Part 2 Specific Issues of Arbitration in Brazil, 22 Electric Energy Arbitration

This concluding chapter examines electric energy arbitration in Brazil. An appropriately developed electric sector is a key element for any country's economic and social growth. It requires an adequate volume of investment, either domestic or foreign, in order to meet the regularly increasing needs of all stakeholders involved in such market, including the population. Brazil's electricity sector is the largest in South America and plays an important role in the country's economy. Moreover, Brazil has its own and well-functioning electricity generation system. To keep up with the development and needs of such a system, the Brazilian legal and regulatory framework has undergone through important changes over the past 25 years or so. A well-established and complex set of rules and regulations is now in place; in this context, arbitration has been steadily introduced as an alternative method to resolve the disputes arising in that sector. The chapter then provides an overview of the electric energy market in Brazil, with some historical milestones and details on the steps taken for its modernization, as well as its current structure. It also analyses how arbitration has now become an important part of this complex system, in which a variety of actors operate at different levels.

Part 2 Specific Issues of Arbitration in Brazil, 15 Post M&A Arbitration

This chapter addresses post-mergers and acquisitions (M&A) arbitration. M&A transactions provide fertile ground for litigation. These complex transactions usually give rise to a significant level of information asymmetry between the parties regarding the target company. Buyer and seller harbour opposing interests concerning the sale value. Representations and warranties, as well as the allocation of risk among parties, although aimed at facilitating the closing of the transaction, also frequently create tension and give rise to dissonant expectations during the post-closing phase. Cross-border M&A transactions add even more layers of complexity given the different business cultures and legal regimes involved. Even though M&A deals have established standard global commercial practices, which follow the common law framework, they still raise a series of challenges for parties, stakeholders, and legal advisors, generating all types of post-closing disputes. Although there are several means of dispute resolution, M&A parties have reliably chosen arbitration as a method for resolving their disputes in Brazil. The chapter then looks at the issues that most frequently feature in the arbitration of international M&A disputes in Brazil.

Part 2 Specific Issues of Arbitration in Brazil, 13 Agreements between Shareholders and General Corporate Matters

This chapter focuses on the use of arbitration to settle corporate disputes in Brazil. This dispute resolution method is faster, informal, and more technical than court decisions. In addition, dispute resolution through arbitration has four important advantages when compared to court decisions: the proceedings adjust to the matter under discussion; it is less litigious, which means that parties if the dispute (e.g., shareholder or partners of the same entity) may continue to maintain their business relationship while they are waiting for the arbitration award; and the arbitrators appointed to resolve the dispute are usually specialized in corporate matters. Unlike other countries, these advantages have been leading even Brazilian public corporations to solve their corporate conflicts through arbitration. According to recent research, corporate matters lead the number of arbitration proceedings in some of the Brazilian Arbitration Chambers. The chapter then examines objective arbitration eligibility and subjective arbitration eligibility in corporate arbitration in Brazil.

Part 2 Specific Issues of Arbitration in Brazil, 9 International versus National Awards

This chapter explores the difference between international and national awards. The Superior Tribunal of Justice (STJ) is, strictly speaking, the last judicial body competent to deal with matters of an infra-constitutional nature. Hence, it is the Court that harmonizes the case law related to arbitration in Brazil. In 2004, the competence to recognize and enforce foreign judicial and arbitral awards was transferred from the Supremo Tribunal Federal (Supreme Court) to the STJ. Immediately after being granted such competence, the STJ introduced very contemporaneous rules on the recognition and enforcement of foreign awards by issuing on May 4, 2005 the Resolution Number 9. It is possible to issue provisional relief during the recognition proceeding; it is also possible to issue partial recognition of foreign arbitral awards; and allowed to enforce provisional relief granted abroad through rogatory letter. The chapter then highlights the main arbitration concepts and addresses the STJ's arbitration case law.

Part 1 Fundaments of Arbitration in Brazil, 2 Comments of the Brazilian Arbitration Law

This chapter examines the Brazilian Arbitration Law (BAL) of 1996. The BAL is a standalone act encompassing roughly 40 articles. It is divided into eight chapters and is applicable to both domestic and international arbitration, except for Chapter VI (The Recognition and Enforcement of Foreign Awards), which is modelled on the New York Convention (NYC). Hence, the BAL legislator adopted a monistic approach. Consequently, the BAL contains no definition of domestic or international arbitration, but only defines the term foreign award. According to article 34, sole paragraph BAL, an award is considered a foreign award if it was rendered outside the territory of Brazil. The present translation of the BAL builds on the terminology of the UNCITRAL Model Law on Commercial Arbitration and the NYC because both documents inspired the authors of the BAL and are cornerstones of international arbitration. This chapter of the book then provides comments on the BAL article by article.

