22/7/2024
Overview
In recent years, the global landscape has been marked by a series of critical and unforeseen events, although not entirely unprecedented.
From the emergence of the COVID-19 pandemic to the escalated conflict between Russia and Ukraine, followed by supply chain disruptions leading to price spikes for food, raw materials,
energy, and commodities, to worsening climate change impacting contractual obligations, the world has been navigating a number of challenges.
The legal and economic implications of these events, coupled with the dynamic nature of business, demand adaptation across all industries. The market dynamics, however, are not sufficient to solve the problems faced, so the dispute resolution market is on the rise.
The increase in the number of disputes poses new challenges to legal practitioners, calling for efficient solutions and adaptations, especiallyin the field of arbitration, which is always in
search of better performance and self-regulation. Several key themes emerged in the 2023 arbitration landscape, demonstrating arbitration’s clear adaptability.
Scope of the duty of disclosure
During 2023, new solutions have been implemented with respect to the duty of disclosure of arbitrators and its impact on challenges and annulment lawsuits. The escalation of belligerence and opportunism by certain parties has prompted the arbitration market to address the inherent subjectivity by introducing new metrics for arbitrators and parties regarding disclosure obligations.
After all, the duty of disclosure is an important accountability mechanism for arbitrators vis-à-vis the parties, as it ensures the handling of situations that may raise concerns about impartiality and independence – essential attributes for the exercise of the adjudicative function. While the arbitrator’s duty of independence is linked to objective criteria, impartiality is linked to subjective criteria, since it externalizes a state of mind of the adjudicator. Thus, there are three duties to be observed.
To guide disclosure and make it possible to challenge arbitrators objectively, the Brazilian market has responded with new measures.
These include adjustments to the Conflict of Interest and Availability Form (Supplementary Rule No. 4/2023) of the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (“CAM-CCBC”), which aims to increase the level of transparency in arbitration proceedings.
The new version of the Form includes questions about previous professional relationships between the arbitrators, the lawyers and the parties in the last three years, reflecting best practices observed in international arbitration, such as the IBA Guidelines on Conflict of Interest in International Arbitration. In addition, the parties are urged to provide the arbitrators with relevant information about the dispute and the persons involved, so that they can answer the Questionnaire accurately.
The Brazilian Arbitration Committee (the “CBAr”) has also taken the initiative to provide guidance to arbitrators on how to comply with the duty of disclosure. To this end, the CBAr has published the Guidelines on the Arbitrator’s Duty of Disclosure, considering international and globally accepted guidelines on the subject.
Premises of corporate arbitration
As collective arbitration has become more prevalent in Brazil, the lack of rules and premises underlying these proceedings has become apparent, particularly in corporate arbitration. After all, although the Brazilian Corporations Act (Law No. 6,404/1976) authorizes a company’s governing documents to provide that any disputes between shareholders and the company, or between controlling shareholders and minority shareholders, may be settled by arbitration, it does not – and should not – prescribe the specifics of the arbitration process.
In order to fill this gap, the CAM-CCBC has developed and published the Corporate Arbitration Rules, a groundbreaking initiative that validates the self-regulatory capacity of arbitration. The Corporate Arbitration Rules introduce new practical and specific rules for the management and resolution of issues arising in collective arbitrations involving corporate matters.
In order to be applicable to the dispute, it is necessary that (i) the company’s governing documents contain an arbitration clause in which the parties have agreed that the arbitration will be administered by the CAM-CCBC and will be subject to its rules; (ii) the legal nature of the dispute submitted to arbitration requires a uniform decision for all parties concerned; and (iii) the award to be rendered must have the ability of affecting not only the parties on both sides of the dispute, but also the legal sphere of the corporation, limited liability company or association and, at the same time, all those designated by the Rules as Affected Third Parties, i. e. partners, associates, shareholders and administrators.
Given the growing number of corporate issues submitted to arbitration, the CAM-CCBC Corporate Arbitration Rules are certainly an important step forward.
Jurisdiction to rule on the early production of evidence
The Brazilian Code of Civil Procedure of 2015 («Code of Civil Procedure») allows the production of evidence without urgency. This has raised doubts as to the jurisdiction to hear such cases when the parties have signed an arbitration clause.
