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01 December 2010
A first instance civil court of Santiago City recently issued a resolution confirming the court's jurisdiction to grant interim protection measures in connection with ongoing shipping arbitral proceedings conducted in New York. The proceedings were commenced by a company based in the British Virgin Islands that had entered into an agreement with a Chilean shipyard for the construction of a yacht.
In 2004 Chile adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, as per Law 19,971. According to UNCITRAL, the model law is designed to assist states in reforming and modernising their laws on arbitral procedure, so as to take into account the particular features and needs of international commercial arbitration.
Regarding interim measures by a court, Article 9 of the law states that: "It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure."
Theoretically, in Chile this article makes it possible to request from a local court any of the interim measures set forth under Chilean procedural regulations, such as attachments or goods retention, in order to protect the outcome of a foreign arbitration award. However, this criterion had not been tested in the context of international arbitration proceedings relating to a shipping dispute until this recent case.
The case referred to an agreement for the construction of a yacht at a Chilean shipyard. The yacht was still under construction and the owner (based in the British Virgin Islands) had made a substantive performance of his instalment duties. However, the Chilean shipyard issued a formal termination notice based on alleged failure to pay one particular instalment. The owner argued that such notice was improper because the instalment was not yet due.
The construction agreement was subject to the laws of the United States and the state of New York, and claims or disputes of a non-technical nature were referred to an arbitration panel in New York governed by the rules of the Society of Maritime Arbitrators.
The dispute went ahead and the owner commenced arbitration proceedings at the agreed venue. Notwithstanding these developments, the shipyard threatened to sell the yacht to a third party and the owner requested interim measures in Chile before a first instance civil court of Santiago City to prohibit and avoid such a sale. The petition was based fundamentally on the terms of Article 9 of the Chilean adoption of the model law and granted by the Chilean court.
The Chilean shipyard filed a defence challenging the jurisdiction of the Chilean court, but the case was settled in the international arbitration proceedings. Accordingly, the matter is now closed.
In light of this decision, and subject to compliance with local procedural requirements, a party to international arbitration involving a shipping dispute is allowed to request interim measures from a Chilean court, if applicable, to secure the outcome of the trial.
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