4/30/2021
On the first of April, the new Bidding Law was sanctioned and, among several innovations, it now further encourages the use of alternative dispute resolution methods in conflicts involving the Public Administration.
In chapter XII, the new Law gives a special focus on the use of arbitration in contracts celebrated with Public Authorities. Arbitration, considered a private and alternative method of dispute resolution, has been gaining more strength in the Brazilian market.
This is because, in arbitration, the parties involved have greater freedom to decide on procedural issues, such as choosing the arbitrators (judges) and even deciding how the discovery phase will take place. Also, the rendered award is final and unappealable – which dismisses the need to wait for the judgment of endless appeals, as seen in the Judiciary.
And these are considered to be the most attractive elements regarding arbitration, especially because it is a specialized and faster solution as compared to the State Court.
Although arbitration has been used for a long time in private disputes, it only recently began to receive greater prominence in controversies involving the public administration. More specifically in 2015, when the General Arbitration Law was amended to clearly allow the use of this method by Public Authorities.
Even though specific laws already foresee the use of arbitration with public administration entities (as in the cases of the Concessions Law and PPP Law, for example), the former Bidding Law did not embody its use. In a way, this made it difficult to justify the legality of the use of arbitration in public contracts governed by the old law.
Now, however, the New Bidding Law appears as the main rule to regulate, in a general way, the use of arbitration and other alternative means of conflict resolution in the scope of contracts signed with the administration, as well as mediation, conciliation and the dispute resolution committee.
More than that, the New Law brings important innovations regarding the use of these alternative methods in disputes with the public administration. Among the main ones, the following stand out: (i) the possibility of an arbitration award serving to terminate public contracts (art. 138, III); (ii) the broad provision of submission to arbitration of all disputes that deal with waivable property rights, without exceptions, along with a list only of exemplary situations (art. 151, sole paragraph), and (iii) the permission of the amendment of ongoing contracts to allow the inclusion of alternative dispute resolution methods (art. 153).
Therefore, issues that were once controversial are now regulated by specific legislation in order to provide greater legal certainty to all, to private contractors, internal and external investors as well and the public administration itself.
Hence, the arbitration market and of other alternative dispute resolution methods involving contracts celebrated with the administration, which had already been showing relevant (but timid) development, will now have one more rule in its favor. Accordingly, an even greater adhesion to these important forms of dispute resolution is expected.
The Dispute Resolution team, specialized in the matter, is available to provide clarifications and guidance on this subject.
Coauthors: Patricia Trompeter Secher, Silvia Rodrigues Pachikoski and Tonico Monteiro da Silva
