THE AUTHOR:
Anna-Katharina Scheffer da Silveira, Lawyer at Adriana Braghetta Advogados
On 25 June 2024, the Brazilian Arbitration Committee (Comitê Brasileiro de Arbitragem – “CBAr”) hosted an event on its Guidelines on the Arbitrator’s Duty of Disclosure, which were officially launched in September 2023 (the “CBAr Guidelines”). The event took place at the premises of the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (Centro de Arbitragem e Mediação da Câmara de Comércio Brasil-Canadá – “CAM-CCBC”) in São Paulo.
The panel discussion was held in Portuguese between the drafters of the Brazilian Arbitration Act (“BAA”) (Law nº 9.307/1996 (reformed by Law nº 13.129/2015)), Selma Ferreira Lemes, Carlos Alberto Carmona and Pedro A. Batista Martins, and was moderated by Debora Visconte, President of CBAr, and Patrícia Kobayashi, Executive Director of CAM-CCBC.
Opening by CBAr and CAM-CCBC
Debora Visconte opened the discussion and explained how the CBAr Guidelines emerged from a collaborative drafting process by the CBAr Board of Directors that took almost a year between 2022 and 2023, incorporating input from the BAA drafters, academics, arbitration institutions, and the CBAr members.
Patrícia Kobayashi then discussed CAM-CCBC’s new questionnaire regarding the availability and potential conflicts of interests of arbitrators acting in CAM-CCBC cases (the “Questionnaire”), which serves as a tool to facilitate the process of disclosure to the parties and is therefore more than a simple arbitrator statement form. It is divided into four categories of questions:
(i) Initial questions including on the arbitrator’s availability,
(ii) Questions on the arbitrator’s relationship to the parties,
(iii) Questions on the arbitrator’s relationship to the parties’ counsel, and
(iv) Additional questions on the arbitrator’s interest in the outcome of the case and potential additional disclosures.
The moderators then invited the panelists to comment on the CBAr Guidelines in turn.
The Panel Discussion
For the ease of reference of the reader of this report, each of the guidelines will be quoted below, followed by the respective summary of comments made by the panelists and moderators:
Debora Visconte commented that Guideline 1 is of introductory nature and clarifies the nature and applicability of the CBAr Guidelines. The panel stressed the CBAr Guidelines’ important role in filling Brazil’s legislative gap regarding arbitrator disclosure. Selma Lemes explained that the Guidelines complement existing international standards like the IBA (International Bar Association) Guidelines on Conflicts of Interest in International Arbitration (2024) (“IBA Guidelines”) while reflecting local needs. Pedro A. Batista Martins noted that the CBAr Guidelines emerged from years of experience and the growing Brazilian arbitration market, aiming to harmonize varying disclosure practices. Carlos Alberto Carmona added that while inspired by international standards, the Guidelines take a simpler approach, avoiding strict categorization and scenario lists and incorporating Brazilian case law.
- The duty of disclosure of the arbitrator provided for in Article 14, paragraph 1 of the Brazilian Arbitration Act remains throughout the entire course of the arbitration proceedings, until the arbitrator’s jurisdiction is functus officio.
Mr. Batista Martins clarified that while Article 14.1 of the BAA mentions the arbitrator’s duty to disclose only before his or her appointment, it always also implicitly included a disclosure duty throughout the proceedings. Mr. Carmona elaborated that the continued duty to disclose applies not only regarding new circumstances but also to existing facts that may later be qualified as potential conflicts. He added that new jurisprudence might require the disclosure of facts that were not disclosed beforehand
This Guideline reflects international practice, which distinguishes between disclosable facts and actual conflicts of interest. Ms. Visconte noted, that the principle that a lack of disclosure as such does not automatically imply a lack of independence or impartiality was confirmed by the Brazilian Federal Supreme Court (Superior Tribunal de Justiça – STJ) just a few days before the event and quoted a relevant part of the decision (RECURSO ESPECIAL Nº 2101901 – SP (2023/0366445-2)).
Mr. Carmona observed that the state court of São Paulo had already decided in the same sense a while ago in several instances. He added that, nonetheless, state courts of other countries may disagree with this approach. They may find that the mere lack of disclosure leads to a discomfort of the parties, which as such may be a reason to challenge an arbitrator. Mr. Batista Martins confirmed that especially some U.S. courts have followed this approach in the past, stating that the mere lack of disclosure can have an impact on an arbitrator’s impartiality. He further stated that what is decisive is that a third person will analyze whether an arbitrator is impartial or not, and that eventually this does not depend on the “eyes of the parties” – an expression that is used by some arbitral institutions in their disclosure forms. According to Mr. Batista Martins, the disclosure standard based only on the parties’ perception is problematic since it is impossible for the arbitrator to know how the parties think of a certain fact. Ms. Lemes stressed that the STJ in its recent decision used the expression “interested observer” (observador interessado), meaning that an arbitrator deciding on whether to make a disclosure should evaluate a situation from the very standpoint of the party to the dispute.
