Arbitration

Last verified on Friday 16th March 2018

Paraguay

José Antonio Moreno Rodríguez
Altra Servicios Juridicos

    Legislation

  1. 1.

    Which legislation governs the enforcement of international commercial arbitration awards and arbitral agreements in international business contracts, and international commercial arbitration proceedings?

  2. Paraguayan Law 948 of 1996 ratified the New York Convention of 1958 on recognition and enforcement of awards.

    Paraguayan Arbitration Law 1,879 of 2002 is inspired by the UNCITRAL Model Arbitration Law, which in turn is drawn upon the New York Convention in matters of recognition and enforcement of awards.

    Additionally, article 44 of the Paraguayan Arbitration Law states that foreign awards shall be recognised and enforced according to the treaties ratified by Paraguay. It also states:

    If more than one international treaty is applicable, except agreement on the contrary between parties, the treaty most favourable to the party requesting recognition and enforcement of an arbitration agreement and award shall apply. If no international treaty or convention is applicable, foreign awards shall be recognised and enforced in the Republic according to the rules of this law and the specific provisions of this chapter.

    There are no pending proposals to modify Paraguayan arbitration legislation.

  3. 2.

    Has the UNCITRAL model arbitration law been adopted in your jurisdiction? 

  4. The Paraguayan Arbitration Law 1879 of 2002 has been drawn upon the UNCITRAL Model Arbitration Law. Moreover, there are minor variations between both instruments.

    For instance, regarding the agreement to arbitrate and substantive claim before a court, article 11 of the Paraguayan Arbitration Law follows article 8 of the Model Law in the sense that the judge shall in principle submit the parties to arbitration. However, the difference lies in the final part. Article 11 prescribes that if the parties have initiated judicial proceedings, the arbitration proceedings may, nevertheless, begin or proceed and an award may be rendered, “as long as the parties desist from the judicial intervention before the award is rendered”.

    As will be seen again below (see answer to question 36), in regard to the kompetenz-kompetenz principle, article 19 departs from article 16 of the Model Law in the sense that the award cannot be rendered if, in the meantime, there is a judicial decision pending on the subject.

    Article 20 of the Paraguayan Law allows the arbitral tribunal to order interim measures, and on the matter, it states:

    Interim measures of protection ordered by the arbitral tribunal shall be effective by judicial order adopted without the other party being heard within the third day of being requested by said tribunal. Before the constitution of the arbitral tribunal interim measures of protection shall be requested before the competent Civil and Commercial Judge and shall be decided by the latter. Interim measures of protection granted judicially shall expire within seven days of the constitution of the arbitral tribunal; this tribunal is entitled to confirm them or not, or modify them, from the moment of its constitution.

    Conventions

  5. 3.

    Is your jurisdiction a party to both the New York Convention and the Panama Convention? Is it a party to any other conventions or treaties governing international commercial arbitration agreements, awards or proceedings? 

  6. Yes, Paraguay is a party to both conventions. Law No. 948 of 1996 ratified the New York Convention of 1958 on Recognition and Enforcement of Foreign Arbitral Awards; while Law No. 611 of 1976 ratified the Inter-American Convention on International Commercial Arbitration (Panama 1975), sponsored by the Organization of American States (OAS).

    Additionally, Paraguay adopted the Inter-American Convention on Enforcement of Foreign Arbitral Awards, ratified by Law 889 of 1981, also sponsored by the OAS. 

    Paraguay adopted other OAS instruments related – at least partially – to arbitration, such as the Inter-American Convention on Letters Rogatory (Panama, 1975), via Law No. 613 of 1976, whereas its additional protocol was incorporated through Law No. 894 of 1981. Law No. 890 of 1981, in turn, approved the Inter-American Convention on Execution of Preventive Measures (Montevideo, 1979); Law No. 612 of 1976 ratified the Inter-American Convention on the Taking of Evidence Abroad (Panama, 1975); Law No. 614 of 1976 incorporated the Inter-American Convention on the Legal Regime of Powers of Attorney to be used abroad (Panama, 1975); and, finally, Law No. 891 of 1981 adopted the Inter-American Convention on Proof and Information on Foreign Law (Montevideo, 1979).

    At a regional level, Paraguay ratified South American Common Market (MERCOSUR) instruments related to arbitration, such as the MERCOSUR International Commercial Arbitration Agreement (Common Market Council Decision No. 3/98, adopted by Law No. 3303 of 2007); and the MERCOSUR Protocol on International Jurisdiction in Contract Law Matters (Common Market Council Decision No. 1/94).

  7. 4.

    Is your jurisdiction a party to the ICSID Convention? Have steps been taken to renounce the Convention or withdraw from ICSID? 

  8. Yes, Paraguay is a party to the ICSID Convention. Paraguay joined the International Centre for Settlement of Investment Disputes (ICSID) by Law 944 of 1982.

    The country ratified 22 bilateral instruments on investment promotion and protection, contemplating – among other provisions – ICSID arbitration, with the following countries: France (Law 804/80, article 12); United Kingdom and Northern Ireland (Law 92/91, article 9; and Law 798/95, article 8); China (Law 29/92, article 6); United States (Law 155/93, article 5); Korea (Law 225/93, articles 12, 13); the Netherlands (Law 349/94, article 9); Hungary (Law 467/94, articles 9, 10); Germany (Law 612/95, articles 10, 11); Austria (Law 1180/97, articles 8, 9); Spain (Law 461/94, articles 10, 11); Ecuador (Law 469/94, articles 8, 9); Peru (Law 468/94, articles 8, 9); Romania (Law 527/94, articles 8, 9); Chile (Law 897/96, articles 8, 9); Venezuela (Law 1058/97, articles 9, 10); El Salvador (Law 1316/98, articles 9, 10); Czech Republic (Law 1472/99, article 9, 10); Portugal (Law 1722/01, articles 9, 10); Bolivia (Law 1891/02, articles 9, 10); Cuba (Law 1900/02, articles 9, 10); and Italy (Law 4904/2013, articles 9, 10).

    Paraguay has not taken steps to renounce the Convention or withdraw from ICSID.

