Costa Rica is making strides toward becoming an attractive location for international commercial arbitration.

Most recently, Costa Rica passed the International Commercial Arbitration Act on May 25, 2011.  This new law, together with other laws, policies, and country characteristics described below, is expected to put Costa Rica on the map of international arbitration venues for four reasons.  First, the new law is based on the UNCITRAL Model Law on International Commercial Arbitration, considered the gold standard for arbitration law worldwide.  Second, many related aspects of Costa Rica's legal regime promote and facilitate international arbitration in Costa Rica.  Third, the new law has the support of the three branches of government.  And fourth, Costa Rica´s hospitable environment for foreign visitors invites contracting parties to consider Costa Rica as the situs for dispute resolution.

I. THE INTERNATIONAL ARBITRATION LAW IS BASED ON THE RESPECTED UN MODEL LAW.

Resolving disputes through arbitration is a fundamental right in Costa Rica, according to Article 43 of the Costa Rican Constitution.  Building on this constitutional principle, on May 25^th 2011, Costa Rica published in its Official Gazette, and thereby finalized passage into law, the International Commercial Arbitration Act, Law 8937, based on the UNCITRAL Model Law.

Roy Herrera, litigation partner at Arias & Muñoz, Costa Rica, has pointed out how the new International Commercial Arbitration Act invigorates international arbitration in Costa Rica:

"This regulation applies to foreign legal persons and to commercial activity conducted, in whole or in part, abroad. It also applies to commercial activities in which there has been an agreement between the parties that the commerce is of an international nature.

The new legislation overcomes the limitations of the previous law on Alternative Resolution of Conflicts and Promotion of Social Peace, Law No. 7727, by changing the language that can be used in the arbitration proceeding and who can act as arbitrators in the process. (...)

With the approval and implementation of this new International Commercial Arbitration Act, Costa Rica aims to become an attractive and competitive venue for international arbitration.  Since Costa Rica is known worldwide for its stable democracy, the country can compete on an equal footing with other major arbitration sites worldwide."

II. RELATED NATIONAL LEGISLATION REINFORCES THE NEW LAW.

Although the International Commercial Arbitration Act is new, the Costa Rican government has endeavored for decades to pass legislation to strengthen the nation´s competitiveness and reinforce the rule of law. The Ministry of Justice and the Congressional Committee on International Affairs have built over time a legislative package comprised of several key pieces of legislation, arising from Article 43 of the Costa Rica Constitution, to further this goal.

This legislative package-the aforementioned International Commercial Arbitration Act, the Hague Convention, a reform to the Law for Alternative Dispute Resolution and Promotion of Social Peace (the RAC Act), the New York and Panama Conventions, and the the Code of Civil Procedure-are intimately related, and each piece works together to facilitate international arbitration in Costa Rica.

A) Costa Rica's Accession to the Apostille Convention Facilitates the Use of Public Documents as Evidence in Arbitration.

On February 22, 2011, Costa Rica adopted the Hague Convention abolishing the Requirement of Legalization for Foreign Public Documents with Law 8923, ¨the Apostille¨.  On December 15, 2011, assuming no objections from the member states of the Hague Convention, Costa Rica will become an official member to the Hague Convention.

B) Costa Rica's Arbitral Awards are Enforceable in Member States of the New York and Panama Conventions.

On November 15, 1977 Costa Rica ratified the New York Convention of June 10, 1958 with Law 6157.  This Convention eliminates the necessity of recognizing an arbitral award through exequatur and compels member states to recognize and enforce international arbitration awards made in other member states.

The New York Convention was drafted and signed under the supervision of the United Nations and is one of the most important legal instruments worldwide, and has been ratified by more than 140 countries.

Costa Rica is also a signatory to the Inter-American Convention on International Commercial Arbitration of 1975 (the ¨Panama Convention¨), which, like the New York Convention, requires member states to recognize and enforce arbitration awards issued in other member states.

The Panama Convention, a product of the Organization of American States, has been adopted by eighteen countries.  Costa Rica ratified the Convention on January 30, 1977 with Law 6165.

