply for new evidence related to new facts related to the dispute, notwithstanding that the court may request additional ex officio evidence.
Finally, the Peruvian legal system is governed by the principle of iuria novit curia, so that both the parties and the court can specify their positions and judgments, respectively, attending to legal bases not invoked by the parties initially.
Peruvian legislation does not allow judges to establish conditions, of any kind, for filing an appeal. Judges should limit themselves to verifying compliance with the requirements established by the legislation for each process, in order to determine the admission and origin of an appeal.
The second instance is empowered to confirm, revoke or annul the subject matter of appeal. In the case of revocation, the judge modifies the decision by resolving the merits of the dispute in a different sense from that of the appealed decision. In case of annulment, it orders the court of first instance to re-issue sentence, establishing guidelines for this.
The expenses related to the litigation are initially assumed by each of the parties. Subsequently, when issuing sentence, the judge condemns the defeated party to assume the expenses incurred by the other party.
Peruvian law distinguishes between: (i) costs that are constituted by judicial fees, fees of judicial assistance bodies and other judicial expenses incurred during the process; and (ii) costs are the fees of the attorneys of the winning party, plus 5% to the Bar Association of the respective judicial district.
If several claims have been discussed in the process, the sentence affects only those received in favour of the winner.
If the convicted party does not agree with the calculation of the court costs and fees, it can file an appeal for the higher instance to review the decision.
The costs are 100% reimbursed by the losing party. As for the amount of the attorney's fees of the winning party, there must be a liquidation at the end of the judicial process in which the reasonableness of the same is determined depending on the complexity of the work performed. In order to make the collection of costs effective, it is essential that the winner submit to the court by a certain date the documents that accredit the payments made to the defence lawyer, as well as the corresponding taxes.
If the court costs and fees are not reimbursed immediately by the losing party, the legal interest rate is applied until its effective payment.
Arbitration is considered a jurisdictional route for the resolution of disputes, even it is applicable to public entities, and can be agreed with rules of national or international courts (articles 63 and 139.1 of the Constitution). This route, managed by individuals and private institutions is the most used; it is regulated by the Peruvian Arbitration Law, which respects the UNCITRAL model law.
The Justice Department issued a law that promotes ADRs: conciliation, arbitration and mediation (Law 26872), performing free services nationwide for any individual who wishes to resort to government centres.
The procedural legislation contains a regulation to use ADR in processes before the civil or labour and administrative courts; however, since it is not obligatory and lacks a sanction, the lack of agreement in these channels means the mechanism is not widely used.
If the arbitration is expressly agreed, the party cannot refuse to intervene in said jurisdictional mechanism.
The Justice Department has small facilities in certain cities of the country to promote ADRs. On a private level, since the summons to a conciliation meeting are mandatory for certain cases, there are a variety of National Conciliation Centres that are regulated by the Justice Department.
Regarding arbitration, it can be developed independently or through specialised private centres, operating on the basis of the prior arbitration agreement. The best known, and those that require the prior registration of the arbitrators, are Lima’s Chamber of Commerce (CCL), the American Chambers (AMCHAM), and the Center for Analysis and Resolution of Conflicts (CARC) at the Pontificial Universidad Católica del Perú (PUCP).
In Peru, the only rule applicable to the development and conduct of arbitration is Legislative Decree No 1071, which indicates that the parties may establish, by mutual agreement, the rules they deem appropriate or subject to the regulations of the arbitration institutions that they consider convenient.
The rules that can be submitted for the conduct of the process are found in the Rules of Practice of the International Bar Association (IBA) or the Rules for the Efficient Management of Procedures in International Arbitration (Prague Rules).
However, in the absence of agreement of the parties, the arbitrators have the power to apply the rules they deem appropriate to the particular case. In that case, the arbitrators resort only to the principles in arbitration or to the customs in the matter, but in no case do they resort to civil procedural legislation.
On the other hand, in the matter of recognition and enforcement of arbitration awards, the Peruvian legal system is governed by the provisions of both Legislative Decree No 1071 and the Civil Procedure Code.