  9. 5.

    Is your jurisdiction a party to other conventions that directly affect the enforceability of arbitration agreements, rights or awards?

  10. No. Paraguay is not party to any other conventions that directly affect the enforceability of arbitration agreements, rights or awards besides the ones previously mentioned.

    Commercial arbitral agreements and arbitrability

  11. 6.

    Some jurisdictions have permitted parties to compel resolution of a dispute by means of arbitration only if the agreement to arbitrate was entered into after a dispute has arisen. Is a pre-dispute arbitration clause to resolve international commercial disputes by arbitration enforceable?

  12. Article 3 (a) of the Paraguayan Arbitration Law, following an analogue provision of the UNCITRAL Model Law, recognises both an arbitration clause included in a contract for controversies that may arise between the parties in the future as well as an agreement by which the parties decide to refer to arbitration controversies that have already arisen between them.

    There is no need for any post-dispute compromiso.

  13. 7.

    What are the requirements for an enforceable arbitral agreement? 

  14. Regarding the form of the arbitration agreement, it is unfortunate that article 10 of the Paraguayan Arbitration Law is more restrictive than article 7 of the UNCITRAL Model Law of 1985. In turn, it follows what in the 2006 amendment was included as Option I of the Model Law.

    Article 10 requires the arbitration agreement to be in writing. It considers the requirement as fulfilled when the arbitration agreement is included in a document signed by the parties, when it is stated in an exchange of letters or special telegrams between them as well as when the parties have exchanged legal claims in which the existence of an arbitration agreement and its terms were upheld by one party and not denied by the other.

    Additionally, article 10 provides that the reference made in a contract to a document which contains an arbitration compromise, constitutes an arbitration agreement as long as the contract is in writing and the reference implies that the compromise is part of the contract.

    The approach upheld by the national arbitration law is inconceivable when considering the broad criteria of freedom of formalities that arise from the Paraguayan Civil Code (articles 302, 673, 676, 704, 705 and 703), which is in accordance with the evidentiary openness of the Code of Civil Procedure (articles 246 and other related provisions).

  15. 8.

    Is there subject matter that is not legally subject to arbitration in the context of an international business transaction?

  16. Article 2 of the Paraguayan law is peculiar. It establishes that every matter that can be subject to settlement and is “patrimonial” (pecuniary) in content shall be subject to arbitration, as long as there is no definite judicial ruling on the matter. 

    This article excludes matters that require intervention of the Ministerio Público (which would be analogue to the office of an Attorney General), such as, for example, issues related to family law or to minors.

    Furthermore, the scope of Law 194 of 1993 on Agency, Representation and Distributorship, regarding court jurisdiction and arbitration, has been very controversial. One matter widely discussed in the application of Law 194 is the obligation to submit controversies to the jurisdiction of Paraguayan tribunals (article 10). In its Acuerdo y Sentencia No. 827 of 2001, the Paraguayan Supreme Court held that article 10 “constitutes a guarantee for the parties so that the matter at stake can be discussed in the place of performance of the contract. Nothing more logical or fair… the State, through this law, intervenes in the relationship by establishing clear rules to which the parties shall adhere”.

    Article 10 also contemplates the possibility of resorting to arbitration, which led to a different discussion as regards whether it could be conducted in a foreign country with the possibility that arbitrators might not apply Paraguayan Law. The matter was settled by Acuerdo y Sentencia No. 285 of 2006 in the case: Accion de Inconstitucionalidad en el juicio: Gunder ICSA c/KIA Motors Corporation s/ indemnización de daños y perjuicios.

    The Supreme Court did not deny that these issues could be submitted to arbitration, but stated in its decision that given the mandatory character of Law 194, arbitration should be conducted in Paraguay. This has the obvious objective of allowing a possible later scrutiny by the local Supreme Court regarding whether the award observes the mandatory Paraguayan Law.

    The Gunder case has an additional important factor: the parties had expressly provided that the appointed arbitrators should apply Korean law. Accordingly, this implied an obvious attempt to fraudulently evade the imperative applicable law. The Paraguayan Supreme Court did not admit this possibility and thus overruled the parties’ agreement. 

  17. 9.

    Are there any limits to the ability of a state or an instrumentality of the state to enter into an agreement to arbitrate in your jurisdiction? If so, under what circumstances may the state or its instrumentalities enter into such an agreement? Please describe the requirements that must be met for the state to enter into a binding arbitration agreement.

  18. In the past, legislation prohibited, arbitration of matters related to the state and municipalities, under penalty of annulment. This situation has changed in recent years with several legal enactments. 

    In the mid-90s, Law No. 489 of 1995 authorised the Central Bank to submit certain matters to arbitration (articles 2 and 19). This was later extended to other state entities and subject matters, by two sets of legal rules: Law No. 1618 of Concession of Public Works and Services, and Law No. 2051 of 2003 on Public Procurement.

    Anyhow, Law No. 2051 and Law No. 1618, both of which govern public contracts, have slightly different arrangements for arbitration. Even though both laws have different objectives in principle, they both include procurement of “public works”. Therefore, the differences between them could eventually lead to confusion.

    According to Law No. 2051, arbitration is optional, and if it takes place, it is to be governed by Law No. 1879 (article 9). In turn, Law No. 1618 establishes conciliation as the first method of dispute resolution, and only when it does not lead to a solution, arbitration. This applies if arbitration has been established as a dispute resolution mechanism in the terms and conditions of the corresponding tender (article 45).

    Furthermore, article 2 of the Paraguayan Arbitration Law makes specific reference to the possibility of the state and instrumentalities of the state, as well as municipalities, to enter into arbitration agreements in regard to disputes that may arise with particulars – nationals or foreigners – as long as they derive from legal acts or contracts governed by private law.

    Finally, Law No. 5102 of 2014, which regulates public-private partnership agreements, as a specific type of contracts involving the state and particulars, establishes in its article 41 that disputes related to the interpretation, execution, compliance, development or termination of such agreements, which could not be settled through negotiations between the parties, can be submitted to arbitration at law, provided that such disputes relate to private law matters.

