Argentina is once again going through a deep economic and financial crisis which, regardless of the results of the October elections, will continue to worsen. In this scenario, it is important to anticipate the impact the crisis may have on businesses and contracts, and to study which legal mechanisms can be applied to mitigate difficulties and adverse effects.
As a reference, we can consider what happened after the 2001 default; as a result of the crisis, various situations arose that affected both contracts between private parties and contracts to which the State was a party, and it was through arbitration that companies found a suitable way to resolve their disputes.
In this regard, the case of bondholders and investors is emblematic. Between 1990 and 2001, Argentina signed and ratified more bilateral investment treaties than any other nation in Latin America. This enabled many multinational companies, following the default and the Argentine Government’s refusal to pay for the damage caused by the economic measures adopted, to resort to international arbitration, alleging breach of contract under the bilateral investment treaty of their respective countries. From 2002 onwards, the number of arbitrations brought against the Argentine Republic began to increase, especially before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), where Argentina ranks first among countries with open cases against them.
Relationships between private parties were not immune to this trend; the disputes arising from the outbreak of the crisis meant that many of the problems between companies were submitted to the General Arbitration Tribunal of the Buenos Aires Stock Exchange.
Arbitration is an alternative dispute resolution method, based on the autonomy of the parties’ will, which makes it possible to avoid the intervention of state courts, reducing costs and shortening timeframes. It is an effective mechanism that offers much greater speed and flexibility than ordinary courts.
Since it lacks the excessive procedural formalities and rituals of state jurisdiction, the margin for dilatory tactics is greatly reduced and disputes are resolved more quickly; moreover, successive appeals can be filed against judgments issued by first instance judges, which means these proceedings can drag on indefinitely, whereas this does not happen in arbitration, since awards are not subject to appeal (they can only be reviewed on matters relating to the validity of the arbitration clause or agreement and procedural irregularities, but not on the merits). In this way, arbitration meets companies’ growing need to enforce their claims quickly in order to clean up their balance sheets. It also gives broad scope to private autonomy, since the parties, by mutual agreement, can design the type of procedure best suited to their needs according to the particularities of the dispute; they can choose the rules of procedure, choose arbitrators specialized in the subject matter who can handle the complexity of the dispute, provide that the arbitrators may order interim measures, choose the law applicable to the merits of the dispute and the language of the proceedings, etc.
Another benefit of arbitration is its confidentiality; the dispute is not made public, thus safeguarding the image and reputation of the parties.
Furthermore, the arbitral award is binding on the parties; that is, it has the same enforceability as court judgments and can be enforced by judges without the need for homologation or compliance with prior requirements. In addition, the award can be recognized and enforced not only in the country where it is issued, but also in any of the member States of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This is extremely important since, if difficulties arise when enforcing an award, whether due to Government measures or to insufficient funds for compliance, it will be possible to go to another country where the losing party has assets and enforce the award there.
For all these reasons, including arbitration clauses in contracts, or entering into arbitration agreements once a dispute arises, is one of the precautions that companies, regardless of the sector in which they operate, should take into account in times of crisis. Arbitration is an effective resource that, in a context of uncertainty and instability, provides clear guidelines tailored by and for the parties.
