International arbitration law and rules in Peru

In Peru, arbitration is a dispute resolution mechanism increasingly used by companies, and this confidence in this dispute resolution mechanism is mainly due to the quality of arbitral awards and a legal system that ensures respect for arbitral decisions. According to a recent survey, although 65% of the total number of respondents stated they had requested the annulment of the award, 47% of the total number of respondents say that these proceedings have a less than 10% chance of success. Confidence in arbitration and the volume of arbitration proceedings are likely to increase over the next few years.

1.1.1 Peruvian legislation first recognised arbitration in Section One, “Jurisdiction”, of the Civil Procedural Code (1852). Sixty years later, it would be repealed by the 1912 Civil Procedural Code which only superficially regulated arbitration. The 1979 Political Constitution of Peru (and later, the 1993 Political Constitution of Peru) saw arbitration as an exceptional jurisdiction and an alternative to court proceedings. Subsequently, for the first time in Peruvian legislation, the 1984 Civil Code specifically referred to the arbitration clause by which parties agreed to solve any disputes strictly through arbitration. Following that, the 1992 Code of Civil Procedure contemplated the institution of arbitration.

1.1.2 That same year, in 1992, the first Arbitration Act was enacted (Law No. 25935); however, it was rapidly repealed by the 1995 Arbitration Act (Law No. 26572), which currently regulates the arbitration process. Likewise, the State Procurement Act (Law No. 26850), establishes arbitration as a dispute resolution mechanism in contracts entered into with the State. This provision has been kept in its subsequent amendments made through Legislative Decree No. 1017 and Law No. 30225.

1.1.3 Currently, the Arbitration Act (Legislative Decree No. 1071) (Arbitration Act), which regulates the main guidelines applicable to arbitration proceedings conducted under the Peruvian legal system, is currently in force. Therefore, this chapter will be largely based on the provisions set forth in the Arbitration Act.

2.1.1 The Arbitration Act regulating arbitration in Peru is applicable to arbitration proceedings carried out within the territory of Peru, irrespective of whether it is a national or international arbitration. However, should there be any international treaties or agreements to which Peru is a party and which apply to arbitration, these will prevail and the Arbitration Act shall be applied on a supplementary basis.

2.1.2 Arbitration may be used in the following circumstances:

• When the parties’ domiciles, at the time the arbitration agreement is concluded, are located in different states
• When the place of arbitration, as determined by the agreement, is outside the state in which the parties’ domiciles are located;
• In the case of parties domiciled in Peru, when the place of performance of a substantial part of the obligations arising from the legal relationship, or when the place with which the subject-matter of the dispute has a closer relationship is outside Peruvian territory.

2.2.1 The Arbitration Act provides for the principle of non-intervention. This principle restricts the intervention of the Court in disputes subject to the rules established by the Arbitration Act and establishes the assistance and collaboration of the Court in the cases expressly contemplated by the Arbitration Act.

2.2.2 In addition, it includes the principle of independence. Because of this principle, the arbitral tribunal enjoys full independence, which means that its actions are not subject to any external authority or provision.

2.2.3 The Arbitration Act also lays down the principles of autonomy, separability and kompetenz-kompetenz, under which the arbitral tribunal has full powers to commence and continue arbitral proceedings within the process, to rule on the validity of the arbitration agreement, to decide on its own competence and to make the award.

2.3.1 Arbitration may be ad hoc or institutional, depending on whether it is administered by an arbitral tribunal directly appointed by the parties or administered by an arbitral institution.

2.3.2 In the absence of a statement to that effect, the arbitration is deemed to be ad hoc. Where an institutional arbitration is involved, the arbitration rules of the institution administering the arbitration may apply.

2.4.1 Disputes arising against Peruvian State entities shall be submitted to arbitration in accordance with the State Procurement Act (Law No. 30225) and its Regulations.

2.4.2 Where the State Procurement Act does not make provision for a particular matter, the Arbitration Act shall apply on a supplementary basis.

