Author: André de Almeida – almeida@almeidalaw.com.br
But just a few weeks following the final judgment approval by the US Courts of the approximately USD 3 billion settlement reached between Petrobras and investors, bringing to a close the class action lawsuit the company was facing there, astonishingly the Brazilian Judiciary dismissed the public civil action brought in Brazil, which had the identical aim of protecting investors here.
The Court held that as the company´s bylaws contained an arbitration clause the matter should be decided by arbitration.
The Court’s holding will obviously be appealed by AIDMIN – The Brazilian Association of Minority Investors that, represented by Almeida Advogados, had filed the public civil action seeking indemnification of Brazilian shareholders according to the same conditions as those that were approved abroad.
Though the facts on which both actions are based are identical (namely, Petrobras share devaluation resulting from the scandals the Operation Car Wash revealed), the results obtained in the US and Brazilian Courts to the present moment are as different as water and wine, indicating an undeniable civil deficit.
Business ethics are in the process of being defined in Brazil from the outcome yet the difference in treatment between the lawsuits couldn´t be more extreme as US law, much more advanced from a procedural perspective, customarily resolves minority shareholder claims regarding capital markets loss justly whereas in Brazil those seeking indemnification face all types of adversity.
From a strictly juridical perspective, it is our view that the arbitration clause to Petrobras’ bylaws is null and void for a number of reasons, including: (i) the inexistence of the arbitration clause at the time the company had its IPO, indicating a changing of the rules in the middle of the game, an affront to the concept of inseparability from Judiciary control set forth in Art. 5º, XXXV, of the Brazilian Constitution; (ii) the fact that the Petrobras Shareholders’ Meeting calling for changing the bylaws and at which the insertion of the arbitration clause was approved was annulled; and (iii) the inapplicability of the arbitration clause to AIDMIN, which is an association representing the interests of minority shareholders that do not hold direct participation in the control structure of the company and never consented to submitting Petrobras disputes to arbitration.
At this juncture, it is beholden on all those preoccupied with Brazilian company ethics and with the rights of minority shareholders victim to the Petrobras corruption scheme to close ranks and reverse this injustice within the boundaries of the Law.
It is our hope that the other instances of the Brazilian Judiciary will take the view that the non-recognition of Brazilian shareholder rights is in disparate contrast with the treatment of those in the exact same situation abroad, and that this does not sit well.
We must advance, or otherwise be left behind, conscious that we should not only be critical of the Brazilian Supreme Court justices and their recent polemic decisions but also recognizing the incontestable fact that our entire judicial structure is in urgent need of reaching a new plateau best representing the expectations of Brazilian society for justice.