The term ‘commercial’ under Argentina’s International Commercial Arbitration Law and its implications for state arbitrations

Back to Arbitration Committee publications

Julio César Rivera Jr
Partner, Marval O’Farrell Mairal, Buenos Aires, Argentina
jcrh@marval.com

Martín Vainstein
Senior Associate, Marval O’Farrell Mairal, Buenos Aires, Argentina
mvai@marval.com

Introduction

Until recently, Argentina lacked a comprehensive regulation on arbitration applicable nationwide. The legislation on this matter was dispersed in the local procedural codes that frequently provided obsolete solutions, contrary to the development that arbitration has had in the world.

That scenario has now changed radically. The first legislative milestone was the entry into force in 2015 of the Argentine Civil and Commercial Code (CCC), which replaced and unified both the existing civil and commercial laws that were traditionally regulated in different corpus for over a century. The CCC included a specific chapter on the arbitration agreement, which recognised several universally accepted standards, such as the principles of competence-competence and the separability of the arbitration clause.¹ Though the CCC also included other questionable provisions – such as those related to the scope of judicial review of awards – Argentine courts have so far construed such provisions in an arbitration-friendly fashion by, for example, limiting the grounds for review of arbitral awards.²

In 2018, the Argentine Congress enacted Law No 27,449 which exclusively governs international commercial arbitration.³ As a result, Argentina moved to a dualist arbitration regime, under which Law No 27,449 is limited to international commercial arbitration while domestic arbitrations are regulated by the CCC, the Argentine Civil and Commercial Procedural Code – applicable in the City of Buenos Aires and Federal Courts – and other local procedural codes.⁴

Law No 27,449 is essentially based on the UNCITRAL Model Law on International Commercial Arbitration (as amended in 2006) (the ‘Model Law’) and thus adopts the main principles in modern comparative legislation, following the line of other countries of the region.⁵ However, some of its provisions depart from the Model Law.  

One of the main variations of Law 27,449 lies in the provisions referring to its subject matter scope of application. Unlike the Model Law, the Argentine legislator included a definition of what should be understood by the term ‘commercial’, which has aroused both praise and criticism among the arbitration community. In the paragraphs that follow, the impact that this provision could have on the application of Law No 27,449 is analysed and its implications with respect to arbitrations involving states.

The definition of ‘commercial’ under Law 27,449 and its differences with the Model Law

Article 1 of Law No 27,449 provides for its subject matter and territorial scope of application by establishing that arbitrations qualifying both as ‘commercial’ and ‘international’ shall be governed ‘exclusively’ by said act. This last expression is absent in the Model Law and has been added by the Argentine legislator with a double purpose: on the one hand, it reaffirms that Law 27,449 only applies to international commercial arbitrations; on the other hand, it excludes the application of the CCC and the local Procedural Codes which are reserved for domestic arbitrations. Thus, Law 27,449 achieves a unifying effect in the regulation of international commercial arbitration throughout the country.⁶

The Model Law has left undefined the term ‘commercial’. This approach responds to the fact that, like most legislative guides, it has a strong purpose of global applicability and seeks to cover as many situations as possible in every legal context.⁷ However, in order to give some guidance to legislators, the drafters included a footnote to article 1.1 clarifying that ‘[t]he term “commercial” should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not’ and provided a non-exhaustive list of transactions of a commercial nature.

As it arises from the discussions during the drafting of the Model Law, this footnote reflected the consensus among the Drafting Committee that the qualification of a relationship as commercial did not depend on the nature of the parties, but on the character of the underlying transaction.⁸ In other words, there is no reference to whether or not the parties are merchants, since the Model Law is addressed both to legal systems that make that distinction and those that do not.⁹ In the same vein, it has been pointed out that the ‘legal foundation of a claim […] is irrelevant to the question whether an arbitration is “commercial”’.¹⁰ Finally, the footnote provides a non-exhaustive list of transactions of a commercial nature, which conveys the idea that all economic relations with the object of the production, circulation or transformation of goods would be considered commercial.¹¹

Law 27,449 included in its article 6 a definition of when an arbitration is commercial. On this matter, Argentina differed from other countries in the region such as Uruguay and Chile, whose arbitration laws reflect article 1.1 of the Model Law and its footnote almost verbatim, with minimal changes.

