In principle, domestic parties do not resort on a regular basis to the use of international arbitration as the main tool to solve disputes. The situations that domestic parties refer to arbitration or, eventually, local courts depend on the sophistication or complexity of the dispute.

Since Uruguay has a longstanding tradition of respect to the rule of law, which has been cemented in the independence and quality of its judges, this tradition explains certain underdevelopment in the arbitration practice, both locally and internationally.

The main local arbitration institution is the Centro de Conciliación y Arbitraje (CCA) created by the Bolsa de Comercio de Uruguay in 1997. The CCA is member of the International Chamber of Commerce (ICC), the Inter American Commission of Commercial Arbitration and the Ibero American Centre of Arbitration.

That said, international arbitration is prevalent with respect to disputes involving the Uruguayan State (or state-owned companies), in particular against foreign investors. International arbitration is also relevant in disputes between local and foreign construction companies on large construction projects disputes. Disputes related to distribution agreements and concessions are also referred to arbitration on a regular basis.

The enforcement of foreign arbitral awards are regularly allowed by local courts as long as they meet the local regulations and/or treaties ratified by Uruguay. In this respect, Uruguay ratified the first and the second Montevideo Procedural Law Treaty from 1899 and 1940 respectively (“1899 MPLT” and “1940 MPLT”), which allows enforcement of foreign arbitral awards. Uruguay also ratified the New York Convention (NYC) on the Recognition and Enforcement of Foreign Arbitral Awards by Law-Decree No 15.229 of 11December 1981). Therefore, under the NYC, Uruguayan courts are bound to recognise and enforce foreign awards.

In 2020, the COVID-19 pandemic changed legal practice and international commercial arbitration was no exception. On the procedural side, arbitration has traditionally required international travel and in-person hearings, both regarded as indispensable to achieving fairness and neutrality in the resolution of cross-border disputes. However, the pandemic restricted those requirements because the health situation worldwide. Hence, during pandemic remote methods to connect altered the way hearings and depositions were taking place. 

Therefore, new regulations were issued by the local institutions to deal with the procedural problems created by remote arbitration in order to avoid the annulment of the awards rendered by the arbitrators because of a possible violation of the international public order or the due process of law principles.

Regarding the type of disputes that were fuelled by the pandemic, breach of contract actions constituted the highest number of cases followed by an increase of force majeure disputes based on the impact of the pandemic on contracts. Nonetheless, “fait du prince” defence related to administrative or legislative decisions passed by the authorities were also hot topics in arbitration disputes. 

In addition, the pandemic impacted international arbitration because, in light of the difficulties of conducting arbitration in the manner it was expected prior to the pandemic, parties resorted to alternative methods to sidestep arbitration costs. Mediation or direct negotiations to suspend a contract or amend an existing one increased significantly.

Construction is one of the industries that has seen an increase in the percentage of its disputes. However, during the pandemic the construction industry was the first to resume economic activity. However, there were problems with the supply chain that altered the timeline of construction projects and created potential claims between a construction company and its clients. 

For international arbitration the ICC is the most used arbitral institution. For local arbitration, the CCA was the most prominent. No new arbitral institution was established this year.

There are no specific courts with particular jurisdiction to hear in disputes related to international arbitration. Disputes related to international arbitration commonly fall first within the jurisdiction of the civil courts. In the case of the enforcement of arbitral awards, the Supreme Court of Justice holds exclusive jurisdiction.

In recent times, the Uruguayan government has started to promote Uruguay as a main seat for international arbitration in Latin America. This ambition is grounded in solid respect for the institutions and a new legal framework established by Act No 19.636 of 13 (July 13, 2018) which regulates international commercial arbitration (ICA). The ICA is based on the UNCITRAL Model Law and represents a legislative milestone for Uruguayan dispute resolution practice, fully aligned with international legal standards. The ICA does not deviate in a significant way from the UNCITRAL Model Law.

After the enactment of the ICA in 2018, there was no significant change in new arbitration legislation.

