In an interview to Revista Consultor Jurídico (ConJur), our partner Marilda Rosado de Sá Ribeiro, comments on the consolidation of Arbitration in Brazil. Read the full story at: https://cutt.ly/vRfK0Tw
The Arbitration Act (Law 9307/1996) is now 25 years old. For experts, this law popularized and professionalized arbitration procedures, which became the standard means of dispute resolution for business issues. But it has been facing obstacles, doubts and actions for annulments in court.
Experts say the Arbitration Act does not need major changes
Six years ago, the Arbitration Act was amended by Law 13,129/2015. Its goal was to render the act compatible with the text and principles contained in the Code of Civil Procedure of 2015 and with the precedents of higher courts.
University of Rio de Janeiro’ Professor of Civil Law Gustavo Tepedino, partner of Gustavo Tepedino Advogados, states that these 25 years of arbitration regulation in Brazil is “very positive”. According to him, the country went from widespread distrust to the “dejudicialization” of claims (especially regarding the waiver of accessing the Courts and the absence of a two-tiered system of jurisdiction) to a now common adoption of arbitration. Tepedino stresses that the Courts became unencumbered with corporate matters.
The biggest problem, according to the Professor, was “the mistaken belief that arbitration would always be better than judicial proceedings.” “That is simply not true. The Brazilian Courts are very valuable and arbitration is particularly advisable for large disputes, not for small or medium ones. In addition, choosing arbitrators is always a delicate matter, since it depends not only on their specialization, but also on the dedication and availability of the arbitrator. There is always a human component that, when it comes to the Courts, is not as impactful because of the several instances that are going to look into the dispute.”
The Courts are heavier. The ruling authority is not always an expert. But the ruling is subject to almost 80 types of appeals. The judge answers to the National Council of Justice and to the administration. In addition to the obligations, the judge’s job is guaranteed for a lifetime, cannot be unwillingly transferred nor can have wages lowered. The process is public. In the arbitration, there are no appeals and the acts are confidential. The arbitrator, in addition to working for firms with hundreds of clients, may be an attorney or referee in several cases simultaneously. These are the reasons that have led to arbitration to face several actions for annulment — and companies that no longer accept arbitration clauses in contracts.
José Nantala Bádue Freire, arbitration expert at Peixoto & Cury Advogados, emphasizes the importance of the declaration of constitutionality of the Arbitration Act by the Federal Supreme Court in 2001. Another important milestone, according to the lawyer, was the ratification, in 2002, of the New York Convention on the Execution of Foreign Arbitration Awards, which made Brazilian law more adequate to the institute’s international standards.
Freire also highlights the importance of the recognition by the Federal Audit Court and the Superior Court of Justice that the public administration could sign valid arbitration commitments — an understanding that entered into the 2015 reform of the Arbitration Act.
Marilda Rosado de Sá Ribeiro, partner in the oil, gas and energy sectors of BRZ Advogados, estimates that maturation process was in place, proven by the exponential increase in the number of procedures and by the professionalization of the management bodies. “In addition to a firm action to support arbitration, the arbitration chambers have been playing an important role in the institutional and educational front. They have been promoting debates and supported educational initiatives, as many universities have joined the competitions.”
Vamilson Costa, partner in the arbitration and litigation area of Costa Tavares Paes Advogados, points out the role played by the Courts in the consolidation of Arbitration. According to the lawyer, the Courts ensured the effectiveness of arbitration, in line with international practices.
The Arbitration Act should be reformed to regulate the use of new technologies in procedures, says Vamilson Costa. “This would bring enormous benefits in applying arbitration to concrete cases, increasing the efficiency and speed of arbitration procedures and, consequently, reducing costs for the parties — one of the main criticisms arbitration faces.”
The lawyer also emphasizes the need to harmonize the rule with the General Data Protection Rules (Law 13709/2018). After all, in arbitration, there is the processing of sensitive data of the parties, and the existing rules are still merely regulatory.
The law could increase the transparency of arbitrations, says Marilda Rosado de Sá Ribeiro. She also advocates for a debate around greater inclusion and diversity of gender and race in the list of arbitrators.
“This process of perfecting it must be ongoing, I do not believe that we need urgent legislative reform”, says Gustavo Tepedino. “The most important change must come from the culture of the Brazilian legal community, which is used to filing endless and delaying appeals and lengthy motions, making an evidentiary stage that is not always focused on the main points to be examined by the arbitrators.”
However, experts criticize Bill 3293/2021, which amends the Arbitration Act “with the goal of providing objective limits to the arbitrator’s performance and optimizing the duty of disclosure to the parties”. Thus, the bill limits the number of arbitrations per arbitrator and prohibits the existence of an “absolute or partial” identity of the members of two arbitration courts at the same time.
In the opinion of lawyers, this is an undue interference in the activity of the arbitrators. And the legal parameters will never be able to cover every possibility of possible conflicts or impediments.
Confidentiality x precedents
Arbitration procedures are usually confidential, in order to protect trade secrets. However, this ends up making it difficult to build caselaw, as awards are not made public.
One way to reconcile the confidentiality of arbitrations with the construction of caselaw in a particular field would be to disclose a summary of the decision and the arbitration arguments, without identifying the parties, but with their authorization, experts point out, emphasizing that there are already arbitration chambers doing just that. However, they state, the arbitration community must come together to set parameters for these publications.
Bill 3293/2021 compels arbitration chambers to publish, on their websites, the entirety of the judgments. But it also provides that the parties may justifiably request that any excerpts or information from the award remain confidential.
With the popularization of arbitration, the number of annulments of arbitration awards by the Courts also increased. This reflects that this method of dispute resolution has matured and stimulates parties to choose it to settle their conflicts, specialists say.
“The Courts have been denying unfounded actions for annulment and easily granting, without rendering subjective decisions, relief in cases an objective violation of the right to be heard, to a defense and due process is not complied with”, affirms Gustavo Tepedino.
The Brazilian Courts are very receptive to arbitration and only annul awards in serious cases, says José Nantala Bádue Freire. And if the annulments are mistaken, it is possible to appeal to higher instances, he points out.
The action for the annulment of an arbitration award does not serve as an appeal of the losing party on what was awarded by the arbitration. The instrument serves only to seek the recognition of a nullity, so that the decision on the merit is returned to the arbitration tribunal, explains Marilda Rosado de Sá Ribeiro.
“I look favorably on the restraints imposed by the Courts to the attempts to transform the action for annulment into some sort of appeal of the arbitration award. It even serves to discourage the inappropriate filing of said action. Actions for annulment aren’t particularly common, I would say. I think they come in the wake of the exponential growth in the number of arbitrations. Not in the same proportion, of course, but an increase in cases was, in a way, expected. I also don’t see the action for annulment as an obstacle to the evolution of arbitration. It is something to be wary of and talked about, but it does not have the power to prevent the evolution of arbitration.”
Vamilson Costa recalls that, traditionally, there are no appeals against arbitration awards. The lawyer points out that some solutions for this are beginning to emerge, allowing appeals such as, for example, with the formation of a new arbitration court with appeal jurisdiction, all regulated in the initial arbitration term itself.
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