On June 8, 2015, the Brazilian President issued Decree No 8,465 of 2015 (the “Decree“), which lays down the procedural criteria according to which government and private parties may submit to arbitration disputes arising in the framework of the port and dock sector.
Many statutes in Brazil allow arbitration in regulated industries, such as the Hydrocarbons law (Law 9,748 of 1997), the Public-Private Partnership Act (Law 11,079 of 2004), the Act on the Free Market of Electricity (Law 10,848 of 2004), or the Act on the Road Transport of Cargo (Law 11,442 of 2007), to name a few.
Reference to arbitration as a means of resolving disputes was also present in Art. 62 of the Law regulating the administration of port and dock areas by the Federal Union (Law 12,815 of 2013), which provided in its first paragraph that “the resolution of disputes relating to the debts mentioned in the heading of this article may be referred to arbitration in accordance with Law 9,307 of 1996 [the Brazilian Arbitration Act].”
None of the other statutes were subject to Decree regulating the terms and conditions for arbitration. As such, the enactment of the Decree was heralded a an auspicious sign not only to the progress of arbitration on issues related to port and dock activities, but also more generally, regarding arbitration with the public administration in general.
Many points in the Decree were welcomed as positive developments.
Art. 1 of the decree provides the limits of objective arbitrability under the Decree, namely that “the arbitration proceeding foreseen in this Decree may involve waivable patrimonial rights”, adopting the same definition coined for the Brazilian Arbitration Act (Law 9,307 of 1996), and recites three examples of disputes that may arise in the port and dock areas.
In addition, Art. 4 of the Decree provides that the proceedings relating to port and dock areas should preferably be referred to institutional—rather than ad hoc—arbitration, which is certainly a wise choice as the governmental entities are not so familiar with arbitration.
Another particularly useful point is that Art. 6 of the Decree does away with the requirement of a public bid in what regards the choice of an arbitrator or of an arbitration institution.
Art. 8 of the Decree provides the main procedural requirements for the proceeding, specifying that the arbitrators will apply Brazilian law to the merits of the dispute and that the award should be rendered within 24 months, save for party agreement to extend such time period.
Still, some other provisions deserve criticism.
First, even if disputes regarding economic and financial imbalances of the contractual obligations are clearly arbitrable per Art. 2nd of the Decree, Art. 6 delegates to the public administration the choice of submitting them arbitration, once this type of conflict arises. This seems to be an opportunistic strategy from the public administration to avoid arbitration in weaker cases.
Art. 3 provides that “all information regarding the arbitration proceeding will be made public.” This language appears to require broad publicity of the acts and submission filed in the arbitral proceeding. Although the Brazilian Constitution requires publicity of acts involving the public administration, we believe that this constitutional principle should not be construed so broadly and only the main acts, such as decisions, should be disclosed to the public, to avoid that sensitive information be made available to third parties.
It is understandable, due to the state financial constrains, the rule in the sense that the private party shall advance all court and arbitrators fees, including the one that would be due by the public entity, without prejudice to the possibility of the final arbitral award sentencing the public entity to reimburse all such fees. Nonetheless, in our view the Decree went too far when it orders the private party to even bear the cost of experts requested by the public entities.
Finally, the sole paragraph of Art. 5 provides that arbitrators who are foreign nationals must hold the appropriate visa in order to act as arbitrators in Brazil. In this provision, the Decree appears to overreach in its purpose and even regulates immigration issues.
In sum, although some requirements included in the Decree can be perceived as reflecting idiosyncrasies or parochial interests of the Brazilian public administration, its enactment can be seen as a positive development. The mere fact that this market sector now disposes of a detailed regulation of the arbitration proceedings should suffice to encourage public officials to make broader use of arbitration, increasing certainty and facilitating the resolution of disputes in a sensitive and regulated market.