In order to be valid, the arbitration agreement must be in writing and take the form of an arbitration clause included in a contract or in the form of a separate agreement. According to the ICA, the agreement is considered written when it is reflected in a document signed by the parties or in an exchange of letters, communications or other means of electronic communication that can evidence the existence of the agreement. In addition, the reference made in a contract to a document containing an arbitration clause constitutes an arbitration agreement as long as the contract is in writing and the reference implies that said clause is part of the contract.

According to Article 476 Civil Procedural Code (CPC), matters that may not refer to arbitration are those related to rights that cannot be settled or waived by a party. In light of the legal definition, case law has interpreted as excluded from arbitration criminal and family Law claims, and, although it has been a source of recent debate, labour disputes. A recent ruling from the Supreme Court of Justice construed that there is no reason to exclude labour disputes from local or international arbitration. However, labour Courts of Appeal have rejected the possibility of arbitrating labour disputes, arguing that the employee cannot waive in favour of an employer a most favourable forum and legal frame. Moreover, the Labour Court of Appeal understands that the employee cannot agree to arbitrate a labour dispute because the employer is not free to negotiate the terms and conditions of the agreement.

As per Article 28.1 of the ICA, the arbitral tribunal shall decide the dispute in accordance with the rules of the law chosen by the parties as applicable to the merits of the dispute. Any indication of the law or legal system of a particular State shall be understood to refer, unless otherwise stated, to the substantive law of that State and not to its rules on the of conflict of laws.

In a case where the parties have failed to agree on a certain "applicable law", the court will apply the substantive law they deem most adequate to the dispute. In addition, the court would apply to the dispute the contract terms and the uses and customs of international trade that are applicable to the case. Although this legal provision does not diverge from the various arbitration regulations, in this connection, Article 28 No 2 of the Model Law establishes that, “failing any designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable”. In Uruguayan law, the arbitral tribunal is entitled to apply the substantive law as it sees fit. 

Arbitral Agreements are favoured by local courts and regularly enforced in application of Article 494 of the CPC. However, as case law has concluded that arbitration is an exception to the ordinary jurisdiction of the local courts, rulings have established that the subject matter of the dispute should be clearly included in the arbitration agreement. This is to say that if by chance the arbitral agreement is not clearly written, local courts would feel inclined to assume jurisdiction.

ICA establishes in Article 16 that even if the contract in which the arbitral agreement is inserted could be considered null and void, that circumstance does not determine that the arbitration clause or arbitration agreement could be considered invalid. Therefore, separability clauses are applied in Uruguay. Similar considerations should be made in connection with local arbitration regulated under the CPC.

The parties are free to determine the number of arbitrators and respective qualifications of the arbitral tribunal to be appointed. However, once an arbitrator is approached by a party, the arbitrator has a duty to disclose any circumstance that could rise to challenge its impartiality or independence. In cases where the arbitrator discloses a situation that impairs them from accepting the appointment parties should appoint a replacement arbitrator.

Arbitrators could be challenged by the parties only on the grounds that their impartiality or independence could be compromised. It is possible to also challenge the appointment of an arbitrator if they lack sufficient credentials in accordance with the qualifications agreed by the parties. In addition, it is not possible to challenge an arbitrator appointed by the same party unless the grounds for such a challenge were only known by the appointing party after the appointment. The parties are not allowed to challenge an arbitrator by reason of nationality or background. Finally, in arbitrations in which a State or a public entity is a party, the status of the public official of the arbitrator appointed by that party does not necessarily imply grounds for challenge.

Parties are free to choose the method for selecting arbitrators. Nevertheless, if the parties fail to establish such method of appointment, the ICA provides a default procedure. In the case of an arbitration proceeding with three arbitrators each party shall appoint an arbitrator and the two arbitrators so appointed shall appoint the third one. If a party fails to appoint the arbitrator within 30 days of the written request from the other party to do so, or if the two arbitrators fail to agree on the third arbitrator within 30 days of their appointment, the appointment will be made, at the request of one of the parties, by the competent court without delay. In arbitration proceedings with a sole arbitrator, if the parties cannot agree on the appointment of the arbitrator, the arbitrator will be appointed, at the request of any of the parties, by the competent court.