Part 2 Specific Issues of Arbitration in Brazil, 21 Oil and Gas Arbitration

This chapter discusses oil and gas arbitration in Brazil. The oil and gas sector has undoubtedly played a big role in the evolution of arbitration in Brazil. It is a very international and sophisticated industry, and as such, a very frequent user of arbitration. Nowadays, it does not even make sense anymore to refer to arbitration as an alternative means of dispute resolution in certain areas. When it comes to international contracts, or to certain industries, such as oil and gas, arbitration has become the natural and sometimes almost the only means of dispute resolution. The possibility of having neutral and specialized arbitrators, neutral venues, and confidentiality, among other features of arbitration, make it very appealing for the players in industries like the oil and gas sector. The chapter then looks at some examples of the types of cases that have arisen within the industry of oil and gas. Many of these cases present cutting-edge legal issues that are shaping the evolution of Brazilian arbitration law and practice in general.

Part 2 Specific Issues of Arbitration in Brazil, 19 Insolvency and Arbitration

This chapter addresses the main issues regarding the possibilities of using arbitration in dispute resolution under the Brazilian Bankruptcy Law (BBL). Such possibilities include an insolvent company agreeing to an arbitration clause and the viability of submitting insolvency-related disputes to an arbitral tribunal. The Brazilian insolvency system is regulated by the BBL. In essence, this provides for two kinds of proceedings: judicial restructuring and liquidation. Judicial restructuring proceedings give debtors the opportunity to present a reorganizational plan to their creditors. Debtors will attempt to convince creditors not only of their ability to overcome the temporary economic and financial crisis, but also of their business' feasibility. In some circumstances, the economic and financial distress is so extreme that no means exist to reverse the situation, in which case it is preferable to definitively interrupt the debtor's activities, forcibly eliminating the enterprise from the market and liquidating its assets, in order to pay creditors and prevent the damages inflicted on the community from aggravation by breaching credit reliability. Brazilian liquidation proceeding may be initiated by debtors (voluntary petition) or creditors (involuntary petition).

Part 2 Specific Issues of Arbitration in Brazil, 11 Project Finance, PPP, and Concession Agreements

This chapter examines investment arbitration in Brazil. In the 1990s, the country signed a dozen Bilateral Investment Treaties (BITs). These included clauses modelled on the framework for classic investor-state-arbitration. However, these BITs were never ratified and there are no signs that this will soon change. In recent years, Brazil has entered into a new type of investment agreement with a number of emerging markets. These contracts do not provide for investor-state-arbitration, but rather a kind of conciliation or meditation mechanism on the state-to-state level, which has never been tested so far. Since 2015, however, Brazil has been heading towards a new type of investment arbitration based on Brazilian Arbitration Law (BAL) and the New York Convention (NYC). In this new type of arbitrations, the public administration will, in principle, be represented by its own state attorneys. The arbitration framework used by Brazilian public administration is modelled on the legal framework of Commercial Arbitration, though with some important modifications mainly serving the interest of public administration.

Part 2 Specific Issues of Arbitration in Brazil, 7 Non-signatories

This chapter studies situations under Brazilian law in which a non-signatory may be bound by an arbitration agreement to which it was not originally a party. It also discusses relevant principles in Brazilian Contract Law and Brazilian Arbitration Law, as well as the case law of the Brazilian Superior Tribunal of Justice (STJ). The STJ plays a vital role in the Brazilian legal system, as it (i) sets out the jurisprudence to guide the lower courts; and (ii) amends and harmonizes the decisions of the lower courts, where needed. The STJ also retains exclusive jurisdiction to recognize and enforce foreign awards in Brazil. When does Brazilian law become relevant to ascertain questions of binding a non-signatory to arbitration? The law applicable to the arbitration agreement is the relevant law for the purpose of deciding whether (and in which circumstances) a non-signatory can be bound to arbitration. In situations where the parties have agreed that the law applicable to the arbitration agreement is the law of Brazil, the issues of (i) whether a non-signatory can be compelled to arbitrate or (ii) whether a non-signatory can intervene in an arbitral procedure will, of course, be tested against this law.

Part 2 Specific Issues of Arbitration in Brazil, 18 Construction Contracts Involving the Public Administration

This chapter explores arbitration concerning construction contracts involving the public administration in Brazil. Contractual risk allocation is a crucial part of the economy of the contract and should be respected by arbitral tribunals while deciding such disputes. In practice, and especially in contracts involving public entities, it is the owner of the (future) facility who defines the draft contract used in the bidding process and, therefore, has the first say on the allocation of risks. In preparing the contract for the public tender, the public authority, as the owner, may feel tempted to allocate the vast majority of the risks to the private party, i.e., the contractor. However, the owner should avoid the pure and simple transfer of all risks to contractors for two main reasons. Firstly, it may preclude parties from submitting bids, limiting the competition between the market players. Secondly, the bidders will take into consideration the heavy allocation of risk on them when submitting their price offers, which will significantly increase the price of the project and sometimes even affect its viability. The chapter then considers the FIDIC (International Federation of Consulting Engineers) Red Book and Brazilian Law 8,666/1993 on construction works for the public sector.