CHILE Trends and Developments Contributed by: Julio Pellegrini, Fernando Zuñiga and Bernardo Aylwin, Pellegrini y Rencoret
matters outside the scope of the arbitration agree - ment and attributed liability to Ecuador for acts com - mitted by a third party who was not bound by the arbitration agreement. In rejecting the challenge, the Court confined its analysis to affirming that the award “appears consistent with the terms of the arbitration agreement” and that the arbitral tribunal had explicitly addressed and resolved the question of jurisdiction ratione personae. Accordingly, the Court concluded that the annulment petition sought to reopen a matter already adjudicated in the award, which lies beyond the permissible scope of review under the IAA. A similar approach was taken in Empresa Pública de Hidrocarburos del Ecuador , where the applicant contended that the arbitral tribunal had exceeded its jurisdiction by treating three separate contracts as a single legal instrument, thereby infringing its right to individual arbitral proceedings for each contract. The Court rejected this argument, finding that the issue had been thoroughly examined by the tribunal, and showing deference to its interpretation of the contrac - tual and jurisdictional framework. As will be further examined below, this judicial doc - trine – strictly limiting the scope of annulment to pro - cedural improprieties – may warrant further nuance when invoked in connection with the public policy exception under Chilean law. The Concept of Chilean Public Policy It is a recurring feature of annulment proceedings in Chile to invoke an alleged violation of Chilean public policy as a basis for challenging international arbitral awards. The cases under review adhere to this pat - tern and provide further illustration of the judiciary’s treatment of such arguments. From its earliest rulings, the Court has drawn a clear conceptual distinction between the notion of Chilean public policy under the International Arbitration Act and the broader concept of domestic public policy in Chilean private law. The Court has consistently held that the relevant standard is that of international public policy – that is, a breach of the fundamental principles underpinning the Chilean legal system and recognised in the international context (see Cases No 9.134-2007, No 1.971-2012, and No 11.466-2015). This distinc -
tion is essential, given that domestic public policy in Chilean law encompasses a broader set of mandatory rules that may not, by themselves, amount to viola- tions of the core values of morality and justice nec - essary to warrant the annulment of an international arbitral award. In this jurisprudential framework, the Court has con - sistently affirmed that Chilean international public policy encompasses both procedural and substan - tive dimensions. With respect to the procedural limb – rightly distinguished from the application of Chilean domestic procedural rules to international arbitration – the Court has defined relevant violations as breaches of “fundamental procedural guarantees essential to the validity of the arbitral process” ( Empresa Pública de Hidrocarburos del Ecuador ). These include “prin - ciples as essential as due process, equality of arms, adversarial proceedings, the impartiality of the arbi - tral tribunal, and the prohibition of fraud or corruption affecting any of its members” ( Worley International Services and Empresa Pública de Hidrocarburos del Ecuador ). On the substantive side, as noted by Chilean legal scholars, the inherent indeterminacy of the concept of public policy raises the risk that parties may attempt to recharacterise issues of law or fact as violations of public policy in order to secure a disguised review on the merits (see J.C. Marín, El concepto de orden públi- co como causal de nulidad de un laudo tratándose de un arbitraje comercial internacional ). The Court, how - ever, has consistently rejected such attempts, reiter - ating that the annulment action is not an appellate mechanism and does not authorise a reassessment of the tribunal’s legal or factual determinations. As such, the mere allegation of an error of law or erroneous factual inference is insufficient to establish a breach of public policy. Where the annulment petition is based on an alleged incompatibility between the award and Chilean inter - national public policy, the Court’s role is limited to assessing whether the substantive outcome of the award is patently incompatible with the most basic and universally accepted principles of morality and justice within the Chilean legal order. The Court is not empowered to substitute its own legal or factual
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