A. LEGISLATION AND RULES
A.1 Legislation
International arbitration in Brazil continues to be governed by the Brazilian Arbitration Act (Law No. 9.307/1996, as amended by Law No. 13.129/2015), to which there have been no legislative amendments in the past year.
A.2 Institutions, rules and infrastructure
The Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (CAM-CCBC), which is the largest Brazilian arbitration institution, revised its arbitration rules for the first time in the last 10 years. The new rules entered into force on 1 November 2022 (“2022 Rules”). Below is a summary of the key changes in contrast to the previous rules (“2012 Rules”).
A.2.1 Possibility of using UNCITRAL Rules — article 1.2 of the 2022 Rules
The CAM-CCBC may also administer proceedings governed by the UNCITRAL Rules.
A.2.2 Written communications — article 3 of the 2022 Rules
Communications shall be preferably sent electronically. Written communications (submissions, notices, subpoenas) shall be sent electronically with proof of delivery or receipt, without the need for hard copies, unless the parties agreed otherwise.
Communications shall be deemed received when delivered to the electronic or physical address informed by the party.
If the party has not provided its address, communications shall be deemed to be received when delivered directly to the addressee or their representative at the registered office, primary residence, or postal address of the party or their representative; or at the addresses (electronic or hard copy form) informed in the contract or in the arbitration agreement for receiving communications between the parties.
A notification shall be deemed received if reasonable steps have been taken to deliver the communication to a party’s addresses and there is a notification with proof of attempted delivery.
A.2.3 Arbitral tribunal may deliberate remotely — article 4 of the 2022 Rules
Acts of the arbitral proceedings may take place at a different location from that of the seat, or remotely by videoconference or other means of communication, at the discretion of the arbitral tribunal.
A.2.4 Impartiality and independence of arbitrators — article 9 of the 2022 Rules
The parties must disclose any individuals or legal entities that may be relevant to the arbitration as well as the existence of third-party funding in order to allow the arbitrators to verify and disclose any conflict of interest.
A.2.5 Challenge of arbitrators — article 14 of the 2022 Rules
A party may challenge arbitrators for lack of independence, impartiality, or for justifiable cause within 10 days after becoming aware of the relevant fact. A special committee composed of three members of the list of arbitrators appointed by the CAM-CCBC Presidency will decide the challenge. The 2022 Rules grant the special committee powers to request the parties and the challenged arbitrator to provide additional clarifications, the production of new documents, and any other measures deemed useful, necessary, and proper, provided that the requests do not delay the committee’s decision. The committee’s decision is final, with no possibility of appeal.
A.2.6 Request for joinder of additional parties — article 18 of the 2022 Rules
A party that wants to include an additional party to the arbitration shall submit a request for arbitration against the additional party to the secretariat at the earliest opportunity. Likewise, if a party voluntarily wishes to be included in the proceedings, it may submit a request to join the arbitration.
If the arbitral tribunal has not yet been constituted, the CAM-CCBC Presidency shall decide on the joinder of the additional party when there is consent from all parties, or the additional party has a connection with the subject matter submitted to the arbitration and may, on a prima facie analysis, be deemed to be bound by the arbitration agreement.
If the arbitral tribunal is already constituted, it shall decide on the joinder of the additional party after consultation with the parties.
A.2.7 Consolidation of proceedings — article 19 of the 2022 Rules
The 2022 Rules provide more clarity as to the consolidation of proceedings.
The CAM-CCBC Presidency shall decide a party’s request for consolidation. The request shall be made before the constitution of the arbitral tribunal of the second proceeding. The Presidency will consider the status of the first proceeding and whether any one of the following requirements has been met:
- The parties have agreed to the consolidation.
- All of the claims in the arbitrations are made based on the same arbitration agreement(s).
- The arbitration claims are not made based on the same arbitration agreements(s), but the arbitrations involve the same parties, the disputes are related to the same legal relationship, and the CAM-CCBC Presidency understands that the arbitration agreements are compatible.
When deciding on the consolidation, the CAM-CCBC Presidency may consult the arbitrators already invested in the position.
A.2.8 Disputes involving multiple contracts — article 20 of the 2022 Rules
The parties may bring claims arising from or related to more than one contract in a single arbitral proceeding. Before the constitution of the arbitral tribunal, the CAM-CCBC Presidency shall decide any objection to a continuation in a single proceeding of claims arising from or related to more than one contract. Once the arbitral tribunal is constituted, it shall analyze the decision that had authorized the processing of the claims in a single arbitration.
Claims arising from or related to more than one contract is possible when the arbitration agreements are compatible; the claims originate from the same transaction of series of transactions; and there is no significant impact on the efficiency and speed of the proceeding.
A.2.9 Emergency arbitrator — article 21 of the 2022 Rules
Unless the parties have agreed otherwise (the so-called “opt-out system”), the party that needs provisional measures may file for the appointment of an emergency arbitrator before the constitution of the arbitral tribunal. The emergency arbitrator shall comply with the same duties of independence and impartiality from the arbitral tribunal.
