Published on Wednesday 18th April 2018
Which legislation governs the enforcement of international commercial arbitration awards and arbitral agreements in international business contracts, and international commercial arbitration proceedings?
In Nicaragua, the legal framework relating to international commercial arbitration can be found in the following texts:
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.
Has the UNCITRAL model arbitration law been adopted in your jurisdiction?
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:
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?
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.
Is your jurisdiction a party to the ICSID Convention? Have steps been taken to renounce the Convention or withdraw from ICSID?
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.
Is your jurisdiction a party to other conventions that directly affect the enforceability of arbitration agreements, rights or awards?
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?
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.
What are the requirements for an enforceable arbitral agreement?
The Arbitration Law requires the arbitration agreement to be in writing.
The arbitration agreement is deemed to be in writing if:
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.
Is there subject matter that is not legally subject to arbitration in the context of an international business transaction?
Article 23 of the Arbitration law excludes the following subject matters from the scope of arbitration:
Also, labour disputes are expressly excluded from the scope of the Arbitration Law.
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.
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.
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?
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.
How does the law limit party autonomy with respect to the terms of an arbitral agreement?
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.
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?
The Arbitration Law does not contain provisions to this effect.
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?
The Arbitration Law does not contain provisions to this effect.
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?
This is not possible under Nicaraguan law.
Is there any law in your jurisdiction specifically governing the arbitrability of consumer or labour disputes?
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.
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?
The Arbitration Law does not contain provisions relating to class-action arbitration or group arbitration.
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?
If the parties’ contract is silent on the issue of class-action arbitration, is class-action arbitration allowed under the law of your jurisdiction?
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?
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.
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?
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.
Does the law require that arbitrators in international arbitrations be citizens or residents of your jurisdiction?
Article 33 of the Arbitration Law expressly allows foreign arbitrators in arbitrations seated in Nicaragua, unless otherwise agreed by the parties.
Does your law require that arbitrators in international cases be lawyers?
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.
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?
The Arbitration Law does include provisions regarding immunity of arbitrators.
Are the fees of foreign arbitrators serving in an arbitration seated in your jurisdiction subject to taxation?
All income earned on the territory of Nicaragua is subject to Nicaraguan taxes.
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?
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.
Will courts entertain requests to disqualify an arbitrator before the conclusion of an award?
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).
Does the law require that arbitral proceedings seated in your jurisdiction be held in a specific language?
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.
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?
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.
Are the fees of foreign lawyers earned for services rendered in connection with an arbitration seated in your jurisdiction subject to local taxation?
All income perceived in the territory of Nicaragua is subject to Nicaraguan taxes.
In what circumstances, if any, does your law allow the consolidation of multiple arbitral proceedings into a single proceeding?
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.
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.
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.
Does the law impose a duty of confidentiality in arbitration? If so, on whom?
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).
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?
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.
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?
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.
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?
There are no mandatory rules regarding witness testimony in the Arbitration Law.
Are there restrictions in your jurisdiction on the interviewing of witnesses in anticipation of hearings or giving of testimony?
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.
Can arbitrators decide on their own jurisdiction? Is the principle of ‘Kompentenz-Kompetenz’ followed in the courts?
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.
Do the courts follow the principle of the independence and separability of the arbitration clause?
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.
Are arbitral tribunals empowered to grant interim relief? If so, how is that relief enforced in the courts?
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.
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?
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.
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?
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.
Can a party in an international commercial arbitration seek interim or provisional relief from a court without first seeking relief from the arbitral tribunal?
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.
Have the courts issued injunctions enjoining arbitral proceedings from going forward?
We are not aware of any cases in Nicaragua where courts have issued injunctions enjoining arbitral proceedings from going forward.
Does the law provide that post-award interest accrues on an unpaid arbitral award?
The Arbitration Law does not provide that post-award interest accrues on an unpaid arbitral award.
Is an arbitral tribunal empowered to award attorneys’ fees to the prevailing party or is that power reserved to the courts?
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.
Is an arbitral tribunal empowered to award punitive or exemplary damages? Is the arbitral tribunal empowered to award interest?
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.
What are the grounds for challenging or vacating an international award issued in an arbitration seated in your jurisdiction?
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:
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.
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?
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.
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?
We are not aware of any cases in Nicaragua where courts have vacated international awards on the grounds of ‘public policy’.
What is the period of time a party has to challenge such an award after its issuance?
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.
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.
There are no recent significant cases to report.
Do the courts consider themselves empowered to vacate an arbitral award rendered in another jurisdiction?
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.
May parties waive all court review of an arbitral award rendered in your jurisdiction (or restrict or expand the scope of that court review)?
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.
Please describe the process for enforcing an arbitral award rendered in another jurisdiction.
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:
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.
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?
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.
Please compare how long it takes to enforce an arbitral award rendered abroad with how long it takes to domesticate a foreign judgment.
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.
Please describe some significant recent experiences with the enforcement of foreign arbitral awards.
There are no recent significant cases to report.
To what degree has “public policy” been a ground to refuse enforcement of an international award rendered abroad?
We are not aware of any cases in Nicaragua where courts have refused enforcement of an international arbitral award on grounds of public policy.
Can a foreign arbitral award be enforced if the award has been set aside by the courts at the seat of the arbitration?
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.
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.
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.
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?
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.