The Dispute Resolution Review

Editor
Richard Clark

Law Business Research

The Dispute Resolution Review

Reproduced with permission from Law Business Research. This article was first published in The Dispute Resolution Review, (published in April 2009 editor Richard Clark). For further information please email Adam.Sargent@lbresearch.com

The Dispute Resolution Review

Editor

Richard Clark

Law Business Research Ltd

Publisher Gideon Roberton MArketing manager Adam Sargent editorial assistant Nick Drummond-Roe production editor Jonathan Cowie subeditor Jonathan Allen editor-in-chief Callum Campbell managing director Richard Davey Published in the United Kingdom by Law Business Research Ltd, London 87 Lancaster Road, London, W11 1QQ, UK 2009 Law Business Research Ltd Copyright in individual chapters vests with the contributors No photocopying: copyright licences do not apply. The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. The publishers accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of August 2008, be advised that this is a developing area. Enquiries concerning reproduction should be sent to Law Business Research, at the address above. Enquiries concerning editorial content should be directed to the Publisher gideon.roberton@lbresearch.com

Printed in Great Britain by Encompass Print Solutions, Derbyshire Tel: +44 870 897 3239

acknowledgements
The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:
AKINCI LAW OFFICE Arthur Cox Br & Karrer AG Bredin Prat Collas Day Advocates Cravath, Swaine & Moore LLP De Brauw Blackstone Westbroek DittmAr & Indrenius Estudios Palacios Lleras SA FONTES & TARSO RIBEIRO ADVOGADOS Gilbert + Tobin Hengeler Mueller JUN HE LAW OFFICES KARANJAWALA & CO Klavins & Slaidins LAWIN Kuroda Law Offices Lin and Partners, Attorneys-at-Law Magisters Mannheimer Swartling MARVAL, OFARRELL& MAIRAL MODRIKAMEN ogilvy renault Rudolph, Bernstein & Associates Inc Slaughter and May Sofunde, Osakwe, Ogundipe & Belgore Studio Legale Bonelli Erede Pappalardo Szecskay Attorneys at Law Tuca Zbarcea & Asociatii Attorneys At Law Ura Menndez Vlasova Mikhel and Partners Law Firm Von wobeser y sierra Yulchon

contents

Preface

................................................................................................................. vii Richard Clark argentina..........................................................................................1 Martn Campbell australia......................................................................................... 24 Steven Glass, Amy Annan, Garth Campbell and Asia Lenard belarus.............................................................................................. 46 Alexey Anischenko, Olga Grechko and Maria Yurieva belgium............................................................................................. 62 Mischal Modrikamen and Laurent Arnauts brazil.................................................................................................. 76 Marcus Fontes, Max Fontes and Ana Gabriela Kurtz canada............................................................................................... 98 William McNamara and Randy Sutton China................................................................................................. 111 Xiao Wei, Weining Zou and Xi Deng colombia........................................................................................ 122 Hugo Palacios Meja and Oscar Tutasaura Castellanos england and wales.............................................................. 134 Richard Clark finland........................................................................................... 155 Petteri Uoti and Eva Storskrubb

Chapter 1

Chapter 2

Chapter 3

Chapter 4

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Chapter 10

iii

Contents

Chapter 11

france.............................................................................................. 166 Tim Portwood Germany......................................................................................... 180 Henning Blz and Carsten van de Sande Guernsey....................................................................................... 195 Christian Hay and Rachael Farnham hong kong................................................................................... 209 Mark Yeadon and Vishal Melwani hungary......................................................................................... 222 Zoltn Balzs Kovcs, Sra Surnyi and Dvid Kerpel india.................................................................................................. 237 R N Karanjawala ireland. .......................................................................................... 255 Claire McGrade and Sara Carpendale italy................................................................................................... 268 Vincenzo Spandri and Monica Iacoviello japan.................................................................................................. 290 David Curren korea................................................................................................ 300 Young Seok Lee and Sae Youn Kim latvia. .............................................................................................. 313 Ilga Gudrenika-Krebs mexico.............................................................................................. 332 Claus von Wobeser and Marco Tulio Venegas Cruz netherlands.............................................................................. 349 Ruud Hermans and Margriet de Boer nigeria. ........................................................................................... 363 Babajide Ogundipe iv

