International Arbitration and the Republic of Colombia: Commercial, Comparative and Constitutional Concerns from a U.S. Perspective

By Strong, S. I. | Duke Journal of Comparative & International Law, Fall 2011 | Go to article overview

International Arbitration and the Republic of Colombia: Commercial, Comparative and Constitutional Concerns from a U.S. Perspective


Strong, S. I., Duke Journal of Comparative & International Law


INTRODUCTION

For decades, Latin American nations have worked to stabilize their economies and liberalize their trade regimes. (1) By all accounts, these efforts have been highly successful, allowing Latin America to weather the recent economic downturn far better than any of the world's developed economies. (2) Indeed, as the United Nations recognized in March 2011:

   The region's economic reforms of past decades, its fiscal and
   macroeconomic prudence and its sound financial supervision, ...
   have allowed it ... to enter the new decade with a promising
   outlook for growth.... For the first time in its history, the
   region achieved during the past decade a combination of high
   growth, macroeconomic stability, poverty reduction and improvement
   in income distribution. On the strength of the foregoing and of its
   privileged endowment in natural resources, energy, water and
   biodiversity, the Latin American ... region will be called upon to
   assume an increasingly larger role in the global economy. (3)

Commercial potential of this magnitude has not gone unnoticed. Countries from all over the world are turning their eyes toward Latin America, and the United States is no exception. In fact, Latin America is currently the United States' fastest-growing export market, with three times as many goods and services heading to this region as to China. (4)

Although many Latin nations boast significant economic accomplishments, one country--the Republic of Colombia--is particularly impressive. For years, Colombia has been a model of political and economic stability in the Latin American region. (5) Although the country's commercial reputation has at times been overshadowed by other issues, (6) that did not stop the World Bank from ranking Colombia in 2011 as the best country in Latin America and the Caribbean for protecting investors and the third-best in the region for ease of doing business. (7)

American investors and companies are already benefitting from the Colombian success story, engaging in enough cross-border business to make Colombia the United States' twenty-sixth most active trading partner. (8) The amount of commercial activity between Colombia and the United States is expected to rise by an additional $1.1 billion as a result of a free trade agreement (9) that was recently ratified by the U.S. Congress. (10)

As impressive as Colombia may be in some regards, problems do exist. For example, one of the biggest concerns commercial actors have about cross-border transactions involves the ability to enforce contractual obligations in a timely and effective manner. (11) Unfortunately, this is one area where Colombia does not rank highly at all. (12) However, the difficulty in Colombia is not that the courts are corrupt. Instead, it is the length of time that it takes for a dispute to make its way through the judicial system. (13) Although the situation is improving, in 2011 the World Bank reported that Colombia had the sixth slowest judicial system in the world, with the average contract dispute taking 1,346 days to resolve. (14)

Corporate actors do not welcome the prospect of lengthy litigation. If the likely cost of remedying a contractual breach outweighs the potential profits to be made from the transaction, the transaction will not be completed. However, litigation is not the only means of resolving commercial disputes. (15) Arbitration has long been seen as an appropriate alternative to judicial relief, particularly when national courts are unable to provide principled, predictable or timely resolution of legal controversies. (16) Therefore, it is unsurprising that arbitration is being used in Colombia with increasing frequency to resolve both domestic and international disputes. (17) Indeed, Colombia has been ranked very highly in terms of the strength of its laws regarding commercial arbitration. (18)

U.S. parties may see Colombian acceptance of arbitration as a positive indication of the country's suitability for international trade, and that is true in many ways.

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