3.1.1 The Arbitration Act defines an arbitration agreement as an agreement whereby the parties undertake to remove themselves from the jurisdiction of the Court in order to submit agreed disputes to arbitration for the purpose of resolving one or more conflicts of interest that may arise or have arisen within a legal relationship.

3.2.1 The arbitration agreement must contain the agreement of the parties, requiring them to submit one or more disputes to arbitration.

3.2.2 The arbitration agreement must be in writing or in any form that allows its content to be verified. The arbitration agreement may be concluded as a contract or included as a clause in an agreement.

3.2.3 Furthermore, according to the Arbitration Act, the arbitration agreement shall be in writing in the following cases:

• When an electronic communication is made and the information contained therein is accessible for subsequent reference
• When it is included in an exchange of statements of claim and defence in which the existence of an agreement is affirmed by one party, without being denied by the other
• When reference is made in a contract to a document containing an arbitration clause, provided that such reference implies that said clause is part of the contract.

3.2.4 In the case of international arbitration, the arbitration agreement shall be deemed valid if it meets all the requirements laid down by the rules of law chosen by the parties to apply to the arbitration agreement, or by those chosen to apply to the substance of the dispute, or by Peruvian law.

3.3.1 The Arbitration Act states that disputes over matters which the parties have the power of free disposal under the law, as well as those authorized by law or international agreements, may be submitted to arbitration. In other words, rights can be submitted to arbitration only where the parties are free to dispose of them (or even renounce them), without legal restrictions. In addition, matters authorised by law or international agreements may be submitted to arbitration.

3.3.2 In the case of an international arbitration in which one of the parties is a state or a state-controlled company, organisation or enterprise, that party may not invoke the prerogatives of its own law in order to escape the obligations arising from the arbitration agreement.

3.4.1 The Arbitration Act regulates the principle of separability of the arbitration agreement. If  the arbitration agreement is part of a contract, it shall be deemed to be a separate agreement from the other provisions of the contract.

3.4.2 The main implication of applying this principle is that the arbitral tribunal may hear disputes concerning the validity or effectiveness of the contract containing the arbitration clause. Therefore, questioning the validity or effectiveness of the contract containing the arbitration agreement, does not affect the arbitration agreement clause contained therein.

3.5. Where there is a binding arbitration agreement, the parties are obliged to submit the disputes covered by the agreement to arbitration in accordance with the terms agreed therein.

3.5.2 If one of the parties attempts to bring the dispute before the Court, the other party may file a motion to dismiss based on the existence of an arbitration agreement, the effect of which shall be to prevent the Court from hearing the dispute and from referring it to an arbitration proceeding.

3.5.3 It should be noted that the arbitration agreement is binding between the parties to the arbitration agreement and not with third parties except in those cases where it is understood that there would be an extension of the arbitration agreement.

3.6.1 The Arbitration Act provides that the arbitration agreement extends to any party which consents to submit to arbitration, in good faith. Their consent may be determined by their active and decisive participation in the negotiation, conclusion, performance or termination of the contract covered by the arbitration agreement or to which the agreement relates. Third parties who are not parties to the arbitration agreement may have nonetheless consented to the arbitration if, by their activity in relation to the underlying contract, they knew and accepted that the contract contained an arbitration agreement.

3.6.2 The arbitration agreement will also extend to those who intend to derive rights or benefits from the primary contract, according to its terms.

4.1.1 The parties are free to determine the number of arbitrators to be appointed to the arbitral tribunal. However, in the absence of agreement or in the case of doubt, the arbitral tribunal shall consist of three arbitrators.

4.1.2 Any individual with full civil rights and without an international criminal conviction may be appointed as arbitrator, unless there is any conflict of interest, ie they have previously participated in the case in question or have any sort of interest in the case. In addition, state officials and public servants are not allowed to serve as arbitrators in Peru.

4.1.3 In domestic de jure arbitration processes, an arbitrator must also be a lawyer by profession, unless otherwise agreed. However, in international arbitration processes, an arbitrator shall not be required to be a lawyer.