The emergency arbitrator proceeding is regulated by Annex I of the 2022 Rules and its institution does not imply the waiver of any other provisional measures before the competent judicial authority.
A.2.10 Amendment or alteration of claims — article 23 of the 2022 Rules
In the same sense as provided in the 2012 Rules, the parties may alter, modify, or amend their claims until the date of execution of the Terms of Reference. The 2022 Rules innovate by expressly providing that the alteration, modification, or amendment of the claim, as well as the inclusion of new claims after the Terms of Reference are executed, must be authorized by the arbitral tribunal. The arbitral tribunal shall consider the nature of such new claims, the current status of the arbitration, and any other relevant circumstances.
A.2.11 Conduct of the proceedings — article 25 of the 2022 Rules
The arbitral tribunal may call physical or remote hearings to consult with the parties on procedural measures, including to suggest the resolution of the dispute by another alternative dispute resolution method. It may also modify deadlines for submissions and production of evidence.
A.2.12 The time limit for rendering the award — article 29 of the 2022 Rules
Under the 2012 Rules, an arbitral tribunal should issue an award within 60 days, which could be extended for up to 30 days at the presiding arbitrator’s discretion. Now the time limit for rendering the award may be extended for up to 60 days.
A.2.13 Arbitral award — article 30 of the 2022 Rules
Following the changes brought by the COVID-19 pandemic, the 2022 Rules provide that the arbitral award may be signed electronically and/or have separate signature sheets subsequently combined into a single document if the parties have not agreed otherwise.
A.2.14 Expedited proceedings — articles 36 and 37 of the 2022 Rules
Disputes shall be solved in an expedited manner if they involve amounts that do not exceed the amount of BRL 3 million (circa USD 580,000 based on the November 2022 exchange rate). The expedited procedure provisions are not applicable if the parties agreed to opt out of it. Before the constitution of the arbitral tribunal, the CAM-CCBC Presidency, at their discretion or at the request of a party, may dismiss the application of the expedited procedure. Such a decision is subject to ratification from the arbitral tribunal.
A.2.15 Confidentiality — article 39 of the 2022 Rules
The 2012 Rules provided that the CAM-CCBC could disclose excerpts of arbitral awards for research purposes, without identifying the parties. The 2022 Rules confer the possibility of objecting to such a publication on the parties.
A.2.16 Processing personal data — article 41 of the 2022 Rules
The 2022 Rules expressly regulate the processing of personal data, according to the Brazilian Data Protection Law (LGPD). The arbitral tribunal and the parties shall ensure compliance with the data protection legislation throughout the proceedings. In case of a suspected or confirmed personal data breach related to the arbitral proceeding, the CAM-CCBC and other participants shall be immediately informed so that the competent authority may be duly notified.
Once the arbitration ends, the personal data processed during the arbitration shall be stored for as long as necessary for the regular exercise of rights, including from the CAM-CCBC, and for compliance with a legal obligation, and subsequently shall be subject to anonymization or disposal.
A.2.17 Responsibility of arbitrators – article 42 of the 2022 Rules
Under the 2012 Rules, no arbitrator, nor the CAM-CCBC, nor any person connected with the CAM-CCBC should be held accountable for any acts, facts or omission related to the arbitration. The 2022 Rules modified such provision to include responsibility in cases of “proven willful misconduct.”
The review of the CAM-CCBC Rules was important to align them with relevant international institutions, such as the ICC and the ICDR, which had also reviewed its rules in the past years.
B. CASES
B.1 Arbitrators shall decide on whether or not the arbitration clause is valid in case of bankruptcy of a party
The Superior Court of Justice (STJ), which is the highest court in Brazil for nonconstitutional matters, has recently decided that a party under bankruptcy cannot submit a dispute under a contract subject to an arbitration clause directly to the judicial courts so that the issue on whether the bankruptcy adversely affects the validity and enforceability of the arbitration clause shall be first resolved in arbitration.
Special Appeal No. 1.959.435,[1] judged on 30 August 2022, analyzed a dispute arising from a contract with an arbitration clause entered into by an architecture firm which went bankrupt. The bankrupt estate of the architecture firm brought a lawsuit to review the arbitration agreement before the judicial courts, under the argument of impecuniosity, that is to say, that it did not have funds to litigate in arbitration, as it would be much more expensive than court proceedings. The court of appeals of the State of Rio de Janeiro upheld the dispute in the judicial venue, allegedly to avoid denial of access to justice, as the bankrupt estate proved that it had no money to commence arbitration.
The STJ reviewed the second-level decision and dismissed the judicial lawsuit, due to the existence of the arbitration clause. According to the unanimous understanding of the third chamber of the STJ, the arbitral tribunal shall decide on its own jurisdiction, which is in line with the worldwide adopted arbitration principle of “Kompetenz-Kompetenz,” i.e., the arbitrators shall have jurisdiction to decide on their own jurisdiction. It is likewise in line with article 6, paragraph 9 of the Brazilian Bankruptcy Law, according to which the declaration of bankruptcy of a party does not affect the enforceability of the arbitration clause.
