Associations criticize bill that limits role of arbitrators, obliges disclosure of decisions

07/14/2022

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Pedro Batista Martins — Foto: Leo Pinheiro/Valor

A bill in progress in the Chamber of Deputies intends to change the Arbitration Law to limit the role of arbitrators (who act as judges in cases) and determine that procedures and rulings must be disclosed. Trade groups and representatives of law firms, however, see this new structure as a dismantling of arbitration in the country and are trying to block the bill.

Arbitration is an alternative means of conflict resolution to the justice system and has, among its main characteristics, the confidentiality of the proceedings. The bill, if approved, therefore, changes its entire structure.

Experts say it would create a “Frankenstein”, something that does not exist anywhere else in the world and would certainly cease to be used.

“If approved, it will be a serious setback. There is no other paradigm in any other jurisdiction with the kind of interference this bill seeks to implement. We will see the migration of arbitration outwards,” says lawyer Pedro Batista Martins, partner at Batista Martins law firm and one of the contributors to the Arbitration Law.

The law that is currently in force and that Mr. Batista Martins helped to draft – 9.307 – has existed for 25 years and has its roots in the model law of UNCITRAL, a UN organ that studies rules for the development of mercantile law. “It is approved by the international community,” the lawyer stresses.

Adherence to the mechanism is voluntary between the parties and is done by contract between them. Billions of reais are involved in these disputes. Arbitration is practiced in private chambers and is widely used by companies to discuss contractual issues, especially in the corporate area.

In 2019, for example, there were 967 ongoing processes in the eight main chambers in operation in Brazil, and, added together, they involved R$60.91 billion. This data appears in the latest edition of the research “Arbitration in Numbers and Values”, one of the main in the area, authored by lawyer and professor Selma Lemes.

Through this system, arbitrators – usually three – are chosen by the parties and decide the dispute. These arbitrators are not necessarily lawyers. The parties may nominate professionals who specialize in the topic under discussion. An economist or an engineer, for example. And the decision given by them is final.

The justice system cannot interfere in the merit, to say whether the party is right or wrong in its claim or defense. It is only responsible for what is called “legality control”, to verify, when questioned by the parties, whether the procedure was carried out as established by law.

The bill that changes the rules (PL n 3293) was filed by deputy Margarete Coelho (Progressive Party, PP, of Piauí) in October last year and, since then, has generated tension in the arbitration market. This month, however, tempers became much more heated.

Last Wednesday, July 6, seven deputies presented an urgency request for the bill to be considered. A new race began among experts to try to convince party leaders not to take the issue forward.

The urgency request is still pending deliberation in the plenary session. The bill is currently in the Constitution and Justice and Citizenship Commission (CCJC) of the Chamber of Deputies and its rapporteur is deputy Bia Kicis (PSL-DF).

The Institute of Brazilian Lawyers (IAB) issued a technical note on the subject on July 8 and, in the text, referred to the bill as the “Anti-Arbitration Bill”.

“In the best scenario, it will result in the reduction of cases, the migration of Brazilian arbitrations to other countries, and the elimination of the country as a possible seat for international arbitrations, generating, in the end, losses to the Brazilian economy,” says a note signed by attorney Joaquim de Paiva Muniz, member of the association’s permanent commission of arbitration and mediation.

The note also says that there is no urgency requirement for the project to be voted on in this pre-electoral moment and that it needs to be debated by representatives of the political and legal classes, which did not happen.

At least 30 other organizations had already manifested previously against the changes foreseen in the bill. Among them, are sectionals of the Brazilian Bar Association (OAB), arbitration chambers from all over the country, centers, and institutes linked to the legal profession and industry federations.

The bill deals with two sensitive changes: the disclosure of rulings and the performance of arbitrators. It limits, for example, the number of cases in which a single professional may act – a maximum of ten –, prevents the same formation of a court from being repeated in another, and determines that before accepting the invitation to act as a judge, the arbitrator will have to disclose the arbitrations in which he or she acts.

In the justification part of the bill, the author, Ms. Coelho, says that the idea “is to increase legal certainty and cohesion of decisions”. Contacted by Valor, she was not immediately available for comments.

The vision of specialists in the sector, however, is completely different. Besides misaligning the country’s rules with those practiced in the rest of the world, they say, there would be unconstitutionality. By limiting the role of arbitrators, for example, free enterprise would be restricted. It would be like telling a doctor how many patients he can see.

Nobody disagrees, however, that the discussions around the duty of disclosure of arbitrators are more latent. They gained momentum after an injunction decision by the Court of Justice of São Paulo (TJSP) suspending the sentence given in the arbitration in which J&F and Paper Excellence dispute shareholding control of Eldorado Brasil – in March 2021.

One of the reasons was the participation of one of the arbitrators. J&F claims that the judge shared an office with lawyers who work for the opposing party and did not disclose this information in the case.

Lawyers who work with arbitration say, however, that requests to challenge an arbitrator are a minority. At the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada, one of the leading ones in the country, for example, the decisions regarding requests to challenge arbitrators amount to less than 1% of all cases in progress.

In 2021, there were 427 proceedings in progress and only three decisions were rendered on challenges to arbitrators. In all cases, the arbitrators continued.

According to lawyers heard by Valor, Brazil adopts the same criteria as other countries that also practice arbitration and follows international doctrine and jurisprudence. In cases where there is a challenge request, it is necessary to verify whether the fact that was not disclosed may influence the judgment.

*By Joice Bacelo — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/