CHILE Law and Practice Contributed by: Macarena Ravinet and Federico Espinosa, Cuatrecasas
6. Enforcement 6.1 Enforcement of Collateral by Secured Lenders Secured lenders in Chile may enforce collateral when obligations are due and unpaid, with procedures vary- ing by the type of collateral and the terms of the secu- rity agreement. Mortgages require judicial foreclosure and a public auction, while pledges may be enforced judicially or, if permitted, through extrajudicial actions, such as intervention or collecting amounts and apply- ing them to the payment of the debt. Guarantees are enforced against guarantors after the debtor defaults, with procedural protections. Personal guarantees require court action, while demand guar- antees may be payable upon first demand, if agreed. Enforcement is subject to statutory procedures, debt- or rights, and priority claims, with practical challenges Chilean law generally recognises the choice of a for- eign law as the governing law of a contract, provided that the agreement has a reasonable connection to the chosen jurisdiction and that the application of such law does not violate Chilean public policy or mandatory rules. In practice, cross-border financing agreements often opt for New York or English law, and Chilean courts have consistently upheld these choices in commercial matters. Submission to Foreign Jurisdiction and Exclusive Chilean Competence Submission to a foreign jurisdiction is also permitted. Chilean courts will respect valid jurisdiction clauses, although they retain competence over matters consid- ered subject to exclusive Chilean jurisdiction, such as rights over real estate located in Chile or insolvency proceedings involving Chilean companies. In these cases, local law and courts cannot be displaced. Waivers of Sovereign Immunity in Chilean Law Waivers of sovereign immunity are recognised under Chilean law and are commonly included in financing agreements with state-owned entities. Courts have including judicial delays and costs. 6.2 Foreign Law and Jurisdiction Recognition of Foreign Governing Law in Contracts
accepted such waivers provided they are expressed clearly and unequivocally, although certain core sov- ereign acts remain non-waivable under constitutional and public international law principles. 6.3 Foreign Court Judgments Foreign court judgments can be enforced in Chile after recognition by the Supreme Court through an exe- quatur proceeding, which ensures reciprocity, proper service, finality, and no conflict with public policy, without retrial of the merits. Once recognised, judg- ments are executed via standard procedures. Foreign arbitral awards are enforceable under the New York and Inter-American Conventions, requiring application to the Santiago Court of Appeals, which verifies formal requirements and public policy compliance. Chilean courts generally adopt a pro-enforcement stance for both foreign judgments and arbitral awards, provided procedural safeguards and public policy are respect- ed. 6.4 A Foreign Lender’s Ability to Enforce Its Rights Foreign lenders’ rights under Chilean loan or secu- rity agreements are generally protected; however, enforcement can be affected by insolvency proceed- ings, which impose an automatic stay and require creditors to participate collectively. Statutory claims, such as labour and taxes, rank ahead of secured creditors. Proper perfection and registration of secu- rity interests are essential; otherwise, lenders’ rights may be unenforceable or subordinated. Judicial pro- cedures, especially for mortgages, can lead to delays due to required foreclosure and auction processes. 7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes Impact of Insolvency Reorganisation Proceedings on Secured Creditors in Chile The commencement of insolvency proceedings in Chile has a direct impact on a lender’s ability to enforce loans, security, and guarantees. In particular, insol- vency reorganisation proceedings grant the debtor an automatic stay that prevents individual enforcement actions by creditors. As a general rule, this means that secured lenders cannot foreclose on their collateral
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