4.2.1 The arbitrators shall be appointed by the parties, by an arbitral institution or by any third party to whom the parties have conferred the mandate. The arbitral institution or the third party may request from any of the parties such information as they deem necessary to comply with the mandate.

4.2.2 The parties may freely agree on the procedure to appoint the sole arbitrator or arbitrators or submit to the procedure contained in the relevant rules of arbitration, provided that the principle of equality is not violated. In the absence of an agreement, the following rules shall apply:

• In the case of a sole arbitrator, or where the parties have agreed that the appointment of all arbitrators or the presiding arbitrator shall be made by mutual agreement between them, they shall have 15 days from receipt of the request for appointment to do so.
• In the case of three arbitrators, each party shall appoint one arbitrator within 15 days of receipt of the request to do so. In cases where there are multiple claimants or respondents, the claimants and respondents will each respectively collectively appoint an arbitrator by agreement between them unless otherwise provided in the arbitration agreement. Within 15 days of the acceptance of the last appointment, the two arbitrators will appoint the third who shall preside over the arbitral tribunal.
• If in any of the above cases one or more arbitrators are not appointed, the appointment shall be made, at the request of either party, by the Chamber of Commerce of the place of arbitration or of the place where the arbitration agreement was concluded, when the place of arbitration has not been agreed. In the absence of a Chamber of Commerce in such places, the appointment shall be made by the Chamber of Commerce of the nearest locality.
• In international arbitration, the appointment referred to in the above paragraph shall be made by the Chamber of Commerce at the place of arbitration or, when the place of arbitration has not been agreed upon, by the Chamber of Commerce of Lima.
• The Arbitration Act establishes that if the arbitral institution or the third party in charge of appointing the arbitrators fails to do so within the period determined by the parties, or the applicable rules of arbitration or, failing that, within 15  days of requesting their intervention, it shall be deemed to have rejected the assignment. In such cases, the appointment shall be made, in the absence of a different agreement between the parties, by following the default procedure laid out above.

4.3.1 The arbitrators shall maintain independence and impartiality from the parties to the arbitral proceedings. To ensure this, such persons nominated to participate as arbitrators must disclose if circumstances exist that may give rise to justifiable doubts as to their impartiality and independence.

4.3.2 Arbitrators may be challenged only if there are justifiable doubts as to their independence and impartiality, or if they do not meet the qualifications agreed upon by the parties or those set out in the Arbitration Act or the rules of the arbitral institution chosen by the parties.

4.4.1 The Arbitration Act gives the parties full freedom to determine the procedure to be followed in challenging an arbitrator and allows them to submit to the procedure contained in any arbitration rules.

4.4.2 However, if there is no agreement on the matter, the challenge procedure shall be as follows:

• A challenge shall be filed with the arbitral tribunal as soon as the reason for it becomes known. The challenged arbitrator and the other party shall be given a period of ten days to indicate what they consider appropriate
• In the event that the other party agrees to the challenge or the challenged arbitrator withdraws, another arbitrator shall be appointed under the same procedure as the challenged arbitrator, unless an alternate arbitrator already exists.
• If there is no agreement on the challenge or the challenged arbitrator denies the reason for the challenge, or if the challenged arbitrator is the sole arbitrator, the challenge shall be resolved by the arbitral institution that appointed the latter arbitrator or, failing that, by the appropriate Chamber of Commerce.
• If a tribunal is made up of more than one arbitrator, the challenge shall be resolved by the other arbitrators by an absolute majority without the vote of the challenged party. In the event of a tie, the presiding arbitrator shall decide, unless it is the challenged party, in which case the arbitral institution that appointed such arbitrator or, failing that, the appropriate Chamber of Commerce shall decide.

4.4.3 Unless otherwise agreed, once the period for issuing the award is running, no request for challenge shall proceed.

4.4.4 The challenge procedure, unless indicated by the arbitral tribunal, does not stay the arbitral proceedings.

4.4.5 The decision resolving the challenge is final and uncontested.

4.5.1 According to the Arbitration Act, the fees of the arbitrators and the secretary shall be established by the arbitral tribunal in a reasonable manner, taking into consideration the amount of the dispute, the complexity of the case, the time spent, the arbitral proceedings, the practices and customs of arbitration or any other relevant circumstances.

