Mandatory Arbitration and the Public Administration - the Landscape of Peru

Abstract

The present paper discusses mandatory arbitration with the public administration in Peru, as established by law since 1998 for procurement relations between the State and particulars. The essay starts with an anecdotal background of a Federal Supreme Court of Brazil's decision regarding the execution of criminal sentences. A parallel is established between the same practical problem of the tardiness of courts to issue final rulings, which served as one of the main arguments for the institution of said mandatory arbitration in Peru, in the context of privatizations in the ’90s. The paper presents several amendments to Peruvian law and issues like the Odebrecht scandal as symptoms of a problem that is the impossibility to create a “one-size-fits-all” solution given the wide scope of public procurement. The essay goes on to explain why mandatory arbitration is not suitable, from the party autonomy principle to practical problems such as costs, corruption, and denial of justice. Finally, in light of recent solutions already adopted in Latin America, the paper offers a proposal to be adopted by Peru, considering the regulatory space of public administration and suggesting that the option for arbitration should be a strategic and motivated choice made in a case-by-case cost-benefit analysis.