    For these purposes, said article provides that contracts are to regulate aspects such as the corresponding procedural stages, the requirements to be fulfilled in each stage, the composition of the jurisdictional organs, and the effectiveness of the decisions, opinions and awards, notwithstanding those aspects already regulated by the corresponding decree.

    In particular, Decree No. 1350 of 2014, which regulates Law No. 5102, stipulates, among other matters, that arbitration is the third tier of dispute settlement mechanisms on public-private partnership agreements. In this regard, it is stipulated that, unless otherwise agreed by the parties, the provisions under Law No. 1879 shall apply, thus allowing parties to select different arbitration rules, institutional or ad hoc, domestic or foreign. Article 110 of Decree No. 1350, expressly provides that the choice of the forum based on the regulations or contained in the specific bidding terms and conditions for each agreement, excludes any other forum, jurisdiction or dispute settlement mechanism.

  19. 10.

    Does the law specify whether an arbitration will be in equity or under law if the parties do not expressly specify the nature of the arbitration in the agreement?

  20. Article 32 of the Paraguayan Arbitration Law specifies that the arbitrators are only allowed to decide in equity if the parties have expressly authorised it to do so. Article 32 of the Paraguayan Law differs from article 28 of the UNCITRAL Model Law in that, rather than using expressions such as “ex a quo et bono” or “amiable composition”, it simply uses the words “in equity”. In substance, these terms refer to the same thing.

    With regard to public contracts, Decree No. 21.909 which regulates Law No. 2051 of 2003 on Public Procurement, rejects arbitration in equity.

  21. 11.

    How does the law limit party autonomy with respect to the terms of an arbitral agreement? 

  22. According to article 12 of the Paraguayan Arbitration Law, parties are free to determine the number of arbitrators, as long as they choose an odd number. Failing such determination, the number of arbitrators shall be three.

    Furthermore, article 13 (b) prescribes that the parties are free to specify how the arbitrators shall be selected. If they do not, article 13 (c) provides the following mechanism: if three arbitrators have to be appointed, each party will choose one and both chosen arbitrators will select the third one. If the agreement provides for one arbitrator, and the parties cannot agree on one person, a judge will name one at the request of any of the parties. 

    The parties are free to specify the arbitral institution of their choice. Pursuant to article 3 of the Paraguayan Arbitration Law, in accordance with article 2 of the UNCITRAL Model Law, “arbitration” means any arbitration proceeding whether or not administered by a permanent arbitral institution. Further, article 22 of the Paraguayan Arbitration Law grants the parties the freedom to agree on the set of rules to be used in the arbitration proceeding. See also answers to questions 19 and 20.

    Concerning the freedom of the parties to agree to a seat in a foreign jurisdiction, article 23 provides that the parties are free to agree on the venue of the arbitration. In the event of a lack of agreement on the matter, the arbitral tribunal is the one to decide, based on the circumstances of the case.

  23. 12.

    Under what circumstances does the law allow a non-signatory to an arbitral agreement to pursue a claim in an international arbitration against a party that signed the arbitral agreement?

  24. The Paraguayan Arbitration Law contains no provision on the matter and neither is there reported case law regarding the issue.

  25. 13.

    Under what circumstances does the law allow a signatory to an arbitral agreement to pursue a claim in an international arbitration against a party that did not sign the arbitral agreement?

  26. The Paraguayan Arbitration Law contains no provision on the matter and neither is there reported case law regarding the issue.

  27. 14.

    Under what circumstances may a non-signatory to an arbitral agreement compel arbitration of a claim asserted against it in a court of law by a signatory of the arbitral agreement?

  28. There is no provision in the Paraguayan Arbitration Law and no reported case law regarding this issue.

  29. 15.

    Is there any law in your jurisdiction specifically governing the arbitrability of consumer or labour disputes?

  30. Law No. 1334 of 1998 regarding consumer protection prohibits standard contract clauses that impose arbitration (article 28 (d)). This restriction is tempered by regulations (Decree No. 20572 of 2003, Resolution No. 147 of 2003 and Decree No. 21004 of 2003), which state that arbitration clauses would be valid if voluntarily agreed by consumers.

    In regards to labour disputes, article 97 of the Paraguayan constitution expressly recognises arbitration as a possible dispute resolution mechanism in matters related to collective labour agreements.

  31. 16.

    Does your jurisdiction provide for class-action arbitration or group arbitration? If so, are there any limitations to the arbitrability of such claims or requirements that must be met before such claims may be arbitrated? 

  32. There is no provision on the Paraguayan Arbitration Law and no reported case law regarding this issue.

  33. 17.

    Are contractual waivers precluding arbitration of claims on a class-wide basis enforceable? Under what circumstances have such waivers been upheld or set aside by the courts?

  34. The Paraguayan Arbitration Law contains no provision on the matter and neither is there reported case law regarding the issue.

  35. 18.

    If the parties’ contract is silent on the issue of class-action arbitration, is class-action arbitration allowed under the law of your jurisdiction?

  36. Paraguayan Law does not contain provisions on class-action arbitration, nor is there case law dealing with this matter.

  37. 19.

    Are foreign arbitral institutions without a physical presence in your jurisdiction authorised to administer arbitrations in your jurisdiction? Does the law require that a foreign institution be licensed under local law in order to administer an arbitration seated there?

  38. The Paraguayan Arbitration Law contains no provision regarding the authorisation required by foreign arbitral institutions to administer arbitrations seated in the country. 

    Arbitral institutions and arbitrators

  39. 20.

    Is an arbitral award issued in an arbitration seated in your jurisdiction under the auspices of a foreign institution (such as the ICC, ICDR, LCIA or similar institutions) vulnerable to challenge because it was issued under the auspices of a foreign institution?

  40. Article 3 of the Paraguayan Arbitration Law, defines arbitration in the same terms of article 2 (a) of the UNCITRAL Model Law. Accordingly, “arbitration means any arbitration whether or not administered by a permanent arbitral institution”.

    However, the Paraguayan Arbitration Law does not contain any provision differencing national from foreign arbitral institutions.

    Further, among the reasons based on which a party may request the annulment of an arbitral award, provided for in article 40 of the Paraguayan Arbitration Law, none of them refers to the auspice of a foreign arbitral institution. 

