Guillermo Coronado Aguilar

How does international arbitration work?

Understanding International Arbitration

International arbitration serves as a sophisticated alternative dispute resolution mechanism that enables parties from different jurisdictions to resolve their conflicts outside the traditional court system. Operating as a private and consensual process, it provides a structured framework where disputing parties can present their cases before selected arbitrators. This method has gained widespread recognition for serving as a neutral, efficient, and globally enforceable approach to resolving complex international commercial disputes and investment-related disagreements, while maintaining confidentiality and flexibility throughout the proceedings.

Key Features of International Arbitration

The key features include: a voluntary agreement between parties to resolve disputes through arbitration rather than courts; a neutral venue with impartial arbitrators who have no conflicts of interest; confidential proceedings that protect sensitive business information; binding decisions that carry legal authority and require compliance; and international enforcement through the New York Convention, allowing arbitral awards to be recognized and enforced across jurisdictions worldwide.

The Arbitration Process

  1. Arbitration Agreement: Parties mutually agree to submit their disputes to arbitration, either through a clause in their original contract or through a separate agreement after a dispute has emerged
  2. Selection of Arbitrators: Parties carefully select one or more qualified arbitrators to hear their case, considering factors such as expertise, experience, and potential conflicts of interest
  3. Preliminary Meetings: Establishing detailed procedures, timelines, and administrative matters through initial case management conferences and procedural orders
  4. Written Submissions: Parties present comprehensive written arguments and supporting evidence, including statements of claim, defense, replies, and relevant documentation
  5. Hearings: Conducting oral presentations, examining witnesses, questioning expert testimony, and addressing arbitrators’ inquiries in structured sessions
  6. Final Award: Arbitrators deliberate and issue their reasoned decision, which includes findings of fact, legal analysis, and the ultimate determination of the dispute

Common Arbitration Institutions

  • International Chamber of Commerce (ICC)
  • London Court of International Arbitration (LCIA)
  • International Centre for Settlement of Investment Disputes (ICSID)
  • Singapore International Arbitration Centre (SIAC)

Advantages of International Arbitration

International arbitration provides numerous significant advantages that make it an attractive choice for resolving cross-border disputes:

  • Neutrality in cross-border disputes, ensuring that neither party gains an unfair advantage from their home jurisdiction’s legal system
  • Expertise of arbitrators in specific industries or legal areas, allowing for more informed and technically accurate decision-making based on deep subject matter knowledge
  • Flexible procedures that can be tailored to meet the specific needs of the parties involved, including choice of language, venue, and procedural rules
  • Confidentiality protections that safeguard sensitive business information, trade secrets, and reputational interests throughout the proceedings
  • Easier enforcement across borders through established international conventions, providing greater certainty in the execution of arbitral awards

Costs and Duration

The costs associated with international arbitration typically encompass several important categories that parties should carefully consider when budgeting for their dispute resolution process:

  • Arbitrators’ fees and compensation, which vary based on the complexity of the case and the arbitrators’ experience levels
  • Administrative costs charged by arbitration institutions for case management, scheduling, and organizational support throughout the proceedings
  • Legal representation expenses, including attorneys’ fees, document preparation, and strategic advisory services
  • Expert witness consultation and testimony fees, covering both technical specialists and industry professionals who provide crucial insights
  • Venue rental, technological infrastructure, interpretation services, and other logistical arrangements necessary for conducting the proceedings

While the timeline for resolution can vary depending on case complexity and parties’ cooperation, most international arbitration cases reach completion within a 12-18 month timeframe, though some may extend longer due to various procedural factors and circumstances.

Guillermo Coronado Aguilar

Understanding International Arbitration Award Enforcement

International arbitration awards are typically enforced through a multi-step process that relies on international treaties and national laws. If there’s no international treaty but a national law exists, the national law will govern the enforcement of an international arbitral award. Conversely, if there’s no national law but only a treaty, the treaty will likely be applied.

When a state has both national legislation and has signed a treaty for the recognition and enforcement of arbitral awards, these should be interpreted harmoniously to give effect to the recognition and enforcement of international arbitral awards.

The primary mechanism for enforcing international arbitration awards is the 1958 New York Convention, officially known as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This treaty, ratified by over 160 countries, is a cornerstone of international arbitration enforcement.

The first step in enforcement is having the award recognized by a court in the country where enforcement is sought. This process typically involves filing the arbitral award with the court, along with a certified copy of the award and the original arbitration agreement. These documents must be translated into the official language of the country where enforcement is sought.

