/ Arbitration Returns to the Legislative Agenda

Raúl Montero
Partner at Alessandri

As the legislative process for the bill on national reconstruction and economic and social development (Bulletin No. 18,216-05) nears completion, public discussion has understandably focused on its tax, economic, and environmental measures. There is, however, a less visible aspect that deserves attention: the bill once again incorporates specialized dispute resolution mechanisms for regulatory and investment matters.

This is neither a general reform of arbitration nor a new arbitration statute. The text introduces two distinct solutions, and only one of them is strictly arbitral. The other—which is easily confused with arbitration—is a technical procedure for determining amounts, subject to judicial review. That distinction is not insignificant. It affects the nature of the procedure, the standard of review, and the way in which project owners and investors must assess risks and strategies.

The first scenario is triggered when a favorable Environmental Qualification Resolution is overturned by a final court ruling. In that case, the project owner may request from the Ministry of Finance reimbursement of the direct and actual expenses incurred in connection with the project’s implementation. The amount is determined by a three-member collegiate body appointed by the Administration, whose composition deviates significantly from traditional models and raises precisely the question regarding its legal nature. Both the project owner and the Ministry of Finance may appeal this decision to the Court of Appeals, whose ruling is subject only to cassation.

The second provision is part of the tax certainty regime established for certain large-scale investments. In this context, disputes arising from the investment contract between the State and the investor have been structured, during the project’s processing, as mandatory mixed-type arbitration, the terms of which must be agreed upon in the respective contract.

Beyond the specific content of each provision, their inclusion is significant because it brings the design of special dispute resolution mechanisms back into the legislative debate. This is not common. In recent years, the discussion on arbitration in Chile has focused primarily on commercial practice, international arbitration, or specific adjustments to existing regulations. Here, however, the legislature is turning to specialized mechanisms—one expert-based and the other arbitral—to address disputes arising at the intersection of regulation, investment, and legal certainty.

Comparative experience shows that this trend is not exceptional. In various jurisdictions, arbitral, expert-based, or hybrid mechanisms associated with infrastructure, energy, concessions, foreign investment, and regulatory disputes have proliferated.

The reason is clear: there are disputes that require a degree of technical specialization that ordinary proceedings do not always provide with the necessary speed or depth.

Therefore, the bill’s primary significance lies not only in the two mechanisms it introduces but also in the institutional policy question it reopens: what characteristics should dispute resolution mechanisms have when they are transferred from the commercial sphere to highly regulated sectors?

The restitution procedure following the annulment of an RCA illustrates this point well. It does not replicate the classic model of commercial arbitration. Its jurisdiction derives from the law; the scope is limited to direct and actual expenses, rather than open-ended compensation; the commission is appointed by the Administration; and subsequent review lies with the Court of Appeals.

Its proximity to or distance from the traditional notion of arbitration is precisely one of the issues the bill invites discussion on. What is relevant is that it is a special mechanism for the technical determination of amounts, closer to certain principles of expert assessment than to ordinary litigation.

This design choice raises fundamental questions. When is arbitration preferable, and when is a commission of experts with judicial review preferable? What requirements regarding independence, specialization, and transparency must each satisfy? What should be the scope of judicial review? Is the current framework for arbitration proceedings and expert mechanisms sufficient, or will it be necessary to develop more specific rules for these new modalities?

These are not merely dogmatic questions. They affect the predictability of the system, the allocation of risks, and the quality of the final decision. Several jurisdictions have grappled with them as specialized dispute resolution has moved beyond its traditional boundaries.

Hence, the main value of these provisions does not necessarily lie in the number of cases they will hear, but in the debate they foreshadow. Over decades, Chile has built a solid and recognized track record in arbitration, particularly in commercial and international matters. The next challenge consists not only in refining these institutions—an indispensable task—but also in rigorously distinguishing between genuine arbitration and other forms of technical adjudication, and in adapting the rules to disputes of different natures.

It is foreseeable that, once the legislative process is concluded, public attention will return to the tax and economic aspects of the bill. From the perspective of dispute resolution, however, there is another point worth noting: when the legislature seeks to combine specialization, efficiency, and legal certainty, it once again turns to mechanisms outside the ordinary judicial process.

The most interesting discussion arising from this initiative is likely not the creation of one specific mechanism or another. Rather, it is the recognition that disputes related to investment, infrastructure, the environment, and economic regulation are becoming increasingly complex and require institutional responses that differ from traditional ones. If this trend takes hold, the question will no longer be whether arbitration is part of the Chilean legislative conversation, but rather what dispute resolution models we want to develop to keep pace with this evolution.

This column was originally published in El Mercurio Legal