  41. 21.

    Does the law require that arbitrators in international arbitrations be citizens or residents of your jurisdiction?

  42. Article 13 of Paraguayan Arbitration Law provides that citizenship shall not be an obstacle for the appointment as arbitrator unless the parties agree otherwise. Moreover, regarding migratory aspects, the Paraguayan Law states in article 13 (a):

    [F]or the performance of their duties, foreign arbitrators shall be admitted into the country as foreign non residents, for a six-month period. This period can be extended for similar periods. The arbitrator must receive retribution for his tasks during his stay in the country.

  43. 22.

    Does your law require that arbitrators in international cases be lawyers? 

  44. The Paraguayan Arbitration Law does not mention this requirement.

  45. 23.

    Does your jurisdiction provide immunity to arbitrators serving in an arbitration with its legal seat in your jurisdiction? Under what circumstances does such immunity apply or not apply? 

  46. Paraguayan Law does not contain a provision with respect to the immunity of arbitrators. 

  47. 24.

    Are the fees of foreign arbitrators serving in an arbitration seated in your jurisdiction subject to taxation?

  48. Yes, arbitrators are subject to pay Value Added Tax (IVA) of 10 per cent as well as Personal Income Tax (IRP). The rate of this tax in Paraguay is of 10 per cent, and the law imposes an obligation of withholding this amount for payments abroad.

  49. 25.

    Must arbitrators in international arbitrations be independent and impartial? What is the legal standard governing conflicts of interest and disclosure by arbitrators in international arbitrations?

  50. Article 14 of the Paraguayan Arbitration Law replicates the formula of the Model Law that arbitrators must be independent and impartial. The same article establishes that the arbitrator has the duty to disclose any circumstance that could give rise to justifiable doubts in regard to both standards. 

  51. 26.

    Will courts entertain requests to disqualify an arbitrator before the conclusion of an award? 

  52. Article 15 of the Paraguayan Arbitration Law grants the parties the possibility to agree on the procedure to be followed for the challenge of an arbitrator.

    Failing such determination, the norm provides that if a challenge is not successful before the arbitral tribunal, the requesting party may, within 15 days, have recourse to a judge, who has to decide in the next seven days. The latter’s decision cannot be appealed.

    Besides the reduction from 30 to 15 days, article 15 differs from article 13 of the Model Law in that it does not state that while such a request before a judge is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and dictate an award.

    Arbitral proceedings

  53. 27.

    Does the law require that arbitral proceedings seated in your jurisdiction be held in a specific language? 

  54. Article 25 of the Paraguayan Arbitration Law states that parties are free to determine the language in which the arbitral proceeding will be conducted. 

  55. 28.

    Can foreign lawyers serve as advocates in arbitral proceedings in your jurisdiction? If so, can they do so alone or must a local lawyer serve as co-counsel? 

  56. Foreign lawyers can serve as advocates in arbitral proceedings in Paraguay. There is no need to act with a local lawyer as co-counsel.

  57. 29.

    Are the fees of foreign lawyers earned for services rendered in connection with an arbitration seated in your jurisdiction subject to local taxation?

  58. The fees of foreign advocates acting in international arbitral proceedings seated in Paraguay may be subject to taxes, in the same conditions as the fees of foreign arbitrators (see answer to question 23).

  59. 30.

    In what circumstances, if any, does your law allow the consolidation of multiple arbitral proceedings into a single proceeding?

  60. The Paraguayan Arbitration Law contains no provision on the matter and neither is there reported case law regarding the issue.

  61. 31.

    Please describe common practice and usage in international arbitrations seated in your jurisdiction with respect to a party’s right to require an opposing party to produce documents pertinent to the dispute. 

  62. Article 27 of the Paraguayan Arbitration Law follows article 24 of the UNCITRAL Model Law, and states that any document or information provided by one party will be necessarily communicated to the other party. There is no reference to obligatory document production.

  63. 32.

    Does the law impose a duty of confidentiality in arbitration? If so, on whom? 

  64. There is no provision in the Paraguayan Arbitration Law that addresses the duty of confidentiality in arbitration.

  65. 33.

    Does the law authorise third-party funding for international arbitration? Are there any ethical limitations imposed upon counsel to the parties that restricts the use of such funding?

  66. The Paraguayan Arbitration Law contains no provision on third-party funding. 

  67. 34.

    Are there any mandatory national rules of professional ethics that apply to counsel in an international arbitration in your jurisdiction? If so, are those rules applicable to counsel from another jurisdiction participating in an arbitration in your jurisdiction? 

  68. The Paraguayan Arbitration Law does not set mandatory rules of professional ethics applicable to counsel in an international arbitration. 

  69. 35.

    Are there any mandatory rules on oath or affirmation for witnesses testifying in an arbitration in your jurisdiction that have to be administered prior to their testimony? If so, what are they? 

  70. The Paraguayan Arbitration Law contains no provision on oath or affirmation for witnesses in arbitration.

  71. 36.

    Are there restrictions in your jurisdiction on the interviewing of witnesses in anticipation of hearings or giving of testimony?

  72. Article 23 of the Paraguayan Arbitration Law, on the seat of the arbitration, provides that the arbitral tribunal may, unless agreement on the contrary, meet on a place other than the seat, which it deems appropriate, for interviewing witnesses.

    Further, article 42 of the Paraguayan Arbitration Law, on the annulment of an arbitral award, stipulates that the interviewing of witnesses must take place at the seat of the court.

    Other than the provisions above mentioned, the Paraguayan Arbitration Law contains no further reference to the possibility of interviewing witnesses in anticipation of hearings or giving of testimony.

    Court support for arbitration

  73. 37.

    Can arbitrators decide on their own jurisdiction? Is the principle of ‘Kompentenz-Kompetenz’ followed in the courts?

  74. Article 19 of the Paraguayan Arbitration Law follows article 16 of the Model Law in the sense that the arbitral court may decide on its own jurisdiction.

