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Nicaragua

Published on Wednesday 18th April 2018

    Legislation

    • Nicaragua

      In Nicaragua, the legal framework relating to international commercial arbitration can be found in the following texts:

      • the Nicaragua Code of Civil Procedure (articles 542 to 552);  
      • the Law on Mediation and Arbitration dated 25 May 2005 (hereinafter the Arbitration Law);  
      • the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958); and
      • the Inter-American Convention on International Commercial Arbitration (Panama, 1975).

      Article 22 of the Arbitration Law provides the definition of "international arbitration", which is the definition given by article 1 (3) and (4) of the UNCITRAL Model Law on International Arbitration. Pursuant to that provision, an arbitration is considered international when the parties to an arbitration agreement have their places of business in different countries. Furthermore, an arbitration is considered international when one of the following places is located outside the country in which the parties have their places of business: the place of arbitration; the place of performance of a substantial part of the obligations of the commercial contract or the place that the subject-matter of the dispute is most closely connected to; or when the parties have agreed that the subject-matter of the arbitration agreement is related to more than one country.

      There is currently no published proposal to change the existing legal framework applicable to arbitration in Nicaragua.

    • Nicaragua

      Yes, the Arbitration Law is based on the UNCITRAL Model Law on International Arbitration (in its pre-2006 version) but it has not yet been amended to reflect the changes made to the UNCITRAL Model Law in 2006. As a result, the provisions on arbitration agreements referenced in electronic communications and the extensive provisions on interim measures and preliminary orders are not yet reflected in the Arbitration Law.

      Notable variations from the model text include the following points:

      • In a variation of article 8 of the UNCITRAL Model Law, the Arbitration Law seems to allow the civil courts an ex officio right to refer the parties to arbitration (where an valid arbitration agreement between the parties exists). This right comes in addition to the referral to arbitration when a party so requests.
      • The procedure for challenging an arbitrator before civil courts suspends the arbitration proceedings until the challenge is resolved. Civil courts have 15 days to decide on the challenge (as opposed to 30 days in the UNCITRAL Model Law).
      • The Arbitration Law has not transposed article 27 of the UNCITRAL Model Law on court assistance in taking evidence (see question 39).
  • Conventions

    • Nicaragua

      Nicaragua is a party to both the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the New York Convention) and the Inter-American Convention on International Commercial Arbitration (Panama, 1975). Both conventions entered into force in Nicaragua in 2003.

      Furthermore, Nicaragua is a party to the Convention of International Private Law (the Code of Bustamante), the Convention of the International Centre for Settlement of Investment Disputes (since 1994) and the Central American System of Integration where the commercial disputes between the counterparties should be settled through the Mechanism of Solution of Commercial Disputes.

      Other treaties such as the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA) establish arbitration as a mechanism of settlement of disputes. Chapter XX of DR-CAFTA prescribes arbitration for disputes between states and Chapter X regulates the disputes between Investors and the host state. The settlement of disputes regarding investments under DR-CAFTA are referred to the provisions of the Convention of the International Centre for Settlement of Investment Disputes and its complementary mechanism.

      The European Union-Central America Association Agreement also establishes a mechanism for the settlement of commercial disputes.

    • Nicaragua

      Nicaragua ratified the Convention of the International Centre for Settlement of Investment Disputes in February 1994 and it entered into force in April 1995.

      While there have been public statements (in 2007 and 2008) by government officials expressing political ambition to denounce the ICSID Convention, no actual steps have been undertaken to withdraw from the ICSID.

  • Commercial arbitral agreements and arbitrability

    • Nicaragua

      The broad definition of "arbitration agreement" given by article 27 of the Arbitration Law can be read so as to include pre-dispute arbitration clauses.

      The Arbitration Law expressly allows arbitration agreements that are separate from the commercial contract (autonomous arbitration agreements).

      Consequently, civil courts would enforce such arbitration agreements and refer the parties to arbitration.

      In Nicaragua, there is no need for a post-dispute compromiso.

    • Nicaragua

      The Arbitration Law requires the arbitration agreement to be in writing.    

