I- Introduction
For 14 years, two sets of legislation on arbitration proceedings coexisted in Costa Rica. This situation is known as regulatory dualism.
On the one hand, domestic arbitration was regulated by Law No. 7727, “Alternative Dispute Resolution and Promotion of Social Peace RAC” (hereinafter RAC Law), in force since 1998. On the other hand, in 2011, Law No. 8937, entitled “Law on Commercial Arbitration based on the Model Law of the United Nations Commission on International Trade Law (UNCITRAL),” hereinafter LACI Law, was enacted to regulate international arbitration.
Recently, legislators opted to move away from regulatory dualism and adopt a monistic system, under which both domestic and international arbitration are governed by the same law.
To this end, Law No. 10535, “Law to Harmonize Costa Rican Arbitration Regulations,” was enacted and entered into force on April 2, 2025.
II- Main changes
This new legislation reformed the regulatory framework, integrating domestic arbitration into the regulation of international arbitration. In other words, the rules on arbitration contained in the RAC Law were repealed, especially Chapter III, and in their place, it was provided that both domestic and international arbitration are regulated under the LACI Law, which changed its name to “Arbitration Law.”
As for the changes implied by the new scenario, it should be noted that the reform has a particular impact on domestic arbitration, since the previous regulation of this type of arbitration was repealed.
Among the most notable changes for domestic arbitration are:
- Interim measures (Art. 17): The power of the Arbitral Tribunal to grant interim measures. However, it should be noted that before the reform, some arbitration centers had already incorporated this power into their rules.
- Jurisdiction of the Tribunal (Art. 16): Suspension of proceedings when jurisdiction is in dispute. Before the reform, suspension was only permitted when the proceedings were indispensable, urgent, or convenient and not prejudicial to the parties. Now, the Tribunal has the power to decide whether to rule on the jurisdictional objection as a preliminary matter or to resolve it in the body of the award. If it is resolved as a preliminary issue, the parties may appeal to the First Chamber of the Supreme Court of Justice. However, despite this, the Tribunal has the power to continue with its proceedings.
- Number of arbitrators (Art. 10): If the parties do not choose the number of arbitrators, the law provides that a single arbitrator shall resolve domestic arbitrations.
- Language of arbitration (Art. 22): With the reform, the parties may choose the language of the proceedings, and failing that, the Tribunal will decide. In other words, Spanish is no longer the rule, as it was before the reform.
In addition, the harmonization introduced relevant changes applicable to both types of arbitration (domestic and international), which are detailed below:
- Virtuality (Art. 20): The possibility of proceedings being conducted by remote or virtual means is included, recognizing a practice that is already common in arbitration proceedings in the country.
- Preliminary injunctive relief (Article 17, paragraph 3): It is provided that, if the parties agree, an arbitral tribunal may be constituted before the commencement of the arbitral proceedings for the sole purpose of hearing requests for injunctive relief and granting such relief. As indicated above, precautionary measures are a new feature in domestic arbitration, and it will be important to observe how the reform works in practice.
- Extension of the arbitration agreement (Art. 7 A): The extension of the arbitration agreement is introduced to those whose consent is determined by their decisive participation in the negotiation, conclusion, performance, or termination of the contract comprising the agreement, and is also extended to those who intend to derive rights or benefits from the contract. This has a significant effect on parties who are not signatories to the clause but who play a significant role in the legal transaction.
- Enforcement of the award (Article 35): The basic rules for the enforcement of the award are established, for example, that such enforcement shall be carried out under the provisions for the enforcement of court judgments, under the procedural rules applicable to the subject matter of the arbitral award. These rules were introduced by the addition of Article 35 to the previous LACI Law, now called the Arbitration Law.
III. Aspects to be taken into consideration.
It is important to bear in mind the new provisions on arbitration when drafting the clause, since issues such as the number of arbitrators and the language of the proceedings, if not defined in the arbitration agreement, are determined following the rules of the Arbitration Act.
Likewise, during the execution of a business transaction, if a potential conflict arises, it is advisable to identify whether there is an arbitration agreement in the main contract, since even if no agreement has been signed, it is possible that the effects of the arbitration clause may be interpreted as extending to non-signatories if the circumstances defined in the law apply.
Once in the arbitration process, it is also necessary to consider the new regulatory framework, especially in relation to precautionary measures and the rules on the discussion of jurisdiction and its effects on the process, as these are aspects that could influence the outcome of the process.
IV- Conclusion
The Arbitration Law is based on the model law of the United Nations Commission on International Trade Law, and this legislative step therefore constitutes an effort to modernize the regulation of arbitration in Costa Rica.
This reflects the country’s interest in adopting the best practices in arbitration and, in turn, promoting this type of process as an alternative mechanism for dispute resolution.