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Venezuela: Arbitration in a country without the rule of law

By Veneconomy

08.04.05 | It is seven years this month since the Venezuelan Commercial Arbitration Law went into force. This law allows parties to a juridical relationship, whether contractual or noncontractual, to submit disputes to independent arbitrators for a decision as a means of settling any differences that may arise in connection with that relationship.

Arbitration is a transparent, objective process that is, moreover, effective. One of the most important aspects of the Commercial Arbitration Law is the clause establishing that arbitration awards have the same legal weight as decisions handed down by the courts of the Republic. Actions to have arbitration awards declared void are only possible when there has been an breach of due process -when the make-up of the arbitration court or the arbitration process is not in accordance with the provisions of this Law, for example-, or when the award is granted in connection with a dispute not provided for in the arbitration agreement.

As a result of the enactment of the Commercial Arbitration Law, the Caracas and Maracaibo Chambers of Commerce and the Venezuelan-American Chamber (VenAmCham) have each set up their own arbitration center. The Caracas Chamber of Commerce’s arbitration center is a member of the International Chamber of Commerce, with headquarters in Paris and one of the largest arbitration centers in the world. It is also a member of the American Arbitration Association (United States).

This complementary public system of justice has proved to be very successful in relieving the congested Venezuelan courts.

Today, it has become standard practice for an ever-increasing number of companies and other organizations to include an arbitration clause in their contracts. What is more, the number of commercial disputes being submitted to arbitration is on the increase, since this is a faster, more transparent, and less costly means of settling differences. If the application of this mechanism has not become more widespread, it is because it was only seven years ago that the arbitration clause began to be included in contracts.

As for international arbitration, that was in existence prior to 1998, although it is only since that year that it has been possible to submit international contracts to arbitration in Venezuela. Arbitration represents a big step forward in the legal system, but a tremendous irony in a country where the rule of law is defunct.

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