5/31/2021
On March 2nd, 2021, the First Court of Business Law of the São Paulo Court of Appeals – when ruling on interlocutory appeal No. 2263639-76.2020.8.26.0000 – unsealed the records of a claim to vacate an arbitration award issued in São Paulo. The Court understood that article 189, IV, of the Brazilian Civil Procedure Code (CPC), which provides for such secrecy, is unconstitutional.
Although controversial, this understanding is hardly news. Some of the Business Courts in the District of São Paulo had already been ruling out the automatic secrecy of judicial proceedings in lawsuits in which a topic related to arbitration is discussed. Thus, what we saw was only the confirmation, by the Court of Appeals, of a trend that had already emerged in lower courts.
This recent decision by the São Paulo Court of Appeals does not justify, under any circumstances, the alarmism and dramatization that has been seen in our local arbitration community. This authority does not lead to the scrutiny of everything the parties said and discussed in arbitral proceedings, nor does it expose to the public eye their most intimate and compromising secrets. Not at all!
The fact that the confidentiality of judicial proceedings should not be automatically applied to every claim in which arbitration is discussed does not mean that this guarantee has been ruled out indefinitely. Privacy or social interest (e.g., trade secrets) continue to deserve judicial protection, as they always have. The honorable Justice Cesar Ciampolini Neto stated in his opinion that only secrecy of justice “based on the automatic application of article 189, IV, of the CPC” would be ruled out. Subparagraphs I, II, and III of the same article – which provide for additional reasons why a Court may seal the records- are still valid and in force.
In other words, if there is a valid reason that justifies sealing of the records, a party can and should plead to the Court that the claim be dealt under seal. This would be the case, for example, if there are a case or document that call for special safekeeping.
Brazil is not the only jurisdiction where claims to vacate arbitral awards may be subject to public scrutiny. In most countries, this type of lawsuit does not benefit from automatic and ironclad secrecy. This is the case in the United States, England, Australia, Germany, Belgium, France and Switzerland (where anonymity – rather than secrecy – seems to be the rule).
Therefore, the Court of Appeal’s decision will not disrupt arbitrations in Brazil, just as one would never presume to say something similar about London, New York, or Paris.
In fact, the confidentiality of arbitral proceedings – although one of its celebrated features – certainly is not the preponderant or decisive element for the inclusion of arbitration clauses in agreements, contracts, or by-laws. There are other more relevant advantages and benefits that have always been secured by the Judiciary, in all its instances. Arbitration is worth much more than its confidentiality!
For these reasons, in our opinion, the decision of the São Paulo Court of Appeals is far from justifying any kind of alarmism or overreaction. Brazil – and specifically the State of São Paulo – continues to emerge as an extremely favorable jurisdiction for arbitration. The specialized courts in the judicial district of São Paulo continue as a reference of legal certainty and good procedural technique, factors that surely contribute to the choice of our city as the main seat of arbitral proceedings. Arbitration is not at risk! On the contrary, it thrives, flourishing, with the support and under the protection of the São Paulo Court of Appeals.
Coauthors: Tonico Monteiro da Silva and Júlio César Costa Ferro
