On December 23, 2025, the Paraguayan Executive Branch enacted a new arbitration law (the New Law), which fully repeals Title I of Law No. 1879/2002 and modernizes the arbitration regime in force since 2002. The New Law will apply to arbitral proceedings commenced after its entry into force and to arbitral awards rendered under this new framework.
 
The reform seeks to align Paraguayan arbitration law with current trends in comparative law and to consolidate a pro-arbitration legislative policy, drawing, among others, on the arbitration laws of Peru, Spain, Panama and Switzerland.

Main pillars of the reform

  • Updates in the regulation of arbitrable matters.
  • Express recognition of the favor arbitri principle.
  • Strengthening of the principle of non-intervention by state courts.
  • Regulation of the extension of arbitration agreements to non-signatories.
  • Further development of the interim measures regime.
  • New rules on annulment and recognition and enforcement of arbitral awards.

Expansion of arbitrable matters

The New Law expressly recognizes certain arbitrable matters not previously recognized in the past regime and introduces other changes. Among the main innovations:
  • Disputes involving professional athletes are expressly recognized as arbitrable.
  • Arbitration is permitted in succession-related disputes between heirs, executors or legatees concerning the inventory, valuation, administration and partition of the estate.
  • The intervention of the Public Prosecutor’s Office as a determining factor in assessing objective arbitrability is eliminated.
  • The range of state entities authorized to submit disputes to arbitration is expanded to include all bodies covered by Law No. 7278/2024 on the organization of the State administration.

Favor arbitri principle

The New Law expressly incorporates a rule of interpretation in favor of arbitration. In cases of doubt regarding the scope or application of its provisions, the interpretation that favors the validity and effectiveness of arbitration must prevail.
 
Likewise, in the event of normative gaps, such gaps must be filled in accordance with the general principles of arbitration, avoiding the direct supplementary application of civil procedural rules.

Judicial non-intervention and arbitral autonomy

The principle of non-intervention by the Judiciary is reaffirmed, with the New Law expressly providing for:
  • The prohibition on ordinary courts suspending arbitral proceedings by any means whatsoever.
  • The classification of any undue judicial intervention as judicial misconduct.
In addition, the negative effect of the Kompetenz-Kompetenz principle is strengthened, providing that a judge may only assume jurisdiction if the arbitration agreement is manifestly and clearly null, ineffective or incapable of being performed.

Extension of arbitration agreements to non-signatories

The New Law expressly regulates the possibility of extending an arbitration agreement to non-signatory third parties in exceptional circumstances.
 
An arbitral tribunal may declare such extension where the third party’s consent may be inferred, in accordance with the principle of good faith, from:
  • Its active and decisive participation in the negotiation, conclusion, performance or termination of the contract; or
  • The obtaining of rights or benefits derived from the contract containing the arbitration clause.
The provision adopts a flexible approach, avoiding a closed list of scenarios and allowing the application of criteria developed by comparative doctrine and case law.

Interim measures

The regime governing interim measures is expanded and modernised, incorporating, among other aspects:
  • The definition of interim measures in accordance with the UNCITRAL Model Law (2006).
  • The possibility of ordering ex parte measures in cases of urgency.
  • The applicant’s liability for damages if the interim measure is found to be unjustified.
  • The power of the arbitral tribunal to directly procure the effectiveness and enforcement of the measures it orders.

Annulment of arbitral awards

  • The concept of a “recourse” is replaced by that of a setting-aside action, highlighting its original nature.
  • Expressly establishes that the annulment grounds are exhaustive and of restrictive interpretation.
  • Any review of the merits of the award is classified as judicial misconduct.
  • The waiver or contractual limitation of the annulment is permitted in international arbitrations, subject to strict conditions.

Recognition and enforcement of arbitral awards

  • The requirement for recognition of arbitral awards rendered in Paraguay is eliminated, equating them to domestic court judgments.
  • Judicial jurisdiction for the recognition and enforcement of foreign arbitral awards is redefined.
  • Grounds relating to non-arbitrability and public policy may no longer be examined ex officio by the judge and must be alleged and proven by the interested party.