Commercial arbitration in Puerto Rico is generally based in contractual law. This implies that Arbitration agreements in Puerto Rico are constructed as contracts and agreements that allow parties to structure how to manage their contractual disputes using arbitrators functioning under specifically delegated powers. It is a widely used and preferred method of conflict resolution promoted by a strong national policy and enforced by federal and state laws. Leveraging the benefits of privacy, efficiency and finality, the general practice is for parties to subject themselves to the award issued by the arbitrator; one that is generally final and binding. This article addresses both the Federal Arbitration Act and the Puerto Rico Arbitration Act as they provide the framework for commercial arbitration in Puerto Rico and how it applies to arbitration agreements and or contracts. The law that regulates international commercial arbitration in Puerto Rico is discussed in my article,
The Federal Arbitraton Act (FAA) is the primary statute governing arbitration in Puerto Rico and it applies when the a transactions subject to arbitration affect interstate commerce. Thus, local courts are required to follow the provisions of the FAA and enforce arbitration contracts agreed by the parties like any other agreement. In other words Commercial arbitration in Puerto Rico is subject to federal law which is not the only law enforcing arbitration agreements in Puerto Rico.
The Puerto Rico Arbitration Act is based on the Federal Arbitration Act and its interpretative jurisprudence guides the disposition of cases in the local jurisdiction. Like sections 10 and 11 of the FAA, the Puerto Rico Arbitration Act provides an expedited judicial review process to revoke or modify an award under very limited situations.
Beyond their similarities, common origin and professed public policy in favor of arbitration, there is a fundamental distinction in the application of both laws. The Puerto Rico Arbitration Act has been interpreted to allow expanded judicial review when the parties explicitly provide in the agreement that the award “conform to law. Conditioning an award “to conform to law” means that the arbitrator cannot disregard the substantive law adopted by the United States and Puerto Rico Supreme Courts. This is not possible under the FAA which restricts the parties’ abilities to seek judicial review based on legal error.
The view of the Supreme Court of Puerto Rico is that the Puerto Rico Arbitration Act can coexist with its federal counterpart because federal arbitration policy simply mandates the courts to enforce the parties’ private agreements; that although the FAA has narrow grounds for judicial review, it does not preclude parties to elect an arbitration agreement that opts out of the FAA in favor of the Puerto Rico Arbitration Act which allows for expanded judicial review when the parties thus expressly provide for it.
You can obtain additional information about arbitration in Puerto Rico and how the Supreme Court of Puerto Rico has addressed judicial review of commercial arbitration in Puerto Rico and the awards arising from disputes in interstate commerce and how arbitration contracts in Puerto Rico have been scrutinized under the FAA and the Puerto Rico Arbitration Act, you can access my detailed article- “Judicial Review of Commercial Arbitration Awards in Puerto Rico: Charting the Supreme Court of Puerto Rico’s Conflicted Interpretation of the Federal Arbitration Act”, published in Volume XIX of the Revista de la Academia Puertoriqueña de Jurisprudencia y Legislación.
International arbitration is of importance in business and commercial affairs within a country’s jurisdiction and across borders. It has become the preferred method of solving international disputes and while Puerto Rico is limited by the United States broad reach on international affairs, Puerto Rico has taken steps to adopt legislation in accordance with international commercial arbitration that benefit trade among borders and supports adjudication of transnational disputes.
PR International Commercial Arbitration Law No. 10-2012 (“PRICA”) is a law modeled by the UNCITRAL Model Law for Commercial International Arbitration of 1985 and subsequently amended in 2006 (“Model Law”). UNCITRAL (The United Nations Commission on International Trade Law) is part of the United Nations, and it is focused on promoting international commerce and investments by standardizing laws affecting trade and international business.
The Model Law has been successful in achieving its goals for the most part. It has been adopted by 85 countries and is currently the most widely used arbitration law in international commercial arbitration. It provides a unified and harmonized framework for international arbitration which is based on common principles and practices. The Model Law standardizes the administration of arbitral proceedings, ensures that states respect their obligations under international arbitration agreements, and provides justice to parties involved in disputes. It also facilitates the recognition and enforcement of arbitral awards across international borders. Additionally, the Model Law has been instrumental in developing a uniform set of rules that can be adapted to the varied legal frameworks of countries around the world, allowing arbitration proceedings to be conducted in an efficient and cost-effective manner. It also provides a legal framework to address challenges such as the enforceability of awards and challenges to arbitral jurisdiction. Further, the Model Law has been successful in promoting arbitration as a fair, efficient, and cost-effective dispute resolution mechanism in international commercial arbitration. It has also enabled states to focus their resources on other legal matters and provided increased opportunities for international trade. All of these factors have contributed to the success of the Model Law in recent years.
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