Arbitration in El Salvador under the LMCA
Arbitration in El Salvador under the LMCA
Published on october 30 , 2023
![Foto de Héctor Josué Deras Argueta](../img/equipo/588user_4.jpg)
Héctor Josué Deras Argueta - Associate
Arbitration is the legal mechanism by means of which two or more parties involved in a controversy or dispute, by mutual agreement, decide to go before an impartial and specialized third party, called arbitral tribunal; the arbitral tribunal, acting as a judge in the solution of the controversy, and after having heard the parties, pronounces a decision which is called "arbitral award". This decision has the same legal effects as a sentence pronounced before a court.
On the contrary, before the Mediation, Conciliation and Arbitration Law (LMCA) came into force in August 2002, it was already stipulated in different Salvadoran regulatory bodies, including the Constitution in the first degree, as well as in the Code of Commerce, the Civil Code and some International Treaties, as second degree norms. However, the LMCA made it possible to have a single body of law that stipulates the basic rules of arbitration proceedings. However, currently this law has become somewhat outdated, given the demands of the world in which we find ourselves, by limiting the actions of the parties within the arbitration proceedings.
The purpose of the LMCA is to promote the legal culture of rapprochement and dialogue between the parties involved, seeking through this dialogue solutions under alternative means of conflict resolution. Based on this, according to our legislation, arbitration procedures can be classified as follows: A) By the territory where the arbitration takes place: National, that in which the parties submit their controversy to the application of the Salvadoran legislation; and International, that in which, according to the arbitration agreement or by the place of fulfillment of the obligations must be held in a State different from the domicile of the parties. B) By the type of procedure: Ad Hoc, in which the parties agree among themselves the rules of procedure applicable in the process (in El Salvador, it is the most common); Institutional, when the parties agree to submit to a procedure previously established by an Arbitration Center. C) By the form of resolution: De jure, when the tribunal resolves subject to the rules applicable to the merits of the case; de equidad, when it resolves according to the best knowledge and understanding of the arbitral tribunal, without being subject to the rules applicable to the merits of the controversy.
Knowing the types of arbitration, it is important to point out that only disputes of a civil or commercial nature can be submitted for discussion, in which the parties have free disposal, therefore, generally excluding issues related to labor, criminal or family law. For example, commercial lease disputes may be submitted to the arbitrator, which favors the parties by providing a quick and efficient procedure, provided that adequate planning is carried out. This implies that, from the moment the arbitration agreement is agreed upon, the parties can establish that it is a conflict to be resolved before an arbitration center, and this allows the parties to know the costs of the proceedings, thus generating confidence that a conflict will be resolved within a certain period of time and the cost thereof, which does not happen in the judicial process.
Once the arbitration process is concluded, by means of the pronouncement of the award, the victorious party, in the absence of voluntary compliance with the award, has the right to enforce the award through the courts. This enforcement may be of awards rendered nationally or internationally. In the case of the latter, they will be enforced in accordance with the treaties, covenants or conventions in force in El Salvador.
The LMCA recognizes that all types of institutions may have Arbitration Centers, as long as they comply with the requirements established in the law, among which are mainly to have Regulations and a Code of Ethics. The Centers are authorized by the Ministry of the Interior. In our country, the only Arbitration Center that currently exists is that of the Chamber of Commerce and Industry of El Salvador.
In summary, arbitration is a procedure in which the parties involved in a conflict agree to submit their dispute to an arbitrator or an arbitral tribunal instead of resorting to the courts. This method of dispute resolution has become a popular option due to its flexibility, confidentiality, neutrality, specialization and enforceability. This ensures that decisions are made quickly and efficiently, with a high degree of knowledge and expertise in the subject matter.
On the contrary, before the Mediation, Conciliation and Arbitration Law (LMCA) came into force in August 2002, it was already stipulated in different Salvadoran regulatory bodies, including the Constitution in the first degree, as well as in the Code of Commerce, the Civil Code and some International Treaties, as second degree norms. However, the LMCA made it possible to have a single body of law that stipulates the basic rules of arbitration proceedings. However, currently this law has become somewhat outdated, given the demands of the world in which we find ourselves, by limiting the actions of the parties within the arbitration proceedings.
The purpose of the LMCA is to promote the legal culture of rapprochement and dialogue between the parties involved, seeking through this dialogue solutions under alternative means of conflict resolution. Based on this, according to our legislation, arbitration procedures can be classified as follows: A) By the territory where the arbitration takes place: National, that in which the parties submit their controversy to the application of the Salvadoran legislation; and International, that in which, according to the arbitration agreement or by the place of fulfillment of the obligations must be held in a State different from the domicile of the parties. B) By the type of procedure: Ad Hoc, in which the parties agree among themselves the rules of procedure applicable in the process (in El Salvador, it is the most common); Institutional, when the parties agree to submit to a procedure previously established by an Arbitration Center. C) By the form of resolution: De jure, when the tribunal resolves subject to the rules applicable to the merits of the case; de equidad, when it resolves according to the best knowledge and understanding of the arbitral tribunal, without being subject to the rules applicable to the merits of the controversy.
Knowing the types of arbitration, it is important to point out that only disputes of a civil or commercial nature can be submitted for discussion, in which the parties have free disposal, therefore, generally excluding issues related to labor, criminal or family law. For example, commercial lease disputes may be submitted to the arbitrator, which favors the parties by providing a quick and efficient procedure, provided that adequate planning is carried out. This implies that, from the moment the arbitration agreement is agreed upon, the parties can establish that it is a conflict to be resolved before an arbitration center, and this allows the parties to know the costs of the proceedings, thus generating confidence that a conflict will be resolved within a certain period of time and the cost thereof, which does not happen in the judicial process.
Once the arbitration process is concluded, by means of the pronouncement of the award, the victorious party, in the absence of voluntary compliance with the award, has the right to enforce the award through the courts. This enforcement may be of awards rendered nationally or internationally. In the case of the latter, they will be enforced in accordance with the treaties, covenants or conventions in force in El Salvador.
The LMCA recognizes that all types of institutions may have Arbitration Centers, as long as they comply with the requirements established in the law, among which are mainly to have Regulations and a Code of Ethics. The Centers are authorized by the Ministry of the Interior. In our country, the only Arbitration Center that currently exists is that of the Chamber of Commerce and Industry of El Salvador.
In summary, arbitration is a procedure in which the parties involved in a conflict agree to submit their dispute to an arbitrator or an arbitral tribunal instead of resorting to the courts. This method of dispute resolution has become a popular option due to its flexibility, confidentiality, neutrality, specialization and enforceability. This ensures that decisions are made quickly and efficiently, with a high degree of knowledge and expertise in the subject matter.