Brazil has enacted revisions to its 1996 Arbitration Act, including changes dealing with state entities, shareholder disputes and interim relief.
Law No. 13,129 was enacted on 26 May after being approved by the Brazilian Congress and the Office of the President, and will take effect 60 days later. The final text of the law is available here.
It marks the first change to the country’s arbitration regime in 19 years. The bill was drafted by a 22-strong special committee of judges and practitioners established by the Brazilian Senate in 2012 to update the country’s arbitration and mediation laws.
The changes preserve the essence of the country’s 19-year-old arbitration framework, while fine tuning some of the key points according to Sergio André Laclau Marques, of Veirano Advogados. “In some cases the changes consolidated and detailed already accepted practices, by bringing them into the law”.
In other areas important improvements were made, he says, noting that the new law expressly permits Brazilian state entities to participate in arbitrations, subject to laws governing transparency in public affairs. For Laclau this change should clear some of the stumbling blocks that have been faced by investors in large infrastructure projects, which normally involve both private and public entities: “This change finally overcomes what has been a matter of great incertitude in the past and has led to major disputes and misunderstandings,” he says.
The provisions governing shareholder disputes have also been amended to clarify that an arbitration clause in the by-laws of a corporation is binding upon all shareholders, including the ones that voted against the clause’s inclusion. But shareholders who oppose the clause will have the right to liquidate their shares, subject to certain exceptions.
Elsewhere, amendments allowing the submission to arbitration of consumer and employment disputes were vetoed by the Brazilian vice-president. Despite this, the Senate can still revoke the vetoes according to Adriana Braghetta, member of the special committee and lawyer at L O Baptista Schmidt Valois Miranda Ferreira Agel Advogados.
“The vetoes probably derive from some political pressure from unions and consumer associations. However, the draft that we have proposed was very protective to the consumer and the high management. Arbitration would go ahead only if they wanted it to. For those categories, it was not an obligation to arbitrate but rather a mere possibility,” she explains. As a result, the arbitration of both labour and consumer-related disputes remains open for further discussions and improvements in the future.
Brazil has long been known as a friendly environment for arbitration and the 1996 law was not only resolutely progressive, it was a crucial step to placing Brazil among the biggest arbitration players worldwide.
The idea behind the changes was to expand the scope of application of the law by modernising it to make arbitration more accessible. According Braghetta, this reaffirms the commitment of the Brazilian legal regime towards arbitration as an effective mechanism for dispute resolution. “[The new law] will help investments and agreements with state companies as we now have a clear possibility to choose arbitration. Apart from that, arbitration will keep on growing. There is no doubt about that,” she says.
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