When in an appointment procedure previously agreed by the parties: (i) a party does not act in accordance with the provisions of the arbitration agreement, (ii) or the parties or two arbitrators cannot reach an agreement in accordance with the aforementioned procedure, or (iii) a third party, including an arbitral institution fails to comply with the function conferred in said procedure, either party may request the competent court to take the necessary measures to enforce the procedure.

Any decision on these issues by the competent court shall be final and not subject to recourse. 

When appointing an arbitrator, the competent court shall take due account of the conditions required for an arbitrator by the agreement between the parties and take the necessary measures to guarantee the appointment of an independent and impartial arbitrator. In the case of sole arbitrator proceedings, the Court will also take into account the convenience of appointing an arbitrator of a nationality different from the parties’ nationality.

The party willing to challenge an arbitrator shall send to the arbitral tribunal a notification, within 15 days following the day on which it becomes aware of the constitution of the arbitral tribunal or of any of the circumstances that ground the challenge. As stated in 4.1 Limits on Selection, challenges of arbitrators are based on the absence of impartiality or independence. An additional ground to challenge the arbitrator is the lack of qualifications agreed by the parties in the arbitration agreement or separate document. The written challenge shall state the reasons for the challenge. Unless the challenged arbitrator resigns or the other party accepts the challenge, it will be for the arbitral tribunal to decide on the challenge.

If the challenge initiated is not successful because the arbitral tribunal rejects the request, the challenging party may request the court to review the decision within 30 days following the receipt of notification of the decision rejecting the challenge. The court will have a maximum of 60 days to rule, and its decision will be final without subject to recourse. While that request is pending, the arbitral tribunal will suspend its proceedings, which will resume once the challenge is resolved or 60 days after its initiation.

Arbitrators are subject to the same independence and impartiality standards applicable to local judges (Article 485.3). Arbitrators are obliged to disclose any prior relationship (of any kind) maintained with any of the parties that could affect impartiality. Although there is no statute or specific regulation in this respect, the IBA guidelines on Conflicts of Interest in International Arbitration are a source of reference for scholarly opinions and rulings. 

Criminal investigations or other matters excluded from arbitration should be referred to the competent criminal or ordinary Courts (Article 493 CPC). See 3.2. Arbitrability for more details.

In Uruguay, the arbitral tribunal is entitled to rule on its own jurisdiction, the competence-competence principle is consistently applied by local courts in international and local arbitration. According to Article 475.2 of the CPC, the arbitral tribunal is competent to rule on all matters related to the validity and effectiveness of the arbitral clause and arbitral agreement. In addition, according to Article 16 of the ICA the arbitral tribunal shall be empowered to decide on its own jurisdiction, including on exceptions relating to the existence or validity of the arbitration agreement. 

The absence of jurisdiction defence must be filed at the latest jointly with the answer to the complaint. The parties will not be prevented from filing the absence of jurisdiction defence due to the fact that they have appointed an arbitrator or participated in their appointment. The objection based on the fact that the arbitral tribunal has exceeded its command must be opposed as soon as the matter that allegedly exceeds its mandate arises during the arbitral proceedings. The arbitral tribunal may, in any case, examine an objection filed after the term elapses if it considers the delay to be grounded. 

The arbitral tribunal may decide the absence of jurisdiction defence as a preliminary procedural matter or in the final award. 

In a case where the arbitral tribunal decides that it has jurisdiction on the dispute, any of the parties, within 30 days following the notification of that decision, may request the competent tribunal to review the matter within a maximum period of 60 days and the decision of this court will be final and not subject to recourse. During that time the arbitral tribunal may continue its proceedings and issue an award. 

