Arbitration Law in Paraguay
Arbitration law in Paraguay is governed primarily by the Arbitration Law of 1998 (Law No. 2,249), which was updated by Law No. 3,086 in 2006, and further refined by the Paraguayan Civil Code in relation to arbitration. The law aligns with international standards, particularly the UNCITRAL Model Law on International Commercial Arbitration, which provides a framework for both domestic and international arbitration.
Key Features of Arbitration in Paraguay:
Arbitration Law No. 2,249 (1998):
- This law governs the arbitration process in Paraguay and is based on international standards such as the UNCITRAL Model Law.
- The law provides a legal framework for arbitration agreements, the role and powers of arbitrators, procedures for arbitration, and the recognition and enforcement of arbitral awards.
Arbitration Agreements:
- Arbitration agreements in Paraguay are generally binding and enforceable. Parties to a contract can agree to submit their disputes to arbitration, either in a specific clause or after the dispute arises.
- If a party attempts to challenge the validity of an arbitration agreement, the courts may intervene only in limited circumstances, such as if the agreement is manifestly invalid or unenforceable.
Arbitration Procedure:
- The arbitration process is largely determined by the agreement of the parties or, if the parties fail to agree, the appointed arbitrator or arbitral institution. This includes aspects like the venue, language, and procedural rules.
- Paraguay recognizes both institutional and ad-hoc arbitration. In institutional arbitration, the parties may choose from various institutions such as the Paraguayan Chamber of Commerce and Services (Cámara de Comercio y Servicios de Paraguay), while ad-hoc arbitration allows the parties more flexibility.
Appointment of Arbitrators:
- The parties have the freedom to agree on the number and selection of arbitrators. If no agreement is reached, the court can appoint an arbitrator.
- Arbitrators in Paraguay must be independent and impartial, and they must adhere to the principles of fairness throughout the arbitration process.
Recognition and Enforcement of Arbitral Awards:
- Domestic Arbitration: Arbitral awards are generally binding within Paraguay. If a party refuses to comply with the award, the opposing party can apply to the courts for enforcement.
- International Arbitration: Paraguay is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). This means that foreign arbitral awards are recognized and enforceable in Paraguay, subject to the conditions stipulated in the Convention, such as public policy exceptions.
Role of Courts:
- Courts in Paraguay typically play a limited role in the arbitration process, offering assistance in enforcing arbitration agreements and awards. However, the court can intervene in cases where a party challenges the validity of the arbitration process or award.
- Courts can set aside an arbitral award under specific grounds, such as if the award goes against public policy or violates fundamental principles of Paraguayan law.
Arbitration as a Method of Dispute Resolution:
- Arbitration is seen as a flexible, efficient, and less costly alternative to litigation. It is frequently used in commercial, civil, and construction disputes.
- It is particularly popular in international trade disputes and in agreements involving foreign companies, as Paraguay’s legal framework supports international arbitration practices.
Arbitral Institutions:
- Cámara de Comercio y Servicios de Paraguay: This chamber is one of the most important arbitration institutions in Paraguay, facilitating both domestic and international arbitration.
- Other institutions may also be involved, depending on the sector and the parties’ preferences.
Public Policy Exceptions:
- Like many jurisdictions, Paraguay maintains that arbitral awards cannot violate the country’s public policy. If an arbitral award is found to breach public policy, the courts may refuse to recognize or enforce it.
Recent Developments and Trends:
- Paraguay has continued to modernize its arbitration laws to attract more foreign investment and facilitate international commercial transactions. The country’s legal framework increasingly aligns with international norms, making it a more viable choice for international arbitration.
Summary:
Arbitration in Paraguay is a well-established alternative dispute resolution method, with laws that are largely aligned with international standards like the UNCITRAL Model Law and the New York Convention. The Arbitration Law of 1998 provides a comprehensive legal structure for both domestic and international arbitration. The arbitration process is designed to be flexible, with arbitration agreements and procedures largely determined by the parties involved. Arbitration is seen as an effective method for resolving commercial disputes in Paraguay, and the courts provide a supportive role in enforcing arbitration agreements and awards.
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