12/8/2024
In June, the Superior Court of Justice (“STJ”) addressed the consequences of arbitrators’ breaches of the duty of disclosure in Special Appeal nº 2.101.901, which involved an arbitration between companies in the healthcare sector.
After the arbitral award was rendered, the liable party sought to annul it. The trial court judge dismissed the claim, a decision upheld by the São Paulo Court of Justice. In reviewing the Special Appeal, the STJ concurred with the lower courts, demonstrating deference to the arbitration process.
The application for annulment was based on two grounds. First, one of the arbitrators declared in the independence and impartiality questionnaire that he had never served as an arbitrator before. Second, this same arbitrator allegedly failed to disclose that his law firm represented a company with commercial ties with the Respondent’s sole partner.
Regarding the arbitrator’s previous experience, the STJ deemed the misstatement irrelevant since the arbitrator’s curriculum, presented during the proceedings, showed his prior participation in arbitrations. The party had access to this information throughout the arbitration but only raised concerns after the rendering of the unfavorable award.
The STJ also rejected the argument concerning the arbitrator’s law firm’s connections. The Court noted that there was no partnership between the Respondent and the company represented by the law firm, meaning there was no justifiable doubt about the arbitrator’s impartiality or independence.
The Superior Court’s decision was reassuring. The Brazilian Arbitration Act introduces the concept of “justifiable doubt” to guide the duty of disclosure. Given it is an abstract term, some academic and professional entities provide guidelines to clarify its application. Examples include the International Bar Association (“IBA”) Guidelines on Conflicts of Interest in International Arbitration – its updates were discussed in a previous newsletter – and, more recently, the Brazilian Arbitration Committee (“CBAr”) Guidelines on the Arbitrator’s Duty of Disclosure.
In the ruling, the STJ Justices used the IBA Guidelines to support their standings. Additionally, CBAr played a crucial role through its participation as amicus curiae.
In summary, the STJ concluded that a breach of the duty of disclosure should not automatically annul an arbitral award. Courts must assess whether the undisclosed fact could taint the arbitrator’s impartiality and independence. This distinction between disclosure and the evaluation of impartiality enhances legal certainty for arbitration users by delineating the extent to which a breach of the duty of disclosure can or cannot lead to the annulment of an award.
Arbitration offers numerous benefits as a dispute resolution mechanism, but its effectiveness depends on skilled professionals who can correctly manage the process. The Dispute Resolution team at L.O. Baptista is prepared to assist clients in arbitral disputes, drawing on our extensive experience.
Co – authored by: Silvia Rodrigues Pachikoski, Mariana Dias Sallowicz, Gabriel Rogenfisch Quintans, José Victor Palazzi Zakia and Julia Guimarães Rosseto
