International Arbitration

May 23, 2023

What is international arbitration?

International arbitration is the method of dispute resolution where parties agree to resolve their disputes privately. By choosing arbitration instead of going to court, parties can avoid complex and costly court proceedings and obtain a quick and efficient solution to their disputes.

It is important to bear in mind that arbitration can only take place if both parties agree to submit to it, which is usually established by an arbitration clause in the contract or agreement. The arbitration award, which is the decision of the arbitrator(s), is final and binding on the parties, and cannot be appealed, except in very limited circumstances.

In Colombia, both international and domestic arbitration are regulated by Law 1563 of 2012.

Criteria for determining when international arbitration proceeds in Colombia

Law 1563 of 2012 is the norm that regulates both domestic and international arbitration in Colombia. This law establishes a dualist system in arbitration matters, where rules are established to differentiate one type of arbitration from the other.

Article 62 of the aforementioned law determines that arbitration shall be international when at least one (1) of three (3) criteria is met:

1. "The parties to an arbitration agreement have, at the time of the conclusion, their domiciles in different States; or
   The place of performance of a substantial part of the obligations, or
2. the place with which the subject matter of the dispute is most closely connected, is located outside the State in which the parties are domiciled; or
3. The dispute submitted to arbitration affects the interests of international trade".

Indeed, the law provides that arbitration is considered international if at least one of the three criteria mentioned in the article in question is met.

It is essential to note that, by virtue of the foregoing, the parties cannot agree that an arbitration is international if the requirements of the law are not met. In other words, the will of the parties cannot prevail over the requirements established by law.

Furthermore, it is relevant to mention that the international character of an arbitration cannot be excluded by the will of the parties if the criteria established by law are met.

First criteria:

The domicile of the parties

As mentioned above, according to Article 62, arbitration is international when the parties to an arbitration agreement have, at the time of the conclusion of such agreement, domiciles in different States.

In addition, a clarification is made in the law in cases where one of the parties has more than one domicile:

"1. If any of the parties has more than one domicile, the domicile shall be the one that is most closely related to the arbitration agreement."
It also states that "2. If a party has no domicile, its habitual residence shall be taken into account."

Therefore, in Colombia, arbitration will be international in those cases where an arbitration agreement has been entered into by parties domiciled in different States. However, in cases where the parties have more than one domicile, the place where decisions are made, and the arbitration agreement is entered into shall be taken into account.

In conclusion, the domicile that is most closely related to the matter in controversy should be identified, hence, the place of constitution or incorporation of the company should not necessarily be taken into account exclusively.

Second criteria:

Place of the substantial performance of the obligations or the place where the subject of the dispute is most closely connected is located outside the State in which the parties have their domiciles.

Accordingly, these criteria contains two distinct rules:

1. The first rule states that if the place of performance of a substantial part of the obligations is located outside the State in which the parties have their domiciles, then the dispute may be considered to have an international character.
2. The second rule provides that if the place with which the subject of the dispute is most closely connected is outside the State in which the parties have their domiciles, the dispute may also be considered to be of an international character.

For the configuration of this second criteria, an international element that is important in the particular case must be observed. Thus, not just any element transforms the arbitration into an international arbitration, but it must be analyzed according to the consequences of the acts performed by the parties.

Third criteria:

The dispute submitted to arbitration affects the interests of international trade.

Finally, this criteria was adopted from French law, whose jurisprudential development has detailed in depth its application.

Thus, it refers to the fact that international trade is affected when a transaction does not take place only in one State and involves a transfer of goods, services, or funds across borders.

In conclusion, it is essential to know the legal regulations applicable to international arbitration and to be aware of the criteria that must be met for it to be considered as such. The regulation of international arbitration is an issue of great relevance for the business and commercial world.

At AGT Attorneys, we have a comprehensive legal team with experience in more than 20 areas of law that will be able to advise you legally in your arbitration process.

If you have any doubts or require legal advice to carry out an international arbitration, do not hesitate to contact us. Write to our Contact Form to schedule an appointment with our team or contact us at +57 3105706331.

How many types of international arbitration are there?

International arbitration resolves different disputes, so there are three (3) broad categories:

1. Arbitration between States.
2. International commercial arbitration.
3. Investment arbitration.

Firstly, international arbitration can take place between sovereign states, in which case it seeks to resolve conflicts of public international law. In this sense, arbitration between states can have different forms of application, for example, to define the territorial limits between countries or when a national of a country is affected by the treatment they have received in another state.

In any event, in this case, the parties to the arbitration are the States involved in the dispute.