    Nevertheless, article 19 differs from the solution provided in the Model Law in the sense that according to the former, the arbitral tribunal cannot render a final award if there is a judicial ruling pending on the issue of its competence. This is an undesirable provision that could lead to counterproductive delays in the process.

    However, article 19 signifies a step forward with regard to the prior normative vacuum which led to the establishment of a negative precedent on the subject in the case INDUMAR SA c/ Compañía Cervecera Brahma del Paraguay s/indemnización de daños y perjuicios (AI No. 253, 4 May 2005, Tribunal de Apelación en lo Civil y Comercial, 2ª Sala).

    The solution upheld in that occasion would have been different if trends in comparative law had been accounted for, which unfortunately did not occur. The matter has now been settled in the opposite direction, a solution desirable for arbitration.

  75. 38.

    Do the courts follow the principle of the independence and separability of the arbitration clause? 

  76. The independence and separability of the arbitration agreement is expressly recognised in article 19 of the Paraguayan Arbitration Law.

  77. 39.

    Are arbitral tribunals empowered to grant interim relief? If so, how is that relief enforced in the courts? 

  78. Article 20 of the Paraguayan Arbitration Law – following article 17, sub paragraph (1) of the Model Law – provides that unless the parties provide otherwise, the arbitral tribunal may, at the request of a party, grant interim measures.

    Accordingly, interim measures cannot be granted ex officio.

    Furthermore, article 20 adds – in comparison with the Model Law – that:

    Interim measures of protection ordered by the arbitral tribunal shall be effective by judicial order adopted without the other party being heard within the third day of being requested by said tribunal. Before the constitution of the arbitral tribunal interim measures of protection shall be requested before the competent Civil and Commercial Judge and shall be decided by the latter. Interim measures of protection granted judicially shall expire within seven days of the constitution of the arbitral tribunal; this tribunal shall be entitled to confirm them or not, or modify them, from the moment of its constitution.

    Paraguayan Law does not adopt a provision similar to article 9 of the Model law, which provides that it is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure.

  79. 40.

    Can arbitrators issue orders, subpoenas or use other legal processes to compel the production of evidence by a third party or compel a third-party witness to appear before them? If so, will a court lend its aid in enforcing such an order against a recalcitrant third party? Also, if arbitrators can issue orders, subpoenas or use other legal processes to compel the production of evidence by a third party or compel a third-party witness to appear before them, are there any limitations to their doing so? 

  80. Even though the Paraguayan Arbitration Law contains no provision expressly referring the subject, article 22 grants the arbitral tribunal the power to conduct the proceedings in the manner they deem appropriate. This includes the power to determine the admissibility, pertinence and value of evidence. Accordingly, based on said article, arbitrators have the power to issue orders to compel the production of evidence by a third party or to compel third-party witnesses to appear before them.

    Furthermore, article 31 provides that the arbitral tribunal, or a party with the former's conformity, may request judicial assistance in the taking of evidence. 

  81. 41.

    Can a party to an arbitration seek relief from the court to obtain evidence in aid of an international arbitration? What is the scope of such relief?

  82. As has been mentioned above, according to article 31 of the Paraguayan Arbitration Law, the arbitral tribunal, or a party with the approval of the arbitral tribunal, may request assistance from a competent judge in the taking of evidence.

    There is no provision in the Paraguayan Arbitration Law that specifies the scope of such request.

  83. 42.

    Can a party in an international commercial arbitration seek interim or provisional relief from a court without first seeking relief from the arbitral tribunal?

  84. Yes. Pursuant to article 20 of the Paraguayan Arbitration Law, before the constitution of the arbitral tribunal, interim measures shall be requested before the competent Civil and Commercial Judge and shall be decided by the latter.

    See also answer to question 37. 

  85. 43.

    Have the courts issued injunctions enjoining arbitral proceedings from going forward? 

  86. There are no reported cases on this matter. 

  87. 44.

    Does the law provide that post-award interest accrues on an unpaid arbitral award? 

  88. In principle, any obligation to pay post-award interest will depend on the parties’ agreement and the particular decision of the tribunal, but Paraguayan Arbitration Law does not include a specific provision related to interests.

  89. 45.

    Is an arbitral tribunal empowered to award attorneys’ fees to the prevailing party or is that power reserved to the courts?

  90. According to article 3 of the Paraguayan Arbitration Law, the power of the arbitral tribunal to award attorney’s fees to the prevailing party in an arbitration proceeding is subject to the parties’ agreement.

  91. 46.

    Is an arbitral tribunal empowered to award punitive or exemplary damages? Is the arbitral tribunal empowered to award interest? 

  92. Paraguayan Law does not contemplate punitive or exemplary damages.

    Awards - content

  93. 47.

    What are the grounds for challenging or vacating an international award issued in an arbitration seated in your jurisdiction? 

  94. Article 40 of the Paraguayan Arbitration Law reproduces the text of article 34 of the Model Law almost entirely. Other paragraphs of the Model Law´s provision are distributed between articles 41 and 43 of the former.

    The first paragraph of article 40 states that the annulment of an arbitral award can only be requested before the competent Court of Appeals in Civil and Commercial matters of the place where the award was dictated. It discards scrutiny through an appeal procedure. In line with the Model Law and the New York Convention, the grounds for challenging an arbitral award are the following:

    • a party to the arbitration was affected by an incapacity; or the arbitration agreement is not valid under the law to which the parties have subjected it, or, failing any indication thereof, under Paraguayan Law;
    • the party requesting the annulment was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present its case;
    • the award deals with a dispute not contemplated by the arbitration agreement, or contains decisions on matters beyond the scope of the arbitration agreement;
    • the composition of the arbitral tribunal or the arbitral procedure were not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law which the parties cannot derogate, or, failing such agreement, were not in accordance with this Law; and
    • the award deals with matters which are not allowed to be subject to arbitration, or the award is in conflict with either Paraguayan or international public policy. 
  95. 48.

    Is “lack of reasonableness”, manifest disregard or a mistake in the application of the substantive law to the dispute of an international award grounds to vacate it? 

  96. Please see question 45.

  97. 49.

    Have international awards rendered in your jurisdiction been vacated on the grounds of "public policy"? If so, how has the "public policy" ground for vacating an award been interpreted in your jurisdiction?

