CORRESPONDENT’S REPORT – BRAZIL
CONSTRUCTION DISPUTE RESOLUTION IN BRAZIL – RECENT RELEVANT DEVELOPMENTS IN ARBITRATION AND ALTERNATIVE DISPUTE RESOLUTION
CECILIA VIDIGAL MONTEIRO DE BARROS
Partner, Motta Fernandes Advogados – São Paulo office Representative for Brazil
In Brazil as elsewhere, arbitration is generally preferred to litigation, as both owners and contractors tend to view arbitration as rendering more expedite and technical decisions.
The Brazilian Arbitration Law was enacted in 1996. Arbitration was not immediately used, due to a debate on its conformity to the Constitution, namely whether the constitutional principle of free access to the judiciary system would subject an arbitration award to challenge in court. It took a long time until the Brazilian Supreme Court had a unanimous understanding in favor of the constitutionality of arbitration in Brazil and arbitration began effectively being chosen as the dispute resolution method by contracting parties.
Arbitration was recently expressly provided in law as admissible to contracts with Public Administration entities. Until then, arbitration was specifically provided for in law for the cases of concession and PPPs. Given that Brazil is a civil law country, the Public Administration entities may only act as previously provided in law. Until the enactment of laws permitting that disputes arising out of contracts with Public Administration entities be referred to arbitration, the validity of its adoption in contracts with the Public Administration was subject to challenge by the Federal Controller Council ( Tribunal de Contas da União ) or in court.
The average duration of an arbitral proceeding ranges in Brazil from six months to three years. In contrast, a judicial proceeding in Brazil may take from six to 10 years until final decision, to the sole benefit of the defaulting party.
On the flip side, arbitration is generally considered costly, to the point of being unfeasible for mid- to small size companies. As an alternative to a costly arbitration, and especially in response to the need of construction and infrastructure contracts to have an immediately enforceable decision, Brazil has been seeing the adoption of dispute boards in contracts with Public Administration entities.
Pt 1] Construction Dispute Resolution in Brazil
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