On July 31, the Government of the State of São Paulo published Decree No. 64,356/2019¹, which “provides for the use, within the scope of direct and local public administration, of arbitration as a means of resolving conflicts over freely transferable property rights”.
Considered one of the references of arbitration in Brazil and headquarters of most major arbitration chambers in the country, the state of São Paulo has used arbitration clause in its concession agreements and public-private partnerships (PPP) since 2006.
The drafting process of the decree was submitted for public consultation and involved the intense participation of interested civil society, so that the suggestions were analyzed and the final result meets the relevant part of the contributions presented, consolidating the best practices recommended by the specialized literature.
Decree 64.356 / 2019 defines that the Attorney General of the State of São Paulo will be responsible for drafting the arbitration conventions to be used by the direct public administration and its public agencies. In addition, the decree states that if direct public administration is required to resolve a dispute through arbitration, the arbitral chamber shall be located in the state of São Paulo, Portuguese shall be the applicable language and the proceeding shall be subject to the principle of publicity, including the electronic availability of the full procedural documents.
Among the novelties brought by the decree, it is worth mentioning the use of ad hoc arbitration and the formation of a register of arbitral institutions that can be appointed to manage disputes.
Regarding the use of ad hoc arbitration, it was pointed out the need to indicate the version of the UNCITRAL Arbitration Rules to be applied in such arbitration, given the possibility of updating such rules over time. Thus, the draft decree was amended to provide that the UNCITRAL Arbitration Rules to be used will be the ones in force “at the time of the request for arbitration”. Although the need to preserve the possibility of an ad hoc procedure has been recognized, the decree states that the preference should be for institutional arbitration.
Regarding the choice of the arbitration chamber, the decree establishes that the registration of arbitration chambers consists of the creation of a referential list of entities that meet minimum requirements to be appointed to administer arbitration proceedings involving the São Paulo public administration. Thus, criteria were adopted that meet the objective requirements required by the public administration, combined with a criterion imbued with greater subjectivity, which is the recognized suitability and competence of the arbitral institution. Finally, the choice of the arbitration chamber, when not established in the contract, must be made by the applicant for the arbitration at the time the dispute arises.
The initiative of the state of São Paulo to regulate the use of arbitration to resolve conflicts involving direct administration and its public agencies is part of a trend that has already stabilized in some entities and spheres of public administration — such as the Port Sector (Decree no. 8,465/2015), the State of Rio de Janeiro (Decree No. 46,245/2018) and the State of Minas Gerais (Law No. 19,477/2011) — and has been progressively growing in the public sphere.
An example of this is Decree No. 9,957², published by the Federal Government on August 7, 2019, which regulates the rebidding of partnership contracts in the roads, rail and airport sectors. With the issuance of this decree, the rebidding of infrastructure projects gained reinforcement from the point of view of legal certainty by requiring the use of private mechanisms, such as arbitration, to resolve conflicts.
It is also worth mentioning the recently published Law No. 13,867³, of August 26, 2019, which allows the choice of mediation or arbitration for the definition of compensation values in expropriations for public utility.
Arbitration experts understand that Decree No. 64,356/2019 is substantially technical and shows investors that there are no obstacles to arbitration in the state of São Paulo, increasing legal certainty and respecting the regulations of arbitration institutions. In addition, the decree guides and brings security to the public manager regarding fundamental issues related to the use of arbitration, without compromising the choices and allowing adjustments according to the evolution of such institute.
Thus, with the ability to influence other states in the country to pave the way for the same type of regulation, the decree of the state of São Paulo becomes a manual of conduct for public administration, being an important measure that democratizes the access to arbitration, unburden the judiciary and promote greater efficiency and speed in resolving conflicts involving public entities.
¹ Available at: <http://diariooficial.imprensaoficial.com.br/nav_v5/index.asp?c=4&e=20190801&p=1>.
² Available at: <http://www.planalto.gov.br/ccivil_03/_ato2019-2022/2019/decreto/D9957.htm>.
³ Available at: <http://www.planalto.gov.br/ccivil_03/_Ato2019-2022/2019/Lei/L13867.htm>.