The only limitation to submit disputes to arbitration is that they deal with matters that are not freely available. In that sense, in the Peruvian system, contracts with the state are arbitrated (in which case it is mandatory), as well as disputes between consumers and their suppliers (consumer arbitration). However, this arbitration has its own regulation in the Peruvian system, so it is not governed by Legislative Decree No 1071.
In Peru, the appeal for annulment is the only means to challenge an arbitration award, which is regulated only in Legislative Decree No 1071.
In accordance with this rule, the validity of the same is evaluated through the annulment resource in accordance with the grounds established, but without evaluating the merits of the dispute, or qualifying the criteria, motivations or interpretations adopted by the arbitral tribunal. Moreover, the rule prohibits judges, who are responsible for assessing the appeal for annulment, to rule on the merits of the dispute decided in an arbitration award, subjecting them to liability otherwise.
However, the grounds for requesting the annulment of an arbitration award limit the following assumptions, in accordance with Article 63 of Legislative Decree No 1071:
In the case of cases (i), (ii), (iii) and (iv), they only proceed as grounds for annulment when they have been the subject of a claim in the arbitration process.
However, the processing of this suit must be carried out within a period of 20 days, counted from the notification of the arbitration award or the resolution that resolves the requests for rectification, interpretation, integration and exclusion. For this, the plaintiff must expressly and clearly indicate the grounds invoked, duly accredited, since the evidence is limited to the offer of documents.
Once the appeal for annulment is resolved, the defendant may file an extraordinary appeal (casacion) against said sentence with the Supreme Court. That exceptional process is not intended to be a substantial challenge, but only intended for review should the sentence be issued according to the current procedures and legislation.
On the other hand, although the appeal for annulment constitutes the only means to challenge against an arbitration award, sometimes this award is subject to a constitutional Civil Rights Action, in order to evaluate the violation of constitutional rights. However, the Constitutional Court has established in the Minera Maria Julia Case (No 00142-2011-AA), as a binding precedent, the exceptional nature of an arbitration protection process, limiting it to the following three assumptions:
Assumptions (i) and (ii) only apply if they had been the subject of an express claim before the arbitral tribunal and that the latter has been dismissed by it.
In the case of the execution of national awards, the jurisdictional body issues the enforcement mandate for the sole merit of the arbitration award and, if applicable, the resolutions that resolve the requests for rectification, interpretation, integration and exclusion of the award. Against this mandate, the executed party can only object by accrediting (i) the fulfilment of the obligation, or (ii) the suspension of the execution by virtue of the process of annulment of the same award. If the opposition is declared founded, an appeal against these proceeds and against the resolution that resolves the opposition proceeds cassation.
On the other hand, in the case of the execution of foreign awards, it is necessary to take into account that these previously need to be recognised – that is, that the state grants it enforceability within the national territory. The recognition of an arbitration award is regulated in articles 75 and 76 of Legislative Decree No 1071, according to which the treaty that will be applicable for its recognition or the national norm is applied, if it is more favourable. In case of applying the national norm, recognition is requested before a judge in a non-contentious process.
Once the foreign arbitration award is recognised, it is executed in accordance with the treaty that is applicable for its execution. Thus, if the Convention on the Recognition and Enforcement of Foreign Arbitral Sentences, approved in New York in 1958, is applicable, the rules for the execution of national awards could be applied, if these were more favourable.
Pursuant to a constitutional reform, held as a result of a public referendum, the rules regarding the election, evaluation, ratification and dismissal of judges in Peru were modified, establishing that these functions would be in charge of a new constitutional body called the Junta Nacional de Justicia (Peruvian National Board of Justice).
According to its regulations (Law No 30904 and Law No 30916), this new bureau is in charge of appointing, after a public contest of merits and personal evaluation, judges and prosecutors at all levels (including the Supreme Court and supreme prosecutors). It is also noted that, pursuant to the aforesaid regulations, the National Board of Justice will execute the partial evaluation of performance of judges and prosecutors, at all levels, every three years and six months, establishing those not ratified or dismissed will not be able to re-enter the judiciary and the public ministry.
