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Wednesday, November 10, 2010

Choice of law in Latin American international contracts

Maria Mercedes Albornoz of Mexico’s Centro de Investigación y Docencia Económicas (CIDE), has posted a new paper, Choice of Law in International Contracts in Latin American Legal Systems. Here’s the abstract.

Nowadays, party autonomy is a world-wide accepted principle in the field of international contracts entered into by companies or individuals. In Latin America, however, some countries do not accept it. Unfortunately, there is no international convention unifying the determination of the law of international contracts in force in all Latin American states. Although some of the treaties ratified by these countries do admit the parties’ right to select the lex contractus, the terms and scope of such acknowledgment may vary from treaty to treaty. Also, at the level of national sources of law, while some countries have legislation or case law that expressly allows party autonomy, others are still reticent to the idea of letting the parties choose the law that shall govern their international contracts.

The traditional territorialism of the Latin region of the American continent has caused the assimilation of party autonomy to be very slow. Nevertheless, in recent years, a remarkable phenomenon has taken place: even the most reticent states, certainly compelled by the pressures of international commerce and by the regional integration’s needs, have signed treaties on international arbitration, where the choice of the law applicable to the substance of the controversy is expressly accepted. Although these treaties only apply to international contracts subject to arbitration proceedings, they are helping to, gradually, fissure the states’ resistance to party autonomy. But it is necessary to recognize that the legislators’ and judges’ deep-rooted mentality changes required for a general admission of choice of law in international contracts could still take some years. In the meanwhile, what happens in day-to-day practice? Is there any alternative for the parties who desire to exercise their autonomy by selecting their contract’s law? This might be important both for a foreign party – used to choosing the law of its international contracts – and for a party established in a Latin American country where no choice of law is permitted or where that choice is subject to restrictions.

This article presents a wide panorama of the multilateral treaties and the national laws dealing with the determination of the law of international contracts in force in Latin American countries, including references to the case law available to the public. Furthermore, it focuses on some states’ resistance to adopt party autonomy by exploring the causes of such attitude, the consequences it can bring, as well as the possible options for the affected parties. In addition, it notes a quite recent fissure to this resistance, introduced via international arbitration. Finally, it stresses the need for a uniformed or – at least – harmonized regulation in all Latin American countries, allowing the parties to choose the law of their international contracts. Looking for the legal certainty essential for the development of international commerce, and without neglecting the state’s fundamental interests, different ways for achieving this goal are proposed.

FGS

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