Chapter 12

Chapter 13

Chapter 14

Chapter 15

Chapter 16

Chapter 17

Chapter 18

Chapter 19

Chapter 20

Chapter 21

Chapter 22

Chapter 23

Chapter 24

Contents

Chapter 25

portugal. ...................................................................................... 378 Joo Maria Pimentel romania.......................................................................................... 390 Levana Zigmund Russia................................................................................................. 402 Alexander Vaneev south africa............................................................................... 410 Gerhard Rudolph spain................................................................................................... 423 Esteban Astarloa and Eduardo Snchez-Cervera sweden. ........................................................................................... 430 Jakob Ragnwaldh and Niklas stenius switzerland. .............................................................................. 449 Daniel Hochstrasser and Cline Schmidt taiwan.............................................................................................. 459 George Lin turkey. ............................................................................................ 471 Ziya Akinci united states............................................................................. 485 Nina M Dillon and Timothy G Cameron

Chapter 26

Chapter 27

Chapter 28

Chapter 29

Chapter 30

Chapter 31

Chapter 32

Chapter 33

Chapter 34

Appendix 1 Appendix 2

About the Authors................................................................ 500 Contributing Law Firms contact details......... 524

Chapter 8

colombia
Hugo Palacios Meja and Oscar Tutasaura Castellanos*

INTRODUCTION TO DISPUTE RESOLUTION FRAMEWORK

Colombia is a presidential republic with a centralised government, organised in accordance with the principle of the separation of powers of autonomous executive, legislative and judicial branches, with a prevalent continental law system based on a written Constitution and written laws. Laws are enacted by the Congress and must abide by the Constitution. The executive exercises its powers through decrees and resolutions, which must comply with the Constitution and the laws. The judicial branch forms a single court system with several courts of limited and general jurisdiction. The Colombian judicial branch has several courts of limited and general jurisdiction. The courts within the ordinary jurisdiction handle most of the civil, criminal and labour matters but such courts are organised in separate chambers of limited jurisdiction. Other special courts hear cases relating to indigenous groups and matters of peace. The Superior Judicial Council, a collegiate court of 13 justices divided into two chambers that handle the administrative and disciplinary matters of the judicial system and the legal profession. The three principal jurisdictions are the following: a  The Ordinary Jurisdiction handles the great bulk of the disputes between private parties, including civil, labour, criminal and family matters and is headed by the Supreme Court of Justice, a collegiate court of 23 justices divided into three chambers of limited jurisdiction for criminal, civil and labour matters. The circuit courts and municipal courts are the trial courts of individual judges with jurisdiction based on the territory, the subject matter and the amounts involved. The appellate courts are the 31 district superior tribunals and the Supreme Court of Justice.
*  Hugo Palacios Meja is the managing partner and Oscar Tutasaura Castellanos an associate at Estudios Palacios Lleras SA.

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Colombia b  The Administrative Jurisdiction hears all disputes arising out of government contracts and torts involving government entities. It also handles challenges to the constitutionality and legality of decrees and regulations. It is headed by the Council of State, an appellate collegiate court of 31 members divided into 5 chambers. The trial courts within this jurisdiction are the administrative tribunals, each one located in each political subdivision of the country. Recently, one-judge administrative courts have been created to adjudicate minor disputes and firstinstance procedures. c  The Constitutional Jurisdiction has a single Constitutional Court that decides, among other things, (1) challenges to the constitutionality of laws and certain decrees tantamount to Law; (2) presidential objections to proposed legislation grounded on constitutional reasons, and (3) the constitutionality of international treaties prior to their enactment. It is also the court of last resort in the tutela proceedings which involve the protection of fundamental rights. The Public Prosecutor and his or her delegates prosecute criminal causes and also belong to the judicial branch. Certain agencies (such as superintendencies) have been provided with specific judicial powers regarding bankruptcy, corporate and competition matters. Although rulings of both the Supreme Court and the Council of State are deemed to be final, the Constitutional Court has consistently held that those rulings may be revoked in tutela proceedings for violations of fundamental rights. Recently both, the Supreme Court and the Council of State also claimed jurisdiction to revoke rulings of the Constitutional Court in tutela proceedings. The most important ADR procedures recognised by Colombian laws are arbitration and mediation. The legal framework for ADR procedures are Decree 1818/1998, Law 640 of 2001 and the Code of Civil Procedure (CCP). II THE YEAR IN REVIEW