Courts in Uruguay have shown a general reluctance to intervene in disputes subject to an arbitration agreement. In fact, case law tends to confirm the jurisdiction of the arbitral tribunal. In this connection, it is worth to mention that the Supreme Court of Justice ruled that there is no reason to exclude labour disputes from the arbitral jurisdiction (Ruling No 596/2017). Although ruling of the Supreme Court of Justice was not unanimous, and there are recent conflicting decisions issued by the Labour Court of Appeals, it reveals that Uruguayan Courts favour arbitration as an alternative method to solve disputes. The reverse side of that judicial policy is the severe analysis conducted by the local courts over the matters excluded from arbitration or the specific matters the parties have agreed to be arbitrated in the arbitral agreement. 

See 5.2 Challenges to Jurisdiction.

The standard of judicial review is a de novo analysis. Higher courts act as if they were considering the question for the first time, affording no deference to the decisions of the lower courts.

Parties subject to arbitral agreement are not impaired from promoting an action with local courts. Local courts do not raise the absence of jurisdiction ex-officio; the defendant must raise the existence of an arbitration agreement and request a declaration of absence of jurisdiction. According to Article 475 of the CPC in a local arbitration If the party fails to raise the absence of jurisdiction at the time of answering the complaint, it will be interpreted that the party has waived the arbitration clause. However, for international arbitration under the ICA, the court to which a dispute is submitted on a matter that is the subject of an arbitration agreement, shall refer the parties to arbitration if requested by any of them, at the latest, at the time of filing the first brief on the merits. The only exception is that it is proven that the said agreement is null, ineffective or impossible to enforce.

The fact that a party has commenced litigation with local courts, does not suspend or prevent the initiation or continuation of the arbitration proceedings.

There are no specific regulations to allow a third party to join an existing arbitration. Given that local courts consider arbitration an exceptional jurisdiction the absence of participation on the arbitral agreement will preclude a third party to participate in the proceedings. Participation of third parties is limited to the effect of interim measures and mandatory gathering of evidence. The only possibility for a third party to participate in an existing arbitration would be the explicit acceptance from the plaintiff and defendant in the course of the arbitration proceeding.

Arbitral tribunals are allowed to award interim relief or preliminary measures. However, it is customary that the parties promote the interim relief with local courts. The practice of promoting the interim relief prior to arbitration with local courts is based on its powers to enforce the decision in a more expeditious manner. The lack of arbitrators' power to enforce the decision as a consequence of the absence of coercive powers (so-called imperium), limit the ability to request interim measures with the arbitral tribunal. 

Having said that, according to Article 17 of the ICA, unless otherwise agreed by the parties, the arbitral tribunal may, at the request of one of them, order the adoption of precautionary measures that it deems necessary with respect to the subject matter of the dispute. The arbitral tribunal may require the applicant to provide a performance bond to cover potential damages.

Such a precautionary measure ordered by an arbitral tribunal will be considered as binding between the parties. If the party subject to an interim measure does not comply with the arbitral tribunal interim award, it will be enforced, with the competent local court.

As per the ICA, a precautionary measure would be a temporary measure, granted in the form of an award, by which, at any time prior to the issuance of the final award, the court orders one of the parties to:

• status quo, pending settlement of the dispute;
• take steps to prevent any actual or imminent damage or impairment of the arbitral proceedings, or to refrain from certain acts that are likely to cause such damage or impairment of the arbitral proceedings;
• provide some means to preserve assets that allow the award to be issued enforced; and
• reserve evidence that could be relevant and pertinent to decide on the dispute.

The precautionary measure will be granted by the arbitral tribunal when necessary for the protection of a right and whenever there is a potential irreversible damage in light of the duration of the process. This decision of the arbitral tribunal will not be considered as prejudgment regarding the main purpose of the dispute. 

Local courts have a relevant role in international arbitration in cases to ensure that the preliminary measure or interim measure is promoted by one of the parties prior to the initiation of the arbitral proceedings. In this case, the arbitral claim should be started within 30 days counted as from the date the measure takes effect.

