THE AUTHORS:
Maria Luiza Mayr Maia, associate at Lauro Gama Advogados
Rafaella Farias Pereira, lawyer at Lefosse Advogados
Eduardo Leardini Petter, mid-level associate at BMA Advogados
Luiza de Sousa Braz, junior associate at MAMG Advogados
This article provides an overview of the arbitration highlights in Brazil in 2022, a particularly relevant year for arbitration in the country. More specifically, this article
- considers statistics disclosed in 2022 by some of the main arbitration institutions in the country,
- covers the recent “anti-arbitration” bill proposed in the Brazilian Congress,
- analyzes the first conflict of jurisdiction between arbitral tribunals decided by the Brazilian Superior Court of Justice, and
- takes note of a relevant change in the regulatory framework requiring disclosure of arbitral proceedings’ information, despite any confidentiality undertakings.
Arbitration in Brazil in Numbers
Arbitration has become one of the most discussed topics in the Brazilian legal community. After only 26 years since the enactment of the Brazilian Arbitration Act (“BAA“), Brazil is now regarded as one of the leading countries in the arbitration field, and commercial arbitration is the most commonly used method of alternative dispute resolution in the country.
The latest statistics on arbitration proceedings commenced in the country, published in 2022, reveal that Brazil experiences a steady growth in the number of cases administered by the main national institutions. According to information released by the Center for Arbitration and Mediation Brazil-Canada (“CAM-CCBC“), in the years 2020 and 2021, more than 230 new cases were registered, which led CAM-CCBC to achieve the landmark figure of 1,311 administered arbitrations. In 2021, the total of the sums disputed in these cases amounted to BRL 5.6 billion, while the average amount in dispute reached BRL 43.7 million.
In the same sense, preliminary statistics released by the International Chamber of Commerce (“ICC“) in 2022 for the year 2021 rank Brazilian parties as the second most common in arbitration proceedings registered that year.
The “Anti-Arbitration” Bill
This thriving environment for arbitration may be put in check if Bill No. 3,923/21 is approved by the Brazilian Congress. This bill amends the BAA with the declared purpose of “disciplining the arbitrator’s role, improving the duty of disclosure, establishing the disclosure of information after the conclusion of the arbitration procedure and the publicity of annulment proceedings“. The bill is currently being discussed in the Chamber of Deputies and has already mobilized more than 40 entities against the parliamentary initiative.
According to the Brazilian Arbitration Committee (“CBAr“), the main arbitration entity in Brazil, the changes proposed in the bill increase legal uncertainty and weaken the entire arbitration system in the country. Its approval would represent a real step backwards, contrary to most modern legislation in the world, as it promotes undue interference by the State in private proceedings.
The main changes proposed by the bill would:
- limit the choice to arbitrators who have no more than 10 cases;
- limit the choice to arbitrators who do not compose other arbitration tribunals with the same arbitrators of the case;
- limit the choice to arbitrators who are not on the board of directors of the arbitral institution that administers the proceeding;
- impose on arbitrators the duty to disclose any fact that gives rise to “the slightest doubt” as to their impartiality and independence;
- require the arbitral institution to publish the composition of the tribunals and the amount of the dispute;
- require the arbitral institution to publish the award (with the possibility to redact sensitive information); and
- determine that the proceedings for annulment of arbitral awards shall not be confidential before the Judiciary.
Following strong criticism from the civil society, the discussion and voting of the bill were postponed by the Chamber of Deputies. In an interview in November 2022, the president of the Chamber of Deputies, Arthur Lira, stated that the bill would not be processed hastily.
The arbitration community in the country fear that the bill is overreaching and portrays a dangerous interference in the autonomy of the parties who elected arbitration as an extrajudicial means of resolving their disputes. If approved, it will certainly harm Brazil’s reputation as an arbitration-friendly country.
Lis Pendens Between Related Arbitration Proceedings Settled by the Superior Court of Justice
In June 2022, the Brazilian Superior Court of Justice (“STJ“) adjudicated for the first time a conflict of jurisdiction between arbitral tribunals. The arbitration proceedings involved a major Brazilian multinational meat processing company, JBS S.A. (“JBS“), whose controlling shareholders confessed to committing illicit acts.