On 13 December 2007, the Supreme Court of Justice admitted a labour lawsuit against Lebanon, brought by a former employee of the Lebanese embassy in Bogot, being the first time that a Colombian court claims jurisdiction to adjudicate disputes involving another sovereign state. Commentators consider that the ratio decidendi of the order could be applicable in the future to civil and commercial disputes. On 28 March 2008, the Civil Chamber of the Supreme Court of Justice held that under Colombian Law, an arbitration award cannot be set aside due to the lack of subject matter jurisdiction of the arbitration tribunal, since such event was not included as a specific cause for annulment under Article 163 of Decree 1818 of 1998, and holding that the issues of jurisdiction of the tribunal could only be raised during the arbitral

 In Colombian Law, mediacin is a non-binding informal proceeding, with no legal effects, where a mediator tries to work out a solution to any given controversy. The effects of conciliation and mediation are different, because the conciliation agreement has a res judicata effect and can be enforced before courts.

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Colombia proceedings. The ruling was issued in the context of a tutela action filed against a decision of the Bogot District Superior Court, which set aside an arbitration award issued in a controversy between Bancolombia and the Gilinski Group. According to the Bogot Superior Court ruling, (suspended through a tutela action by the Civil Chamber of the Superior Court), the arbitration tribunal lacked jurisdiction over the subject matter, because the underlying contract between the parties referred such specific controversies to the decision of an international accounting firm. This case is an example of the challenges faced by practitioners owing to loopholes in domestic arbitration rules, and the consequent burdens of diligence imposed on practitioners. On 2 February 2009, in the context of a tutela action, the Constitutional Court annulled an arbitration award issued in a conflict between ETB. and Telefnica Mviles Colombia for violations of ETBs due process of law. Although the Constitutional Court has consistently ruled that arbitration awards (as well as judicial decisions) can be vacated in tutela proceedings for violations to fundamental rights, this case is remarkable because the court reviewed the merits of the award and concluded that it had been based on substantive provisions previously annulled by the administrative jurisdiction. On 29 April 2008, an arbitration tribunal decided a dispute between the two private television concessionaires (Caracol TV and RCN) and the National Commission of Television. The tribunal was asked to consider whether there had been a breakdown of the economic equilibrium of the concession agreements, following a change in the macroeconomic conditions that had been considered in 1997 to set the concession fee, and whether the government owed the concessionaires an indemnification. The tribunal ruled that the concessionaires had assumed certain economic risks, and that failure to obtain the projected profits did not create an undue unbalance in the concession agreement. This case is noteworthy because it disregarded previous arbitration awards in connection with the concept of economic unbalance in television concession agreements. III i COURT PROCEDURE Overview of court procedure

In general terms, litigation is a mixture of the adversarial and inquisitive systems, where the parties have the burden of presenting the facts and the supporting evidence, but the judge is granted with wide powers to investigate the facts on his or her own initiative and to determine the applicable rules of law. Procedural rules are set forth in procedural codes for civil, administrative, criminal and labour matters. The most important principles of procedural law include due process of law, gratuity of proceedings, contradiction (both in regard to evidence

 Although the Labour Chamber of the Supreme Court of Justice subsequently revoked the Civil Chambers decision, and ruled that a tutela action can only suspend the effects of a judicial decision if the enforcement of the ruling would impose an irremediable prejudice to the losing party, the ratio decidendi regarding the grounds for annulment of an arbitration award was not addressed by the Labour Chamber of the Supreme Court of Justice.

