More often than desirable, for purposes of legal certainty, suppliers require assistance in collecting debts arising from contracts entered into with the State or any of its decentralized and autonomous entities.
The complexity of collection lies in the fact that the Constitutional Court and other courts have ruled that several of the avenues or processes attempted by suppliers to resolve the situation are inadmissible, without clarifying which is the correct one. Below, we explore these criteria and discuss the best option to agree upon in contracts to resolve conflicts.
I- Summary judgment
The courts heard and ruled favorably on several cases in which the supplier sued the State through a trial of first instance called “summary judgment.” However, the Constitutional Court ruled that this is not the appropriate way to sue the State, but rather through contentious-administrative proceedings (cases 1034-2019, 3433-2019, 1593-2020, 6988-2021).
II- Contentious-administrative proceedings
The law provides that this process is applicable in two cases: in the event of disputes over administrative decisions and in the event of disputes arising from contracts. It also provides that, to initiate the process, the decision being challenged must be one that exhausts administrative remedies.
The requirement to exhaust administrative remedies should be understood to refer to cases where the proceedings are brought due to disputes arising from administrative decisions and not when they arise from contracts.
Unfortunately, the courts have interpreted that this requirement also applies to the second case and, therefore, place suppliers in a difficult situation, as they must find a way to have an administrative decision issued before accessing the contentious-administrative process. This is a criterion that must be changed.
III- Administrative file and amparo for failure to resolve
In accordance with the criterion explained in the previous section, suppliers have attempted to get the administrative authority to issue a resolution related to the contract that can be challenged through administrative remedies. The State’s strategy has been to fail to resolve, leaving the file indefinitely suspended.
To resolve this silence, suppliers file amparo appeals, through which they seek to have the amparo court order the State to issue a decision. Once again, based on an erroneous criterion, the Constitutional Court has denied the appeals for constitutional protection, considering that they cannot be used as a tool for collecting payments from the State (5321-2016; 701-2017; 4757-2017; 4732-2018).
This criterion is mistaken because the supplier is not asking for a favorable resolution, but only for the administrative authority to comply with the constitutional mandate to resolve the matter. This is another criterion that should be modified.
In view of these difficulties, a practical alternative is for administrative contracts to stipulate that any dispute shall be submitted to institutional arbitration (subject to the rules of one of the country’s arbitration centers).
Arbitration is expressly permitted in Article 103 of the State Procurement Law and has been recognized as valid by the courts provided that the State has given its consent. Arbitration allows the supplier to be certain of the appropriate legal channel for resolving disputes arising from the contract, including debts incurred by the State.