4.5.2 In the event of non-payment of advances, the arbitral tribunal may stay the arbitral proceedings until such time as the relevant party fulfils their obligation or such obligation is assumed by the other party.

4.5.3 If a period deemed reasonable by the court has elapsed without the advance being paid, the arbitrators may terminate the arbitral proceedings.

4.5.4 The tribunal shall distribute the costs of the arbitration according to the agreement of the parties or, failing that, the costs shall be borne by the unsuccessful party. However, the tribunal may apportion the costs between the parties if it deems this to be reasonable.

4.6.1 Acceptance of the office of arbitrator creates an obligation on the part of the arbitrators to perform the mandate, and they shall be liable for any damages they may cause if they fail to perform the mandate due to wilful misconduct or gross negligence.

4.7.1 In accordance with the principle of kompetenz-kompetenz, as set out above, the arbitral tribunal is competent to decide on its own jurisdiction should it be challenged.

5.1.1 Unless otherwise agreed by the parties, the arbitral process is deemed to have commenced on the date of receipt of the request to submit a particular dispute to arbitration.

5.2.1 The parties are free to determine the rules applicable to arbitral proceedings. In the absence of an agreement or rules that apply by default, the arbitral tribunal has the power to define the applicable rules and must also guarantee equal treatment to the parties so that they can see their rights asserted.

5.3.1 The parties are free to determine the place of arbitration. In the absence of agreement, the arbitral tribunal has the power to define the location taking into account the circumstances of the case.

5.4.1 The parties are free to choose the language to be used in arbitration, failing which the court is empowered to decide it on a case-by-case basis.

5.5.1 Unless the parties have agreed otherwise with respect to the content of the statement of claim and the statement of defence, the claimant shall state the facts on which the claim is based, the nature and circumstances of the dispute and the relief sought, and the respondent shall state its position with respect to the issues raised in the claim. The parties must file their respective statements of case within the time agreed by the parties or determined by the arbitral tribunal.

5.5.2 The parties, when filing their Statement of Claim and Statement of Defence, must provide all documents they consider relevant or refer to the documents or other evidence they will submit or propose.

5.5.3 Unless otherwise agreed, during proceedings, either party may modify or extend its Statement of Claim or Statement of Defence, unless the arbitral tribunal considers it inappropriate to allow such amendment having regard to the delay in making it, the prejudice to other party or any other circumstances.

5.6.1 The arbitral tribunal has the power to decide on the holding of any hearing for the taking of evidence, the issuing of conclusions and the presentation of positions.

5.6.2 At the request of either party, the tribunal shall conduct the respective hearing in a timely manner, unless otherwise agreed.

5.6.3 A summons to the hearing shall be made in advance and the parties may take part in the hearings directly or through their representatives.

5.7.1 The arbitral tribunal has the power to determine the admission, relevance and evaluation of the evidence submitted to the process, as well as to request at any time the filing of evidentiary material or to dispense in a reasoned manner with any evidence provided and not acted upon, according to the circumstances of the case.

5.8.1 Once constituted, the arbitral tribunal may, at the request of either party, adopt such interim measures as it deems necessary to ensure the effectiveness of the award, and may impose such protective measures as it deems appropriate to ensure compensation for any damages that may be caused by the enforcement of the measure.

5.8.2 Before ruling, the arbitral tribunal shall inform the other party of the request. However, the arbitral tribunal may issue an interim measure without informing the other party, if the requesting party can justify its request in order to ensure that the effectiveness of the measure is not frustrated. Once the measure has been implemented, the decision may be reconsidered.

5.8.3 The arbitral tribunal has the power to enforce its interim measures at the request of a party unless it deems it necessary or desirable to require the assistance of law enforcement agents. In cases of non-compliance with the interim measure, or when judicial enforcement is required, the interested party shall resort to the competent judicial authority, which, solely on the basis of the document evidencing the existence of the arbitration and the interim decision, shall proceed to enforce the measure without admitting any appeal or objection. The judicial authority is not competent to interpret the content or scope of the interim measure.