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Colombia and court decisions), double instance, good faith, procedural exactitude and res judicata, among others. ii Procedures and time frames

Civil and commercial litigation is conducted through the ordinary proceeding set forth in the Code of Civil Procedure (CCP). Prior to filing a claim, and except as otherwise provided, the parties must conduct a preliminary mediation process. Failing such mediation, the proceedings are initiated by filing a claim, which if admitted by the court, must be personally served on the defendant, who in turn can file an answer or a counterclaim. Thereafter, a hearing is held to decide, among other things, about defences based on procedural grounds. Following the hearing, the court issues an order deciding which evidence is admissible, and scheduling dates for its production. Once the evidentiary period is closed the parties must submit their closing arguments, after which a judgment will be issued. As a general rule judgments can be appealed, usually within three days following their service. Despite relatively short time limits set forth in the CCP, an ordinary proceeding lasts an average of four years at the trial stage, and two years on appeal, owing to case overload at the courts and procedural motions. Shorter versions of the ordinary proceedings, including the abridged procedure and the verbal proceedings are used for claims involving some real estate matters and disputes involving minor amounts, among many others. Money judgments and certain documents such as promissory notes can be enforced through an executory proceeding (a collection procedure), that could seek the seizure and forced sale of the debtors assets, which lasts an average of two years. Administrative litigation is conducted following the same general structure of the ordinary procedures, but timelines may vary depending upon the court and complexity of the case. Notably, the statute of limitations for administrative litigation is substantially shorter in comparison to civil or commercial claims. Recently, Law 1285 of 2009 introduced a preliminary mediation as a prerequisite for bringing a lawsuit in administrative litigation. In the cases of violation to constitutional fundamental rights by a governmental entity or by certain private entities, the affected person can present a tutela action aimed at the protection and defence of the threatened right, which must be decided by the competent judge within 10 business days. There are three types of interim remedies available ex parte: attachments, receiverships and notices of pendency (in litigation regarding real estate). Injunctive relief as practised in other legal systems is not available. A motion for an interim remedy is regularly filed without notice, and must be decided the next business day after being filed. In administrative litigation involving challenges to the constitutionality or legality of a decree or regulation, and if certain conditions are met, the claimant can request the effects of the challenged provision to be suspended, pending the outcome of the suit. In cases of violation to fundamental constitutional rights, a tutela action can be filed as an interim remedy to avoid irremediable damage while the proper judicial action is commenced. In this proceeding the judge has discretion to order any interim measure necessary for the protection of the threatened right. The tutela must be resolved within

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Colombia 10 business days. If appealed, a decision must be issued within 20 business days. The Constitutional Court can review any tutela decision. iii Class actions

Class actions are permissible, and their use has increased consistently in recent years. Class actions have exclusively compensatory purposes and can be brought when a group of at least 20 people meets uniform conditions regarding the cause of the individual damages to its members. Although class actions are often used in consumer-protection issues, they are also common in cases involving environmental damage and cases against administrative authorities. The complaint must identify the members of the class and include the estimated damages sustained. Unless a member of the class decides to opt out of the group, he will be covered with the results of the process and the res judicata effect of the judgment will extend to such member. If the judgment is favourable to the class, the judge should assign part of the compensation to the members of the class that did not take part in the proceedings. iv Representation in proceedings

As a general rule, non-lawyers are not allowed to commence and carry on judicial proceedings without being represented by a lawyer, except: (1) for certain public actions set forth in the Constitution and the laws; (2) if the amounts involved do not exceed 7,453,500 Colombian pesos; (3) in administrative labour conciliations and in single instance labour proceedings; (4) in opposition to certain interim applications such as attachments; and (5) in certain minor causes litigated at territories where there is only one practicing attorney. Legal entities are also authorised to represent themselves through in-house counsel or through their executive officers if they are lawyers. v Service out of the jurisdiction

Natural persons may be personally served with documents outside of the jurisdiction by means of a letter rogatory sent to the foreign countrys judicial authorities through the Colombian Ministry of Foreign Affairs, or through a direct commission from the Colombian Court to the Colombian consular or diplomatic agent in such foreign country. Colombia is party to the InterAmerican Convention on Letters Rogatory. The Convention provides a mechanism for the service of documents in connection with civil and commercial litigation through judicial channels, diplomatic or consular agents, or designated central authorities of each member country. Such letters rogatory must be executed in accordance with the legal rules of the State of destination. Generally speaking, only the documents initiating proceedings or initial citations to third parties must be personally served. Further proceedings are served through the courts docket.

