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4. Rational Dispute Resolution
4.1 Rule of Law
4.2 Enforcement of Contracts
4.3 Commercial Dispute Resolution
In-Country Assessment

4. Rational Dispute Resolution

Goal – An efficient institutional framework that balances the rights of the public, owners, lenders and borrowers in the event of a dispute or loan default

 

4.1 Rule of Law (Very Weak)

Core Question: Do all market participants abide by the rule of law and have confidence in the courts and the ability of police to control crime?

The level of confidence for the police, courts, and contract enforcement is very weak due to corruption in the country. Even when records are supposed to be accessible, sometimes citizens have zero access and are ignored. It is the second to worst country in the world in terms of what it costs investors in the event of crime and violence.

Impartiality (Very Weak)

4.1.1   What is the confidence level of the strength and impartiality of the police, courts and contract enforcement?

Percentile Ranking 14.69; Trend ↑

Source: Governance Matters 2012, World Bank
http://info.worldbank.org/governance/wgi/sc_chart.asp

Independent Judiciary (Very Weak)

4.1.2   Can members of the judiciary be held accountable for their actions?

Score 53 out of 100

Judges are appointed fairly, but citizens have zero access to the asset disclosure records of members of the national-level judiciary. Also, the regulations governing conflicts of interest for the national level judiciary are very weak.

Source: Global Integrity Report 2010 Guatemala – https://www.globalintegrity.org/global/the-global-integrity-report-2010/guatemala/

Costs of Crime (Very Weak)

4.1.3   What are the business costs of crime and violence?

Ranked 147 out of 148; Score 1.97 out of 7; Trend ↓

Source: The Global Competitiveness Report 2013-2014, World Economic Forum
http://www.weforum.org/issues/global-competitiveness

 

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4.2 Enforcement of Contracts (Weak)

Core Question:  Are systems in place for timely and efficient enforcement of contracts?
Courts are slow and in some cases corrupt because of unqualified lawyers and judges. Major reform of the judicial system is required, and more courts, better judges, transparency, and automation of the data must be demanded for the future of the judicial system.

4.2.1 Judical Enforcement (Strong)

Ranked 97 out of 188; Trend =

4.2.1.1 What is the number of procedures involved in resolving a commercial dispute?

31

4.2.1.2 What is the time between the filing of a lawsuit and resolution in judicial enforcements?

1402 days

4.2.1.3 What is the cost of judicial enforcements as a percentage of claim value?

26.5%

Source: Doing Business 2014 – http://www.doingbusiness.org/data/exploreeconomies/guatemala

4.2.2 – Summary Proceedings (Weak)

“Guatemalan Courts generally seems to be very slow, inefficient, and extremely corrupt. There are roughly 12 courts in Guatemala City responsible for commercial and civil matters, including claims related to company law. Courts are understaffed and lack the financial resources to provide good service. Arbitration is an alternative to slow court systems, but the option of third- party arbitrators is not widely known. Furthermore, arbitration is expensive and in many cases the arbitral awards are not final, as rulings are often brought to the judicial arena.” (USAID)

SQ 10  Summary proceedings are alternative dispute resolution processes where creditors can apply for a direct court order in property disputes. What is the time between notice of intent to foreclose and loan collection in summary proceedings if available to lenders?

Not available

SQ 11  What is the cost of summary proceeding if available to lenders as a percentage of property value?

Not available 

4.2.3 – Power-of-Sale (Weak)

SQ 12  Power-of-sale agreements give creditors the power to sell properties after notice to the borrower without court intervention. What is the time between notice of intent to sell and loan collection for power-of-sale agreements if available to lenders?

Weak 

SQ 13  What is the cost of power-of-sale agreements if available to lenders as a percentage of property value?

Unknown

Source – USAID 2004 – http://egateg.usaid.gov/sites/default/files/Guatemala.pdf

 

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4.3 Commercial Dispute Resolution (Strong)

Core Question: Can commercial disputes be resolved efficiently and fairly without exorbitant expense and delay?

Although the indicator is strong, the lack of a firm foundation for the rule of law causes commercial dispute resolution to be weak. Corruption weakens the judicial system which drives businesses to Alternative Dispute Resolution (ADR). Courts in rural areas are very corrupt and judges lack knowledge of certain subject matter.

4.3.1 Commercial Courts (Weak)

SQ 14  Do specialized commercial courts exist for the handling of property disputes and foreclosures?

“The ordinary courts dealing with civil matters have the primary responsibility for implementing the bankruptcy legislation for non-financial entities and individuals. As is the case with the other Central American countries that are the focus of this assessment, there are no bankruptcy courts in Guatemala, as there are also no specialized commercial courts. Civil judges of the first instance have subject matter jurisdiction over bankruptcy cases. Personal jurisdiction is determined by the location where the debtor has a principal place of business or, if such location cannot be established, the place where the debtor normally resides. The courts of appeal are also the courts of civil jurisdiction.” (USAID)

4.3.2 Alternative Dispute Resolution (Strong)

SQ 15  Are alternative dispute resolution mechanisms in place including commercial arbitration, private mediation and community based processes?

“Guatemala’s 20 language groups and indigenous majority emerged from revolution and civil war violence with no trust in public institutions. ADR, as part of a major effort at judicial modernization, created a new way to resolve civil, criminal, land tenure, family and community disputes non-violently and without recourse to expensive, outdated, delay-ridden litigation. Guatemala began offering court-annexed mediation centers, in the languages of the local people, respectful of their customary laws and norms, but also connected to the formal justice system. Efforts exist to initiate mediation centers throughout the country at new Centros de Administracion de Justicia, especially in remote, under-served parts of the country. ‘Mobile courts’ (refitted buses) with a justice of the peace in one room and a mediator in the other, travel from neighborhood to neighborhood according to a posted schedule.”

Source:United Nations of Office of Drug and Crime: http://www.unodc.org/documents/nigeria//publications/Otherpublications/Training_manual_on_alternative_dispute_resolution_and_restorative_justice.pdf

4.3.3 Commercial Treaties (Strong)

SQ 16  What bilateral, regional and international commercial treaties exist concerning business between countries?

The United States is Guatemala’s largest trading partner and the two countries are parties to the CAFTA-DR. U.S. Exports to Guatemala include oil, agricultural products, articles for relief and machinery. On the other hand, the imports from Guatemala include agricultural products as well as gold and silver. Guatemala has bilateral investment agreements with Argentina, Belgium, Cuba, Chile, Finland, France, Germany, Israel, Italy, South Korea, Spain, Sweden, Switzerland, Taiwan, the Czech Republic and The Netherlands. In addition to CAFTA-DR, Guatemala has signed bilateral or regional free trade agreements with Chile, the European Union, Peru, Mexico, Colombia, Taiwan and Panama, and is currently negotiating a free trade agreement with Canada and the European Free Trade Agreement (EFTA) countries.

Source:US Department of State – U.S Relations with Guatemala http://www.state.gov/r/pa/ei/bgn/2045.htm

 

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