If the interim measure is decided by the arbitral tribunal in the course of an arbitration proceeding, the arbitral tribunal may also request the assistance of a local court to enforce the measure against a party in breach.

To that end, the local court will have the same jurisdiction to issue precautionary measures for arbitration proceedings, regardless of whether or not these arbitrations are seated in Uruguay. For purposes of deciding on the issuance of an interim measure or precautionary measure, the local court should take into account the principles of international arbitration and the particularities of the ongoing arbitral dispute. Regarding the type of measures that could be granted by local courts see 6.1 Types of Relief.

Although the role of an emergency arbitrator has not been established in the ICA, local arbitral institutions such as the CCA have regulated that an emergency arbitrator may issue interim and precautionary measures. According to the CCA rules the emergency arbitrator’s competence would be limited to precautionary measures, secure evidence or anticipated evidence, which due to their nature or circumstances should be received prior to the appointment of the arbitral tribunal.

The party that is willing to request the intervention of an emergency arbitrator should file its request with the CCA in writing. The existence of a prior appointment of an emergency arbitrator does not prevent the local courts from assuming jurisdiction at the request of one of the parties or for the enforcement of the interim or precautionary measure.

Uruguayan law does not allow the local courts or the arbitral tribunal to ask security for costs only for the claimant. Advanced costs for the arbitration are requested for both parties equally.

Parties are free to establish the arbitral procedure in the arbitral agreement or after the dispute started. In case where the parties fail to establish the arbitral procedure, the arbitral tribunal is entitled to decide the procedure that is more adequate for the dispute. Such a procedure would also regulate the admissibility and assessment of the evidence. 

There are no particular steps prior to promoting an international arbitration. However, if one of the parties refuses to enter into the arbitration and, consequently, to honour the procedure established by the ICA, the claimant is entitled to promote the judicial enforcement of the arbitral agreement with the local courts. In this case, the local court would, on behalf of the breaching party, grant the arbitral agreement, appoint the arbitrator, set the procedure and indicate the matters that must be subject to decision by the arbitral tribunal.

Arbitrator’s powers over the arbitration procedure are equal to the ones hold by a local judge but without the imperium or coercion powers. Arbitrators are entitled to collect their fees and exercise its analysis with independence and impartiality. Arbitrator’s main duties are to issue the award within the agreed term but limited to the matters subject to arbitration. 

There are no particular qualifications or other requirements for legal representatives to appear in an international arbitration.

The arbitral tribunal or any of the parties, with the prior authorisation of the arbitral tribunal, may request the assistance of a competent local court for the taking of evidence or enforcing the request of evidence. The court may attend grant the request in accordance with the applicable rules on evidence.

Since the parties are free to establish the procedure, this choice also includes rules regarding evidence and its assessment. The same applies to the domestic procedure. As explained, if parties fail to set the rules of procedure the arbitral tribunal of the international arbitration would establish the ones that are appropriate to the dispute. In the case of domestic arbitration, if the parties fail to set the rules of procedure the CPC would apply. However, the set of procedural rules established by the parties, or the international tribunal must respect the due process of law.

The arbitral tribunal has no compulsion powers regarding the production of evidence. The compulsion power to produce evidence is exercised through the assistance of the local courts within the limits of the local regulations. This means that if a document is requested by the arbitral tribunal, but according to local rules such a document would be deemed to be secret or confidential, it is likely that the local court would refuse to produce the document. On the other hand, in a case where the party refuses to cooperate with the production of evidence, the arbitral tribunal may issue the award with the evidence already produced, taking into consideration such an absence of cooperation.

ICA does not regulate confidentially, so the parties are the ones that should establish the confidentiality rules applicable to the international arbitration (including the disclosure in subsequent proceedings).

The award shall be made in writing and in the language agreed by the parties. In order to be valid the award should be signed by the majority of the members of the arbitral tribunal, provided that the reasons for the lack of one or more signatures are established in the award. The date and place of issuance should be clearly stated. 