      The arbitration agreement is deemed to be in writing if:       

      • it is contained in a document signed by the parties;    
      • it is contained in an exchange letters, telex, telegrams or other means of telecommunication which provide a record of the agreement;     
      • it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another; or   
      • if there is a reference in a contract to a document containing an arbitration clause provided that the contract is in writing and the reference is such as to make that clause part of the contract.     

      Pursuant to article 27, paragraph 3 of the Arbitration Law, the parties to an arbitration agreement shall expressly establish the terms and conditions of the arbitration. However, the same provision allows the parties, where no specific rules have been adopted, to complement, modify or revoke the arbitration agreement at any time by special consent. 

    • Nicaragua

      Article 23 of the Arbitration law excludes the following subject matters from the scope of arbitration:

      • disputes that have already received a final judicial resolution;
      • subject matters that are inseparably linked to subject matters over which the parties have no free disposition, for which the law expressly prohibits arbitration or for which it provides a specific procedure;
      • alimonies;
      • divorce and assimilated proceedings;
      • annulment of marriage;
      • civil status of persons;
      • declarations of legal age (majority);
      • and generally all situations involving natural or legal persons that cannot represent themselves (the law applicable to such persons will establish the formalities for their participation in an arbitration);
      • cases in which the Public Prosecutor must be a party; and
      • cases between attorneys and principals.

      Also, labour disputes are expressly excluded from the scope of the Arbitration Law.

    • Nicaragua

      Article 1 of the Arbitration Law expressly states that the Nicaraguan state has the right to use arbitration in its contractual relations.

      For the state to enter into an arbitration agreement, the principle of arbitration as well as the terms and conditions of the arbitration must be included in the notice of public procurement.

    • Nicaragua

      Pursuant to article 54 of the Arbitration Law, the arbitral tribunal shall decide the dispute under law in accordance with the rules of law designated by the parties or, failing such designation, the law determined by the arbitral tribunal.

      The arbitral tribunal can only decide ex aequo et bono if the parties have expressly authorised it to do so.

    • Nicaragua

      Article 30 of the Arbitration Law provides that arbitral tribunals deciding under law must be composed exclusively of lawyers.

      The parties are free to determine the number of arbitrators but the Arbitration Law requires that an arbitral tribunal shall always be composed of an odd number of arbitrators.

      The parties are free to designate the arbitration institution of their choice and agree to a seat in a foreign jurisdiction.

    • Nicaragua

      Consumer protection laws provide for a prohibition of arbitration clauses in boiler-plate contracts.

      However, nothing prevents the consumer and the other party to agree to arbitration once the dispute has arisen. Such arbitration would follow the provisions of the Arbitration Law (as there is no specific law governing consumer arbitration).

      Labour disputes are expressly excluded from the scope of the Arbitration Law. The Labour Code only provides for arbitration of collective labour disputes. There is no legal provision expressly governing arbitrability of individual labour dipsutes.

    • Nicaragua

      Nicaragua is a party to the ICSID Convention and, as such, recognises ICSID's direct jurisdiction.

      Also, the Comisión Interamericana de Arbitraje Comercial (CIAC) can administer arbitration through the Mediation and Arbitration Centre of the Chamber of Commerce of Nicaragua because this is its national section.

      Foreign arbitral institutions without physical presence in Nicaragua do not require a licence to administer arbitrations under their rules seated in Nicaragua. 

  • Arbitral institutions and arbitrators

    • Nicaragua

      The Arbitration Law provides that any arbitral award shall be recognized as binding in Nicaragua irrespectively of the country in which it was issued.

      Given the large party autonomy in determining the rules applicable to arbitration proceedings, an arbitral award issued by an arbitral tribunal seated in Nicaragua under the auspices of a foreign institution is not subject to challenges other than those provided for any other arbitral award.

    • Nicaragua

      Article 33 of the Arbitration Law expressly allows foreign arbitrators in arbitrations seated in Nicaragua, unless otherwise agreed by the parties.

    • Nicaragua

      Yes. Article 30 of the Arbitration Law states that only lawyers can decide arbitrations under law. The Arbitration Law does not specify whether the lawyer needs to be a registered Nicaraguan lawyer. If the foreign lawyer is part of arbitration proceedings administered by a local arbitral institution, that lawyer would need to be registered with the Directorate of Alternative Dispute Resolution (DIRAC). If the arbitration is administered by a foreign arbitral institution such as LCIA, ICC or ICDR, the foreign lawyer would not need to be registered with the DIRAC.

