I.  INTRODUCTION: ARBITRATION IN PARAGUAY – HISTORY AND INFRASTRUCTURE

A. History and Current Legislation on Arbitration

1. Historical evolution of law relating to arbitration

Recently, there has been a reversal of the traditional Latin American hostility towards arbitration. In this line, Paraguay today has an enviable legal framework on the matter, starting with the Constitution, which allows arbitration and the applicability of international principles and transnational law. This is followed by an extensive set of rules contained in treaties and legislation, including an arbitration law which almost entirely replicates the Model Law proposed by the United Nations Commission on International Trade Law (UNCITRAL).

The Latin American attitude of hostility towards international arbitration has been in part due to the fact that early legal instruments such as the Treaties of Montevideo of 1889 and 1940, and the Bustamante Code of 1928, did not deal with the matter appropriately.  Moreover, the scenario of an historic absence of free trade in the region and the centuries-long held suspicion towards European and North American colonialism, which included even military interventions in defense of their economic interests, contributed to this negative attitude. In response, territorial postures such as the Calvo doctrine in favor of local jurisdiction for disputes with investors,  as well as aversion towards international arbitration were commonplace.