Specific enforcement procedures can vary depending on the national laws of the enforcing country. Some countries have adopted the UNCITRAL Model Law on International Commercial Arbitration, which provides a framework for enforcement procedures in line with the 1958 New York Convention.

While the New York Convention provides for the enforcement of awards, it also outlines limited grounds on which enforcement can be refused. These include invalidity of the arbitration agreement, violation of due process, awards beyond the scope of the arbitration agreement, improper composition of the arbitral tribunal, and awards not yet binding or set aside in the country of origin.

Once recognized, the award is treated like a domestic court judgment. The winning party can then use local legal procedures to execute the award, which may include seizing assets, garnishing wages or bank accounts, and placing liens on property and articles of incorporation when dealing with corporations.

Enforcing international arbitration awards can be complex due to various factors: differences in national laws and procedures, potential for parallel proceedings in multiple jurisdictions, issues of sovereign immunity when dealing with state entities, and the need to locate assets in jurisdictions where enforcement is possible.

While the New York Convention has streamlined the process of enforcing international arbitration awards, it can still be complex and time-consuming. Successful enforcement often requires careful planning, knowledge of local laws, and sometimes creative legal strategies.

Guillermo Coronado Aguilar

Are Arbitration Agreements Mandatory? Key Insights

People unfamiliar with arbitration agreements often wonder if these agreements are mandatory—in other words, if they create any binding obligations.

Generally, arbitration clauses or agreements are indeed mandatory. They create a positive obligation to resolve potential disputes through arbitration and a negative obligation to avoid resolving disputes through national courts.

However, the mandatory nature of these agreements depends on several factors. First, the arbitration agreement must be validly concluded, and the dispute must be arbitrable under national laws. Additionally, the agreement should clearly express the parties’ intent to resolve disputes through arbitration. This may sound like a tautology, but it’s not—the arbitration clause must unambiguously state the parties’ agreement to use arbitration for dispute resolution.

Moreover, arbitration agreements shouldn’t be unconscionable, obtained through fraud or duress, or violate public policy.

While arbitration agreements are often enforceable, their mandatory nature can be challenged. The specifics depend on the jurisdiction, the nature of the dispute, and the circumstances under which the agreement was made. It’s advisable to consult with a legal professional for guidance on specific situations involving arbitration agreements.

Guillermo Coronado Aguilar

LCIA and SIAC new appointments

Kevin Nash, a seasoned arbitration professional, is set to embark on a new chapter in his career as he transitions from his current role as Registrar with the Singapore International Arbitration Centre (SIAC) to assume the prestigious position of Director General at the London Court of International Arbitration (LCIA). This significant move is scheduled to take effect on 1 January 2025, marking a new era for both institutions. More on the press news released by the LCIA can be found here.

Kevin, has been part of SIAC since 2012, brings with him over a decade of invaluable experience in the field of international arbitration. His appointment comes as he prepares to succeed Jackie van Haersolte-van Hof, a respected figure who has skillfully led the LCIA as its Director General for an impressive tenure spanning the past 10 years. This changing of the guard represents a pivotal moment for the LCIA as it looks to build upon its established reputation and embrace future challenges in the ever-evolving landscape of international dispute resolution.

In a parallel development, SIAC has announced the appointment of Vivekananda (Vivek) Neelakantan as its new Registrar, with his tenure also commencing on 1 January 2025. Neelakantan, who currently serves as SIAC’s Deputy Registrar, brings a wealth of experience to his new role. Prior to rejoining SIAC earlier this year, he honed his skills in private practice, where he gained valuable insights serving both as counsel and arbitrator. This diverse background positions him well to navigate the complex demands of his new position. Meanwhile, continuity in SIAC’s leadership is ensured as Gloria Lim maintains her role as CEO, providing stability during this transition period.

Guillermo Coronado Aguilar

Are arbitration agreements legal?

The short answer is yes, arbitration agreements are legal. However, their legality varies depending on the jurisdiction and specific circumstances that can render an agreement invalid.

Generally, a clause is legal if the parties agree to resolve their dispute through arbitration, provided they have the legal capacity to do so. However, certain elements can invalidate an arbitration agreement, preventing it from being recognized.

An arbitration agreement shouldn’t be excessively unfair to one party—this is known as unconscionability. The agreement should be balanced and not overly burden either party. For instance, requiring one party to pay for all arbitration proceedings upfront or allowing only one party to select the arbitrator would create an unfair imbalance.

Another factor that can invalidate an arbitration agreement is lack of consent. Without mutual agreement to arbitrate, there’s no valid contract. However, this issue typically requires discussion before an arbitral tribunal or national court.