Following a question from the audience regarding the subjective versus the objective disclosure standard, the panelists discussed their respective relevance. The tendency in the discussion was that the objective standard should prevail when an arbitrator decides whether to make a disclosure or not, as it seems that, at least in Brazil, the state court that will eventually evaluate whether or not an arbitrator was conflicted would apply this standard.
The panelists then discussed that arbitrator forms of some institutions, especially in the U.S., are very detailed and include questions for instance with respect to the arbitrator candidate’s religion, schools of his or her kids etc., which in these cultures may indeed be relevant for the parties. Mr. Carmona added that nonetheless, there must be a certain “limit to the curiosity” of parties and noted that requests for clarifications of disclosures by parties have become very detailed.
With respect to the issue of requests for clarifications, the panelists and the audience also discussed situations in which these requests are made in bad faith, meaning that a party already knew or should have known of a circumstance that it requires clarification on. It was suggested to fine parties that unambiguously act with this kind of procedural bad faith.
Patrícia Kobayashi explained that Guideline 4 concerns the scope of disclosure. Arbitrators must make reasonable inquiries to identify conflicts, which corresponds to Standard 7(d) of the IBA Guidelines. The Guideline also addresses the:
- Extension of the conflict check to related entities/interested individuals,
- Preclusion and
- The arbitrator’s right to request clarifications from the parties.
Mr. Batista Martins added that the ICC International Court of Arbitration first started including related entities into the information to be considered by arbitrator candidates in their conflict check. He noted that it would be important to establish whether the entities and persons that are indicated as related have an actual and economic relation to the dispute.
Ms. Visconte explained that this Guideline establishes the parties’ duty to cooperate in the disclosure process by providing relevant information to the arbitrator under article 14.1 of the BAA. Selma Lemes emphasized how this duty connects to the right to challenge arbitrators under Article 15, stressing the importance of timely disclosure. Mr. Carmona advocated for a balanced approach requiring effort from both arbitrators and parties, suggesting penalties for non-compliance. Ms. Lemes differentiated between mere common interests of an arbitrator and a party or counsel (like lecturing together) and actual conflicts of interest, which may justify an objection.
- Until the acceptance or confirmation of the arbitrator, the parties have the burden of informing themselves about public and easily accessible facts, and may conduct their own research to ensure the proper exercise of the arbitrator’s duty of disclosure, provided that they do so through lawful means, during the course of the arbitration, and should raise any issues relating to the arbitrator’s independence or impartiality at the first opportunity they have to make a submission.
- Information that is public and easily accessible to the parties, such as, for example, information obtained from CNPq’s Lattes platform; CVs published on personal or law firm websites; disclosures of professional activities on social media; participation in institutional or academic activities; participation in conferences, seminars, publicized events; and texts published in print or electronic media, such as books, articles, periodicals, newspapers, magazines, etc., should be considered as known to the parties, thus not requiring specific disclosure by the arbitrator.
- To ensure that the duty of disclosure is properly exercised, the parties may ask clarification from the arbitrator, including regarding the law firm to which he or she belongs. The parties may also seek further clarification from the arbitrator, provided that the subsequent question is a consequence to the arbitrator’s answer to the previous question.
Ms. Kobayashi explained that this Guideline clearly establishes the parties’ onus to inform themselves about facts that are relevant for the arbitrator’s disclosure prior to his/her confirmation, giving examples of adequate enquiries, such as the research on online CV platforms (the Lattes platform is most commonly used in Brazil), the websites of law firms, etc. The Guideline also establishes that any issues regarding an arbitrator’s independence and impartiality shall be raised at the first opportunity, which is in line with article 20 of the BAA, and addresses the parties’ possibility to request clarifications from the arbitrator.
Mr. Carmona highlighted the usefulness of detailed CVs of the Brazilian platform Lattes, while warning against abusive clarification requests meant to delay proceedings, such as excessive inquiries about family members’ shareholdings. In his view, arbitral institutions should monitor this kind of abusive behavior. Mr. Martins and Ms. Lemes agreed that arbitral institutions should regulate the process of requesting clarifications. Ms. Lemes added that these processes sometimes take up to two years or even longer, which is not acceptable. In the following, the audience and the panelists discussed the so-called “duty to be curious” of the parties.
Ms. Visconte explained that Guideline 7 addresses the issue of estoppel with respect to allegations of conflicts of interest, reflecting the regulation in article 20 of the BAA. This Guideline works in conjunction with Guideline 6 to prevent opportunistic challenges, particularly at a late stage of the proceedings or at the moment of control of the award by state courts.