  98. See question 47.

  99. 50.

    What is the period of time a party has to challenge such an award after its issuance?

  100. Article 41 establishes a time limit of 15 days from the date of notification of the award.

  101. 51.

    Please describe any recent significant experiences or cases that illustrate the attitude of your courts towards the annulment of international awards rendered in your jurisdiction.

  102. In the case Recurso de Nulidad contra Fallo Arbitral No. 58181T0029004 JTI Trading SA v INDUMAR SA, the annulment proceeding against an arbitral award was rejected in limine for extemporaneity, based on article 41 which was invoked to this effect (AI No. 509 de 2006, Cámara de Apelaciones en lo Civil y Comercial, 2ª Sala).

    Regarding the Grupanor case, see question 5.

  103. 52.

    Do the courts consider themselves empowered to vacate an arbitral award rendered in another jurisdiction?

  104. Yes, they do.

    Awards enforcement

  105. 53.

    May parties waive all court review of an arbitral award rendered in your jurisdiction (or restrict or expand the scope of that court review)?

  106. No, the parties are not permitted to limit the court’s power to review an arbitral award. 

  107. 54.

    Please describe the process for enforcing an arbitral award rendered in another jurisdiction.

  108. With respect to the recognition and enforcement of awards, article 44 of the Paraguayan law adds the following to the Model Law:

    Foreign awards shall be recognised and enforced in the country, according to the treaties ratified by the Republic of Paraguay on recognition and enforcement of awards. If more than one international treaty is applicable, except agreement on the contrary between parties, the treaty most favorable to the party requesting recognition and enforcement of an arbitration agreement and award shall apply. If no international treaty or convention is applicable, foreign awards shall be recognised and enforced in the Republic according to the rules of this law and the specific provisions of this chapter.

    Article 45 corresponds to article 35 of the Model Law, with the following changes: The first paragraph allows a choice between two jurisdictions, by stating that: 

    Either the competent Civil and Commercial Judge of the domicile of the person against whom the award is intended to be enforced, or where the goods are located, shall be competent, by option of the party that requests the recognition and enforcement of the award.

    The second paragraph is in line with the proposal for modification of the Model Law introduced by UNCITRAL in its 39th period of sessions, held in 2006. The Paraguayan rule states that the party invoking an award or demanding its enforcement must present the original award or copy thereof. If the award is not drafted in the official language of the state, the invoking party shall present an official translation to said language.

    At the end of Chapter VIII (on recognition and enforcement of awards), article 48 of the Paraguayan Arbitration Law provides a description of the procedure to be followed for the recognition or enforcement of an arbitral award. The Model Law does not contain an analogue provision. Accordingly, pursuant to article 48:

    Once the recognition or enforcement of an award is posed, the judge shall notify the losing party, for a period of five days, by official notice of a cause of action. The losing party will only be able to oppose the enforcement based on the causes established in article 46, and offering all the evidence by which he/she aspires to abide. Documentary evidence shall accompany the presentation; in their absence, a listing thereof, indicating: content, place, archive, public office or person in whose possession they are, must be presented. If none of those causes arise, the judge, within five days, shall dictate resolution deciding the enforcement, ordering summons of the obliged and seizure of goods, if applicable. In case of opposition, the rules for motions for dismissal or exceptions established in the Civil Procedure Code shall apply. The decision on the recognition and enforcement of the award shall not be subject to any recourse. If the enforcement of the award was requested, the legal provisions on enforcement of national judicial decisions established in the Civil Procedure Code will apply as regards to the procedure.

  109. 55.

    Assuming that the award is covered by a convention applicable in your jurisdiction, how long does it take to obtain an order of enforcement in the first instance? How long does it take for the enforcement process to run its full course through to the last instance? 

  110. The average time that the enforcement of a foreign award could take can differ from case to case.

  111. 56.

    Please compare how long it takes to enforce an arbitral award rendered abroad with how long it takes to domesticate a foreign judgment.

  112. The average of time that the enforcement of a foreign award could take can differ from case to case.

  113. 57.

    Please describe some significant recent experiences with the enforcement of foreign arbitral awards.

  114. There are no reported significant experiences in regard to the enforcement of foreign arbitral awards.

  115. 58.

    To what degree has “public policy” been a ground to refuse enforcement of an international award rendered abroad? 

  116. Paraguayan Arbitration Law introduces a variation to the UNCITRAL Model Law in article 40(b), stating as cause for annulment that “according to Paraguayan law, the subject of the controversy cannot be subject to arbitration or that the award is contrary to international public policy or the public policy of the Paraguayan State.”

    This same formula (international public policy or public policy of the Paraguayan state) is used in article 46(b) regarding the enforcement of the award, regardless of the state in which it was rendered. These provisions depart from the UNCITRAL Model Law, which only refers to public policy.

    An example of a direct or mandatory rule is given by Law No. 194 of 1993 regarding International Representation, Agency and Distributorship, which states in article 9 that the parties may exercise their free will in these contracts, subject to the mandatory rules of the Civil Code.

    Without using the terminology “mandatory rules” but rather “public policy”, the Paraguayan Supreme Court has made this rule prevail over the agreement of the parties (Acuerdo y Sentencia No. 827 de la Corte Suprema de Justicia, Sala Constitucional, Electra Amambay SRL v Compañía Antartica Paulista Ind. Brasileira de Bebidas, 12 November 2001).

    Likewise, the Civil Code has other provisions such the one given by article 669 that uses the terms mandatory rules (reglas imperativas), whereas article 9 uses other expressions such as “public policy” and “good customs”. In addition, article 22 refers to the respect owed to “political institutions” and “moral”. Likewise, article 299, related to legal acts, also mentions moral and good customs.

    All these terms refer indistinctively to the general interest that should prevail over any other contractual stipulation of the parties which require a flexible evaluation to be performed on a case-by-case basis. Accordingly, the Paraguayan Law’s reference to “public policy” must be understood in this sense. 

