Corporate Arbitration Litigation: What It Is and When to Use It

The agreement you signed years ago may be your greatest ally or your worst liability

There is a scenario we encounter frequently at Consejurídico: two or three partners who founded a company with great enthusiasm, signed a shareholders' agreement or included a clause in the company's bylaws without reading it carefully, and years later — when the relationship broke down — discovered that the text requires them to resolve their disputes before an arbitral tribunal, not before an ordinary court. Some are relieved. Others are not. The difference almost always comes down to whether they were prepared for that scenario.

This article explains what corporate arbitration litigation is, when it applies, how it works in practice, and what happens when the right strategy is not in place from day one.

What is corporate arbitration?

Arbitration is an alternative dispute resolution (ADR) mechanism in which the parties — in this case, partners, shareholders, or the company itself — agree that their disputes will be resolved by one or more private arbitrators, rather than going through the ordinary court system. The arbitrator holds the same authority as a judge to decide the dispute: the decision is called an arbitral award (laudo arbitral) and carries the same binding force as a court judgment.

In Colombia, arbitration is governed primarily by the National and International Arbitration Statute (Law 1563 of 2012). For arbitration to apply, the parties must have entered into an arbitration agreement — which may be an arbitration clause (cláusula compromisoria) within the company's bylaws or a separate instrument known as a compromiso. Without that prior agreement, there is no mandatory arbitration.

When does it apply in corporate disputes?

Not every dispute between shareholders automatically goes to arbitration. It applies when at least one of the following conditions is met:

• The company's bylaws include an arbitration clause establishing arbitration as the mechanism for resolving disputes between shareholders or between a shareholder and the company.
• The parties sign a compromiso after the dispute arises, agreeing to submit it to arbitration.
• The shareholders' agreement — the separate document that many startups and family-owned businesses sign — contains an arbitration clause.

The most common matters that end up before a corporate arbitral tribunal include: exclusion of shareholders, disputes over profit distribution, challenges to decisions of the shareholders' assembly or board of directors, breach of the shareholders' agreement, disagreements over the valuation of ownership interests or shares, and conflicts over control of management.

A practical word of caution: certain matters are, by their nature, not arbitrable even if the bylaws say otherwise. For example, certain absolute-nullity actions involving corporate acts may be reserved for the ordinary courts or for the Superintendencia de Sociedades (Colombia's corporate regulatory authority), which also exercises jurisdictional functions in corporate matters under Colombian law. This is something worth verifying before initiating any proceeding.

Practical steps: how a corporate arbitration proceeding works

Initiating an arbitration is not as straightforward as simply "filing a claim." There is a specific procedure to follow:

1. Review the arbitration agreement. The first step is to read the arbitration clause carefully: which arbitration center does it designate? How many arbitrators does it provide for? Under what rules? In Bogotá, centers such as the Centro de Arbitraje y Conciliación de la Cámara de Comercio de Bogotá are active, and similar centers operate in Medellín, Cali, and other cities.

1. Attempt prior conciliation (if required). In some cases, the rules of the designated center or the arbitration agreement itself require a conciliation attempt before formally initiating arbitration.

1. File the request for arbitration. The request is submitted to the designated arbitration center and must set out the facts, claims, and legal grounds of the dispute. Experienced legal counsel is essential at this stage: a poorly drafted request can severely limit what the tribunal is authorized to decide.

1. Constitution of the tribunal. The parties appoint the arbitrators — or the center does so if the parties cannot agree. Arbitrators in corporate matters are typically specialized attorneys, sometimes with backgrounds in finance or corporate governance.

1. Hearings and evidentiary proceedings. Unlike ordinary court litigation — which can drag on for many years — arbitration operates within tighter timeframes. But that also means there is less margin for error or delay.

1. Arbitral award. This is the final decision. It may be challenged in very specific circumstances (through an annulment action before the Tribunal Superior de Distrito Judicial, the relevant appellate court), but this is not an appeal in the traditional sense: the grounds for annulment are narrow and do not allow the reviewing court to reconsider the merits of the case as an appellate judge would.

What happens when the right strategy is not in place

Corporate arbitration has real advantages: confidentiality, specialized arbitrators, and relatively greater speed. But it also carries risks that clients tend to underestimate:

• The cost is significant. Arbitrator and center fees are calculated based on the amount in dispute. In high-value corporate disputes, this can represent considerable sums that must be budgeted from the outset.
• What is not claimed cannot be awarded. Unlike court proceedings where a judge may invoke certain principles, an arbitral tribunal decides strictly within the scope of what the parties have requested. A poorly framed claim is a lost opportunity that cannot be recovered.
• The arbitration agreement itself may be flawed. We have seen clauses drafted so vaguely that they generate a preliminary dispute over the tribunal's own jurisdiction — which brings everything to a halt and drives up costs before the substantive debate even begins.
• Evidence is critical from the start. Arbitration does not leave much room for improvising an evidentiary strategy midway through the proceeding. Emails, assembly minutes, contracts, financial statements, and internal communications must be organized and assessed before the request is filed.

And a factor that is often overlooked: a corporate dispute is rarely just a corporate matter. It may have labor law implications (if the shareholders are also employees of the company), tax implications, or even criminal law implications if there is conduct such as misappropriation of assets or document fraud. At Consejurídico, we handle all of these areas under one roof, which allows us to identify those angles before they become unpleasant surprises in the middle of a proceeding.

Do you have a corporate dispute or an arbitration clause you do not fully understand?

The first mistake shareholders in conflict make is waiting too long, believing the situation will resolve itself. The second is acting without having carefully read the agreement that governs them.

If you are in a dispute with your partners, if you have received a notice of arbitration proceedings, or if you simply want to understand what your bylaws' clause says before it is too late, the first step is to get real guidance — not generic advice. Juri, Consejurídico's digital legal assistant, is available right now to give you an initial read of your situation, with no appointment and no upfront cost. What you do with that information can make a significant difference. Jurídiconline #QueremosAcompañarte

El asistente jurídico digital de Jurídiconline analiza tu situación específica. La revisión inicial es gratuita.