Jonathan C. Hamilton, “ Enforcement of Judgments and Arbitral Awards in Latin America,” International Dispute Resolution Newsletter (2002)

The enforcement of foreign judgments and arbitral awards remains a problem in disputes involving Latin American parties. Enforcement issues are important when negotiating contract terms with or for a Latin American entity and when attempting to enforce an award against such an entity. Mexico historically had a territorialistic legal system that refused to apply foreign law or enforce foreign judgments. That stance has relaxed somewhat in recent decades, as evidenced by the accession of Mexico to multilateral conventions.

The enforcement of foreign judgments and arbitral awards remains a problem in disputes involving Latin American parties. Enforcement issues are important when negotiating contract terms with or for a Latin American entity and when attempting to enforce an award against such an entity.

Applicable Treaties

There is no universally applicable treaty regarding the recognition and enforcement of foreign judgments. As a practical matter, the enforcement of foreign judgments in Latin America turns on principles of comity and reciprocity, local laws and court practices that differ by country. This lack of uniformity is a contributing factor to the increased use of arbitration provisions in contracts involving Latin American parties.

Whereas there is no universal international treaty regime for the enforcement of judgments abroad, most major Latin American countries are parties to international conventions relating to the enforcement of international arbitration awards. Every major nation in the Americas except Brazil has ratified the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the New York Convention, and the 1975 Inter-American Convention on International Commercial Arbitration, popularly known as the Panama Convention. Brazil is currently considering ratification of the New York Convention. Many Latin American countries are also parties to the 1928 Pan-American Code of Private International Law, known as the Bustamante Code, and the 1979 Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards, known as the Montevideo Convention. The Bustamante Code was an effort to facilitate enforcement of judgments among Latin American countries, and the Montevideo Convention was, in some ways, an effort to modernize the Bustamante Code; but neither the United States nor any other non-Latin American states are parties to either convention, limiting their applicability in the global business context.

The enforcement of international arbitral awards remains subject to many of the uncertainties that afflict the enforcement of foreign judgments. As courts in various jurisdictions become more accustomed to enforcing arbitral awards, however, arbitration is growing as a preferred method of dispute resolution when any resulting award may need to be enforced in the Latin American jurisdiction of the defendant.

Enforcement in Mexico

Mexico is a jurisdiction that is indicative of the efforts required to enforce foreign judgments and arbitral awards in Latin America. Mexico historically had a territorialistic legal system that refused to apply foreign law or enforce foreign judgments. That stance has relaxed somewhat in recent decades, as evidenced by the accession of Mexico to multilateral conventions.

In contemporary practice, a foreign judgment against a Mexican party in principle should be recognized by the courts of Mexico, but the enforcement process is still marked by exceptions. Among other things, enforcement may be limited or affected by bankruptcy, insolvency, liquidation, reorganization, moratorium and other similar laws of general application relating to or affecting the rights of creditors generally. The judicial recognition of a foreign judgment can take several years, and any attempts to enforce a recognized judgment may be subject to further challenges.

The enforcement of arbitration awards in Mexico is grounded in the ratification by Mexico of the New York and Panama Conventions. Mexican courts are obligated to enforce international arbitral awards, although it is still necessary to comply with certain procedural and constitutional safeguards. Some examples of common defenses to the enforcement of arbitration awards include the following:

• absence of legal capacity of one of the parties to enter into the arbitration agreement;

• denial of proper notice as to the designation of an arbitrator or the communications during the arbitration proceeding;

• arbitral award exceeds the scope of the arbitral agreement;

• formation of the arbitral tribunal violated federal, state or local provisions;

• denial of rights associated with the arbitration proceeding;

• award is not binding because it is subject to foreign court proceedings;

• award violates Mexican public policy.

Even if such defenses are overcome, the enforcement of an arbitral award may be subject to a constitutional challenge known as an amparo, which may result in further delay.

The question of whether it is easier and more efficient to enforce a foreign judgment or international arbitral award in Mexico is subject to debate. While longstanding provisions apply to the enforcement of foreign judgments, the development of Mexican arbitration law and applicability of international treaties are paving the way for more efficient enforcement of arbitration awards.

The question of whether it is easier and more efficient to enforce a foreign judgment or international arbitral award in Mexico is subject to debate. While longstanding provisions apply to the enforcement of foreign judgments, the development of Mexican arbitration law and applicability of international treaties are paving the way for more efficient enforcement of arbitration awards.

Jonathan C. Hamilton