Some jurisdictions have specific restrictions on arbitration. These can limit the types of disputes that can be arbitrated according to local laws. For example, some places don’t allow arbitration for certain labor disputes, criminal matters, probate proceedings, or administrative actions involving state contracts. The concept of “arbitrability” thus depends on state legislation.

In some cases, arbitration is possible but highly regulated or state-administered. This often applies to consumer contracts and financial services. For instance, Mexico and Italy have state-run arbitration systems for specific claims. In Italy, the Arbitro Bancario Finanziario resolves financial disputes between customers and banks through arbitration. In Mexico there is the possibility to resolve consumer claims through arbitration.

Even if arbitration agreements are fairly straightforward, it is always advisable to review the state legislation to determine whether the agreement can be performed in accordance with the national law.

Guillermo Coronado Aguilar

Are arbitration agreements enforceable?

The short answer is no. Arbitration agreements by themselves are not subject to enforcement since they are not awards. The award, that is, the decision of the arbitral tribunal, is generally enforceable across jurisdictions, thanks to various international conventions and national laws that support the recognition and enforcement of arbitral awards. The most significant is the New York Convention of 1958, which provides a framework for enforcing arbitration agreements and awards in over 170 countries.

However, arbitration agreements are subject to recognition.

Article Article II (1) of the NY Convention establishes that:

“1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.”

Arbitration agreements come in two forms: stand-alone agreements or dispute resolution clauses within contracts. These agreements must include essential elements, with the most crucial being a commitment to resolve current or future disputes through arbitration. You can find some of the key elements of arbitration agreements here.

The validity of an arbitration agreement is a crucial factor affecting the enforceability of the arbitral award. To be valid, the award should comply with the law chosen by the parties. If no law was specified, the agreement’s validity is determined by the law of the place where it was made. A further element involves the capacity of the parties, and also, the agreement should not be against the public policy of the place where the arbitration agreement is sought to be enforced.

What does it mean that the arbitral agreement is not subject to enforcement but for recognition. It means that, under the 1958 New York Convention, each state undertakes the obligation to recognize an arbitration agreement, which means, that the Courts will acknowledge the existence of the agreement and send the parties to solve their given dispute through arbitration.

Therefore, whenever there is an arbitration agreement, Courts must stay proceedings in favor of arbitration. To give the possibility to the arbitral tribunal to assess the validity or not of the arbitration agreement. And to solve any issue pertaining to the validity of the arbitral agreement, that is null, void or inoperative or incapable to be performed.

However, careful drafting and consideration of applicable laws are crucial to ensure maximum enforceability. Parties should consult with legal experts familiar with international arbitration to craft robust agreements that will withstand scrutiny in various legal systems.

Guillermo Coronado Aguilar

ICC Vis Pre-Moot

It’s Vis Moot season, and with it comes a series of pre-moots taking place across the globe.

If you’re fortunate enough and keen on managing your time, money, and energy, don’t miss the great opportunity to participate in the ICC Pre-Moot at the ICC Headquarters in Paris.

The ICC pre-moot will take place in person from April 2 to 4, 2025—just around the corner from the Vis Moot in Vienna.

Don’t miss this chance! You have until December 6 to register your team.

Guillermo Coronado Aguilar

¿Qué es el arbitraje comercial?

El arbitraje es una forma de resolución de conflictos. En resumen, es una herramienta versátil para resolver disputas tanto nacionales como internacionales en diversas áreas: transacciones comerciales, controversias en materia de inversión extranjera, e incluso conflictos entre países durante o después de una guerra.

Esta versatilidad hace del arbitraje una herramienta altamente adaptable para la solución de conflictos. En México, se utiliza comúnmente para resolver controversias comerciales entre comerciantes dentro del país, así como entre comerciantes de diferentes partes del mundo en negocios internacionales. Además, existe un mecanismo especializado conocido como “arbitraje en materia de inversiones” para resolver disputas entre inversionistas extranjeros y México.

El arbitraje comercial, de inversiones y entre países comparte una base común: debe existir un acuerdo entre las partes. Este acuerdo, celebrado por escrito entre dos o más partes, contiene el compromiso de resolver sus controversias —presentes y futuras— mediante arbitraje. Puede manifestarse como una cláusula arbitral dentro de un contrato o como un acuerdo específico en un contrato separado.

