We invite you to read the column written by our associate in the Civil Litigation and Arbitration Group, Erico Kompatzki, on the challenges presented by the implementation of foreign remedial clauses in Chile.
According to the latest reports available on the CAM Santiago 2023 Annual Report, the increase in arbitration disputes refers mainly to corporate conflicts and construction disputes.
This is interesting not only insofar as it operates as a barometer of the current mood for litigation in the business world, but also because of a common characteristic of both matters: in both cases there is a remedial regime that can, at least, be improved.
It is well known that the regulation of contractual remedies in our country admits a wide margin for improvement. It is enough to take a quick look at the countless academic texts on obligations and contracts that have emerged in the last 15 years, which have even been described as “modern civil law”, with proposals for interpretation and regulation that seek to meet the needs of business in the 21st century. The same is true of soft law instruments in international commercial matters, such as UNIDROIT, PECL, PLDC or the OHADAC Principles.
However, these discussions and proposals not only offer a wealth of material from a lege ferenda point of view, but can also be introduced and materialized as of now.
Indeed, since in civil matters the autonomy of the will prevails, the parties can redefine the parameters, conditions and, especially, the remedies under which a given contract will be regulated.
This, which a priori sounds very profitable, since it allows to mold the sanction of a certain breach to the particular needs of the parties, may, however, turn into a double-edged sword: if lawyers are not careful when introducing remedy clauses -especially if concepts and institutions typically foreign to our law are introduced-, when litigation arises, it will generate discussions that, besides being preventable, may even render the agreed remedy inapplicable or counterproductive. In other words, the remedy may be worse than the disease.
A classic example of this is the introduction of punitive damage clauses, the appropriateness of which has been repeatedly denied in our country. However, this is not the only case. It is not at all unusual that when agreeing on the anticipated assessment of damages by means of penalty clauses, the limits that our Civil Code imposes for their quantification are disregarded.
Thus, an improper importation of contractual penalties that in other latitudes would be perfectly valid in Chile would constitute a huge penalty clause.
For the same reason, it is very important to pay attention to the wording and regulation of the remedies, as well as to the general harmony of the contract. One way to achieve this is through a collaborative review between the different legal areas involved in the contract.
Although the corporate area is strong in contract drafting, civil litigation areas can play a preventive role, ensuring the proper regulation of remedies and dispute resolution clauses. The same can be said with respect to other specialized areas -such as energy or construction- and those clauses of a technical nature.
Here it is clearly advantageous and useful to have the advice of a full service law firm, which, having specialized teams, is able to offer this multidisciplinary review to ultimately meet the ultimate goal of offering the client what he really needs.
Column written by:
Erico Kompatzki | Associate Civil Litigation and Arbitration Group | ekompatzki@az.cl