    • Nicaragua

      Yes. Arbitrators must be impartial and independent.    

      Article 32 of the Arbitration Law requires that the arbitrators do no have any connection with the parties or their attorneys. 

      The Arbitration Law further states that the grounds for recusal of arbitrators are the same as for magistrates of the judicial system.

    • Nicaragua

      The Arbitration Law allows the parties to an arbitration agreement to freely determine the procedure for challenging an arbitrator.

      If the parties do not decide otherwise, it is possible to bring a challenge against an arbitrator before the Nicaraguan court of appeal within 15 days of becoming aware of the constitution of the arbitral tribunal (article 35 of the Arbitration Law).

  • Arbitral proceedings

    • Nicaragua

      The parties are free to choose the language of the arbitration. In the absence of a determination by the parties, the arbitration shall be in Spanish.

    • Nicaragua

      The Arbitration Law does not contain provisions precluding foreign lawyers from serving as advocates in international arbitrations taking place in Nicaragua without the need of a local co-counsel.

    • Nicaragua

      The Arbitration Law does not contain provisions regarding the consolidation of multiple arbitral proceedings.

      Nevertheless, in light of the extensive freedom given by the Arbitration Law to the parties to determine the arbitration proceedings, it is conceivable that the parties expressly agree to consolidate multiple arbitral proceedings, or that they establish specific rules in their arbitration agreement for the consolidation of multiple arbitration proceedings or refer to such institutional rules that provide for such consolidation.

    • Nicaragua

      The Arbitration Law gives the parties to an arbitration agreement full autonomy to determine the rules regarding evidence.

      Each party must submit to the arbitral tribunal and the opposite party all documents that it considers relevant for its claim. The Arbitration Law does not explicitly provide the arbitral tribunal with the power to compel a party to produce certain documents. However, failure to submit certain evidence allows the arbitral tribunal to consider only the evidence before it and, in certain cases, to treat the failure as an admission of the other party’s allegations.

      Also, article 52 of the Arbitration Law explicitly states that the arbitral tribunal has the power to request the parties to cooperate with the expert appointed by the arbitral tribunal and to order the parties to submit to the expert, or grant him access to, all documents, goods or other relevant objects.

    • Nicaragua

      Yes. A duty of confidentiality is imposed to all the persons involved in the arbitration: the parties, arbitral institution and the tribunal (article 3 of the Arbitration Law).

    • Nicaragua

      The Arbitration Law does not contain provisions regarding third party funding. There appear to be no legal or ethical limitations restricting the use of such funding.

    • Nicaragua

      In accordance with article 3 of the Arbitration Law, the overarching principles applicable to arbitrations taking place in Nicaragua are: pre-eminence of the autonomy of the parties, equality of parties, confidentiality, privacy, informality and flexibility of the process, speed, concentration, effectiveness of evidence, good faith, principle of favoring arbitration, due process and protection of the rights of defence. While those principles are not rules of professional ethics per se, all actions and endeavors of arbitrators and parties must be done in line with these principles.

    • Nicaragua

      Any approach of witnesses in anticipation of hearings must be done in accordance with the above principles in particular equality of parties, effectiveness of evidence, good faith, due process and protection of the rights of defense.

      Therefore any coaching of the witness or instruction on leaving out certain details during the testimony would be in breach of these principles and potentially open the arbitral award to challenge.

  • Court support for arbitration

    • Nicaragua

      Article 42 of the Arbitration Law expressly states the arbitrators’ power to rule on their own jurisdiction, including any objections with respect or the existence or validity of the arbitration agreement.

    • Nicaragua

      Article 42 of the Arbitration Law provides that the arbitration clause, which forms part of a contract, shall be treated as an agreement independent of the other terms of the contract. A decision by an arbitral tribunal that the contract is null and void shall not automatically result in the invalidity of the arbitration clause.

    • Nicaragua

      Article 43 of the Arbitration Law allows the arbitral tribunal to grant interim relief (except if the parties have agreed otherwise in the arbitration agreement). It should be noted here that the current provisions of the Arbitration Law do not reflect the provisions of the UNCITRAL Model Law as amended in 2006.