5.8.4 Any interim measure ordered by an arbitral tribunal located outside Peruvian territory may be recognised and enforced in the Peruvian territory.

5.8.5 Interim measures requested before the arbitral tribunal is constituted will be regulated by the rules of judicial cooperation which require judges to cooperate with the arbitral tribunal and on any terms required by the arbitral tribunal.

5.9.1 The arbitral tribunal or any of the parties with the tribunal's authorisation may request judicial assistance for the taking of evidence if they can prove the existence of the arbitration proceeding and provide the decision authorising the concerned party’s appeal to the Court.

5.9.2 Prior to the constitution of the arbitral tribunal, the parties may request interim measures from a judicial authority.

5.9.3 Once the measure has been enforced, the successful party shall commence the arbitration within ten days, if it has not already done so. If it fails to do so within this period or having complied with it, the arbitral tribunal is not constituted within 90 days of the issuance of the measure, the interim measure shall expire by operation of law.

5.9.4 The arbitral tribunal may modify, replace or render ineffective an interim measure it has granted, as well as any interim measures issued by a judicial authority, even in the case of final judicial decisions. This decision may be taken by the arbitral tribunal, either upon application of any party or, in exceptional circumstances and upon prior notice to the parties, on the arbitral tribunal’s own initiative.

5.9.5 In international arbitration, during the course of proceedings, the parties may also apply to the competent judicial authority, subject to the authorisation of the arbitral tribunal, for the adoption of such interim measures as they deem appropriate.

5.10.1 Unless otherwise agreed, the arbitral tribunal, the secretary, the parties and any person involved in the arbitral proceedings are under an obligation to maintain the confidentiality of the arbitral proceedings, the award and the information known to them.

5.11.1 Decisions of the arbitral tribunal other than the award (which is final – see section 6 below), may be reviewed on the initiative of one of the parties or of the arbitral tribunal, for duly substantiated reasons, within the period of time fixed by the parties, by the applicable arbitration rules or by the arbitral tribunal. In the absence of a determination of the time limit, the review must be filed within three days of notification of the decision.

5.11.2 Unless otherwise agreed, this review does not suspend the enforcement of the decision.

5.12.1 If the parties reach an agreement resolving the dispute in whole or in part, the arbitral tribunal shall terminate the proceedings with respect to the agreed points and, if both parties so request and the arbitral tribunal has no reason to object, shall record that agreement in the form of an award on terms agreed upon by the parties without the need for a statement of reasons, such award being as effective as any other award made on the merits of the dispute.

5.12.2 The proceedings shall continue in respect of the points of the dispute which have not been settled.

6.1.1 All awards must be in written form and signed by the arbitrators. Where there is more than one arbitrator, the signature of the majority or of the presiding arbitrator shall suffice, in which case the award shall state the reason for the absence of one or more signatures.

6.1.2 The award contains the decision resolving the dispute and the reasons upon which the award is based, unless otherwise agreed by the parties. The award shall contain the date of issue and the place of arbitration.

6.2.1Unless otherwise agreed by the parties, within 15 days of notification of the award, either party may request the rectification, clarification, integration and/or exclusion of the award:

• Rectification of the award may be necessary if there is a miscalculation, transcription, typographical or similar error.
• Clarification of the award may be necessary in the event that there is some obscure, imprecise or doubtful aspect of the operative part of the arbitral award or of a part that influences the enforcement thereof.
• Integration of the award may be necessary if the arbitral tribunal has failed to resolve any point of the dispute submitted to arbitration.
• Exclusion of the award may be necessary to remove from the award any point analysed and/or decided in the award and not submitted to arbitration.

6.3.1 The award has res judicata effects since it is final, unappealable, and binding from the time it is notified to the parties.

6.3.2 If either party fails to implement the award within 15 days of the notice of the award, the concerned party may seek enforcement of the award from the arbitral tribunal if it has the power to enforce the award or, if it does not, from the Court.

