Over the years arbitration has gone from being but an alternative conflict resolution method to becoming a true reality of Brazilian companies, bringing with it enormous benefits such as expediency, confidentiality and discretion as well revealing issues demanding competence beyond that of traditional judicial proceedings. One of the more delicate and decisive issues for the parties occurs just at the onset of the arbitration: the nomination of the arbiters. This is because the litigants rely on the resolution of the case being just and equal, such that this reliance has become one of the principal bases to specific and speedy arbitral resolution.
In addition said reliance that the parties have relative to the chosen arbiters, the Brazilian Arbitration Law (Law n. 9.307/96) determines that they should act with impartiality and independence (Article 13, § 6). This means to say that the arbiters cannot have direct interest in the resolution of the conflict as well as cannot have any tie with the parties. Said conditions for the good functioning of an arbitral proceeding are analyzed individually, with impartiality taking subjective and independence objective aspects into consideration. As is obvious, impartiality assessment involves criteria that are difficult to measure and thus it should be examined case by case.
It is towards facilitating this investigation that the Arbitration Law imposes that those that are indicated to be arbiters must disclose before their assuming the position any fact that may raise a doubt as to their impartiality or independence. Thus, any retention or omission of information that can be relevant to the process of choosing and nominating the arbiters is also prohibited under the phrase duty to disclose. As a general rule, practically speaking, this institution is exercised by way of the filling out of questionnaires revealing possible conflicts of interest, in addition to the signature of a commitment of independence, which must be signed immediately after the position of arbiter is accepted. With absolute transparency always being the priority, nothing impedes violations of impartiality and independence being pointed out during the course of the proceeding should any new fact become known.
The duty to disclose is of vital importance to arbitration in that possible non-compliance with the same might result in the party or parties filing an Action to the Declare the Arbitral Sentence Null. This declaration recently occurred in the August 11, 2020 First Reserved Business Law Chamber of the Court of Justice of São Paulo[1], where Presiding Judge Fortes Barbosa held a Brazil-Canada Chamber of Commerce arbitral sentence null for grave ethical breach by its Arbitral Court Arbiter President for his nomination in another arbitral proceeding involving issues similar to those raised by the parties and this not being disclosed by him at any time.
The Court of Justice of São Paulo unanimously decided that said suspect breach of trust characterizes disrespect of the duty to disclose and thus the arbitral decision must be rendered null. This is an important decision that shall mold the standard for years to come.
The São Paulo court determination is an important precedent. This is not only for its resolving a delicate concrete situation but principally for being a source of inspiration with respect to future determination of duty to disclose application that, as demonstrated by this recent decision, must be timely complete and transparent.
Arbitrations are susceptible to the situations of impediment described in the Code of Civil Procedure, however it should be reiterated that one can hopefully look to the arbiters to above merely fulfilling typical procedural formality effectuate their solution. As an example of such a situation that arises repeatedly is the indication of an arbiter from the same law firm, which could be considered as suspect even though this situation is not specified in the law.
Towards addressing said legal gaps and standardizing the duty to disclose, the arbitral community has created international guidelines to be applied to arbitral proceedings.[2] According to the guidelines, red, orange and green-designated Application Lists indicate examples of specific situations warranting disclosure of the arbiter or otherwise arbitral decision nullity declaration possibility.
The nomination of the arbiter is the cornerstone to arbitration as a whole in that in addition to criteria related to expertise and availability the indication of the arbiter should also consider its impartiality and independence towards achieving the arbitration`s best result. Almeida Advogados has professionals specialized in and available for analyzing all legal, technical and procedural arbitration aspects towards just, equitable and efficient conflict resolution.
[1] Civil Appeal n. 1056400-47.2019.8.26.0100. [2] International Bar Association (IBA) Guidelines on Conflicts of Interest in International Arbitration.
[2] International Bar Association (IBA) Guidelines on Conflicts of Interest in International Arbitration.
Written by:
André de Almeida
Eduardo Machado Tortorella
Júlia Molnar Terenna