Volume 6, Number 6, Page 5

New Landmark Arbitration Protocol of the Mercosur

The Trade Arbitration Protocol of the Mercosur is one of the most recent legal provisions to be introduced in the juridical order of the South Cone Market. The Treaty came about in response to the lack of legislation on dispute resolution between private parties, arising from regional trade relations. The Brasília and the Ouro Preto Protocols provide for dispute resolution, but not between private parties.

The Argentinean and Paraguayan governments have supported the creation of a Court of Justice of the Mercosur. On the other hand, the Brazilian and Uruguayan governments have not supported the idea. Brazil's position is clear, given constitutional restrictions prohibiting compliance with judicial decisions issued abroad. Thus, the Brazilian government regards the current arbitration system foreseen in the Brasília and the Ouro Preto Protocols as ideal as it does not conflict with constitutional exigencies.

However, the access of the individual to these mechanisms is extremely complicated. The new convention regulates relationships between private parties, whether individuals or legal entities, which had not been provided for previously. Thus, the Trade Arbitration Protocol of the Mercosur tries facilitate access of individual entities to arbitration systems. It must also be stressed that these provisions do not represent a juridical innovation but rather a compilation of standing international conventions, such as the Inter American Convention on Trade Arbitration (Panama, 1975), Inter American Convention on Extraterritorial Efficiency of Foreign Judgements and Foreign Arbitration Awards (Montevideo 1979) and the Model Regulation on International Arbitration Regulation approved by the General Assembly of the United Nations in 1985.

Article 5 of the Protocol establishes the compulsory nature and the binding effects of the arbitration clause. Articles 8 and 18 provide for autonomy of the arbitration clause and jurisdiction principle.

Article 21 provides for the possibility of petitioning the Arbitration Tribunal for an increase in the award. Its annulment can be achieved through an action for annulment, to be filed before the judicial authority of the States where the headquarters of the Arbitration Tribunal (article 22) is located.

Arbitration can be agreed upon beforehand or at a moment after the controversy arises (article 2). It can also be institutional or "ad hoc" (articles 11 and 12).

The parties can also select the rules to be applied during dispute resolution (article 10), and the dispute may also be resolved through equity (article 9). Arbitration procedure principles are comprised of equality, due process of law, the right to contradict and judicial discretion of the arbitrator.

In relation to the arbitrators, they must be reliable, independent, impartial and neutral (articles 16 and 17). Pursuant to article 6 communication between the parties and the Tribunal reflects modern means of communication (fax, electronic mail, etc.).

Finally, the convention must be seen in context to the development and increase in the number of Arbitration Chambers in the Member-States in the Mercosur, given that many of these ad hoc arbitration bodies are not widely known or are not sophisticated enough to serve many potential clients.