International arbitration has become a common tool for resolving disputes between corporations and investors. However, in countries like Guatemala, this mechanism has been increasingly used to bypass local legislation, especially when managed through institutions such as the American Arbitration Association (AAA). This raises serious concerns about legal sovereignty and respect for national law.
What is the American Arbitration Association and How Does It Affect Guatemala?
The American Arbitration Association (AAA) is a private organization based in the United States that administers international commercial arbitration. While its original purpose was to provide a neutral and efficient dispute resolution process, it has often been used by foreign companies to ignore Guatemalan law.
Many contracts signed between local and international entities include arbitration clauses that bind the parties to settle disputes under AAA rules, often applying foreign laws, such as those of the State of New York—even when the dispute arises in Guatemalan territory.
Application of Foreign Laws: A Door Open to Abuse
A Common Scenario: Contracts with Imposed Arbitration Clauses
In numerous cases, multinational corporations have imposed arbitration clauses that require Guatemala to resolve disputes in private foreign courts. These clauses allow for the application of laws disconnected from the Guatemalan legal system, often affecting labor rights, environmental protections, and national interests.
Arbitrators are not bound by the Constitution of Guatemala and often issue rulings without considering fundamental national principles such as public order or due process. Moreover, attorneys participating in these arbitrations do not need to be licensed in Guatemala, which violates national professional regulations.
Consequences for Guatemala’s Legal Sovereignty
This model has enabled international investors to evade local tax, environmental, and social regulations. Guatemala’s legal sovereignty is undermined each time a dispute is settled in a New York arbitration room instead of a national court.
Additionally, these arbitral awards are enforceable under international treaties such as the New York Convention, obligating Guatemala to comply with decisions that may directly contradict its own legal framework.