      Iterim measures issued by an arbitral tribunal seated in Nicaragua must be complied with de jure by the authorities and public agencies to which they are addressed unless a civil court lifts the interim measure (article 43 of the Arbitration Law).

      Interim injunctions issued by foreign seated arbitral tribunals would need to follow the exequatur proceedings in Nicaragua before being enforceable in the country.

    • Nicaragua

      The Arbitration Law does not explicitly grant the arbitral tribunal the power to issue orders, subpoenas or other legal processes to compel third parties to produce evidence. It has been argued that the discretionary powers of the arbitral tribunal could be interpreted so as to include the power to compel third parties to produce evidence. However, we are not aware of a case in Nicaragua where such powers have been tested.    

      Parties are advised to exercise caution in this context due to the fact that the Arbitration Law has not transposed article 27 of the UNCITRAL Model Law on court assistance in taking evidence.

      Arbitrators will require the assistance of local courts to enforce such orders against parties or recalcitrant third parties. Law establishes the presentation of witnesses but not empower to the arbitral tribunal mechanisms to enforce their orders, subpoenas or other requests. To compel the production of evidence by a third party or compel a third-party witness to appear before an arbitral tribunal an ordinary civil action with an obligation of “doing” is required.

    • Nicaragua

      Yes, the party would need to process an independent action through an ordinary Civil Chamber (articles 916 CCP and following). 

      To compel the production of evidence by a third party or compel a third-party witness to appear before an arbitral tribunal an ordinary civil action with an obligation of “doing” is required.

    • Nicaragua

      The Arbitration Law does not contain a specific provision regarding relief from civil courts in relation to evidence in aid of an international arbitration. As outlined under question 40, Nicaragua has not transposed article 27 of the UNCITRAL Model Law on court assistance in taking evidence.

      Article 29 of the Arbitration Law provides that it is not incompatible with an arbitration agreement that a party, either prior to or during the course of the arbitration, requests a civil court to grant interim relief. 

    • Nicaragua

      Article 65 of the Arbitration Law empowers the arbitral tribunal to condemn the losing party to pay the prevailing party’s attorneys fees, provided that a request to such effect has been made in its statement of claim.    

      Furthermore, the same article 65 of the Arbitration Law allows the arbitral tribunal to order the losing party to assume the costs of the arbitration, such as the administrative expenses and the arbitrators’ costs.

    • Nicaragua

      Nicaraguan law does not provide for punitive or exemplary damages.     

      An arbitral tribunal could technically award punitive or exemplary damages if such damages were allowed under the national law applicable to the dispute under arbitration. However, in such case one wonders whether such an award would meet the public policy test of Nicaraguan courts when considering the recognition or enforcement of that award.    

      The Arbitration Law does not expressly provide for the award of interests. However, the common practice is that arbitral tribunals may award interests when requested by a party and when such award is not specifically excluded by the arbitration agreement or the contract. 

  • Awards - content

    • Nicaragua

      Pursuant to article 61 of the Arbitration Law, an arbitral award may be challenged before the Civil Chamber of the Supreme Court within 15 days of the notification of the arbitral award on one of the following grounds:       

      • one of the parties to the arbitration agreement was under some incapacity which tainted its will, or that such agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the Nicaraguan law;    
      • a party was not given proper notice of the appointment of an arbitrator or of the arbitration proceedings or was otherwise unable to assert its rights;    
      • the award deals with a dispute not contemplated by or not falling within the terms of the arbitration agreement, or it contains decisions on matters beyond the scope of the  arbitration agreement; provided that, if the decision on matters submitted to arbitration can be separated from those not so submitted, only the latter may be set aside;    
      • the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of the Arbitration Law from which the parties could not derogate, or, failing such agreement, was not in accordance with the Arbitration Law;    
      • the subject-matter of the dispute was not arbitrable under the laws of Nicaragua; or   
      • the arbitral award is contrary to Nicaraguan public policy.     

      The Arbitration Law adds that an arbitral award shall be declared invalid if it was not rendered within the period of time specified by the parties or otherwise provided by in the Arbitration Law.

