Brazil approves reforms to Arbitration Act
Tuesday, 2 June 2015 by Sebastian Perry
Brazil has enacted revisions to its 1996 Arbitration Act, including changes dealing with state entities, shareholder disputes and interim relief – but proposals to expand the law’s ambit to consumer and management disputes have been vetoed.
Law No. 13,129 was enacted on 26 May after being approved by the Brazilian Congress and President Dilma Rousseff, and will take effect 60 days later. The final text of the law is available here.
It marks the first change to the country’s arbitration regime in 19 years. The bill was drafted by a 22-strong special committee of judges and practitioners established by the Brazilian Senate in 2012 to update the country’s arbitration and mediation laws.
Judge Luis Felipe Salomão of the Superior Court of Justice, the court of primary resort on arbitration issues in Brazil, chaired the special committee, which included one of the original drafters of the 1996 Act, Carlos Alberto Carmona. Other members of the committee included Adriana Braghetta of L O Baptista, Schmidt, Valois, Miranda, Ferreira, Agel; André Chateaubriand Martins of Sergio Bermudes Advogados; Francisco Antunes Maciel Müssnich of BMA – Barbosa, Müssnich, Aragão; José Roberto Neves of Ferro Castro Neves Daltro & Gomide Advogados; Walton Alencar Rodrigues, justice of the Federal Court of Accounts (TCU); and Tatiana Lacerda Prazeres, senior advisor to the director-general of the World Trade Organization.
Groups including the Brazilian Arbitration Committee (CBAr) and the National Council for Mediation and Arbitration Institutions (CONIMA) also played a role in the discussions of the bill in Congress, where attempts by some parliamentarians to introduce further changes to the draft were defeated.
Committee member Braghetta says the new arbitration law maintains all the advances made in the 1996 Act. “[It] also fills in some of the gaps, consolidating Brazil as a very friendly environment for arbitration”.
Among the biggest changes, the new law allows Brazilian state entities to participate in arbitrations, subject to laws governing transparency in public affairs. While the Brazilian courts confirmed a decade ago that state entities can be bound by arbitration agreements, Braghetta says the amendment should settle any lingering debate as to whether the 1996 Act permits it.
She adds that other laws already allow state-owned entities to arbitrate disputes in particular industry sectors but this is the first time there has been a blanket provision to that effect. However, the 1996 Act’s stipulation that only disputes relating to “freely transferable patrimonial rights” are arbitrable continues to apply.
The provisions governing shareholder disputes have also been amended to clarify that an arbitration clause in the by-laws of a corporation is binding upon all shareholders, including the ones that voted against the clause’s inclusion. But shareholders who oppose the clause will have the right to liquidate their shares, subject to certain exceptions.
While the 1996 Act already allows arbitral tribunals to request interim relief from the courts, the new law expressly authorises parties to go to the courts for provisional measures if the arbitral tribunal has not yet been constituted. After an arbitral tribunal is formed, it will be up to the arbitrators to maintain, modify or revoke those measures. The measures will be revoked if the panel is not formed within 30 days of the effective date of the measures.
A more controversial change allows parties to agree to dispense with rules that restrict their choice of arbitrators to names on the institution’s roster. It is understood that some of the country’s main arbitral institutions were opposed to this reform and alleged that it would lead to a drop in the quality of appointments and amounted to an unconstitutional interference with their freedom to operate as private entities.
The new law also explicitly provides that all foreign arbitral awards must be confirmed by the Superior Court of Justice (STJ) – and only that court – to have effect in Brazil.
However, the Office of the President vetoed provisions in the bill that would have expressly allowed arbitration of disputes relating to consumer adhesion contracts (where the consumer has no ability to negotiate terms) and senior management contracts in certain circumstances.
Maurício Pepe De Lion, partner in the labour and employment practice at Santos Neto Advogados, says the veto is “a setback” for labour lawyers who defend companies in Brazil.
He says the Federal Constitution only allows arbitration of collective disputes between companies and labour or employment unions. The vetoed provisions would have represented “a great advance”, he argues, by allowing disputes between companies and their administrative staff and directors to be arbitrated.
However, Brazilian vice president Michel Temer, who vetoed the proposal, said the provisions would create an undesirable distinction between categories of employees. Although the veto can in theory be overturned by Congress, practitioners believe this is unlikely.
Meanwhile, a draft mediation law issued by the special committee is expected to be voted on soon by the Senate. It deals with mediation in the court system, and provides for mandatory attendance by the parties at the first mediation session, among other things.
LATIN LAWYER http://latinlawyer.com/news/article/48252/brazil-approves-reforms-arbitration-act/
GLOBAL ARBITRATION REVIEW http://globalarbitrationreview.com/news/article/33841/brazil-approves-reforms-arbitration-act/