Special report: Arbitration
Use of arbitration increasing in Central America partly
due to slowness of courts
Arbitration gaining in popularity, but the expense involved can deter some clients who may decide
instead to go to court to resolve disputes
The use of arbitration as a means of
dispute resolution is increasing across
Latin America as a whole and Central
America is no exception, according to
Ignacio Andrade Aycinena, partner
at Sfera in Guatemala City. He points
out that investor-state arbitration cases
are an increasingly important source
of work for law firms, adding that
arbitration is becoming more popular
given that it can take considerable time
to settle cases in the courts.
“In the case of Guatemala, there
are important cases of investor-state
arbitration that bring interesting
opportunities for law firms, many of
which are related to the International
Centre for Settlement of Investment
Disputes (ICSID) and conventions for
the protection of investment,” says
Andrade Aycinena, who has acted as
arbitrator for the Guatemalan Chamber
of Commerce’s arbitration and
conciliation centre, as well as for the
conflict resolution commission of the
Chamber of Industry.
Sfera’s Central American operation
includes offices in Guatemala, Costa
Rica, El Salvador and Nicaragua, which
are also supported by the firm’s New
York representative office. And while
arbitration is growing in popularity in
all of the jurisdictions where the firm
has offices, it is also being used more
widely in locations where the firm is
not present, such as Honduras and
Panama. Indeed, Sfera has plans to
establish itself in Honduras in the early
part of next year.
“The increase in the use of
arbitration is evident in Central
America, and this is the result of a
combination of factors,” Andrade
Aycinena says. “One of the factors is
the length of time cases can take in
court, and with the use of injunctions,
cases are delayed, so judicial solutions
to disputes are not always the most
appropriate.” He continues: “We see
more use of arbitration in specialised
cases, too, such as electricity
distribution.” As a result of this trend,
an increasing number of law firms
in Central America are focusing on
arbitration as a specialisation, Andrade
Aycinena adds.
That said, arbitration is not a
panacea and it is not necessarily
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suitable for all cases and situations.
There are cases where using arbitration
can lead to complications, such as
in a project where it is necessary to
“implement precautionary measures”.
It is also an expensive procedure,
Andrade Aycinena says, and therefore
the decision on whether or not it is
worthwhile for the parties involved
to engage in arbitration to resolve
a dispute is another factor that
needs to be considered. Given these
considerations, the parties may decide
to pursue the case through the local
courts. “However, a half-completed
construction project, for example,
would involve significant losses,
and therefore arbitration would be
a worthwhile method of resolving a
dispute,” Andrade Aycinena explains.
He adds that the use of arbitration can
be viewed positively and negatively.
“When it is used by one party to stop
another from getting a verdict, for
example, that is a negative use of
arbitration.”
Ignacio Andrade
Demanding arbitration clauses
Andrade Aycinena expects the use
of arbitration to increase further,
especially given the fact that more
and more contracts signed between
governments and the private sector
include arbitration clauses. Often these
clauses relate to payments between the
two parties, although, in general terms,
governments in Central America have
traditionally sought to avoid the use
of arbitration as a method of resolving
disputes. However, there is a tendency
for the private sector to demand the
inclusion of arbitration clauses in
contracts, as this provides them with
the greater certainty they require,
Andrade Aycinena says.
Another factor facilitating the greater
use of arbitration in Central America
is the existence of conflict resolution
commissions within the countries’
respective chambers of commerce,
Andrade Aycinena adds. Sfera has three
lawyers (based in Guatemala and Costa
Rica) dedicated to arbitration and the
firm also recently hired an additional
lawyer in Guatemala to oversee such
cases – further evidence that arbitration
is becoming a significant part of the
firm’s work.
December 2018 • THE LATIN AMERICAN LAWYER • 29