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Commercial Arbitration

Legal Environment

The arbitration has been defined by procedural doctrine as an institution that allows the parties to solve their disputes without attending to jurisdictional state bodies. It constitutes a mechanism for the solution of all controversies that may arise in contractual matters or extra-contractual, only if such are susceptible of transaction. Is a way by which it left to particular referees that are not part to the judiciary, the prosecution and subsequent decision of such controversies.

On the Constitution of The Bolivarian Republic of Venezuela, there is a step forward on the matter by recognizing explicitly in its 258 article that the law shall promote the arbitration, conciliation, mediation and any other alternative mean for solving conflicts.

The principles that rules the solution of controversies through arbitration are:

  • Free choice of the place for the arbitration.
  • Free to agree on the language or languages that shall be taken the arbitration procedures.
  • Special regime for public companies.
  • Confidentiality of the parties´ performances.
  • Nullity of the award to a competent Superior Court in the place where it were rendered.

Commercial Arbitration Law (Official Gazette Nº 36.430 4/7/1998)

This aim of this law is to consecrate the institutional or independent arbitration as an alternative method of solving controversies that are susceptible to transaction that arise between people capable to comprise; without prejudice any multilateral or bilateral treaty.

The Nº 1 article of such law establishes that “commercial arbitration shall be applied without prejudice any multilateral or bilateral treaty in force”. This article comprises the legislator´s intent to become into law a project initially developed by Caracas Trade Chamber. In this sense, and doing an extensive interpretation of the arbitration rules, which is comprised on that law text, we can say that arbitration procedure is applicable to activities linked to trade and the production of goods intended for trade. In the same way, Nº 3 of the Commercial Arbitration Law establishes that only shall be referred to arbitration the conflicts that are susceptible to transaction arising between people capable to compromise as long as these people do not make the following assumptions:

  • Contrary to public order that deal about offenses or misdemeanors. Except in the case of conflicts about the amount of civil responsibility, while there had not been determined by final judgement.
  • The ones concerning to the power or functions of Power of State or people or bodies of public law.
  • About the state and people´s capability, linked to goods or incapable rights, without previous law authorization.
  • On those where it has resulted in final judgement, except the financial awareness que arising by its execution concerning exclusively to the parties of the process and there had not been determined by final judgement.

The rule content on Nº 4 article of Trade Arbitration Law that establishes the conditions fo use the Trade Arbitration by state entities posing the following, “when one of the parties of arbitration agreement is a society where the Republic, the States, the Municipalities, and the Autonomous Institutes have a the same or more participation of fifty percent (50%) of social capital in which the people mentioned above have the same or more participation than fifty percent (50%) of social capital. Such agreement will require for its validation, the approval of the statutory competent body and the signed authorization of the Minister Responsible.  The agreement will specify the type of arbitration and the number of referees, which by any case will be less than three (3)”.  In other words, it will stablish as a special condition the signed authorization by the responsible minister to include an arbitration clause on the contracts signed by the State or entities which the State has a participation more than 50%.

Once the arbitration clause are signed by the contracting parties, it is understood that these parties are resigning to ventilate their disputes in an ordinary jurisdiction for submitting them to a referees´ decision by which will be impossible to enforce their claims to ordinary judges because the arbitration agreement is exclusive and exclusionary from the ordinary jurisdiction. As a consequence, according to the Nº 5 of the Trade Arbitration Law the judges of the first instance to whom a trade lawsuit is filed that has its foundation the breach of a contract that contains an arbitration clause duly signed by the parties should refuse to know such conflict, declining in favor of the arbitration court which will be in charge of solving the controversy. This new conception introduce a 180-degree change in the conception stablished by Civil Procedure of 1987.

The N° 6 article of the law defines the arbitration agreement as the one in which the parties decide themselves to submit to an arbitration all or some of the conflicts that have arisen or may arise between them, respecting a contracting law relationship. The arbitration agreement is exclusive and exclusory from the ordinary jurisdiction and can consist on an including clause on the contract or in an independent agreement. This arbitration agreement shall have a writing record in any document or a set of documents that points out the parties’ will to submit an arbitration.

Types of Arbitration

In accordance with the provisions of the article Nº 2 of the Trade Arbitration Law, the arbitration can be either institutional or independent.

  • Institutional Arbitration:  is the one developed by the trade chambers or any other trade associations, as well as existed international associations, the bodies linked to economic and industrial activities, the organizations whose purpose is related to the promotion of alternative resolution of conflicts, the universities and institutes of higher education and other associations and organizations that may be created later to the force of this Law and stablish the arbitration as one of the solution media of conflicts. These institutions can organize their own arbitration centers. The centers created before the rule of the law, can continue working in the terms stablish here and shall adjust their rules to the requirements of such law on the Institutional arbitration, everything concerning to the arbitration procedure, including the notifications, the constitution of the tribunal, the challenge and the replacement of referees and the transaction of the process, it will be ruled in accordance with the arbitration from the arbitration center to whom the parties have been submitted.
  • Independent Arbitration: is the one that takes place when the parties decide by themselves to establish the rules by the arbitration process shall govern that may take place between them. However, when such parties do not establish their own procedure rules, the rules stablished by the trade arbitration shall be applied. These rules shall also be applied to an institutional arbitration if it is stipulated by the parties.