At the time of the judgment, three arbitration proceedings had been initiated against JBS’s controllers before the Brazilian Stock Exchange’s arbitration chamber (Câmara de Arbitragem do Mercado, “CAM“), seeking compensation for damages they would have caused to the company. The first two proceedings – which were later joined – were brought forth by JBS’s minority shareholders, while the third one was filed by JBS itself, with the approval of the shareholders pursuant to the Brazilian Corporations Act (“BCA“). Each tribunal held that it had prevailing jurisdiction over the claims and refused to discontinue its respective proceedings. Following these conflicting decisions, JBS requested the STJ to settle the divergence.
In its decision, the STJ found that the irreconcilable decisions rendered in the arbitrations created a conflict of jurisdiction. Noting that CAM arbitration rules did not provide for how to resolve the impasse, the STJ held that it could not presume that the arbitration chamber, whose function is merely administrative, would have jurisdiction to settle the conflict. Considering the jurisdictional nature of arbitration in Brazil and the STJ’s constitutional authority to rule on conflict of jurisdiction “between any tribunals“, the STJ declared its authority to resolve jurisdictional conflicts between arbitral tribunals.
To decide which proceeding should continue, the STJ did not apply the civil procedure rules to settle conflicts of jurisdiction but rather assessed the legal standing of the parties to bring forth their claims under the BCA. On a controversial legal interpretation, the STJ held that minority shareholders could initiate arbitration proceedings against controllers upon (a) the approval by the shareholders’ general assembly and the inaction of the company to bring forth said claim, or (b) the refusal of the general assembly to authorize the filing of the arbitration. As a result, the STJ held that JBS’s minority shareholders lacked legal standing to claim for damages, as JBS was simultaneously seeking reparation for those damages, and, therefore, that the arbitration it had requested should be discontinued in favor of the company-initiated proceeding.
A more detailed commentary can be found on JusMundi.
New Regulatory Rule: Companies to Disclose Details of Arbitration Proceedings to the Market
In June 2022, the Brazilian Securities and Exchange Commission (“CVM“) passed Resolution No. 80/2022 settling the market’s questions concerning the extent of the disclosure of arbitral proceedings required of reference forms.
As the regulatory authority overseeing publicly-listed companies’ disclosure of information and observance of the regulations, CVM dictates the requirements of periodical disclosure documents. Among those documents are the reference forms, commonly known as the document drafted for the request for public listing, whereby companies are to inform potential investors of the company’s activities, financial health and the risks involved in its business. Within this extensive report, one of the mandatory disclosures regards the involvement of the company or its shareholders in material disputes – that is, disputes which the company or its advisors consider to have the potential to affect the company’s reputation or regular course of business.
When it came to the disclosure of confidential disputes, despite the CVM’s guidance to the effect that confidentiality of legal proceedings should not overrule the need to disclose material disputes, in practice companies often only disclosed a few details, such as a high-level description of the object matter in dispute, the amount involved and the company’s or shareholders’ chances of success. While unquestionably material, shareholders’ disputes are, more often than not, referred to confidential arbitration, thus raising controversy over their disclosure. This prompted much discussion in the backstages of the drafting of reference forms and other disclosure documents alike, with gatekeepers, the company and other stakeholders fighting for the inclusion of more or less information on such sensitive disputes.
Through the recent resolution, however, CVM brought an end to the controversy and determined that, regardless of any parties’ undertakings to preserve the confidentiality of any matter pertaining to a dispute, arbitration agreements included, companies must describe the following details of a shareholder’s dispute:
(a) the parties’ names,
(b) the company/shareholder’s assets or amounts involved in the dispute,
(c) the main facts of the case, and
(d) the claims or requests for relief.
ABOUT THE AUTHORS:
Maria Luiza Mayr Maia is an associate at Lauro Gama Advogados. She acts as secretary to arbitral tribunals in both domestic and international arbitration and is a member of BRVYAP’s Executive Committee.
Rafaella Farias Pereira is trained in both Brazilian and French law, and is a Brazilian qualified lawyer focusing on corporate and international dispute settlement at Lefosse Advogados. She is currently an LL.M candidate at the Queen Mary University of London’s School of International Arbitration and is a member of BRVYAP’s Executive Committee.
Eduardo Leardini Petter is a Master’s student at the University of São Paulo and a mid-level associate at BMA Advogados. He practices both domestic and international arbitration and is a member of BRVYAP’s Executive Committee.
Luiza de Sousa Braz is a Master’s student at the University of São Paulo and a junior associate at MAMG Advogados. She practices both domestic and international arbitration and is a member of BRVYAP’s Executive Committee.