    In practice, the scope of the expressions “international public policy” and “public policy of the Paraguayan State”, introduced in Paraguay by the Arbitration Law, is yet to be seen. It is hoped they will be interpreted in accordance with the cosmopolitan spirit of Paraguayan law regarding international law related matters.

    The outlook

  117. 59.

    Can a foreign arbitral award be enforced if the award has been set aside by the courts at the seat of the arbitration? 

  118. There is no case law addressing the issue of whether an award may be enforced if it has been set aside at the seat of the arbitration.

  119. 60.

    Has your jurisdiction refused to honour an international arbitral award issued against the state or an instrumentality of the state in your jurisdiction? If so, please provide a brief explanation.

  120. No. An important precedent was rendered in the case Ministerio de Agricultura y Ganadería y Procuraduría General de la RPCA c/ Grupanor Cercampo SA s/ nulidad de cláusula contractual y laudo arbitral.

    In this case, the state presented an ordinary civil action requesting the annulment of an award by an arbitral tribunal seated in Paris where proceedings were conducted according to the rules of the International Chamber of Commerce.

    The conflict arose from a contract between Grupanor and the Ministery of Agriculture and Livestock in which the former obliged to supply machinery and services for the implementation of a development programme related to the dairy and agricultural sector in Paraguay, within the framework of a cooperation project with Spain, ratified by Law No. 1520 of 1999. 

    The private company (Grupanor) questioned the jurisdiction of the Paraguayan tribunal, arguing that any appeal should have been brought to courts of the seat of arbitration, something that had not been done.

    It must be taken into account that Paraguay voluntarily submitted to this arbitration, and that this situation was even authorised by law. Moreover, the solicitor general participated in the arbitration proceedings in Paris and no recourse was presented against the award there.

    The Judge for Civil and Commercial Matters of the 8th Chamber (by AI No. 1,816 of 2007) ruled in favour of the Paraguayan state. This was later reversed on appeal (AI No. 6 of 2009, 2nd Chamber) in a decision that upholds the arbitral award.

    The appellate ruling noted that it was true that the supply agreement in question had characteristic features of an administrative – and not private law – contract. One party was the state, its purpose was a public service intended to meet public needs and the procurement process was subject to public bidding. On the other hand, regarding the interpretation and performance of such contract (which ultimately is a sales agreement) private law governs. Proof of this (according to the appeals court) is that the action was filed before a civil and commercial court and not before an administrative instance. The appeals court made express reference to article 248 of the Constitution, which empowers the state to submit to arbitration matters that fall within the scope of private law.

  121. 61.

    What is your view of the future of international arbitration and is the trend positive in your jurisdiction? What advice do you have with respect to dispute resolution for a foreign lawyer advising a foreign client contemplating entering into a business deal with a company from your jurisdiction?

  122. It is fair to state that arbitration in Paraguay is still at an embryonic stage. Nonetheless, the appropriate legal framework is already in place and some arbitrations of certain importance have already been conducted in the country.

Interested in contributing to Latin Lawyer Reference?


Questions

    Legislation

  1. 1.

    Which legislation governs the enforcement of international commercial arbitration awards and arbitral agreements in international business contracts, and international commercial arbitration proceedings?


  2. 2.

    Has the UNCITRAL model arbitration law been adopted in your jurisdiction? 


  3. Conventions

  4. 3.

    Is your jurisdiction a party to both the New York Convention and the Panama Convention? Is it a party to any other conventions or treaties governing international commercial arbitration agreements, awards or proceedings? 


  5. 4.

    Is your jurisdiction a party to the ICSID Convention? Have steps been taken to renounce the Convention or withdraw from ICSID? 


  6. 5.

    Is your jurisdiction a party to other conventions that directly affect the enforceability of arbitration agreements, rights or awards?


  7. Commercial arbitral agreements and arbitrability

  8. 6.

    Some jurisdictions have permitted parties to compel resolution of a dispute by means of arbitration only if the agreement to arbitrate was entered into after a dispute has arisen. Is a pre-dispute arbitration clause to resolve international commercial disputes by arbitration enforceable?


  9. 7.

    What are the requirements for an enforceable arbitral agreement? 


  10. 8.

    Is there subject matter that is not legally subject to arbitration in the context of an international business transaction?


  11. 9.

    Are there any limits to the ability of a state or an instrumentality of the state to enter into an agreement to arbitrate in your jurisdiction? If so, under what circumstances may the state or its instrumentalities enter into such an agreement? Please describe the requirements that must be met for the state to enter into a binding arbitration agreement.


  12. 10.

    Does the law specify whether an arbitration will be in equity or under law if the parties do not expressly specify the nature of the arbitration in the agreement?


  13. 11.

    How does the law limit party autonomy with respect to the terms of an arbitral agreement? 


  14. 12.

    Under what circumstances does the law allow a non-signatory to an arbitral agreement to pursue a claim in an international arbitration against a party that signed the arbitral agreement?


  15. 13.

    Under what circumstances does the law allow a signatory to an arbitral agreement to pursue a claim in an international arbitration against a party that did not sign the arbitral agreement?


  16. 14.

    Under what circumstances may a non-signatory to an arbitral agreement compel arbitration of a claim asserted against it in a court of law by a signatory of the arbitral agreement?


  17. 15.

    Is there any law in your jurisdiction specifically governing the arbitrability of consumer or labour disputes?


  18. 16.

    Does your jurisdiction provide for class-action arbitration or group arbitration? If so, are there any limitations to the arbitrability of such claims or requirements that must be met before such claims may be arbitrated? 


  19. 17.

    Are contractual waivers precluding arbitration of claims on a class-wide basis enforceable? Under what circumstances have such waivers been upheld or set aside by the courts?


  20. 18.

    If the parties’ contract is silent on the issue of class-action arbitration, is class-action arbitration allowed under the law of your jurisdiction?


  21. 19.

    Are foreign arbitral institutions without a physical presence in your jurisdiction authorised to administer arbitrations in your jurisdiction? Does the law require that a foreign institution be licensed under local law in order to administer an arbitration seated there?


  22. Arbitral institutions and arbitrators

  23. 20.