Therefore, albeit this decision does not exactly bring news, it is relevant because it reinforces a pro-arbitration approach from the highest Brazilian nonconstitutional court and the adoption of the principle of “Kompetenz-Kompetenz” even in cases of insolvency. In addition, it deals with a highly controversial issue worldwide, which is whether impecuniosity could render the arbitration clause invalid or unenforceable.
B.2 The Superior Court of Justice decided that it is the competent body to decide conflicts of jurisdiction between arbitral tribunals
The Superior Court of Justice decided that it has competence to judge conflicts of jurisdiction between two or more arbitral tribunals. According to article 105, I(d) of the Brazilian Federal Constitution, the STJ is the competent court to decide conflicts of jurisdiction between any tribunals, including judges from different courts. In Conflict of Competence No. 185.702/DF,[2] the STJ found that the expression “any tribunals” includes arbitral tribunals, even if they are not part of the judiciary system, since they have jurisdictional powers.
In this case, two different arbitral proceedings were commenced before the Câmara de Arbitragem e Mercado(CAM), case No. CAM 93-110, and case No. CAM 186-2021. In the first one, the claimants were the minority shareholders of a listed corporation, seeking damages on behalf of such corporation for losses caused by wrongdoings from its controlling shareholders. Afterwards, the corporation itself filed a separate arbitration seeking damages against the very same controlling shareholders, for the very same facts. In each of those arbitrations, the arbitral tribunals considered themselves competent to judge the case, with res judicata effects.
Under the Brazilian Corporations Law,[3] minority shareholders have extraordinary standing to file a damages claim on behalf of a corporation, if the corporation fails to do so. In the case at stake, the corporation took a long time to file the claim, but eventually did so through an arbitration. Therefore, the question was whether the filing of the second arbitration rendered the first one moot.
Given the jurisdictional nature of arbitration, the STJ considered itself to have power to decide between arbitrations No. CAM 186-2021 and CAM 93-110 as to which arbitral tribunal was competent. The justices from the second chamber of the STJ unanimously ruled that the arbitral tribunal from case No. CAM 186-2021 was the one with jurisdiction to judge the matter, since it was filed by the corporation itself. According to the STJ, the minority shareholders only have extraordinary standing to file a claim on behalf of the corporation if (i) such corporation, in a decision by its general meeting, decides not to pursue the claim, or (ii) the corporation fails to file the claim within three months of the general meeting’s decision. In the case at stake, the corporation’s general meeting took some time to decide, but eventually approved the filing of the claim, which had been done within the three-month period.
Nonetheless, the STJ recommended that arbitral institutions dealing with corporate disputes establish rules to solve conflicts of jurisdiction between arbitration tribunals, to avoid the need for court intervention.
B.3 The Court of Appeals of Sao Paulo decided that the allegation of impartiality of an arbitrator made only in the motion to set aside the arbitration award cannot justify the annulment of the arbitral award
The Court of Appeals of Sao Paulo (TJSP) ruled on Appeal No. 1097621-39.2021.8.26.0100[4] that the allegation of impartiality of an arbitrator raised only in the court motion to set aside the arbitration award — i.e., in the judicial courts but not during the arbitration — cannot justify the annulment of such award. According to the court decision, the party had the duty to challenge the arbitrator in a timely manner during the arbitral proceeding, when it became aware of the facts leading to the arbitrator’s supposed impartiality and lack of independence, under the penalty of preclusion.
The losing party in the arbitral proceedings No. CMA 635-20-JCA filed a court motion to set aside the arbitral award claiming, inter alia, that the arbitrator appointed by the winning party had failed to disclose relevant facts concerning their role as counsel for a company supposedly linked to such winning party.
The Court of Appeals Sao Paulo denied the request to set aside the arbitration award, considering that the losing party’s failure to challenge the arbitrator’s impartiality during the arbitration would go against the general principle of good faith, thereby precluding the allegation afterwards. The court also ruled that there was no financial dependence between the counterparty and the company for which the arbitrator acted as a counsel, so there was no duty to disclose.
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[1] Brazilian Superior Court of Justice, 3rd Chamber, Special Appeal No. 1.959.435/RJ, reporting justice Nancy Andrighi, judged on August 30, 2022.
[2] Brazilian Superior Court of Justice, 2nd Chamber, Conflict of Competence No. 185.702/DF, reporting justice Marcos Aurélio Belizze, judged on 10 June 2022.
[3] Article 246, first paragraph, item (a) of Law No. 6.404 of 15 December 1976.
[4] TJSP, 2nd Chamber of Corporate Law, appeal No. 1097621-39.2021.8.26.0100, Reporting Judge Eduardo Palma Pellegrinelli, judged on 22 November 2022.