Costa Rica´s participation in both conventions creates a secure legal environment for the recognition and enforcement of international arbitration awards.

C) Costa Rican Procedure Provides for the Enforcement of Arbitral Awards in Costa Rica.

The enforcement of the award is regulated by Articles 692 - 708 of the Code of Civil Procedure and Articles 35 and 36 of the International Commercial Arbitration Act.

These Articles explain the procedure that must be followed in executing national and international arbitration awards, as well as the grounds upon which the recognition or enforcement of an arbitral award may be refused, among others, such as:

i) The party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or the arbitral proceeding, or was unable for any other reason, to assert their rights, or

ii) The award deals with a dispute not contemplated by the arbitration agreement or contains decisions on matters beyond the terms of the arbitration agreement, or

iii) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, or

iv) That the award has not yet become binding on the parties or was revoked or suspended by a court in the country where that award was issued, or

v) That, under the law of Costa Rica, the object of the dispute was not arbitrable.

It is important to mention that the RAC Act allows for an execution of the arbitration award even if a request for nullification is pending.

III. THE LEGAL COMMUNITY AND THE THREE BRANCHES OF COSTA RICAN GOVERNMENT SUPPORT INTERNATIONAL ARBITRATION.

A) An Initiative of the Legal Community.

In an effort to promote the enactment of an International Arbitration Law in Costa Rica, the Second International Conference on Arbitration was held in February 2011 in Costa Rica.  Participating in the Conference were Costa Rican arbitration centers and law firms, and foreign professionals in the field of international arbitration, including international arbitrators, lawyers, and representatives of governments.  Participants came from various countries, including Mexico, Peru, Spain, France, Chile, the USA, Panama, Argentina, Colombia, and the Dominican Republic.  The international support to hold the Conference on Arbitration for two consecutive years, and the commitment to hold a third conference in San José, Costa Rica in February 2012, demonstrates the interest of the professional arbitration community in making Costa Rica a home to international arbitration.

Additionally, the ICC Commission in Costa Rica continues to promote arbitration in the country.  For example, it recently founded a Costa Rica Chapter within the Spanish Arbitration Club.

This interest was affirmed once again on April 12, 2011 with another conference, held by the Center for International Conciliation and Arbitration (Centro Internacional de Conciliación y Arbitraje), within the Costa Rican - American Chamber of Commerce (AmCham).  Conference participants discussed how to transform Costa Rica into a major international arbitration center, with Mr. Victor Garita González, National Arbiter, Ignacio Suárez Anzorena, expert in international commercial arbitration in Washington, D.C., and Salvador Fonseca, International Arbiter of Mexico City, Mexico.  At this conference, the participants drafted a preamble for the application of the new International Commercial Arbitration Act (based on the UNCITRAL Model Law).

B) The Executive and Legislative Branches Support International Arbitration in Costa Rica.

The greatest source of support for international arbitration in Costa Rica has come from the Ministry of Justice in Costa Rica, represented by Minister Hernando París, and from the  Committee on International Affairs of the Legislative Assembly, represented by Representative Francisco Chacón.  Led by these bodies, the executive and the legislature have collaborated through an interinstitutional task force that carried out the approval of the International Commercial Arbitration Act and the accession of Costa Rica to the Apostille Convention.

In addition to passing these laws, Hernando Paris plans to make arbitration an activity of national interest by decree in conjunction with the Costa Rican Tourism Institute (ICT).

C) Support of the Judiciary.

In Costa Rica the Judiciary, and the Supreme Court in particular, has always been the father of arbitration in Costa Rica.  The courts have maintained a clear pro-arbitration position, helping to ensure the consolidation and success of this practice in Costa Rica.

