With the Enactment of Law 8937, INTERNATIONAL COMMERCIAL ARBITRATION LAW BASED on UNCITRAL

EDITORS NOTE ON COSTA RICA´S ADOPTION OF UNCITRAL MODEL LAW (LAW 8937)

With the enactment of Law 8937, INTERNATIONAL COMMERCIAL ARBITRATION LAW BASED ON UNCITRAL MODEL LAW, [1] published in the Official Gazette No. 100 of May 25, 2011 Costa Rica becomes the twelfth country in the world to adopt the Model Law including the 2006 admendments.

As a result, Costa Rica has decided for a dual system, where Law 7727 of December, 1997, published in the Official Gazette No. 09 of January 14, 1998 [2], will apply to domestic arbitration and Law 8937 will apply to international arbitration cases.

Notwithstanding, that Law 8937 is basically a copy of the UNCITRAL Model Law, including the 2006 amendments, it is important to note the following particularities:

A)  In Article 1, paragraph 5) the costarrican lawmakers included wording to clearly establish that the law does not apply to Investor-Estate disputes regulated in international agreements.

B)  Footnote 2 of the Model Law, regarding the definition of the term commercial , is included as part of the text of Article 2 in paragraph g).

C)  Regarding Article 7, the Law adopts option I of the 2006 amendments. Costa Rica's new law does require that all arbitration agreements shall be in writing, but this requirement can be reached in a flexible manner under this article, provided that its content is recorded in any form, including electronically.

D)  In Article 10 paragraph 2) , contrary to the Model Law, in lieu of an agreement between the parties, the fallback rule opts for 3 arbitrators instead of 1 .

E)  Law 8937 deviates itself from the text of Article 17 of the Model Law (one of the main admendments) with respect to the form of the interim measure, not requiring the form of an award but requiring the interim measure to be reasoned.

F)  Includes two additional articles regarding the matters that can be subject to arbitration ( matters that under Costa Rica’s civil and commercial law the parties are free to agree) and confidentiality of the arbitral proceedings.

The immediate implications of the Law, position Costa Rica as an arbitration-friendly forum for international arbitration and terminates, in the case of an international arbitration, with the legal obstacle that banned foreign arbitrators and legal counsel to act in international commercial arbitration cases with seat in Costa Rica. Also, it provides a more clear legal frame for the recognition and enforcement of foreign awards and application of the New York and Panama Conventions.

[1] The official name in Spanish is LEY SOBRE ARBITRAJE COMERCIAL INTERNACIONAL BASADA EN LA LEY MODELO DE LA COMISION DE LAS NACIONES UNIDAS PARA EL DERECHO MERCANTIL INTERNACIONAL (CNUDMI)

[2] Currently , there is a bill pending in Congress to modify Law 7727 and in which it is clearly established that it applies to domestic arbitration. At the present it is difficult to predict when the that bill will become law.