Arbitration Process Stablished on Trade Arbitration Law

The Trade Arbitration Law establishes an applicable procedure in arbitration subject, if the cases in which the parties have not stablished their own procedure rules to carry out an independent arbitration, and in the cases of Institutional cases when the parties decide to invoke them.

  • To initiate the arbitration process, the parties shall proceed the appointment of the referees whose can appoint jointly or delegate their appointment to a third party.  The number of referees that participate in an arbitration procedure will always be odd, at the lack of an agreement in such matter, the referees will be three. Once the referees are designated by the parties, these referees shall between ten working days next to their notification, rule about the acceptance or rejection of the charge y if silent to this respect; it is understood that they have rejected the charge.
  • Accepting the charge by each one of the referees, it will install the arbitration tribunal y it will be notified to the parties such installation. On this act, the fees of the members of the tribunal will be fixed, as well as the amount necessary stimated for the working expenses. These amounts can be objected by the parties between the next five (5) working days to the notification of the providence that fixed it through a writing notification in which must express that amounts they consider are fair.
  • Decide the expenses and fees fixation, each party will record between the next ten (10) working days that correspond for such concept. In the case that one of the parties consignees the corresponding amount and the other party does not. The other party shall have a term of 15 days for depositing its corresponding amount. In the case that the deadline has been met for making the consignation of the fees and the parties would not have carried out, the arbitration tribunal shall declare its functions concluded.
  • The process coast shall be included inside the arbitration award and at the same way it will indicate who has to cover and what proportion once the consignation of the coast is effected and the fees by the parties; each of the referees shall have a proportion no more than half of the corresponding fees and the rest will be deposited in an open bank account for such effect.
  • Once the arbitration is finished, either by the parties´ will, by execution of the arbitration award, or by a providence that clarifies it or correct it completely, the President of the Arbitration Tribunal shall distribute the amount left.
  • n case that the arbitration agreement does not designate the term of duration of the process, this will be six (6) months from the Constitution of the arbitral tribunal. This period may be extended by the tribunal once or several times, ex officio or at the request of the parties or their attorneys with express power to do so. The aforementioned span will add days for legal reasons is interrupted or suspended the process.
  • The first hearing shall be notified by the arbitral tribunal the parties ten days in advance, in such a hearing, the document containing the arbitration agreement and the issues subject to the arbitration decision will be read and the claims of the parties reasonably estimated amount shall be expressed.

It is possible that the arbitral tribunal issued precautionary measures precautionary that they related to the subject of the dispute; unless there is a contrary agreement of the parties; for this purpose it may require enough guarantees to the requesting Party of the measure.

In evidentiary matters, the arbitral tribunal may make the incidents which it deems necessary, with or without the participation of the parties and decide whether to hold hearings for the presentation of oral arguments or evidence or whether the proceedings shall be conducted on the basis of documents and other evidence submitted.

Referees shall resolve on impediments and challenges, the blemish of witnesses and objections to expert opinions and any other matters of a similar nature which may arise. The pendency of any blemish procedure does not prevent the continuation of the arbitration proceedings.

The Court or any of the parties with the approval of the arbitration tribunal may request assistance to the Court of first instance competent for the evacuation of the necessary tests and is requesting interim for the implementation of the measures. The Court will keep the application within the scope of their competence in accordance with the rules that applies.

The arbitral procedure will culminate with an award, which will be issued in writing and signed by the referee or referees of the arbitral tribunal. The award, shall be motivated unless, the parties have requested otherwise and shall be recorded in it the date that has been given and the place of arbitration.

Sentencing the award, the arbitral tribunal shall notify each of the parties by delivery of a copy signed by the arbitrators, and it will be enforced. However, the arbitral award may be clarified, corrected and supplemented by the arbitral tribunal of its own motion or on request presented by one of the parties within fifteen (15) business days following the issue of the same.

Against the arbitration award pronounced properly, only comes the recourse to annul. This must be filed in writing to the Superior Court of competent place where has been given, within the five (5) business days following notification of the award or the Providence that correct it, clarify or supplement. Substantiated by the tribunal record must accompany the resource interposed.

The interposition of the recourse to annul does not suspend the execution of the provisions of the arbitration award unless, at the request of the appellant, the Court thus ordered it prior Constitution by the appellant of a bond guaranteeing the enforcement of the award and any damages in the event the appeal is rejected.

Arbitration awards, properly dictated by a tribunal formed out of Venezuela, will be recognized by ordinary as binding and final court, and following the submission of a request in writing to the Court of first instance competent will be forcibly executed by this without requiring exequatur, according to regulations that establishes the code of Civil procedure for the enforcement of sentences. The part that invoke an award or order its execution must accompany your application a copy of the award certified by the tribunal, with the Spanish language translation where necessary.