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Colombia vi Enforcement of foreign judgments

Before foreign judgments can be enforced, they must be recognised as enforceable instruments through the exequatur proceeding conducted before the Supreme Court of Justice. Exequatur is granted only on the basis of international reciprocity or pursuant to international treaties. No exequatur is granted on the basis of international comity, unlike other jurisdictions. The foreign judgment must comply with the following requirements set forth in Article 694 of the CCP. The foreign decision (1) must be final and enforceable; (2) must not refer to in rem rights on assets located in the territory at the time the foreign proceeding commenced; (3) must not be contrary to Colombias public policy; (4) the subject matter of the litigation must not be of the exclusive jurisdiction of domestic courts; (5) the defendant must have been given proper notice and the opportunity of contradiction; and (6) there can not be any domestic ongoing procedure or final judgment for the same subject matter. Once the exequatur is granted the decision can be enforced, following the same rules set forth for the enforcement of domestic judgments. Colombia is signatory to various international treaties regarding the enforcement of foreign judgments and awards, including the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards. vii Assistance to foreign courts

Pursuant to Articles 696 and 697 of the CCP, Colombian courts must process requests of assistance from foreign judges or arbitration tribunals in connection with service of process, evidence production (including deposition of witnesses), summons, subpoenas and the like, as long as those requests are not contrary to Colombian public policy. The request must be done through letters rogatory duly authenticated, translated into Spanish, and delivered to the Colombian Ministry of Foreign Affairs, who will assign the matter to the applicable domestic court. Colombia is a party to the Inter-American Convention on the Taking of Evidence Abroad, to the Inter-American Convention on Rogatory Letters, and is in the process of acceding to the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters. Those international treaties prevail over the CCP. viii Access to court files

Ongoing judicial proceedings can only be accessed by the parties, by any attorney admitted to the practise and their clerks, by public officers (as long as their duties are directly related to proceeding), by court-appointed experts and aides, and by any person with the authorisation of the court for academic or research purposes. Members of the public cannot obtain pleadings or evidence in relation to ongoing proceedings. Furthermore, those documents are privileged under the rules of

International treaty dated 18 March 1970.

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Colombia professional secret, and cannot be disclosed by the attorneys without consent from the client. Final judgments are public, and anyone has the right to obtain an exact copy of such final ruling. ix Litigation funding

Disinterested third parties can provide funds for litigation for profit or altruistic reasons with no restriction. However, if the underlying agreement between the funder and the solicitor is construed as an onerous assignment of litigation rights, and there is a money judgment for the plaintiff, the defendant will be entitled to exercise the beneficio de excusin, pursuant to which he cannot be forced to pay more than the amount received by the plaintiff for such assignment, plus interest. Providing evidence of such onerous assignment to the courts is challenging. Attorneys are not allowed to fund litigation of their clients, but they can enter into contingency fee arrangements. IV i LEGAL PRACTICE Conflicts of interest and Chinese walls

Pursuant to the Disciplinary Code for Lawyers, there is a conflict of interest (and a fault subject to disciplinary action) when a lawyer from the same law firm, simultaneously or consecutively advises or represents clients with conflicting interests, except to the extent that such advice or representation is for the common benefit of all conflicting parties. Commercial competition per se is not a conflicting interest. Kinship, friendship or a related interest with the opposing party or counsel do not raise per se a conflict of interest, but must be disclosed to the client if such situations may adversely affect the attorneys independence, or if such situation could be considered a reason to terminate the attorney-client relationship. Failure of such disclosure is a fault subject to disciplinary action. Notably, the lawyer that represents opposing or incompatible interests in litigation arising out of the same facts commits a crime punishable by imprisonment for one to four years. Chinese walls are not mandatory or regulated. Members of the same law firm may not simultaneously or consecutively represent conflicting parties in litigation (even if both parties consent). In any case, information barriers are commonly used to isolate members of a law firm with kinship or friendship relationships or any other interest with an opposite party. Attorneys should properly and timely disclose such situation to the client. ii Money laundering, proceeds of crime and funds related to terrorism

Although money laundering is punishable under criminal law, there are no specific duties or responsibilities for lawyers in connection to money laundering or protecting against dealing in the proceeds of crime or funds related to terrorism, besides complying with criminal laws. Furthermore, a lawyer commits a disciplinary fault when he advises,

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Colombia intervenes, or sponsors any illegal acts against the state, the community, or a third party. V i DOCUMENTS AND THE PROTECTION OF PRIVILEGE Privilege