According to the Costa Rican Arbiter Victor Garita, the Constitutional Chamber of the Supreme Court respects the principle of one-time review of an arbitration award only for claims for nullification, which is within the sole jurisdiction of the First Chamber.  The Constitutional Chamber has also expanded the scope of arbitration to once non-arbitral topics (e.g., disputes about the Law of Protection for the Representatives of Foreign Companies). Finally, the First Chamber has proclaimed and supported the contractual nature of arbitration, striking down the statutory obligation of an insured party to take all claims against the insurer to arbitration.  In addition to taking a position in conformity with the principles of the Model Law, the First Chamber has consolidated the principle that awards should always be recognized where neither party seeks to challenge the award, the principle of free choice of forum and procedure, and the well-recognized principle of "Kompetenz-Kompetenz".  Perhaps most importantly, the First Chamber of the Supreme Court will not change the outcome of the arbitration award based on the merits of the case.  It should be noted that all the judges of the First Chamber actively participated in the Second Congress of International Arbitration, demonstrating their commitment to the subject of arbitration.

The courts' pro-arbitration position is evident in the limited success of petitions to nullify awards.

In Costa Rica, an arbitration award may be challenged with a petition for nullification before the First Chamber of the Supreme Court. In exceptional cases, an award may challenged through an extraordinary review proceeding, usually in connection with criminal matters.  This proceeding is available to review any resolution of a judicial nature, and is not solely for review of arbitral awards.  However, the Chamber´s review of arbitral awards has been conservative and therefore few arbitral awards have been nullified in Costa Rica.

The First Chamber has historically respected arbitral awards by limiting its review to cases brought under Article 67 of the RAC Act.  That article prescribes a definitive list of the bases for nullification, such as those cases where an award was issued after the deadline, would violate due process, or would be against public policy, to name a few.

According to Professor José Rafael Fernández at the Second Congress of International Arbitration in Costa Rica, other arguments to challenge the award are attacking the law itself, the arbitrators, or arbitration centers. When lawyers use these arguments to challenge the award, however, they are essentially trying to appeal the arbiters´ decision, which is improper.

For example, at the Second Congress on International Arbitration, Francisco González de Cossio of Mexico talked about the significance of judges´ interpretation of the concept of public order as a basis for nullifying an arbitral award, as this is a common grounds for challenging an award. Mr. González discussed his experience in jurisdictions in which judges maintained a broad interpretation of public order. In response, Judge Anabelle León of the First Chamber asked for the floor and explained that Costa Rican judges maintain a narrow interpretation of the concept of public order, to preserve the legal certainty of the parties to an arbitral proceeding.

Statistics support Judge León's assertion.  From 2000 to 2010, the First Chamber ruled the following way on appeal cases of arbitral awards brought before them:

• Appeals filed: 97 cases
• Appeals decided: 74 cases
• Awards nullified: 7 cases or 9.5%

In light of the Court´s specific position on nullification, Costa Rica once again demonstrates its general support of international arbitration.

IV. COSTA RICA IS AN ATTRACTIVE SITUS FOR ARBITRATION.

Costa Rica has many advantages when compared with other countries in the region and is poised to become a preferred location for international arbitration.

These advantages are several important aspects, such as:

• Costa Rica is peaceful and politically stable in comparison with other countries in the region, ensuring tourists, either for business or pleasure, peace of mind and security.
• Costa Rica boasts a well-developed infrastructure, from highways and clean drinking water to 3G cell phone service, modern airports, and the finest in hotels and restaurants, to allow for a productive, yet comfortable stay in Costa Rica.
• The high level of education across Costa Rica ensures quality translation services, arbiters, and local bilingual and multilingual lawyers that can help reduce costs of arbitrating parties having to transport their own staff.
• A wide range of local law firms have extensive experience in alternative dispute resolution and are capable of giving legal advice at the regional level and in all areas of law.
• Well established Centers for Institutional Arbitration provide suitable forums with the necessary amenities.

Of course there is still room for further improvement, principally in the areas of immigration and customs to facilitate the entry of witnesses and evidence, as well as other participants in the proceedings.  But even these issues are on track for improvement to ensure that parties can enjoy an ideal environment and experience.

The International Arbitration Act, recently passed in Costa Rica is the culmination of a great effort, developed over the years by many people and institutions. All the elements converge to make Costa Rica a destination worthy of serious consideration for international arbitration.

San José, Costa Rica
September 21, 2011