04 Apr 2019
Being the new student in an old school is often a considerable challenge. The novice has to get acquainted with the unwritten rules of the institution and must prove him or herself to be worthy of notice time and time again, until the acceptance into the group becomes, silently, a fait accompli. That is indeed the case of Brazil in the old school of international arbitration. In the last decade, the South American country moved from a reluctant critic of the institution to its new rising star.
One can daresay that the interest in Brazil shown in international arbitration circles has reached its highest levels. Many international players and practioners have contacted me in the last couple of months with a myriad of questions about the current arbitral landscape in the country. I will try to summarise my answers to their three main concerns: legal certainty, human capital and institutional structure.
Legal certainty
Brazil has in fact become one of the most pro-arbitration jurisdictions in the world. The country has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. By force of that convention, arbitral awards issued in foreign jurisdictions can be executed in Brazil as if they were rendered in the country. In addition, Article 2º of the Brazilian Law of Arbitration (Law 9307/1996) allows free choice of law to the parties (§1), including “international rules of commerce” (§2). This is a very flexible statutory provision, which gives parties the freedom to adopt the most fitting law and procedures to their industry or trade.
It is absolutely possible, for instance, to solve a local maritime dispute by applying the Terms of the London Maritime Arbitrators Association (LMAA), which are governed by English law. Parties can go as far as agreeing to change the substantive law of the contract, allowing the arbitrators to decide the facts in issue by another governing law, equity, the general principles of law, or even by lex mercatoria.
In a recent decision,[1] the Superior Tribunal of Justice (STJ), the country’s highest appellate court for non-constitutional matters, decided that an arbitration clause in a collateral contract would be deemed to have been incorporated in the second agreement, derogating thus an express choice of jurisdiction clause. Professor Stuart Sime remarked that this decision shows that the country’s highest tribunals have adopted a firm pro-arbitration stance that goes further than jurisdictions where arbitration has long been adopted, such as England and Switzerland.[2]
Parties can be confident, therefore, that the Brazilian courts will uphold the awards and that they can safely submit their disputes in the country to arbitration using the most appropriate proceedings and choice of law to their industries.
Quality of the Arbitrators
Another important aspect of the arbitral landscape in Brazil is certainly the quality of the arbitrators. The country has developed know-how to the most sophisticated levels on arbitration and international commerce and has a good stock of practitioners of the highest calibre. Moreover, the country has a long tradition of international arbitrators, acting both in public as well as in private disputes. It is significant that the national hero, Baron Rio Branco, was a diplomat and arbitrator. During his long term as Minister for External Relations in the first decades of the twentieth century, he pacified all border disputes, with 10 different nations, without firing a single shot. He resorted to arbitration and mediation to solving disputes and pacifying the region.
Brazil is also extremely open to foreigners and their intellectual contribution to the development of the country’s legal institutions. Foreign arbitrators and experts are at constant presence in arbitral tribunals and academic events. Practitioners from all over the world receive the warmest welcome in the country and are frequently invited to contribute with expertise and practical experience. This cultural attitude of openness is key in positioning the country as a leading international arbitration centre. That certainly influenced the ICC’s decision to have a secretariat with firm presence in the country, for instance.
Institutional strength
Brazil also has a very structured legal market, with strong institutions that make it a real international hub. The arbitral chambers, first and foremost, are well organised and provide all the infrastructure necessary to organise and conduct proceedings in the most efficient manner. Indeed, some of them are even spearheading a revolution in the use of technology to solve disputes. The Chamber of Arbitration and Mediation of Santa Catarina (CAMESC), for instance, is investing heavily in the use of AI to provide the best tools to facilitate proceedings, reducing the costs and the time spent with auxiliary matters. The results are faster and cheaper arbitrations.
Universities are also another strong point. Many of them have groups and departments specialised in ADR. The University of the Vale of Itajaí (UNIVALI), for instance, develops a most serious work, focused not only on the academic study of international arbitration but manly in the development of practical skills. The Pre-Moots to the Vis competition in Vienna, furthermore, are already a national institution, with rounds all over the country. The Curitiba round alone, organised by Professor João Bosco Lee, had more than 100 arbitrators, for instance.
Public institutions are also playing a crucial role in establishing Brazil as an international hub for dispute resolution. The Maritime Tribunal, for instance, has a high-level team of experts to conduct due diligence in all cases of wet shipping. It is an administrative tribunal, part of the country’s Navy, that maintains a full register of all ships and conducts evaluations and investigations in all cases of salvage, accidents at sea, etc. The Tribunal’s current President, Admiral Wilson Pereira de Lima Filho, has instituted a regular publication with summaries of the cases judged by the tribunal, which is being of great importance in establishing the framework to the development of the Brazilian view on maritime doctrines.
Conclusions
Brazil, in short, is ripe to consolidate its position as an arbitration hub. The country has the legal framework, the human capital and the institutional infrastructure ready to become an international dispute resolution powerhouse in the coming years. Foreign parties and arbitrators have much to gain in investing in knowledge about and contacts in the local market, which is incomparably receptive to foreign contribution.
Paulo Fernando Pinheiro Machado FCIArb is an advocate, diplomat and arbitrator, Managing Partner of Pinheiro Machado & Co in Brazil.
[1] Recurso Especial Nº 1.639.035 – SP (2015/0257748-2), published on 15 October 2018.
[2] Mentioned in private communication with the author.