Para que sea válido, el acuerdo arbitral debe cumplir ciertas características, además de ser por escrito y estar firmado por partes con facultades para ello. Se recomienda que especifique la institución que administrará el arbitraje, el lugar, el idioma, el número de árbitros (uno o tres), así como el derecho aplicable al asunto y al procedimiento.

En esencia, el arbitraje comercial es un procedimiento en el que las partes en conflicto solicitan a uno o más árbitros que decidan qué empresa o persona tiene la razón. La decisión se basa en las pruebas presentadas por las partes, tanto por escrito como de manera oral. Los árbitros deben resolver conforme a lo que se les ha probado. La decisión final se conoce como “laudo arbitral”, el cual debe ser reconocido por los tribunales del país donde se dictó, así como por los tribunales de los países donde se busque su reconocimiento y ejecución.

Guillermo Coronado Aguilar

Understanding Arbitration Agreements: Are They Binding?

Arbitration agreements are often referred to as “midnight clauses.” They are typically the least reviewed clauses, sometimes signed without much attention, and may come as a surprise years later. Parties might not realize they agreed to arbitration or even understand what arbitration is, leading them to question whether the agreement is binding at all.

Arbitration agreements come in two general forms: arbitration clauses within a contract or standalone agreements. Most commonly, they are included in the dispute resolution clauses of a business transaction.

Are arbitration agreements legally binding? The short answer is a resounding yes. Once signed, an arbitration agreement is legally binding. It obligates parties to resolve disputes arising from the business transaction through arbitration. Furthermore, it prevents parties from resolving their dispute before a national judge. If a party attempts to resort to national courts, the courts should redirect the parties back to arbitration.

Essentially, arbitration agreements are like any other contracts. However, they must meet certain basic requirements for their formation. Some of these elements relate to the fundamental components of an arbitration agreement, while others concern the capacity to enter into agreements.

Regarding capacity, parties entering an arbitration agreement must have the authority to do so. This may seem overly legalistic, but some business representatives might act beyond their powers. This extends to elements of validity, such as the existence of free will, absence of duress, and related aspects.

The primary element is that parties agree to resolve their current and future disputes through arbitration, whether these disputes relate wholly or partly to their business relationship.

The agreement doesn’t necessarily need to be in writing, but there must be evidence that the parties agreed to arbitration. Without this evidence, there is no agreement. This underscores the necessary condition of the agreement’s existence and the flexibility in its form.

While a written agreement isn’t mandatory, evidence of the agreement is crucial. The agreement can be made through electronic means, not limited to traditional paper or fax, but also including more informal communication methods like WhatsApp.

Other noteworthy aspects of arbitration agreements include determining the seat of arbitration, selecting an institution to administer the arbitration, deciding the number of arbitrators, and choosing the language of the arbitration.

If you’d like to read more on various subjects of international arbitration, visit Coronado arbitration.

Guillermo Coronado Aguilar

Investment arbitration on the rise in Mexico

While it’s uncertain whether changes in Mexico’s legal environment under López Obrador directly caused a spike in international investment arbitration, a trend is emerging with nearly twenty pending cases under ICSID rules and the ICSID Additional Facility.

In 2023 alone, eleven cases were filed, primarily in the oil, gas, and mining sectors. Most of these cases involve NAFTA and the USMCA as the applicable rules for foreign investment protection.

Other treaties allegedly violated include the Mexico-Spain BIT in the Fotowatio Renewable Ventures case (ICSID Case No. ARB/24/5), the Mexico-UK BIT in the Bacanora Lithium Limited case (ICSID Case No. ARB/24/21), and the Mexico-China BIT.

Notably, Canadian foreign investors can choose between the USMCA, NAFTA (depending on when the violation occurred), and the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). This is exemplified by the Caisse de dépôt case (ICSID Case No. ARB/23/53), where a Québec company filed an investment claim against Mexico under the CPTPP rather than the USMCA.

Recent changes in Mexican legislation concerning mining activities, national waters, ecological balance, environmental protection, and waste management point to this trend. Some changes aimed at revoking concessions where potential violations occurred, raising alarms in the industry, especially among foreign investors.

Another upcoming change affects the energy sector. Pemex (oil) and CFE (electricity), previously considered State Productive Enterprises with operational autonomy, will lose their independence under new laws, giving the state control over both entities. This could trigger changes in the energy sector, potentially impacting foreign direct investment.

Mexico appears to be following a similar path to Spain and Italy, where changes in energy sector legislation led to numerous investment arbitration claims years ago.

Changes in national laws have significant implications for the treaties Mexico has signed to protect foreign direct investment. This trend is likely to intensify as further legislative changes are implemented.