Pursuant to the CCP, the parties must exhibit all the documents required by a court, except for the information that is granted privilege by the Constitution or the laws. The most important cases of privilege are the following: Professional secrets, such as those derived from attorney-client, or the doctorpatient relationships, enjoy absolute privilege in the context of documentary evidence. Official documents and records are public and can be exhibited, unless privilege has been granted by law, or they refer to issues of national security or defence. However, courts may access such information, provided that appropriate measures are taken to keep its confidentiality. Accounting records, inventories, financial statements and other documents of merchants are secret, but can be subject to limited exhibition for specific purposes if order by any court upon an ex parte request. No one can be forced to disclose private personal information, if such disclosure breaches the constitutional right for intimacy (for instance, sexual orientation, political affiliation, ideological preferences, and religious beliefs). Constitutional or legal privilege grants the right to refrain from disclosing such information in litigation. Generally speaking, privilege cannot be claimed in regulatory (administrative) proceedings, but the regulatory bodies must take the appropriate measures to keep the confidentiality of any disclosed information. In general, communications between a company and its qualified in-house legal advisers will be privileged under the protection of a professional secret. If the in-house lawyer does not act in his legal capacity, we believe that such communications would not be privileged, although there is no statute or case law to support this view. No distinction is made in regard to foreign lawyers. On 21 August 2008, the Supreme Court of Justice ruled that the reasons for the government to claim the privilege of documents related to national security and defence, must be clearly motivated and stated, and that privilege must not be invoked to violate fundamental constitutional rights. ii Production of documents

Unlike other jurisdictions, the parties in litigation are not empowered to take discovery against each other at a pre-trial stage, but may be forced by court at trial, ex officio or upon request, to exhibit documents in their possession. Such exhibition requests may be denied by court if:  a the documents or records are not related to the subject matter of the litigation;

Supreme Court of Justice, Decision 247, 21 August 2008, Justice Pedro Octavio Munar.

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Colombia b  the exhibition of such documents is forbidden by law, or if those documents are privileged; c  the requested evidence is not admissible to prove the specific facts they are intended to prove; d  the evidence relates to irrelevant facts; or e the evidence is deemed unnecessary. In major litigation, production of documents can yield to literally thousands of documents being incorporated into the docket. The exhibition of documents stored overseas must be performed abroad, if ordered by the court through letters rogatory sent to a foreign countrys judicial authorities through the Colombian Ministry of Foreign Affairs, or by means of a direct commission from the Colombian court to the Colombian consular or diplomatic agent in such foreign country. Those documents can be copied and incorporated into the file, but if they are not in Spanish they must be translated by a certified translator. Documents stored electronically receive the same treatment as hard copy documents, and they must be exhibited upon a court order. Litigants can only be constrained to exhibit documents that are in their possession, and cannot be ordered to exhibit documents held by their subsidiary or parent companies or third-party advisers. However, ex officio or upon a litigants request, the court can order non-litigant third parties to exhibit documents they hold, regardless of their business, economic or ownership relationship with the litigants. Third parties are not mandated to exhibit their proprietary information if privileged by law, or if such disclosure would cause them any damage. Pursuant to Law 527 of 1999, any information generated, sent, stored or transmitted electronically is admissible as evidence, and receives the same evidentiary treatment of written or hardcopy documents. However, in assessing the evidentiary value of such documents the Court must take into consideration the reliability of its production, storage and transmission, the reliability of its conservation, and the proper identification of its originator, among other things. There are no regulations forcing a party to reconstruct back-up tapes, or other electronic media that are not readily accessible. Since the litigants do not engage in pretrial discovery, and all request for the exhibition of documents must be authorised by the Court, the issues of oppressive or disproportionate obligations in regard to exhibitions of documents are dealt by the Court at the trial, by rejecting evidentiary requests that do not comply with the standards of legality, effectiveness, pertinence and necessity mentioned above. VI i ALTERNATIVES TO LITIGATION Overview of alternatives to litigation

Arbitration and mediation are the most common alternatives to litigation. In major commercial, infrastructure and finance agreements, arbitration clauses are usually

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Colombia included. Colombian authorities have widely encouraged the use of ADR in order to reduce the workload of the judicial system. ii Arbitration

