Enforcing a Contract in Latin America? Good Luck with That.

enforce-contract-Brazil-colombia-venezuela-peru-mexico-litigation-latin-america-enforce-contract-litigation-slow1I got a call recently from a local manufacturer looking to sue a supplier in a Latin American country for breach of contract.

Given Miami’s proximity to the region, I see these types of cases a lot.

The first thing I’ll do is take a look at the case to confirm that jurisdiction would be proper in the U.S.

And most of the time it is.

However, when the jurisdictional nexus is weak or nonexistent, these Latin American breach of contract cases must be litigated in the region.

Litigation in Latin American is Painfully Slow

So whenever I tell a client that the case must be litigated in Latin America, I say “good luck with that.”

I say this because litigation in South and Central America is painfully slow.

I mean really really slow.

As in 1,402 days slow.

That’s the average time it takes to enforce a contract in Guatemala, for example.

Other countries in the region aren’t much better:

  •  In Colombia it takes 1,288 days to enforce a contract;
  • 426 days in Peru;
  •  480 days in Chile;
  • 590 days in Argentina;
  •  610 days in Venezuela;
  •  725 days in Uruguay; and
  • 731 days in Brazil,

By comparison, the average time it takes to enforce a contract in Russia and China, is  270 days and 406 days, respectively.

In the United States, it takes an average of 370 days

Considering that it’s a lot easier to enforce a contract between two companies in Communist China or corrupt Russia than in any country in Latin America, it’s easy to see why international businesses are reluctant to enter into formal contracts with companies in the region.

How to Avoid Litigation in Latin America

There are two primary ways to avoid getting stuck in the Latin American court system.

International Arbitration

By far international arbitration is the best way to handle a dispute in the region. It’s generally much faster, more predictable, more affordable in the long run and virtually immune to corruptive influence. There are many ways to include an international arbitration clause in your contract or agreement. You’ll see a post on this soon. For a general overview, be sure to head-on over to International Arbitration Advisor.

Forum Selection Clause

If you must litigate, the best measure you can take to keep a dispute out of Latin American courts (if permissible under local law) is to draft a forum selection clause into the contract. With a bit of clever negotiation, you’ll find that the other party will be happy to agree.

Conclusion

Don’t get caught in litigation in South and Central America if you can avoid it. Until the region implements modern court procedures and streamlines its bloated bureaucracy, parties will continue to press their luck with enforcing a contract in Latin America.

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References

World ranking for endless litigation, Andres Oppenheimer

Doing Business 2014,World Bank and the International Financial Corporation

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