In that regard, Law 27,449 establishes that ‘any legal relationship, contractual or non-contractual, of private law or governed predominantly by it in Argentine law’shall be considered commercial. It further incorporates the recommendation of the footnote to article 1.1 of the Model Law, stating that ‘the interpretation shall be broad and in case of doubt, it shall be deemed to be a commercial relationship’. In this way, the definition of the term ‘commercial’ provided by Law 27,449 is not premised on the commercial nature of the underlying transaction but on the nature of applicable law to the transaction. Law 27,449 defines commercial relationships as those governed by ‘private law or predominantly by it’.

This approach has been regarded to be consistent with the CCC, which unified the traditionally differently regulated civil and commercial regimes and eliminated the qualification of merchant. However, a literal interpretation of such rule could lead to the application of the Law 27,449 to situations typical of private law that may prima facie not be strictly commercial.¹² Against this, some commentators have stated that the definition of ‘commercial’ in Law 27,449 should be analysed together with the international jurisdiction principle contained in article 2605 of the CCC – to which the Law refers in article 107 – under which in ‘patrimonial and international matters’ parties can defer jurisdiction to judges or arbitrators outside of Argentina. From this perspective, for the purposes of Law 27,449, a commercial relationship is any legal relationship of a patrimonial nature that, while arbitrable, is predominantly governed by private law.¹³

Another relevant aspect that arises from linking the term ‘commercial’ with private law is, by opposition, relationships governed by public law would be prima facie outside the scope of application of the Law 27,449, notwithstanding their commercial nature. As shown below, this could have a greater impact in the contracts to which the Argentine State is a party.

Arbitrations involving states

International arbitration plays a fundamental role in the resolution of disputes arising from contracts entered into by states and their entities. The possibility of selecting adjudicators with specialised expertise, the greater flexibility of the procedure and the possibility of choosing a neutral forum other than the state courts, are among the advantages usually praised of arbitration. This has led to a marked tendency for states to increasingly accept arbitration as a method of dispute resolution in their contracts. According to the latest statistical report of the ICC, in 2019, 20 per cent of the cases filed in 2019 involved a state or state entity, setting a new all-time ICC record.¹⁴

In Argentina, the possibility for the State to appear as a party before foreign courts or international tribunals has raised various stances over the years. Nevertheless, both the rulings of the Argentine Supreme Court and various laws recognise that the State or an instrumentality of the State may enter into an arbitration agreement if they are authorised by statute.¹⁵

As only those relationships governed predominantly by private law will be considered ‘commercial’, Law 27,449 would prima facie indicate that it would not apply to relations governed preponderantly by public law, irrespective of their commercial nature.This would be the case of the vast majority of contracts to which the Argentine State is a party, even though many of these contractual relationships may reflect an archetypical commercial transaction.

Something similar happens with domestic arbitration legislation. Article 1649 of the CCC defines the arbitration contract as one whose purpose is to settle disputes relating to private law relationships in which public policy is not compromised. Moreover, article 1651 expressly excludes the application of the CCC's chapter on the arbitration contract to disputes to which the State is a party. In this respect, it is disputed whether this exclusion extends to State instrumentalities.¹⁶

Thus, neither Law 27.449 nor the CCC in principle govern arbitration concerning contractual or non-contractualrelationships not predominantly governed by private law to which the State is party. In these cases, the arbitration would only be governed by the local Procedural Codes which, as pointed out above, do not contain modern arbitration rules. However, to the extent that the boundary between public and private law is not clearly demarcated, this distinction may give rise to different interpretations.

However, even if the Law 27,449 or the CCC are not deemed applicable to arbitrations involving states, its provisions can be a valuable interpretative guideline or be applied analogically. It will ultimately be left to the discretion of the arbitrators and judges who may be involved in disputes arising from such contracts.

Notes

1. See articles 1649-1665 of the CCC (available at http://servicios.infoleg.gob.ar/infolegInternet/anexos/235000-239999/235975/norma.htm).

2. See Argentine Supreme Court’s decisions in Ricardo Agustín López v Gemabiotech SA dated 5 September 2017 and Estado Nacional – Procuración del Tesoro Nacional s/ recurso directo dated 6 November 2018, in which the court decided that the setting aside of an arbitral award is limited to the specific grounds for annulment and refused to analyse the merits of the case in the context of such recourse.