In 2023, the Superior Court of Justice (the “STJ”) heard the issue for the first time and ruled that, in the absence of urgency, the Arbitral Tribunal has jurisdiction to hear this type of claim (“Recurso Especial No. 2.023.615 – SP”). Although there is no consolidated case law on this issue, this is an important precedent that can serve as a guide for arbitration professionals.
Considering the impact of this issue, the Arbitration and Mediation Center of the American Chamber of Commerce for Brazil (the “CAM-AMCHAM”) issued a new resolution (Administrative Resolution No. 3/2023) providing that the early production of evidence must follow the procedure established for emergency arbitrators.
Despite CAM-AMCHAM’s initiative, given the ongoing controversy surrounding this issue, it is prudent for parties to determine the jurisdiction for early production of evidence when drafting the arbitration clause. This proactive step can help prevent further disputes from piling up.
Pro-arbitration position of the courts on jurisdiction to hear actions to annul arbitral awards
Despite some alarming news about the rise in lawsuits to set aside arbitral awards, the CBAr and the Brazilian Association of Jurimetrics published a study in 2023 that discredits these baseless attacks on arbitration.
According to the research in this study, between 2018 and 2022, 51.2% of the decisions issued by the São Paulo State Appellate Court in cases related to arbitration were in favor of arbitration. Pre-arbitration injunctions are an example. It is noteworthy that the São Paulo State Appellate Court is the court that hears the most arbitration-related cases in Brazil.
The research also revealed that only 2.8% of arbitration awards are challenged in court, with a success rate dropping even further to just 1.5%. The research underscored the trust and cooperation established between the judiciary and arbitration. It also showed that the increase in the number of litigations on this issue is merely a consequence of the increase in the number of cases resolved by arbitration.
Moving forward
With the dynamic changes in the economy, arbitration in Brazil is poised to move away from its previous focus on corporate disputes, engineering and construction, and general commercial relations.
New types of conflict will add other nuances. Some of the highlights will be the disputes arising from (i) the energy transition, which is a new reality in some Latin American countries, particularly Brazil, despite its dependence on the fossil fuel industry; (ii) the rapid advancement of technology, which gave rise to startups and the Brazilian General Data Protection Act, but is taking on new forms with the increasing use of artificial intelligence, both in business and as a legal tool; (iii) the need for economic players to implement internal ESG (“Environmental, Social and Governance”) policies, both nationally and globally, with serious implications for the fulfillment of commercial contracts; and (iv) the impact of climate change, which will be felt in the development of contractual and commercial relationships, not only because it is a concern included in the new compliance rules, but also because it reflects on the form and manner of fulfillment of obligations.
With respect to arbitration, it is expected that issues such as transparency and diversity will continue to evolve. In recent years, there has been a movement to weaken the confidentiality of arbitration. While on the one hand confidentiality is a feature that should be preserved given the nature of the claims brought to arbitration, on the other hand there is a growing demand for access to information about how cases are decided. Without consensus, the issue is expected to remain on the agenda. The fight for diversity, as opposed to transparency, is unanimous. Although progress has been made, the commitment of arbitration market players must remain constant.
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ABOUT THE AUTHORS
Silvia Rodrigues Pachikoski | [email protected] | +55 11 31470800
Silvia has extensive experience in the judicial and administrative litigation area, involving civil, commercial and consumer relations, with definition of procedural strategies, preparation of documents and monitoring of disputes in all instances of the Judiciary and solid experience conducting judicial hearings, meetings before Public Administration bodies, State and Federal Public Ministry. Silvia also acts and acted in several arbitration procedures, national and international, both as an arbitrator and as a lawyer.
Julia Guimarães Rossetto | [email protected] | +55 11 31470800
Julia has been dedicated to arbitration and other out-of-court methods of dispute resolutions, in different sectors, such as energy, construction, franchising, real estate and commercial agreements.
José Victor Palazzi Zakia | [email protected] | +55 11 31470800
José Victor has dedicated his career to dispute resolution of complex commercial matters, mainly in national and international arbitrations, mediations and negotiations concerning a wide variety of subject matters including civil construction and infrastructure, real estate, corporate disputes and commercial contracts.
Disponível em: BBC-2024