On the other hand, as a result of the 2020 global health crisis, both regulatory measures as well as judicial reforms have been implemented by the government. Regarding the last, these primarily are intended to allow processes to be carried out virtually. All these reforms are being implemented and used progressively.
COVID-19 has had a great impact on the development of judicial work in Peru. Indeed, in order to contain and prevent the spread of this pandemic, the Peruvian government has issued a series of provisions (Supreme Decree No 044-2020-PCM on 15 March 2020) which order strict shelter-in-place measures within the whole territory and determine, among others, the restriction of all types of non-essential activities, including legal activities, which implied the suspension of all judicial terms.
Under these circumstances, the government and the judiciary established several regulations intended to allow the work of the judicial operators remotely as well as the continuation of ongoing processes virtually. In this regard, mechanisms for monitoring and developing processes have been enabled through virtual means by holding virtual audiences, the filing of writs through virtual platforms or email, as well as improving the creation of electronic dockets, among others.
However, through Administrative Resolution No 179-2020-CE-PJ, the judiciary ordered the restart of the judicial deadlines as from 16 July 2020. Since this date, the judicial power has arranged the development of judicial proceedings through virtual means and, exceptionally, in person, which includes the filing of writs and briefs through a virtual platform and emails, the development of virtual audiences, among others.
As is the case with many Latin-American countries, among various litigation issues in the Peruvian legal landscape, taxation is particularly important. Undoubtedly, a large part of the claims of Peruvian citizens are taxation-related. In this article we intend to show the response of the Peruvian justice system and highlight the deficiencies that must be resolved in order to protect citizens' constitutional rights.
Introduction: Peruvian Taxation in the Context of Latin America
The Inter-American Court of Human Rights has not received any taxation-related case for review for the past 15 years, at least. This has occurred in spite of the fact that Article 8.1 of the American Convention on Human Rights expressly states the right of every person to a hearing by a competent, independent and impartial tribunal, previously established by law in order to determine, among other issues, any right or obligation related to taxation.
This inevitably gives rise to questions as to how the filter of the Inter-American Commission on Human Rights has been working when it decides which cases to present to the court. Economic studies in Latin America and the Caribbean give a clear idea of how many people in this region are in a state of absolute defencelessness against the abuses committed by the taxation authority of their country, which blindly pursues the payment of more and more taxes from people who already pay them, without implementing efficient measures to achieve the objective of reducing inequality and improving the general welfare of the people.
In Peru, regardless of economic growth, the general population cannot enjoy optimal infrastructure, public works, schools and roads as there is still a significant taxation gap that prevents proper funding. The tax base is very small because there is high tax evasion and "informality" (ie, persons or businesses not registered at the National Superintendence of Tax Administration, SUNAT). Furthermore, the complexity of the taxation procedures contributes to the fact that tax collection is insufficient.
Instead of implementing solutions to these issues by educating the people and encouraging formality through the creation and dissemination of the benefits of taxpaying, the National Superintendence of Tax Administration (SUNAT) continues to justify its tax administration role by mainly persecuting private companies and generating more tax burdens on those who already struggle to pay their taxes. In such an excessive and mistaken effort to comply with tax collection targets, abuses do occur. Our own litigation practice has allowed us to witness this over the years.
The Response of the Judiciary
The Peruvian justice system is not offering the necessary guarantees so that the burdened taxpayer can have a fair hearing with all the judicial safeguards to which they are entitled, and the taxpayer encounters the following reality instead.
"Pay first, claim later"
If a taxpayer wants to request a petition for suspension of the collection of a tax or a penalty with which they do not agree (ie, precautionary measure), this taxpayer must be rich or have a lot of bank liquidity. This is because to have said petition evaluated by a taxation judge, a bank letter of credit in force for one year (extendable) must be presented for an amount equal to 60% of the tax debt that is being challenged before the judiciary (the total amount of the tax debt was required in the past). Only if this requirement is complied with can the said judge evaluate the precautionary petition; the fact that the said judge grants the precautionary measure is another matter.
