From a relatively marginal place in Brazilian law, arbitration has become one of the fastest growing areas of legal practice in the last two decades. This article explores the evolution of arbitration in Brazilian law and society, and highlights the unique role of Wald Associados Advogados, widely viewed as Brazil’s best litigation boutique firm, in developing arbitration practice.
The first Brazilian Arbitration Act (Law n. 9.307) was enacted in 1996, when Brazil was facing a practical and resource overload in its judicial system, and experienced growing national and international trade common to many Latin American countries.
The Act was inspired by the UNCITRAL Model Law on International Commercial Arbitration but contained ‘”cultural and technical” adjustments’ (Carlos Nehring, Recent Developments in Arbitration Law and Practice in Brazil). It enabled parties to business transactions, domestic or foreign, to agree to arbitration as a means to solve disputes. While arbitration has in most cases proved more costly than resorting to courts, advantages such as the possibility of choosing arbitrators that are better qualified to resolve complex cases make it worth it. They tend to be speedier than lawsuits, which in turn may deliver some economic benefits. There is a wide variety of cases that can be brought to arbitration. These include mergers and acquisitions, infrastructural projects and general corporate matters. Some state contracts may also include arbitration agreements (IBA Arbitration Committee, 2013, Arbitration Guide – Brazil).
The Law was not universally popular. Some Brazilian scholars claimed that the law was unconstitutional and sought judicial remedy to try and prevent the Act from producing precedents. However, in 2001, the Brazilian Federal Supreme Court ruled that the law was constitutional, settling any outstanding legal questions and assuring the growth of arbitration in Brazil.
The 2015 amendments
In 2015, amendments to the Brazilian Arbitration Act were passed. Law 13,129/2015 put forward three measures widely regarded as improvements:
- It clarifies the right of Brazil’s public administration to have recourse to arbitration in the case of transferable public property rights though judgment by equity remains prohibited. In this sense, Brazilian legislators wanted to clarify for the public administration which situations were preferable to be solved by arbitration, because as Luis O’Naghten (2015) points out in his chapter Latin America Overview: A Long Road Travelled, A Long Road to the Journey’s End, ‘several laws expressly authorize arbitration’. These are the Public Services Permission and Concession Law 1995; the Telecommunication Law 1997; Petroleum Law 1997; the Water and Land Transport Law 2001; and the Brazilian Private-Public Partnership Law 2004.
- The arbitral letter, which is a means to enforce the determinations of the arbitrators;
- The adoption of provisional remedies or reliefs, which may be established after proceedings have begun;
- The appointment of alternative arbitrators not already on the current list of arbitrators;
- A provision, already part of arbitration practice, to issue partial awards or extend the deadline for the issue of the arbitral award;
- Changes to the statute of limitations;
- The introduction of a minimum quorum for articles of incorporation so that it binds even dissenting minority shareholders.
Many of these amendments consolidate existing practice, though some, for example, the arbitral letter, are innovations. Overall, arbitration has been understood to be a successful addition to the Brazilian legal system, preventing and/or being an alternative to recourse to litigation.
Wald Associados Advogados
Wald Associados Advogados, winner of the 2016 Business Worldwide Legal Award, and viewed as one of the best law firms in Brazil by Chambers Global, Chambers Latin America, The Legal 500 and Análise Advocacia, has emerged as one of the key players in arbitration practice in Brazil following the well-known expertise of its founding partner Prof. Dr. Arnoldo Wald. Founded in 1954, and with offices in São Paulo, Rio de Janeiro, and Brasília, Wald prides itself on approaching litigation with ‘legal creativity.’ Creativity, to Wald, means that the firm strives ‘to reach customized solutions to the most complex and challenging cases, observing not only strictly legal aspects, but also adopting a multidisciplinary approach to problems, which encompasses analyzing the business structure of the transactions involved and the case at hand, as well as the interests at stake.’
Wald’s approach to litigation – new frontiers
Creativity and innovative thinking have been demonstrated in the firm’s approach to arbitration. In a 2014 article by Prof. Arnoldo Wald, it is argued that arbitration is being used as a way of reaching settlements (Arbitration as catalyst for settlement, RAM 42). The effort to settle as one of the core duties of arbitration is embedded in the Brazilian Arbitration Act through Article 21, paragraph 4, while the obligation of judges to facilitate conciliation are set out in article 125 of the Brazilian Code of Civil Procedure Law. Prof. Wald argues that if arbitrators are fully aware of the complexities of cases and all relevant negotiation details, they are better placed to respond sensitively to the possibilities of reaching a settlement before a formal judgment. The role of arbitrators to facilitate settlement, thus raising the possibility of resolving a conflict soon after it has started, will have positive effects on the cost of disputes, both in terms of time, money spent on legal fees, and lost business. Thus, ‘arbitrators might (and even should) function as mediators when the specific circumstances of the case allow them to’, a conclusion reached by Alexandre Wald and Riccardo Torre in 2015’s Financier Worldwide most recent publication (Arbitration in Brazil: From Childhood to Maturity).
However, to state that one of the goals of arbitration should, where possible, be early settlement could be seen as radical a while ago because of the relatively new addition of arbitration to Brazil’s legal system. In an article entitled Can it be sinful for an arbitrator actively to promote settlement (1999), Christopher Koch and Erik Schäfer point out in their global review of arbitration, that attitudes towards settlement very much depend on the legal tradition of the arbitrator as well as the particular legal jurisdiction or legal system involved. Latin American countries, as O’Naghten argues, were historically resistant to establishing arbitration, evidenced by its adherence to the Calvo Doctrine (a principle by which all firms had to resolve disputes through local courts), a principle since abandoned as individual countries have signed international arbitration treaties. Brazil was a late adopter of arbitration compared to other Latin American countries. However, once arbitration has been accepted, the next logical step is to develop the necessary expertise and political sensitivity to seek mediated settlements where possible. Brazil is now the third-largest user of the International Court of Arbitration (ICC).
Brazil’s future in arbitration
Unlike other nations across Latin America, which still face some challenges for the growth of arbitration – like the absence of limitation clauses concerning judicial interference and the growth of speculation as to the constitutionality of arbitration, including recent debates about the role of nation states in governing their jurisdictions, and the extent of the power of international business in challenging national states (O’Naghten 2015), Brazil seems a more mature and stabilized jurisdiction in the field of arbitration. Thus, considering that it looks set to stay and grow, the creative and socially responsible approach of Wald Associados Advogados is a model best able to deliver due process.