The rules governing domestic arbitration can be agreed between the parties, by establishing a set of procedural rules (in the case of ad-hoc arbitration), or by referring to the procedural rules of a domestic arbitration center (institutional arbitration). Lacking such agreement, the domestic arbitration will be conducted pursuant to the provisions of the CCP and Decree 1818 of 1998 (legal arbitration). However, case law has ruled that in ad-hoc arbitration the parties can only agree on the procedural rules in absence of applicable procedural provisions, eliminating in practice ad-hoc arbitrations. Colombian law (Law 315 of 1996) allows and recognises international arbitration when, as a general rule, there is a controversy that involves residents or nationals of different jurisdictions, or contracts to be performed in several jurisdictions or that are related to international trade. Colombia is a party to both the New York Convention of 1958 on arbitration and the Convention on the Settlement of Investment Disputes (ICSID). In international arbitration, the parties can agree, with no restriction, on the procedural rules applicable to the proceedings. Disputes regarding unilateral acts of administrative Colombian authorities, issued in relation to the special powers those authorities sometimes retain in the performance of a government contract, are not allowed to be resolved through arbitration. The major arbitral institutions commonly used for domestic arbitrations are the centers for arbitration and conciliation of the local chambers of commerce, with the Center of the Bogot Chamber of Commerce being the most traditional and respected institution. For international arbitration the parties usually refer to the International Court of Arbitration of the International Chamber of Commerce and to the International Centre for Dispute Resolutions of the American Arbitration Association. Although no statistics are available, arbitrations, both domestic and international are commonly used in commercial disputes arising out of sophisticated agreements. Arbitration clauses are also usually included in state contracts, particularly those of significant value or involving foreign parties. The usually higher costs of arbitration in comparison to traditional litigation, has prevented the wide use of arbitration in the bulk of low-amount commercial conflicts. Domestic courts are not allowed to review the merits of an arbitration award. However, a domestic award or an international award issued in Colombia can be set aside on one of the following grounds: the arbitration agreement or the arbitration clause is not valid; the appointment of arbitrators was not made in accordance with the law; in case of certain irregularities in the production of evidence, if such irregularities had an impact on the decision; the award was issued after the tribunal had lost jurisdiction; the case was decided at equity, when it should had been decided at law; the decision contains mathematical errors or conflicting orders; or if the arbitration award includes resolutions on matters not subject to arbitration, on matters beyond the remedies sought by the parties or does not address matters submitted to the tribunal.

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Colombia Moreover, the Constitutional Court has consistently ruled that in the context of a tutela action, a court can vacate an award in the case of gross violations to the fundamental right of due process. Such violations have been found, for instance, when the tribunal lacked jurisdiction or where the decision is based on repealed laws. International arbitration awards are recognised and enforced by the Colombian courts in the same manner as foreign judgments, though a procedural system called exequatur that takes place before the Colombian Supreme Court of Justice (described in Section III.vi). Colombia is a party to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. The Supreme Court of Justice has ruled that the exequatur proceeding, which imposes some additional requirements than those set forth on the Convention, is still applicable even to awards issued in countries that are members of the Convention. In July, 2008 the Ministry of Internal Affairs and Justice established a commission of academics to evaluate the current legislation in regard to arbitration. The commission is expected to issue recommendations on critical issues such as the excessive formalism and the fairly elevated costs of arbitration. Law 1258 of 2008 allows the inclusion of arbitration agreements in the by-laws of the recently created sociedad por acciones simplificada. Previously, the inclusion of those clauses was deemed illegal in the articles or by-laws of any company. iii Mediation (conciliation)

The main rules governing mediation are compiled in Decree 1818 of 1998. Mediation can be used to solve disputes involving waivable rights which can be subject to settlement. Mediation over non-waivable rights produces no legal effect. In civil, commercial and administrative litigation the parties are forced to conduct a preliminary mediation process prior to the filing of a claim. In addition, in those areas where preliminary mediation is not mandatory, the litigation and domestic arbitration proceedings include a mediation stage which is conducted before the court or tribunal. The mediation agreement has a res judicata effect and can be enforced before courts. Although rarely used in the past, mediation has become increasingly popular in Colombia for disputes of all sizes. The number of mediations has statistically increased since it was set as a prerequisite for bringing a lawsuit in most civil and commercial litigations, and recently in administrative litigation. According to statistics of the Ministry of Justice, there are 276 authorised mediation centres, processing an average of 60,000 mediations yearly, and reaching agreements in 39 per cent of those cases. Owing to the widespread use of mediation, the government issued Decree 3626 of 2007, providing the Ministry of Justice with wide regulatory and disciplinary powers over mediation centres. Law 1285 of 22 January 2009, introduced mediation as a prerequisite for bringing lawsuit in administrative litigation regarding state contracts, administrative torts, and state liability for illegal acts.