"Wait, your petition is not urgent for us"
This type of precautionary measure requires urgent attention. However, despite this, such precautionary petition must first be made known to the taxation authority, SUNAT, so that it can determine and indicate the amount of the updated tax debt. Only after this new procedure will the judge issue a ruling. Evidently, this regulation for urgent care of petitions has nothing to do with urgency. In addition to the above, the taxpayer must wait for the judicial action to be admitted and so, with this, the matter will easily take several months.
"I have to consult with your counterparty to get to know if they believe you are right"
As a cherry on top, assuming that the taxpayer (with a lot of liquidity) manages to get a bank to grant said financial instrument, every six months SUNAT can demand that the judge will require the taxpayer to increase the bond amount upon updating of the debt that SUNAT itself is settling. It is a never-ending story! The judge, who has the absolute power to settle the case, cannot even review the debt liquidation as determined by SUNAT.
In essence, the Peruvian Government has issued procedural rules that give SUNAT an absolute advantage when it litigates against a taxpayer. An elementary rule of due process is therefore affected – the right to procedural equality or equality of arms.
"Litigate against the funder and master of the judge"
Furthermore, the creation of specialised courts to review tax claims was financed with the budget of SUNAT – and the judges making up those courts were themselves "trained" by personnel of the said taxation authority and the Collegiate Tribunal (the Administrative Tax Court) that reviews their decisions in a second administrative instance.
“Is tax justice complying with the Constitution?"
If any citizen or company has the urgent need to resort to constitutional justice through a petition for constitutional protection for a serious violation of a fundamental right, we anticipate that they will eventually lose the battle; in effect, they are being set up to fail. Why is that so? In the Court of Lima (the one with the greatest number of cases in the whole country), there are 13 constitutional courts – but only one of them has exclusive competence to hear tax disputes. Therefore, the said judge is omnipotent as he or she is the only one in Lima who can review constitutional cases that are related to taxes and can review all other constitutional matters at the same time.
"Welcome to an unwinnable mission"
Clearly, winning a case before those courts is an almost heroic act. The fact that judicial cases are rarely granted against SUNAT illustrates this, particularly when the procedure reaches the Supreme Court through a cassation appeal. It is very common to see that, in relation to the same case, the door is apparently closed to the taxpayer but at the same time opened for SUNAT.
Aggressive media campaigns are also used as mechanisms of pressure to the magistrates who will settle tax cases with significant amounts involved. Here, it does not matter if the decision of the taxation authority is framed within the law or not – what matters is to exert pressure on the magistrates by informing the population how much the tax in dispute amounts to, how much the Peruvian government will no longer receive if the case is ruled in favour of the taxpayer and what the Peruvian government could have (supposedly) done with that money. These campaigns simply serve to alarm the population, despite the fact that – for the reasons already outlined – if the pressure works and the case is not ruled in favour of the taxpayer, the Peruvian government can do little with the money, due to deficiencies in the tax collection system.
Where, then, can a citizen or company look for equal and fair treatment? Let us not forget that Peru has signed international treaties that oblige the government to provide competent, impartial and independent judges, in addition to indicating that all parties are equal before the courts of justice and have access to a simple, fast and effective remedy before the judges. The aforementioned not only shows a clear breach of Peru's international obligations, but also that there is no tax justice, and the judiciary is plagued with petitions for protection from unconstitutional measures.
Just as SUNAT has the right to demand payment of taxes, citizens and companies also have the right to question what they consider to be an improper charge. At present, there is a notable imbalance that needs to be addressed.
In a nutshell: from a legal point of view, the Peruvian tax justice system is unconstitutional. Further, from a practical point of view, some taxpayers regret having paid their taxes and so prefer to stay in the informal sector, which thereby perpetuates the same vicious circle that has caused so much damage to Peru as a country – a low collection rate equals zero public works, which in turn worsens levels of poverty and inequality.
With the significant crisis we are experiencing due to COVID-19, informality in Peru has increased exponentially and tax collection will continue to fall. What is going to happen is more of the same: SUNAT will seek to "squeeze" those who always pay taxes (20% of the economically active Peruvian population) and, as previously stated, without respect for the Constitution. If there is no change, citizens will continue to be unable to access a justice system that, at least, grants them minimal guarantees of independence and impartiality.