Doing Business in Brazil

22. Arbitration in Brazil

07/23/20

The Brazilian Arbitration Law #9,307, enacted on September 23, 1996 (“Brazilian Arbitration Law”) established the rules and procedures related to the use of arbitration as a method of alternative dispute resolution in Brazil. The Brazilian Arbitration Law defines that a person legally competent or a legal entity may submit and solve any private issue, related to disposable and economically measurable rights by arbitration.

The Brazilian Arbitration Law enactment granted effectiveness of arbitration awards in Brazil. The referred law also complies with the Arbitration Model Law, which granted trustworthiness and credibility thereto, enabling the effective start of arbitration practice in Brazil.

Notwithstanding the advantages provided by Brazilian Arbitration Law, it did not address some important matters when it was enacted. Hence, on May 26, 2015, Law #13,129 (“Arbitration Amendment Law”) came into force with the scope of granting more safety to arbitration proceedings and expressly authorizing the use of arbitration in controversial fields such as conflicts with the public administration.

The most important change in the law relates to the participation of the public administration in an arbitration procedure. The amendment authorized the entities of direct and indirect public administration to either execute an arbitration agreement and to effectively participate as a part of an arbitration procedure, being bound by its award.

The admission of public entities reflects decisions rendered by the Brazilian Superior Court of Justice that agreements entered into by such entities might be subject to arbitration, provided the purpose of the contract involves disposable rights and ends disputes by means of which public companies refused to submit their conflicts to arbitration procedures. Legal provisions do not permit that arbitration with a public party be decided by equity, however. Therefore, the arbitration shall apply only the law to resolve such cases.

This provision also established that no arbitration with a public entity as a party could be confidential. Therefore, this condition is in accordance with Federal Constitution that establishes the publicity as one of the governing principles of public administration.

Arbitration Amendment Law expressly provided that the establishment of the arbitral proceeding interrupts the limitation period, according to several court precedents. Therefore, even if arbitration ends by lack of jurisdiction, the parties have a new and full limitation period to file another claim.

Arbitration Amendment Law also amended the current Corporation Law (Law #6,404) and established that all shareholders of a company are bound to the arbitration clause if it is set forth in the company’s by-laws. This inclusion aimed to terminate discussions on the binding effect of the arbitration clause to shareholders that did not approve the provision, regardless if they were initial shareholders or acquired their shares after the incorporation of the company. The amendment clarifies that any shareholder that disagrees with the inclusion of the arbitration clause has the right to withdraw from the company and receive the amount correspondent to his share in company.

Henceforth, with the inclusion of this provision, the shareholder that does not exercise the withdrawal right will be bound to the arbitration clause.

Such rule granted safety and, most important, validity and enforceability to all arbitration clauses included in the by-laws of any corporation. This provision may also apply to limited liability companies that establishes in its articles of association the subsidiary application of the corporation law. 

Arbitration Amendment Law also clarified the right of the parties to seek interim relief with judicial courts without prejudice to the arbitration procedure. Thus, the parties are entitled to pursue an interim measure before the beginning of the arbitration procedure, as a measure to protect a right or avoid any act that could jeopardize its right during the arbitration. The requesting party has the burden to begin arbitration within thirty days counted from the enforcement of the interim measure. The arbitral tribunal shall review the interim measure by either confirming, modifying or revoking it.

Another important matter disciplined by the amendment is the “arbitration letter”, which is a cooperation mechanism between the arbitral tribunal and the judicial court. The “arbitration letter” is a tool by means of which the arbitral tribunal can request the assistance of the judicial court in matters that demands an “act of force”, such as the enforcement of a provisional order issued during the arbitration.

Arbitration Amendment Law set forth that the arbitral tribunal can grant partial awards, as a matter of celerity, effectiveness and economy for the parties, as well that the parties and the arbitral tribunal might extend the term for the arbitral award, the request for clarification, among others.

With respect to the appointment of arbitrators, the parties started to have the right to appoint arbitrators out of the list of the arbitration chambers. The chamber may control this choice of arbitrators regarding their capacity to participate and coordinate an arbitration procedure.

In 2017, an amendment to the Labor Laws (Law #13,467) established that certain conflicts between employees and employers be submitted to arbitration, provided that the compensation paid to the employees is above a defined level and the employee has either requested the inclusion of the arbitration clause or is in full agreement with it.

The abovementioned Laws were essential to consolidate the arbitration procedure in Brazil, creating a safer environment to increase the use of arbitration as an important mechanism of dispute resolutions, removing any doubt that arbitration has jurisdiction powers to grant full and enforceable awards under Brazilian law.

Finally, it is important to mention the impact that COVID-19 has generated in the arbitration proceedings in the year of 2020. Due to the pandemic, the arbitral institutions and the arbitration proceedings had to adapt to a new reality, with undeniable consequences for the future of arbitration not only in Brazil, but worldwide.

Initially, all Brazilian arbitral institutions have suspended it face to face services, which started to be provided remotely and, subsequently, all fillings and documents started to be sent by email or through online platforms. In the same way, the arbitration proceedings, specially the hearings, started to be done exclusively through virtual format. 

The Brazilian arbitral institutions, as well as the most important international arbitral institutions, are adapting their rules to provide for online procedures, in particular how to hold a complete virtual hearing, ensuring an equal treatment to both parties and with the benefit of reducing the costs of the proceeding.

In the meantime, the Arbitral Tribunals have the competence on how to conduct the proceeding during this period, until all the necessary amendments to the arbitral institution rules are completed.


Authors: Fabiana Videira and Ettore Botteselli

De Luca, Derenusson, Schuttoff e Azevedo Advogados
Rua FidĂȘncio Ramos, 195 – 10Âș andar – Vila OlĂ­mpia
04551-010 SĂŁo Paulo – SP
Tel.: +55 (11) 3040 4040

[email protected]

www.ddsa.com.br