3. See Law No 27,449 published in the Official Gazette on 26 July 2018 and entered into force on 3 August 2018, available at http://servicios.infoleg.gob.ar/infolegInternet/anexos/310000-314999/312719/norma.htm. As stated by the recitals of the bill, the Law specifically aimed at including Argentina in global trade and fostering a pro-business climate for investors in the country.

4. The arbitration regulation of the CCC is premised on s 75.12 of the Argentine Constitution, which provides that the Argentine Congress has the power to regulate all matters related to civil and commercial matters, which encompasses contract law, including arbitration agreements. Moreover, with regards to international arbitration, s 75.13 of the Constitution further provides that the Argentine Congress is entitled to ‘regulate trade with foreign nations and between provinces’, which would include arbitration. For a detailed analysis on this matter, see Julio César Rivera  and Gustavo Parodi, Atribuciones del Congreso de la Nación para su Regulación. Principios Fundamentales de la Legislación Proyectada, in Julio César Rivera and Graciela Medina (eds), Comentarios al Proyecto de Código Civil y Comercial de la Nación (Buenos Aires, 2012), p 815.

5. Legislation based on the Model Law has been adopted by Mexico (1993), Venezuela (1998), Paraguay (2002), Chile (2004), Peru (2008), Costa Rica (2011) and Uruguay (2018). However, only Peru and Costa Rica had taken the Model Law in its 2006 version.

6. The exclusivity of the Law does not affect the application of international treaties on this matter to which Argentina is a party, which have a higher hierarchy than Law 27,449 under article 75.22 of the Argentine Constitution.

7. See Maurizio Gotti, Vagueness in the model law on international commercial arbitration, in V Bhatia, J Engberg, M Gotti, and D Heller (eds), Vagueness in Normative Texts (2005), pp 227–254.

8. See Report of the United Nations Commission on International Trade Law on the work of its eighteenth session (Vienna, 3–21 June 1985) (A/40/17), available at www.uncitral.org/pdf/english/yearbooks/yb-1985-e/vol16-p3-46-e.pdf, at p 7.

9. This idea was expressly clarified in a previous draft of the footnote, which stated that the commercial nature was ‘irrespective of whether the parties are “commercial persons” (merchants) under any given national law’. See Fifth Working Group Report, A/CN.9/246, para 158.

10. See Georgios Petrochilos, Procedural law in international arbitration, (Oxford University Press on Demand), p 5.

11. See Philippe Fouchard & Berthold Goldman, Fouchard, Gaillard, Goldman on international commercial arbitration, (Kluwer Law International BV 1999), pp 36, 37.

12. See Julio César Rivera, La Ley de Arbitraje Comercial Internacional, La Ley,2018-E, pp 3, 4. The author refers to the hypothetical case in which two parties – one Argentinean and one Brazilian – would have agreed to determine through arbitration, and with seat in Argentina, the quantum of the damages to the natural person caused by a traffic accident occurred in Brazil. If article 6 of Law 27,449 were literally applied, such arbitration would be commercial and international, since the matter is actually one of private law.

13. See Roque Caivano & Natalia Ceballos Ríos, Tratado de arbitraje comercial internacional argentino: comentario exegético y comparado de la Ley 27.449, La Ley (2020), s 4.1; and María Elsa Uzal,La internacionalidad, la arbitrabilidad y el derecho aplicable en la nueva Ley de Arbitraje Comercial Internacional,Revista de Derecho Comercial 292, 1 November 2018, p 619.

14. ICC Dispute Resolution 2019 Statistics, available at https://iccwbo.org/publication/icc-dispute-resolution-statistics, p 10.

15. For a comprehensiveanalysis on this matter, seeGuido Santiago Tawil & Ignacio Minorini Lima, El Estado y el arbitraje: Primera aproximación, Revista Argentina del Régimen de la Administración Pública – Rap N° 337 (Buenos Aires 2006); and Horacio Grigera Naón, El Estado y el arbitraje con particulares, Revista Jurídica de Buenos Aires, II-III (1989), p 127.

16. See Ignacio Minorini Lima, Reflexiones preliminares sobre el arbitraje y el estado en el Código Civil y Comercial de la Nación, in Ramón Pizarro & AlfonsoButeler, El Código Civil y Comercial de la Nación y el impacto en el Derecho Administrativo, (La Ley 2018).

Back to Arbitration Committee publications