7.1.1 The purpose of annulment is to review the validity of the award in the following cases:

• If the arbitration agreement is challenged on the grounds of being non-existent, null, voidable or ineffective (first ground);
• If one of the parties was not served with notice of appointment of an arbitrator or with notice of any arbitration proceeding or if, for any other reason, it was unable to assert its rights (second ground);
• When the composition of the tribunal or the proceedings do not adjust to the parties’ agreement or to the applicable regulations (third ground);
• When the tribunal decides on a matter not submitted to arbitration (fourth ground);
• When, in the case of domestic arbitration, the arbitral tribunal decides on a matter that cannot be submitted to arbitration (fifth ground);
• When the subject matter of the dispute is not subject to arbitration or the award is contrary to international public policy in the case of international arbitration (sixth ground); or
• When the dispute has been decided on after the time limit agreed to by the parties or provided for in the applicable rules (seventh ground).

7.1.2 When neither of the parties is a national of Peru nor has its domicile, habitual residence or place of business in Peruvian territory, they may expressly waive the option of annulment of the award or limit the grounds to be invoked.

7.2.1 Where any of the first four grounds set out above are invoked, the option of annulment may only be sought if the relevant claim has been made to the arbitral tribunal and that claim has been dismissed.

7.2.2 An application for annulment shall be filed with the Court, specifically the competent Superior Court, within 20 business days following the notice of the award, indicating the cause or causes, which shall be duly substantiated.

7.2.3 Within ten days following the filing of the award, the Superior Court shall decide on its admission and, subsequently, serve the other party with notice thereof, granting it a period of 20 days to file what it deems appropriate and offer the documentary evidence it deems appropriate.

7.2.4 Upon expiration of the above period, a date shall be set for the hearing of the case within the following 20 days. Once the hearing of the case is concluded, the Superior Court has 20 days to resolve the appeal.

7.3.1 If the award is annulled on the first ground, the matter submitted to arbitration may be heard by the Court.

7.3.2 If the award is annulled on the second ground, the arbitration must be resumed from the time the right of defence was violated.

7.3.3 If the award is annulled on the third ground, the parties shall reappoint the arbitrators or the arbitration shall be resumed from the time the parties' agreement was not complied with.

7.3.4 If the award is annulled on the fourth ground, the matter not submitted to arbitration may be heard in a new arbitration proceeding or heard by the Court.

7.3.5 If the award is annulled on the fifth ground, the matter not subject to arbitration may be heard by the Court.

7.3.6 If the award is annulled on the seventh ground, a new arbitration may be commenced, unless the parties compose a new tribunal so that, on the basis of the proceedings, it is able to resolve or, in the case of domestic arbitration, the parties agree that the Superior Court that heard the appeal shall resolve the merits of the dispute.

8.1.1 Provided that there is prior agreement of the parties or the applicable regulations so establish, the arbitral tribunal has the power to enforce its decisions at the request of either party. For example, in the event that property is to be auctioned or title to real estate is to be transferred to a party, the arbitral tribunal could directly enforce its decision by carrying out the auction of property or ordering the Public Registries to vary the title to the property.

8.1.2 However, when the arbitral tribunal deems it necessary to have the assistance of law enforcement agents, it may cease its functions without being subject to liability so that the party concerned may have recourse to the Court.

8.2.1 The party concerned may resort to the Court with a copy of the arbitration award to request the issuance of the writ of execution so that the enforced party may comply with its obligation within a period of five days, under penalty of commencement of mandatory enforcement proceedings.

8.2.2 The enforced party may only object if it proves that the required obligation has been fulfilled or that the enforcement has been stayed.

8.3.1 Awards rendered outside Peruvian territory may be recognised and enforced in Peru, as provided for in the following instruments:

• The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, adopted in New York on June 10 1958;
• The Inter-American Convention on International Commercial Arbitration, adopted in Panama on January 30 1975;
• Any other treaty on recognition and enforcement of arbitral awards to which Peru is a party.

8.3.2 In the absence of a treaty, recognition of the foreign award shall be sought before the Superior Court.