The global economic regime has undergone major changes in recent years. We have gone through pandemics, wars, economic and social crises, which have changed our vision of society and the way the economy operates.
Latin America is a region known for its political and economic volatility as well as its institutions that are not always reliable due to excessive bureaucracy and corruption.
In this context, the use of alternative means of dispute resolution has increased, since the growth of foreign investment in Latin America. For this, arbitration has made an appearance to offer businesses an extra layer of protection with robust, safe and fast processes that mostly end with satisfactory results. In fact, there are studies that show that, on average, a claim before the ordinary jurisdiction can take from 2 to 5 years, while arbitration processes are usually resolved in a period of 6 months to 1 year.
Having seen the benefits and opportunities of arbitration, we will proceed to review the trends of this institution in Latin America in recent years.
New opportunities in the energy sector
The energy sector in Latin America has undergone significant changes in recent years due to a combination of economic, technological, political and environmental factors. This is why significant progress has been made to decarbonize energy in Ibero-American countries. Countries such as Chile, Brazil and Uruguay have led the transition to alternative energies such as wind or solar, while emerging technologies such as green hydrogen and energy storage are gaining prominence.
These new energy alternatives open doors in the field of energy arbitration due to new local and external investment, which can be seen as an area of opportunity. Due to the political volatility of the region it is advisable to resort to new forms of business protection. This is when the arbitration for the energy sector appears as an alternative option for dispute resolution with a lot of advantages such as celerity, legal security, and flexibility, with processes that can be adapted to this economic sector and his particular rules.
Growth of corporate arbitration
Corporate arbitration has established itself as an alternative dispute resolution mechanism in the business field, offering an agile, specialized and confidential solution to conflicts that arise within companies. This method has increasingly been used to allow partners, shareholders and governing bodies to resolve disagreements in a less formal manner than the judicial process and maintain control over the process and minimizing the negative impact on the company’s operations and reputation.
Corporate arbitration has gained a foothold in personal or closely held companies, with special emphasis on family businesses. This type of arbitration is focused on settling disputes between members of a company and has recently become popular in countries such as Colombia, Argentina and Venezuela.
Now, the question may arise: How is an arbitration clause established for corporate disputes?
In this regard, the doctrine has been consistent in that the clause must be inserted in the company’s bylaws and in the case of companies already established the arbitration agreement may be signed in a subsequent act that is duly registered.
Growth in investment arbitration
Investment arbitration is a dispute resolution mechanism between foreign investors and host States based on international treaties, contracts or local legislation that promote and protect foreign investment. Its main objective is to ensure that States comply with the obligations assumed to protect the rights of investors, providing a neutral and specialized forum to resolve conflicts that may arise.
According to the Investor–state dispute settlement (SDS) annual report, in 2023 Latin America had a total of 380 investment arbitration claims, representing 28.5% of the total of such disputes, being the second most demanded region that year, with the most demanded countries being Argentina, Venezuela and Mexico respectively.
Investment arbitration is consolidated as an essential mechanism to resolve disputes between foreign investors and host States, providing a neutral forum that protects the rights of investors within the framework of international commitments. The significant participation of Latin America demonstrates the region’s relevance in the field of international investments and underlines the need to strengthen regulatory frameworks that balance the attraction of investments and the fulfillment of obligations by States.
Conclusion
Arbitration has become an essential mechanism for addressing the challenges posed by Latin America’s dynamic political and economic landscape. Its efficiency, confidentiality, and adaptability have positioned it as a preferred choice for resolving disputes in key sectors such as energy, corporate governance, and foreign investment.
The rise of energy arbitration reflects the region’s transition toward renewable energy and technological advancements, offering opportunities to safeguard investments in a rapidly evolving industry. Similarly, corporate arbitration provides a practical and effective avenue for resolving internal business disputes, fostering stability within organizations and preserving their reputations. Investment arbitration, meanwhile, underscores the region’s role in the global economy, highlighting the importance of robust legal frameworks to attract and protect foreign investment.
As arbitration continues to grow in prominence across Latin America, it serves not only as a tool for conflict resolution but also as a driver of economic development and international collaboration. Strengthening legal and institutional frameworks will be critical to ensuring its sustained success and addressing the unique challenges faced by the region.