    Is an arbitral award issued in an arbitration seated in your jurisdiction under the auspices of a foreign institution (such as the ICC, ICDR, LCIA or similar institutions) vulnerable to challenge because it was issued under the auspices of a foreign institution?


  24. 21.

    Does the law require that arbitrators in international arbitrations be citizens or residents of your jurisdiction?


  25. 22.

    Does your law require that arbitrators in international cases be lawyers? 


  26. 23.

    Does your jurisdiction provide immunity to arbitrators serving in an arbitration with its legal seat in your jurisdiction? Under what circumstances does such immunity apply or not apply? 


  27. 24.

    Are the fees of foreign arbitrators serving in an arbitration seated in your jurisdiction subject to taxation?


  28. 25.

    Must arbitrators in international arbitrations be independent and impartial? What is the legal standard governing conflicts of interest and disclosure by arbitrators in international arbitrations?


  29. 26.

    Will courts entertain requests to disqualify an arbitrator before the conclusion of an award? 


  30. Arbitral proceedings

  31. 27.

    Does the law require that arbitral proceedings seated in your jurisdiction be held in a specific language? 


  32. 28.

    Can foreign lawyers serve as advocates in arbitral proceedings in your jurisdiction? If so, can they do so alone or must a local lawyer serve as co-counsel? 


  33. 29.

    Are the fees of foreign lawyers earned for services rendered in connection with an arbitration seated in your jurisdiction subject to local taxation?


  34. 30.

    In what circumstances, if any, does your law allow the consolidation of multiple arbitral proceedings into a single proceeding?


  35. 31.

    Please describe common practice and usage in international arbitrations seated in your jurisdiction with respect to a party’s right to require an opposing party to produce documents pertinent to the dispute. 


  36. 32.

    Does the law impose a duty of confidentiality in arbitration? If so, on whom? 


  37. 33.

    Does the law authorise third-party funding for international arbitration? Are there any ethical limitations imposed upon counsel to the parties that restricts the use of such funding?


  38. 34.

    Are there any mandatory national rules of professional ethics that apply to counsel in an international arbitration in your jurisdiction? If so, are those rules applicable to counsel from another jurisdiction participating in an arbitration in your jurisdiction? 


  39. 35.

    Are there any mandatory rules on oath or affirmation for witnesses testifying in an arbitration in your jurisdiction that have to be administered prior to their testimony? If so, what are they? 


  40. 36.

    Are there restrictions in your jurisdiction on the interviewing of witnesses in anticipation of hearings or giving of testimony?


  41. Court support for arbitration

  42. 37.

    Can arbitrators decide on their own jurisdiction? Is the principle of ‘Kompentenz-Kompetenz’ followed in the courts?


  43. 38.

    Do the courts follow the principle of the independence and separability of the arbitration clause? 


  44. 39.

    Are arbitral tribunals empowered to grant interim relief? If so, how is that relief enforced in the courts? 


  45. 40.

    Can arbitrators issue orders, subpoenas or use other legal processes to compel the production of evidence by a third party or compel a third-party witness to appear before them? If so, will a court lend its aid in enforcing such an order against a recalcitrant third party? Also, if arbitrators can issue orders, subpoenas or use other legal processes to compel the production of evidence by a third party or compel a third-party witness to appear before them, are there any limitations to their doing so? 


  46. 41.

    Can a party to an arbitration seek relief from the court to obtain evidence in aid of an international arbitration? What is the scope of such relief?


  47. 42.

    Can a party in an international commercial arbitration seek interim or provisional relief from a court without first seeking relief from the arbitral tribunal?


  48. 43.

    Have the courts issued injunctions enjoining arbitral proceedings from going forward? 


  49. 44.

    Does the law provide that post-award interest accrues on an unpaid arbitral award? 


  50. 45.

    Is an arbitral tribunal empowered to award attorneys’ fees to the prevailing party or is that power reserved to the courts?


  51. 46.

    Is an arbitral tribunal empowered to award punitive or exemplary damages? Is the arbitral tribunal empowered to award interest? 


  52. Awards - content

  53. 47.

    What are the grounds for challenging or vacating an international award issued in an arbitration seated in your jurisdiction? 


  54. 48.

    Is “lack of reasonableness”, manifest disregard or a mistake in the application of the substantive law to the dispute of an international award grounds to vacate it? 


  55. 49.

    Have international awards rendered in your jurisdiction been vacated on the grounds of "public policy"? If so, how has the "public policy" ground for vacating an award been interpreted in your jurisdiction?


  56. 50.

    What is the period of time a party has to challenge such an award after its issuance?


  57. 51.

    Please describe any recent significant experiences or cases that illustrate the attitude of your courts towards the annulment of international awards rendered in your jurisdiction.


  58. 52.

    Do the courts consider themselves empowered to vacate an arbitral award rendered in another jurisdiction?


  59. Awards enforcement

  60. 53.

    May parties waive all court review of an arbitral award rendered in your jurisdiction (or restrict or expand the scope of that court review)?


  61. 54.

    Please describe the process for enforcing an arbitral award rendered in another jurisdiction.


  62. 55.

    Assuming that the award is covered by a convention applicable in your jurisdiction, how long does it take to obtain an order of enforcement in the first instance? How long does it take for the enforcement process to run its full course through to the last instance? 


  63. 56.

    Please compare how long it takes to enforce an arbitral award rendered abroad with how long it takes to domesticate a foreign judgment.


  64. 57.

    Please describe some significant recent experiences with the enforcement of foreign arbitral awards.


  65. 58.

    To what degree has “public policy” been a ground to refuse enforcement of an international award rendered abroad? 


  66. The outlook

  67. 59.

    Can a foreign arbitral award be enforced if the award has been set aside by the courts at the seat of the arbitration? 


  68. 60.

    Has your jurisdiction refused to honour an international arbitral award issued against the state or an instrumentality of the state in your jurisdiction? If so, please provide a brief explanation.


  69. 61.

    What is your view of the future of international arbitration and is the trend positive in your jurisdiction? What advice do you have with respect to dispute resolution for a foreign lawyer advising a foreign client contemplating entering into a business deal with a company from your jurisdiction?


Other chapters in Arbitration