A. Legislation, Trends and Tendencies
International arbitration in Peru continues to be governed by the Arbitration Act of 2008 (Decreto Legislativo 1071). In 2015, Legislative Decree 1231 was enacted, changing certain arbitration regulations. Among the most significant changes are:
• A person who has been convicted of a crime can no longer act as an arbitrator.
• When a controversy is related to assets registered in the Public Registry, the arbitration panel must register the claim in the record of the asset in the public registry.
Additionally, in 2015, Law 30225 (procurement law) and Supreme Decree 350-2015-EF (regulations relating to procurement law) were approved. Among other matters, these provide mechanisms to solve any disputes related to procurement activities. These laws took effect on 9 January 2016.
The most important change in dispute resolution is the possibility of having a Dispute Board in public work contracts worth over PEN20 million (approximately US$6 million). This will provide a faster mechanism for solving any controversy that may occur during a contract’s execution. The decisions by the Dispute Board will be binding, but they can be challenged in arbitration.
There have been no significant court decisions in Peru in relation to arbitration in the last year.
C. Costs in International Arbitration
C.1 Allocation of Costs
The Arbitration Act states that the parties can agree on the allocation of costs in advance in the arbitration agreement. If there is no agreement, costs must be paid by the defeated party. However, the arbitration panel can distribute the costs between the parties in the light of the specific circumstances of the case. In our experience, the common rule is that the parties will each bear their own costs and pay 50 percent each of the costs of the arbitration panel and the administrative fees. The procedural rules of the most important arbitration centers follow similar criteria.
The arbitrators’ fees and administrative fees of the arbitration will depend on whether it is an institutional or an ad hoc arbitration. In an institutional arbitration, arbitrators’ and administrative fees are set by the institution based on the economic amount of the claim and counterclaim. In ad hoc arbitrations, the arbitrators’ costs and administrative fees are decided by the Arbitration Panel. They may use as a reference the fees set in an arbitration institution, but this is not mandatory. If, during the arbitration, the arbitrators request any evidence, both parties will have to bear the costs in a 50-50 split.
C.2 Security for Costs
The Arbitration Act does not regulate the possibility of asking for security for the other party’s costs. However, the payment procedure is designed to avoid the need of it. At the beginning of the arbitration, the Arbitration Panel sets an initial estimate of fees, which each party has to pay on a 50-50 split. If one of the parties fails to pay, the Arbitration Panel authorizes the other party to make payment in the other party’s stead. If payment is not made, the Arbitration Panel has the authority to suspend and subsequently terminate the arbitration for lack of payment.
The distribution of costs is decided at the end of the arbitration at the same time as the award. If one of the parties has covered the costs of the other, or considers that it should be entitled to full reimbursement of the arbitration fees, it can ask for a precautionary measure during the arbitration to guarantee full payment. This request has to come from the parties; it is not a decision that can be adopted by the arbitration panel on its own initiative.
C.3 Recovery of Costs
Lawyers’ fees are considered part of the costs of the arbitration, and their payment can be ordered by the Arbitration Panel. The Arbitration Act does not impose any limits in this regard. The costs of in-house counsel or party staff costs are not usually claimed, although it is theoretically possible to ask for them.
In any case, any recovery requested by the party will have to be backed up by proof. In the case of legal services provided by a law firm, or an expert opinion, an invoice and proof of payment will suffice.
Enforcement of the arbitration award can be requested from the arbitrators, as long as the parties have agreed to this in the arbitration agreement or afterwards. However, arbitrators cannot command public force. If this is needed, they will have to ask for assistance from a judge for the enforcement. In that case, it will be necessary to ask the arbitration panel to set the amount of the costs, as a judge’s jurisdiction is limited by the agreement of the parties.
- Ana Maria Arrarte is a partner in Baker & McKenzie’s Lima office. Ms. Arrarte advises clients in civil and commercial procedural law matters, including arbitration, negotiation and conciliation. She is a member of the arbitrators’ lists at the Center for Arbitration of the Lima Chamber of Commerce, the American Chamber of Commerce, the Center of Arbitration at the Professional Association of Engineers of Peru and the Center of Arbitration at the Pontificia Universidad Católica del Peru. In addition to her practice, for the past 18 years, Ms. Arrarte has been a professor at Peru’s most prestigious universities (Pontificia Universidad Catolica del Peru, Universidad de Lima, Universidad del Pacifico, among others). She has authored several articles on arbitration and litigation in both national and international law reviews, and has co-authored several books on litigation and arbitration.
- Sebastián Basombrío is a senior associate in Baker & McKenzie’s Lima office, with experience in commercial and regulatory arbitrations. He has worked and currently works in arbitrations related to the construction, energy and mining sectors. He has taught law courses in Peru´s most prestigious universities (Pontificia Universidad Catolica del Peru, Universidad del Pacifico, UPC)