PERU: An Introduction to Dispute Resolution: Arbitration
Possible Legislative Changes to Peruvian Arbitration Rules
Peru continues to be one of the main seats for arbitration in the region. Its celebrated arbitration law, in force since 2008, is a fundamental pillar of the annual increase in arbitrations, which is also driven by Peru's well-known mandate to arbitrate all disputes pertaining to public procurement.
While in recent years Peru has also experienced solid growth in developing other dispute resolution mechanisms such as dispute boards or the still incipient mediation, arbitration maintains its special relevance as the alternative mechanism to traditional state justice most used by economic agents in Peru.
Although Legislative Decree No. 1071, also known as the Ley de Arbitraje (Arbitration Law), has undergone several amendments since its entry into force, perhaps the most relevant ones as a consequence of isolated negative experiences in the long and fruitful development of arbitration in Peru, this law had not been thoroughly reviewed for evaluation and improvement.
However, that has recently changed in 2024. The Peruvian Government, through the Ministry of Justice and Human Rights, issued Ministerial Resolution Number 0124-2024-JUS, which created the "Grupo de Trabajo Multisectorial para la mejora y actualización de la normativa que regula el arbitraje, con la finalidad de optimizar el marco jurídico vigente” (Multisectoral Working Group for improving and updating regulations governing arbitration, in order to optimise the current legal framework), which is an opportunity to reflect on the progress of arbitration in Peru in the last fifteen years and to promote those legislative and institutional improvements that favour its strengthening and projection.
It is important to highlight that the Peruvian State is represented in the working group in charge of evaluating the Peruvian Arbitration Law and proposing legislative improvements with representatives of the Ministry of Justice and Human Rights, the Procuraduría General del Estado (State Attorney General's Office), which brings together all the public prosecutors in charge of defending the interests of the public institutions, the body in charge of supervising public procurement, among others, as well as representatives of the Peruvian business community, and the main arbitration institutions in the country.
Even though no particular proposal has been publicly discussed in relation to the legislative improvement that the Peruvian Government would like to incorporate into the Arbitration Law, it is highly likely that much of the discussion around changes to the rules will revolve around those rules applicable to disputes in which one party is the State, derived from the laws that regulate the various types of public procurement in Peru.
Recently Passed Legislation in Peru Governing Public Contracts
As had been announced for some time, the Peruvian Congress approved Law Number 32069, the Ley General de Contrataciones Públicas (General Law on Public Procurement), which repeals the Ley de Contrataciones del Estado (Law on State Contracting) that has been in effect for several years. Although this new law modifies some substantive aspects of the contractual process, such as the selection methods itself and the addition of new contracting mechanisms, it also modifies other aspects of the process, such as the handling of disputes pertaining to the state contracting procedure.
Regarding disputes arising from improving and executing state contracts within the framework of the new law that will soon come into force, this new law includes the possibility to submit potential claims to conciliation and arbitration, common dispute resolutions mechanisms, and has changed the name to the mechanism of dispute prevention and resolution boards, whose use has been increasing considerably in public procurement in Peru, with intense promotion activity by the domestic arbitration centres and with the active participation of professionals seeking to specialise in this mechanism.
The fact that it leaves open the possibility of incorporating other dispute resolution mechanisms into standardised contracts is important to highlight. It will allow to explore alternatives to settle contractual disputes more quickly and effectively, thereby putting an end to concerns about the potential negative effects that activating certain dispute resolution mechanisms may have due to alleged effects on ongoing work, stoppages, etc.
Consolidating Transparency and Formalising Arbitration
Regardless of the legislative changes that have already happened or may happen in the medium future, there is a crucial component that needs to be discussed with priority and particular relevance among domestic and international arbitration practitioners associated with Peru. This is partially addressed in the new Ley General de Contrataciones Públicas (Law on Public Procurement), by incorporating the creation of the registry of arbitration institutions and centres for the administration of dispute prevention and resolution boards, administered by the Organismo Supervisor de Contrataciones del Públicas Eficientes (Supervising Body for Efficient Public Procurement), which will replace the Organismo Supervisor de Contrataciones con el Estado (Supervising Body for State Contracting).
This important aspect associated to the proper management of dispute resolution mechanisms such as arbitration has to do with transparency and the need to provide certain formalities to those who provide services for administering arbitration proceedings, such as arbitration centres of chambers of commerce, professional associations or private institutions formed at the free initiative of citizens.
The emphasis that should be placed on this matter has its origin in a phenomenon that has been experienced in recent times, which is the existence of arbitration centres whose formality is questionable and which, in a limited but sensitive manner, end up affecting the well-earned prestige of arbitration institutions and practitioners of arbitration in Peru.
We believe that Peru's positive arbitral climate has not been impacted by this circumstance. The number of arbitrations is still rising, and with it, the calibre of arbitral procedures and parties involved. The sophistication of arbitration in Peru is not just a mere appearance. It is a real transformation that implies substantial and considerable improvements by incorporating, for example, international rules and standards that mirror industry best practices into the proceedings that are heard, with Lima as the seat.
Moreover, the number of foreign arbitrators participating in both domestic and international arbitrations with Lima as the seat has increased noticeably. This entails raising the bar for arbitration in Peru, where it is already a prestigious activity because of the calibre of arbitrators, the calibre of arbitration facilities, and the presence of a legislative framework that works to uphold and advance arbitration as a practical and efficient means of solving disputes.
Future Expectation
We are confident that the future of arbitration in Peru is promising and will continue with the success story it has represented for so many years. The challenge for those involved in its practice and development is to continue to promote excellence and best practices, thus ensuring the high quality of arbitration in Peru and the conviction among new generations of citizens that this is one of the best – if not the best – way to resolve disputes among market players.