By: Antoine del Sordo
Through their domestic laws, the countries determine what subjects and matters may be resolved by arbitration. This prerogative of the countries is supported in terms of international commercial arbitration by provisions contained, among other statues, by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the 'New York Convention').1 and (ii) the UNCITRAL Model Law on International Commercial Arbitration, 1985 (as amended in 2006) (the 'Model Law')2. Therefore, the same subject matter may be arbitrable in one jurisdiction and not arbitrable in another based on each country´s economic, social and political policy.3
Consequently, it is of the essence that legislators and courts of each country evaluate the domestic importance of retaining particular matters based upon the public interest of each State, under the exclusive jurisdiction of national courts, vis a vis the individual liberty to settle disputes through alternative resolution mechanisms such as arbitration.4
Traditionally, the countries have withstood giving effect to arbitration agreements in disputes relating to public law claims for the fear that arbitrators, who are 'paid to do justice'5, be in charge of enforcing laws assigned to protect the public interest. However, in recent years many nations have started to allow arbitration in public law claims as in some ramifications of competition law provided that the dispute does not encompass situations with erga omnes effects, in which case the national courts continue to have exclusive jurisdiction.6
In Mexico, most disputes that engage public law are not arbitrable because the State considers that they involve public interest and therefore have to be resolved by a national court, as a limitation to the principle of freedom of contract. Consequently, disputes related to criminal liability, taxes, family law and civil status, insolvency and bankruptcy, labor, agrarian, territorial resources and waters, exclusive economic zone area resources and authority acts are not subject to arbitration due to a mandatory rule, and any award issued concerning such matters will be null and void.7However, despite the fact that the non-arbitrability of most of the matters listed above is justified , there are some affairs in connection which it seems not to be entirely justifiable.
For example, in terms of the Law of Public Works and Related Services (Ley de Obras Públicas y Servicios Relacionados con las Mismas) and the Law on Public-Private Partnership (Ley de Asociaciones Público Privadas) in force, despite state entities are still allowed to submit to arbitration any dispute that may arise in connection to the interpretation, validity, fulfillment and execution of an administrative contract, disputes that involve administrative rescission8 or early termination are exclusive competence of national administrative courts.9 Many commentators and litigation practitioners have criticized these exception by arguing that the Mexican state hinders mainly foreign investors from submitting to arbitration a dispute that, in principle, could have a purely commercial matter as the cause of action, which discourages foreign investment and elevates the cost of fundamental to the country as infrastructure projects, due to the risk of companies of not being able to settle the dispute through arbitration.10 and consequently it implies that, within the deliberations to invest in a business, the companies evaluate this situation.
1 Article II (1) of the New York Convention.
2 Article 1 (5) of the Model Law.
3 Redfern, A., Hunter, M.J. et al., Redfern and Hunter on International Arbitration. (6th ed., Oxford University Press, 2015) 111.
4 Park, WW Private Adjudicators and the Public Interest: The Expanding Scope of International Arbitration (Brooklyn Journal of International Law, vol. 12, no. 3, 1986) 638.
5 Redfern, A., Hunter, MJ et al. (n 3) 111.
6 De Oliveira, L. The English law approach to arbitrability of disputes. (International Arbitration Law Review 2016, 19(6), 155-167) 11.
7 Uribarri Carpenter, G.. The relationship between arbitration and other forms of public and private justice. A reference to Mexican Arbitration. (UNAM Legal Research Institute, 2005) 259.
8 Administrative recession may be alleged only by the public entity in case of a breach of the contract by the counterparty.
9 Article 98 of the Public Works Law (Public Works Law) and Article 139 in fine of the Public-Private Partnership Law (Public-Private Partnerships Law).
10 González de Cossío, F. Arbitration and Government Contracting. (2013) <http://gdca.com.mx/PDF/arbitraje/ARBITRAJE%20Y%20CONTRATACION%20GUBERNAMENTAL.pdf> accessed 17 October 2022.