International arbitration also resolves disputes related to international trade. Thus, arbitration can be used to resolve disputes between two private entities, between a private person and a public entity, or the State itself, provided that a contract has been entered into for the acquisition of goods or services. It is important to mention that, in these cases, the dispute is linked to private international law. This type of arbitration is the most common in practice.

Finally, investment arbitration is the most recent type of arbitration compared to the two types mentioned above. It takes place between a national of a State and another State where the individual has made investments. The dispute to be resolved involves determining whether the State that received the investment failed to comply with its obligations regarding the protection of foreign investment. The objective will be to determine the international responsibility of the State.

What law or treaty governs international arbitration?

With regard to international arbitration, both international treaties and local regulations must be taken into account.

As mentioned above, in Colombia, the national law that regulates international arbitration is Law 1563 of 2012. This law also regulates domestic arbitration.

Consequently, Colombia has entered into international treaties, such as the 1958 New York Convention, the 1965 Washington Convention and the 1979 Montevideo Convention.

The New York Convention is definitely one of the most important treaties in international arbitration. This treaty stipulates the rules and grounds applicable to the recognition and enforcement of arbitral awards issued in the framework of an international dispute.

On the other hand, we find the 1965 Washington Convention, or its full name "on the Settlement of Investment Disputes between States and Nationals of other States". It contains provisions relating to the resolution of investment disputes and seeks to avoid the implementation of diplomatic protection. This convention also created the International Center for Settlement of Investment Disputes (ICSID).

Finally, the 1979 Montevideo Convention or "on the effectiveness of foreign judgments and arbitral awards" was approved in Colombia by Law 16 of 1981. It contains provisions relating to the formalities required for the recognition of arbitral awards on those occasions when they have been issued between parties that are nationals of States parties to the convention.

Are you an investor or commercial enterprise looking to handle a dispute through international arbitration?

At AGT Attorneys, we have a team of experts in the multiple legislations on international arbitration. Whether for commercial or investment arbitration, our professionals will provide you with quality and personalized advice to resolve your disputes as soon as possible.

If you have any doubts or require legal advice to carry out a national arbitration in Colombia, do not hesitate to contact us. Write to our Contact Form to schedule an appointment with our team or contact us at +57 3105706331.

What bodies conduct international arbitration?

One of the several advantages of international arbitration lies in the international bodies or institutions that can resolve the dispute. These advantages offered by them include subject matter expertise with respect to the hearing of the dispute and the speed of the process.

In order to establish which bodies can hear an international arbitration process, it must therefore be established that it can be: institutional and ad-hoc. Institutional international arbitration is the most common and the entire process is administered by an international institution or body. However, ad-hoc arbitration does not take place before an institution, but is normally conducted in accordance with the rules of the United Nations Commission for the Development of International Trade Law (UNCITRAL).

Therefore, international arbitration may be brought against the following entities:

International Chamber of Commerce, based in Paris.

International Center for Settlement of Investment Disputes (ICSID).

The International Center for Dispute Resolution (ICDR) is the international division of the American Arbitration Association (AAA).

Inter-American Commission on International Commercial Arbitration (CIAC).

The benefits of choosing one of these institutions for the development of arbitration are several. These institutions have their own rules, which optimizes the arbitration process. Likewise, the institutions have a list of expert and experienced professionals for the parties to analyze and appoint as specialized arbitrators.

Do you need legal assistance on international arbitration?

Arbitration as a legal figure was created as an alternative method to ordinary jurisdiction. The long time that a dispute can be delayed in national courts and the lack of technical or specialized knowledge on legal matters has led individuals to opt for arbitration in international institutions such as those mentioned above.

International arbitration puts an end to disputes arising in the exercise of foreign investment and international trade, due to the importance and magnitude of these operations, private parties usually opt for specialized tribunals that reduce the time of the process and increase legal knowledge.

In our firm, AGT Attorneys, we have an expert legal team in national and international legislation that regulates the figure of arbitration in Colombia and abroad. We have professionals specialized in more than 20 areas of law who can advise you in your arbitration process, from the determination of the internationality of your conflict and even in the drafting of arbitration clauses.

Do not hesitate to contact us by filling this Contact Form or through our WhatsApp number +57 3105706331.

If you found this article helpful then let us know in the comments section below. Likewise, feel free to share it using the share options below. Want us to cover another topic of your interest pertaining to legal affairs? If so, then like us and follow us on social media, and post to any of our social media profiles the topic you'd like us to discuss: Facebook AGT Attorneys and Twitter @AttorneysAGT