    • Nicaragua

      The Arbitration Law does not expressly consider lack of reasonableness’, manifest disregard or a mistake in the application of the substantive law to the dispute as grounds for annulment. They may, however, fall within one of the grounds provided by law and it is therefore advisable to review each situation on a case-by-case basis.

    • Nicaragua

      The period to challenge an arbitral award is 15 days from the notification of the award or, if a request for interpretation or correction of the arbitral award has been made, 15 days from the date on which this request has been vacated by the arbitral tribunal.  

    • Nicaragua

      Nicaraguan courts would apply the principle of territoriality of the Arbitration law and as a result would not get involved with vacating an arbitral award rendered in another jurisdiction. Article 61 of the Arbitration law, which deals with the annulment of arbitral awards, therefore only applies to awards rendered by an arbitral tribunal seated in Nicaragua.

      As a result, Nicaraguan courts would resort to refusing the enforcement of an arbitral award rendered in another jurisdiction in application of the provisions of article 63 of the Arbitration Law. 

  • Awards enforcement

    • Nicaragua

      No. The Arbitration Law expressly provides that the annulment procedure is the sole recourse against an arbitral award and there is no provision in the Arbitration Law that could be read to the effect of allowing a waiver of that recourse.  

    • Nicaragua

      Enforcement in Nicaragua of international arbitral awards is obtained through the exequatur procedure before the Civil Chamber of the Supreme Court of Justice.

      A foreign arbitral award will be enforceable in Nicaragua in accordance with the procedures established in Nicaraguan law, provided that they have not been modified by a treaty or convention with another country.

      Where there is no specific treaty or convention, foreign judgments will be enforceable in Nicaragua, subject to the fulfilment of the following conditions:

      • that the execution has been issued as a result of the exercise of a personal action;
      • that the obligation is legal in Nicaragua;
      • the decision to be executed in Nicaragua must meet the requirements which are applicable thereto in the country where it was issued so as to be considered as authentic, as well as any other requirement provided for under Nicaraguan law for their enforceability in Nicaragua;
      • that litigation has been followed with the involvement of the defendant, unless they have been declared rebel for failure to appear in court after having been served;
      • the sentence is not contrary to Nicaraguan public order; and
      • the sentence is enforceable in the country of origin.

      The enforcement of foreign judgments must be requested to the Supreme Court of Justice. If the judgment is in a language other than Spanish, a translation into Spanish will be required. 

    • Nicaragua

      Depending on the level of counter arguments raised by the defense, it is possible to obtain an exequatur within three to sixmonths from the initiation of the proceedings.

    • Nicaragua

      The exequatur proceedings relating to foreign judgments are the same as for the arbitral awards and should therefore be completed within a similar time frame as the one outlined in answer 55.

    • Nicaragua

      We are not aware of any cases in Nicaragua where courts have refused enforcement of an international arbitral award on grounds of public policy.

  • The outlook

    • Nicaragua

      No. Article 63 of the Arbitration Law expressly provides that the setting aside of the arbitral award by the courts at the seat of the arbitration is a ground for refusal of the enforcement of the arbitral award in Nicaragua.

    • Nicaragua

      We are not aware of a case where a Nicaraguan court has refused to honour an international arbitration award issued against the Republic of Nicaragua or a state entity.

    • Nicaragua

      Nicaragua is relatively new to international arbitration: it has only given effect to the New York Convention and the Panama Convention in 2003 and its arbitration law dates from 2005.

      Yet the implementation of the UNCITRAL Model Law has given the local practitioners a tested framework with a well-documented set of interpretation tools.

      In addition, the local arbitration community has undertaken considerable efforts to promote alternative dispute resolution mechanisms such as arbitration and mediation.

      Finally, in the past few years investment in Nicaragua by multinational companies has increased significantly. As a result, interest in international arbitration has been enhanced and the requirements for up-to-date arbitration knowhow are increasing, in particular with regard to experience with institutional rules and appropriate foreign language skills. 

      Independence can at times be an issue when selecting a local arbitrator. Also, the lack of readily available case law from local courts can make some legal strategies unpredictable.

      The outlook for arbitration in Nicaragua is positive and the current legal framework and the recognition of arbitration as a solid dispute resolution mechanism should allow international investors to choose the arbitration rules most suitable for their purposes. 

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