The ABC of arbitration in El Salvador
This is one of the modalities that has contributed the most to the management of the controversies, by facilitating the administration of justice on matters that requires a high specialization and involves the processing of large amounts of information that, otherwise, would collapse the State Courts. One of the most relevant decisions on this mode of conflict resolution is the choice of jurisdiction or the procedural to be be applied to the process to install. In response to the above, a kind of map on El Salvador is presented to initiate a process of this nature, in order to speak about its convenience.
What are the peculiarities of this jurisdiction?
1. International arbitration agreement in distribution contracts.
The Commercial Code of El Salvador was part of a stream in Latin America, adopting a protectionist regulation on this type of contracts. In that context, there was a prohibition to insert an arbitration clause in them. However, the Constitutional Chamber of the Supreme Court of Justice has interpreted said law, in the most favorable sense to the freedom to contract, for which reason it is possible to agree arbitration as a valid way to resolve this kind of contractual disputes.
2. Appointment of Arbitrator, before the defendant’s omission.
At some point the Constitutional Court had to rule on the possibility of appealing on an arbitration award. The sentence was quite didactic about the course of a typical arbitration process. At some point, the Court commented that those responsible for replacing the defendant’s omission on the appointment of the corresponding Arbitrator were the Arbitration Institutions and the State Chambers of Appeal could intervene only if the parties so agreed. Some Chambers followed that criterion, although it was not binding. However, going directly to the Arbitration Institution and paying the corresponding fee could save costs in terms of time and complications.
3. Jurisdiction of the Court before an arbitration clause.
A judge of some other jurisdiction will decline jurisdiction if notices an arbitration clause, between the annexes of the claim. However, there is a practice in El Salvador to continue the processing of the claim pending the response of the defendant. If he decides to invoke the arbitration clause, the Judge will terminate the process and the parties must install the Arbitral Tribunal. Failure to claim the existence of such a clause at that time, the Judge will understand that the parties quit to the effects of said agreement.
4. Appeal on an award.
One of the most important particularities in the country is the possibility of appealing on arbitration awards. The controversy over the validity of that regulation reached the Constitutional Court of El Salvador. In 2011, a verdict was issued stating that said appeal was feasible. Although this decision was widely criticized, it did not imply greater practical implication, since it clarified that it was feasible to renounce the appeal from the moment the arbitration clause was drafted, which became one of the most important clarifications in these type of pacts
5. Nullity at the headquarters of a foreign award.
El Salvador has ratified the New York Convention of 1958, which states certain cases to deny recognition and enforcement of foreign awards. There is much discussion about the way (imperative or optional) in which they should be interpreted. Some jurisdictions such as the United States, Belgium, Australia and France increasingly accept discretion regarding the execution (or not) of annulled awards in their respective jurisdictions. However, the courts of El Salvador have not yet established a specific criterion in this regard.
What is the balance of El Salvador as the venue for an arbitration?
Having reviewed the above, it is important to mention that the law always goes one step back to reality. However, in the case of El Salvador, judicial practice and the willingness to resolve disputes effectively have helped overcome the mismatches in regulatory adaptation. In that sense, Salvadorian jurisdiction is quite practical, to establish an arbitration and the effective utility for the parties depends basically on a previous advice, something that applies for almost any transaction and for any other jurisdiction.
