As of 2015, due to the enactment of Law No. 13.129/2015 (“Arbitration Law Reform”), the use of arbitration within the scope of direct and indirect public administration was expressly allowed. From then on, public entities have been adopting arbitration clauses more frequently, reflecting an increase in their participation in arbitration proceedings.
This increase is shown in the research “Arbitragem em Números” (Arbitration in Numbers), by Professor Selma Lemes[1], which reveals that, after the Reform of the Arbitration Law, there was a vertiginous growth in disputes involving state entities. There is also evidence of an increase in the usage of arbitration clauses in contracts signed by the public administration. The Federal State Administration alone currently has 22 ongoing arbitration cases.
In this scenario, it is natural for the State Administration to take measures to improve arbitration, as the Attorney General’s Office (“AGU” – Advocacia-Geral da União) does by actively participating in meetings promoted by the United Nations Commission on International Trade Law (“UNCITRAL”), an institution that helps modernize national legislation and harmonize international rules on the subject.
During the most recent Session of Working Group III of UNCITRAL – the 47th – held in January of the current year, discussions were centered on the need to create an advisory center on international investment arbitration, aimed at assisting States in resolving disputes with foreign investors, by: (i) providing information aligned with best market practices; and (ii) providing legal assistance to States in the context of international disputes with investors.
During the meeting, AGU argued that besides managing disputes, the center should also aim to prevent them, through mechanisms to contain litigation within the scope of international investment agreements. AGU’s position is pertinent insofar as the escalation of disputes frequently increases time and resources expenditure, and therefore it is imperative to establish the prevention of disputes as a guideline in the management of international investment agreements.
Given the high level of specialization of public entities in arbitration and to optimize the – often consensual – resolution of potential conflicts involving the State Administration, it is essential to hire professionals familiar not only with arbitration, but also with the practice of the country’s public institutions.
