How to settle matters out-of-court

Cristiano Cardoso Dias
Vamilson José Costa

Over the last few years, the methods for resolving conflicts and disputes out-of-court, especially arbitration, have been gaining credibility and importance with commercial and corporate relationships. It is true that the modern concept of jurisdiction is not compatible with the idea of state monopoly; in this context, the so-called alternative dispute resolution – conciliation, mediation and arbitration – are encouraged by the legislation and by the national courts.

A significant example is the new Code of Civil Procedure (CPC), effective as of 2016. The new CPC, idealized with the purpose to break the bureaucratic cycle involved in the proceeding of judicial actions, incentives settlements by means of amicable methods and also establishes the effectiveness of mediation and arbitration. With that, the preliminary conciliation hearings became rule, the jurisdiction of the arbitral tribunals was strengthened and the cooperation between arbitral and state jurisdictions was enhanced.

Said paradigm-breaking proposed by the framers of the new CPC – what had already been widely used by the courts – seeks to solve the matters faced by the Judiciary Branch. In fact, one of the main reasons for the significant increase of arbitrations in the country over the last few years is the state courts’ failure in providing proper solutions to complex matters timely.

It is important to bear in mind that the parties may chose (or not) to submit the dispute to an arbitration procedure. The arbitration may be defined as an institute by means of which a third party solves a controversy involving two or more parties by performing the respective entrusted jurisdictional role. Therefore, the arbitration has a contractual nature; it is consensual.

The choice for arbitration – and, ultimately, its success – depends on the parties’ belief that this mechanism provides more appropriate characteristics than the ones offered by the Judiciary Branch and other alternative dispute resolution methods. Among the main advantages, there is the judges’ expertise on the matter and the discretion of the proceeding, custom-made to fulfill each dispute’s needs, allowing for an efficient outcome and guaranteeing the preservation of the long term contractual relations.

In international trade, for example, arbitration has already been used for a long time, and its scope has been increasingly enlarged throughout the various legal systems. It has not been different in Brazil. The recent changes made to the Arbitration Law (Law No. 9307/96, amended by Law No. 13129/15) were consistent with the expansion of matters and subjects that can be submitted to arbitration. A good example is the arbitration involving the public power: the practice was allowed, but raised questionings and uncertainties. Considering that the inclusion of an arbitral clause is currently seen as one of the main factors while deciding to contract with the public administration (especially by foreign parties), the lawmaker suppressed the omission at federal level by expressly determining the validity of arbitral proceedings involving public entities, provided that the publicity principle is complied with.

Arbitration is also significantly increasing in corporate litigations, becoming the most used method to solve conflicts in complex corporate transactions, such as mergers and acquisitions. The companies have also been using arbitration to solve internal matters. In addition, the Stock Exchange’s corporate governance requirements, according to which the company must adhere to the Market Arbitration Chamber (CAM) in order to be listed in Lever 2 or New Market, are consequences of the arbitration’s success.

In conclusion, arbitration has undeniably become part of the business world. Thus, the market’s agents must get to know this important method to solve resolutions so to use it when necessary.

Over the next articles, we will approach practical aspects of arbitration usually faced by the parties when deciding to seek an arbitral tribunal or the Judiciary Branch, such as the cost involved in an arbitral proceeding, the chamber to be used and the arbitrators’ characteristics.