In principle, the award should be grounded or motivated in the applicable law and contracts selected by the parties. 

Parties are free to determine the term in which the arbitral award should be rendered. In the case of local arbitrations if the parties do not determine the term for the issuance of the award, the term to produce the award would be 90 days counted from the date of the first procedural act by the arbitral tribunal.

The limits on the type of remedies an arbitral tribunal may impose are determined by the applicable law selected by the parties or the terms and conditions of the contract which gave rise to the dispute.

According to Article 34, the parties are free to establish whether legal costs could be reimbursed to the winning party. In a case where the parties have not decided otherwise in the arbitral agreement, the arbitral tribunal shall allow the winning party to recover the legal costs. However, regarding the legal fees, a costs sharing approach is normally followed. In cases where one of the parties have not cooperated with the arbitral tribunal in the production of evidence or the procedural conduct of the party does not meet good faith standards, fees and costs are imposed on the losing party.

The award may only be appealed with a court by petition for annulment. In order to succeed in the annulment recourse, the promoting party should demonstrate one or more of the following: 

• one of the parties to the arbitration agreement was affected by some incapacity, or that said agreement is not valid;
• it has not been duly notified of the appointment of an arbitrator or the arbitration proceedings have breached the due process of law; 
• the award refers to a dispute not provided for in the arbitration agreement or contains decisions that exceed the scope of the arbitration agreement;
• that the members of the arbitral tribunal or the arbitral procedure have not followed the arbitral agreement in place;
• that according to the law of the Republic, the subject matter of the controversy is not subject to arbitration; or
• that the award is contrary to the international public order of Uruguay.

The annulment petition must be filed within three months after the date of the last notification of the award.

Parties cannot agree to exclude or expand the scope of the appeal or challenge under national law.

The judicial review on the merits of the annulment is a de novo standard.

Uruguay has ratified the New York convention without reservations.

An arbitral award, regardless of the country in which it was issued, shall be recognised as binding in Uruguay upon filing of a written request to the competent court. The party that invokes an award or requests its enforcement must file the original award or a duly certified copy along with the original of the arbitration agreement. If the award or agreement is not written in Spanish, the party must file a sworn translation of the documents. Even where the arbitral award has been set aside by the courts in the seat of arbitration, the enforcement before the local courts would be admissible. A new analysis would be performed by the local court.

Regarding the sovereign immunity at the enforcement stage case law has supported the thesis that rejects the general immunity of States. The national rulings are aligned with the international regulations on this matter allowing the enforcement in cases where the assets or activity were not related to an official purpose. 

This is to say that assets, such as embassies, are excluded from the enforcement. Nevertheless, commercial assets can by subject to enforcement. In sum, case law has construed that immunity of the State will not be applied if the enforcing party demonstrates that the assets are intended for a commercial or lucrative activity. 

International public order should be construed as the basic set of common principles on which a State grounds its legal individuality. Therefore, to reject the recognition of a foreign award, such an award must infringe in a concrete and serious manner the essence of our international public order principles. It should be borne in mind that in order to reject the recognition based on the public order exception, the public order to be considered is international public order, not internal public order. Therefore, the approach of local courts regarding recognition of foreign arbitral awards, is more favourable than the one established in the UNCITRAL Model Law which also includes the exception of internal public order.

Uruguay does not regulate class action arbitration nor group arbitration claims.

The only ethical code applicable to the legal profession is the Uruguayan Bar Code of Ethics. However, the code would only apply to Uruguayan practitioners who are members of the Uruguayan Bar. In Uruguay it is not mandatory for a legal practitioner to become a member of the local Bar.

Uruguay has no restrictions regarding third-party funders.

An arbitral tribunal would only be entitled to consolidate separate agreements upon the acceptance of all parties involved in the dispute.

Third parties cannot be bound by an arbitration award issued in a procedure that did not actively participate. National courts would not bind a third party to an arbitration proceeding if such a party did not participate.