Mr. Carmona stressed the idea that the arbitration market “self-regulates” the issue of disclosure, determining which kinds of facts should be disclosed and at which point in the proceedings. In this regard, the decisions on challenges against arbitrators by arbitral institutions are of particular relevance. These decisions, while not binding to the controlling state court, may also guide the respective court’s reasoning.
As explained by Ms. Kobayashi, this Guideline complements the foregoing ones, and extends the idea of article 20 of the BAA, pursuant to which issues that could create conflicts of interest should be raised at the first opportunity. The parties accordingly should make the relevant enquiries at the first opportunity.
[and]
Ms. Visconte suggested to the panelists to comment on Guidelines 9 and 10 at the same time as they are related. Guideline 9 recommends the consideration of internationally accepted guidelines and specifically the IBA Guidelines with respect to the topic of disclosure, and Guideline 10 clarifies that – just like other sets of guidelines or so-called soft-laws – the CBAr Guidelines and other internationally recognized guidelines may be adopted by mutual agreement of the parties, thereby becoming binding. The guidelines can also be modified and adjusted to the specific arbitration. Both Guideline 9 and 10 stress the possibility to apply internationally accepted guidelines also in domestic arbitrations.
Mr. Batista Martins confirmed that it is a good practice to consider various different sets of guidelines. Mr. Carmona stressed the importance of international guidelines also for the Brazilian domestic arbitration market. Especially the consideration of the IBA Guidelines makes sense in Brazil, which – contrary to most European countries – has a monist arbitration law (See Article 34, sole paragraph of the BAA). He also welcomed the Guidelines’ incentive for the parties to agree on the guidelines as binding and adapt them as needed.
Ms. Kobayashi added that CAM-CCBC provides model Terms of Reference, suggesting the adoption of said guidelines by mutual agreement of the participants, however, this is still very rarely done. Mr. Carmona observed that since the models are normally first sent to the arbitrators, they already can include the relevance of guidelines, potentially in an adapted form. Ms. Kobayashi confirmed that this is a good opportunity to make the inclusion of guidelines such as the CBAr Guidelines more common.
Ms. Kobayashi commented that this Guideline stresses the non-binding nature of the CBAr Guidelines, in a way that they are not decisive for different practices that were adopted before or after their publication. Mr. Carmona stated that the market had changed also with respect to which facts should be disclosed.
Conclusion
At the end of the discussion, the panelists stressed Brazil’s distinctive position in the international arbitration market. Ms. Visconte observed that the market’s significant growth over the past years has reduced conflict risks, as the large number of cases and arbitrators create a more diverse ecosystem than in smaller markets. Ms. Lemes added that despite arbitration not being mandatory in Brazil, unlike in countries such as Peru, it has achieved remarkable prominence, which is also due to consistently favorable state court decisions.
The audience and the panelists discussed briefly the disclosure duties of the administrative secretaries. Mr. Carmona confirmed that these duties correspond to the arbitrator’s disclosure duties, as it is the case for experts.
Ms. Kobayashi then addressed the CAM-CCBC statistics for the year 2023: among 438 on-going cases, only 11 arbitrator challenges were filed, with just 2 being upheld. This is a strong indication that the current disclosure process seems to be working well and that the Brazilian arbitration system is “healthy”.
The CBAr event provided unique insights into the considerations behind each of the CBAr Guidelines. The discussion among the BAA drafters, who also rank among the most reputable arbitrators of the country, with the input of the representatives of CBAr and CAM-CCBC, showed the great relevance of the CBAr Guidelines in the reality of the arbitration market. The panelists addressed certain controversies regarding the topic of disclosure, for instance with respect to the relevance of a lack of disclosure and of the subjective versus the objective standard, which will have to be kept in mind by practitioners. Based on the panelists’ comments and issues discussed at the event, one can expect that the CBAr Guidelines will be of great value both in Brazilian domestic and international arbitrations.
ABOUT THE AUTHOR
Anna-Katharina Scheffer da Silveira is lawyer at Adriana Braghetta Advogados in São Paulo, Brazil. She acts in international and domestic arbitrations, with a focus on corporate, commercial, energy and construction disputes. Anna-Katharina also teaches in the Global Law Program of the law faculty FGV Direito São Paulo. She is a former Special Counsel of the law firms L.O. Baptista and MAMG in São Paulo, as well as a former Associate of Clifford Chance in Paris, France, and Noerr in Düsseldorf, Germany. Anna-Katharina also acted several years as a Deputy Counsel of the International Court of Arbitration of the ICC in Paris. She is admitted to the Düsseldorf Bar Association.
*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.
