THE AUTHORS:
Debora Visconte, President of the Brazilian Arbitration Committee & Partner at Visconte Advogados
Eleonora Coelho, Vice-President of the Latin American Arbitration Association & Partner at Eleonora Coelho Advogados
Arbitration is an extrajudicial method of dispute resolution, whereby the parties submit their disputes to the judgment of private arbitrators rather than the Judiciary. The arbitrators, chosen by the parties, exercise jurisdictional functions and issue decisions with the binding effect of a court judgment.
In 1996, Law No. 9.307/1996 (“Brazilian Arbitration Act”) was enacted, inspired by the 1985 United Nations Commission on International Trade Law Model Law on International Commercial Arbitration (“UNCITRAL Model Law”), which represents the best international arbitration practices consolidated over the past four decades. Despite its well-established reputation in Brazil and abroad, arbitration has been subject to public criticism regarding the alleged failure of arbitrators to comply with their duty of disclosure — that is, the obligation to inform the parties of any circumstances that may raise justifiable doubts as to their impartiality and independence in the arbitral process, especially in judicial decisions setting aside arbitral awards. But is there any real basis for this commotion?
Recent data shows that this is not the case. The 2024 “Arbitration Observatory” survey, conducted by Professor Selma Lemes for the Brazilian Arbitration Committee (“CBAr”) in partnership with the Brazilian Association of Jurimetrics (“ABJ”), revealed that, in the city of São Paulo alone, only 1.5% of arbitral awards are set aside by the courts. This data weakens the argument that there are systemic flaws or complicity with questionable conduct on the part of arbitrators.
The exemplary functioning of arbitration in Brazil is also internationally recognized. Surveys conducted by Queen Mary University of London, with specialists from around the globe, report that, since 2018, São Paulo has been one of the most recommended seats for international arbitration.
Given the undeniable success of arbitration in Brazil, attention has been drawn to alleged difficulties concerning arbitrators’ duty of disclosure, which are said to be leading to a high number of arbitral awards being set aside by the courts. Contrary to what some would have us believe, the duty of disclosure is adequately regulated by practices defined both nationally and internationally. Under the Brazilian Arbitration Act, arbitrators must disclose any information that has the potential to affect their impartiality and independence and that is not public.
Following the example of the UNCITRAL Model Law and the most modern arbitration statutes worldwide, the Brazilian Arbitration Act does not contain an exhaustive list of situations that must be disclosed — not least because it would be impossible to predict all scenarios — but there are widely accepted and internationally practiced parameters to guide the exercise of the duty of disclosure. Among these parameters, the following stand out: the International Bar Association’s Guidelines on Conflicts of Interest in International Arbitration, the Guidelines of the Brazilian Arbitration Committee, and the codes of ethics and rules of the arbitral institution chosen by the parties. Moreover, the grounds for challenge and disqualification applicable to judges extend to arbitrators insofar as they are compatible with arbitration.
Thus, there are tested, reliable mechanisms that have been used for decades to determine what information should be disclosed by arbitrators to the parties. And the data shows that arbitrators do comply with their duty of disclosure to the satisfaction of the parties. Within the arbitral process, the number of challenges presented against arbitrators is minimal. According to the aforementioned survey “Arbitration in Numbers,” conducted by the Arbitration Observatory, in 2021, challenges were presented in only 3.34% of the total number of arbitrations in progress in the country’s main arbitral institutions, and successful challenges represented only 0.6% of the total.
Nevertheless, even if an arbitrator fails to comply with the duty of disclosure, the arbitral award rendered by them shall not necessarily be annulled. The only circumstances that may justify the setting aside of an arbitral award by the Judiciary are those expressly provided for in Article 32 of the Arbitration Law, which does not include failure to comply with the duty of disclosure.
At most, failure to disclose may constitute an element evidencing one of the statutory grounds for annulment of an arbitral award: the partiality or lack of independence of the arbitrator. However, to reach this conclusion, an in-depth, fact-based analysis is necessary, demonstrating that the undisclosed circumstance was relevant, that it compromised the arbitrator’s impartiality or independence, and that there was no justification for nondisclosure.
In other words, despite the attention received by a few court decisions that have set aside arbitral awards, such cases are rare. The annulment of an arbitral award by the Judiciary, when duly justified and in accordance with the Arbitration Law, does not undermine or delegitimize the arbitral system. On the contrary: judicial review of arbitral awards is an exceptional but necessary mechanism expressly contemplated by the Brazilian Arbitration Act.
Public debate is important and should indeed take place, but it must be grounded in concrete technical data. The existing rules work well and are the result of decades of institutional maturity, accumulated experience, and consolidated practice in the legal field. The creation of new rules that are poorly defined, excessive, or disconnected from the reality of arbitration risks generating uncertainty and undermining what is most essential in arbitration: the trust of the parties involved and legal certainty.
ABOUT THE AUTHORS
Debora Visconte is a Partner at Visconte Advogados and currently serves as President of the Brazilian Arbitration Committee (CBAr). She has over 20 years of experience in domestic and international arbitration and acts as counsel and arbitrator in complex disputes. Débora holds a Ph.D. and a Master’s degree in International Law from the University of São Paulo (USP), an LL.M. from the London School of Economics and Political Science (LSE), and an LL.B. from the Pontifical Catholic University of São Paulo (PUC-SP). She is also a Member of the ICC International Court of Arbitration and of the ICC Latin American Arbitration Group.
Eleonora Coelho is the Founding Partner of Eleonora Coelho Advogados, with over 20 years of experience in arbitration and dispute resolution. She acts as counsel and arbitrator in national and international proceedings and is recognized among Brazil’s leading arbitration practitioners. Eleonora holds a Master’s degree in Litigation, Arbitration and Alternative Methods of Dispute Resolution (ADR) from Paris-Panthéon-Assas University and an LL.B. from the University of São Paulo (USP). She currently serves as Vice-President of the Asociación Latinoamericana de Arbitraje (ALARB) and as a Permanent Member of the Advisory Council of CAM-CCBC (Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada).
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
* This article was published by the authors in Valor Econômico, and translated to English and adapted for publication on DailyJus.