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Colombia iv Other forms of alternative dispute resolution

Expert determinations as an alternative way to solve conflicts and technical arbitrations involving a panel of experts in a certain area of knowledge (engineering, architecture, etc.) are fairly frequent in conflicts regarding technical issues. Technical awards are final and enforceable instruments. In addition to arbitration and mediation, the parties can have recourse to an aimiable compositeur, who is an uninterested third party, to whom the parties in conflict delegate the power to solve a dispute among them. The decision of the aimiable compositeur has the same effects of a settlement between the parties. Other types of ADR, such as adjudication, referees or early neutral evaluation are unknown or seldom used. VII OUTLOOK & CONCLUSIONS On 22 January 2009, the Congress enacted Law 1285 aimed, among other things, at accelerating the judicial proceedings and alleviating the caseload at the courts. The statute includes provisions to foster orality in judicial proceedings, and creates a committee to draft a unique Code of Procedure for all specialities, excluding criminal law. Currently a proposed amendment to the Code of Civil Procedure is being studied by the Congress for the purpose of simplifying judicial proceedings. For instance, the proposed legislation includes a provision authorising the courts ex-officio to dismiss a lawsuit if the claims prima facie lack legal grounds. The Council of State is currently revising the Code of Administrative Procedure to prepare a draft reform that will be submitted to Congress during 2009. It is foreseeable that in the near future, Congress will continue the process of simplifying legal proceedings and reducing workload of the courts.

Project 197/08S Senate.

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About the Authors HUGO PALACIOS MEJA Estudios Palacios Lleras SA Hugo Palacios Meja is the managing partner of Estudios Palacios Lleras SA. He received a law degree and a degree in economics from Pontificia Universidad Javeriana in Bogot (1964), and a Master of Arts in Economics at Vanderbilt University (1967). In his recent practice, Mr Palacios has been very active in national and international litigation and arbitration, as an arbitrator, as an expert on Colombian law and as counsel, in matters related to banking and finance, railroad transportation, telecommunications, mining and ports, among others. Mr Palacios has advised several governmental agencies in the preparation of drafts of laws, decrees and regulations, including the Budget Organic Law (1973); the Code of Administrative Law (1984); certain central banking regulations (1991 and 1995); the Statute of Ports (1991); regulations on dumping and subsidies; and the Public Utilities Law (electricity, gas, telephone, water and waste, 1994). He served as co-judge in Colombias Council of State (the highest court on Administrative Law), in Colombias Constitutional Court (the highest court on Constitutional Law) and in Colombias Supreme Court. He served as director for Peru and Colombia at the Inter American Development Bank (1973-1975), as member of the Colombian House of Representatives (1975-1982), as governor of the Central Bank of Colombia (1982-1985), as minister of finance of Colombia (1985-1986), and as member of several boards of directors in commercial banks, corporations and other entities. OSCAR TUTASAURA CASTELLANOS Estudios Palacios Lleras SA Oscar Tutasaura Castellanos is an associate at Estudios Palacios Lleras SA. He completed undergraduate studies at Universidad del Rosario in Bogot, and received a Master of Laws from Georgetown University in Washington, DC. He practised law at Bejarano Crdenas y Ospina in Bogot and at the New York offices of Sidley Austin LLP. Mr Tutasaura is admitted to practise in Colombia and in the state of New York. He is also part-time professor of Civil Law at Universidad del Rosario in Bogot. Estudios Palacios Lleras SA Calle 113 No. 7-21 Torre A Oficina 506 Bogot Colombia Tel: +571 6291828 Fax: +571 6291850 hpalacios@palacioslleras.com otutasaura@palacioslleras.com www.palacioslleras.com

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