The CAM-CCBC Arbitration Rules 2012 : A Commentary 9789462744905, 9789462366541

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The CAM-CCBC Arbitration Rules 2012: A Commentary

The CAM-CCBC Ar bitration Rules 2012: A Commentary

Fr e d e r i c o Jo s é S t r au b e , C l au d i o Fi n ke l s t e i n a n d Napoleão Casado Filho (Eds.) .

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ISBN 9789462366541 ISBN 9789462744905 (E-book) © 2016 The authors | Eleven International Publishing This publication is protected by international copyright law. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher. Printed in The Netherlands

The Editors thank the CAM/CCBC personnel, especially Ms. Luíza Helena Cardoso Kömel, for their outstanding effort in revising the texts submitted by the Authors. The responsibility for the content of this book is that of the Authors, and the CAM/CCBC is not bound to the opinions presented in this book.

Table of Contents Foreword Jan Paulsson – President of ICCA

xi

Preface Frederico José Straube – Former President of CAM-CCBC

1

Brazil’s Role in the World of International Arbitration Louise B. Barrington

21

Chapter I – The CAM/CCBC Article 1 – Scope of Application of the Rules Ana Olivia A. Haddad and Eleonora Coelho Article 2 – Name, Head Office, Purpose and Composition of the CAM/CCBC Marcos Paulo de Almeida Salles Article 3 – List of Arbitrators Thiago Marinho Nunes

27

39

53

Chapter II – The Arbitration Proceedings Article 4 – Commencement of the Arbitration Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi

65

Article 5 – Arbitral Tribunal Carlos Suplicy Forbes and Patrícia S. Kobayashi

113

Article 6 – Notifications and Time Periods Haroldo M.D. Verçosa

125

Article 7 – Procedure Cesar A. Guimarães Pereira and Erika Levin

129

Article 8 – Provisional Measures Clávio Valença Filho and Isabela Lacreta

143

vii

Table of Contents

Article 9 – Seat of Arbitration, Applicable Law, and Language Adriana Braghetta, Claudio Finkelstein and Fabio Alonso Vieira

155

Article 10 – Arbitral Award Gilberto Giusti and Douglas Catarucci

169

Article 11 – Compliance with the Arbitral Award José Carlos de Magalhães

185

Chapter III – Costs and Expenses Article 12 – Arbitration Expenses Luciano Benetti Timm

191

Chapter IV – General Provisions Article 13 – Interpretation Marcelo Ricardo Escobar and Yuri Pedroza Leite

205

Article 14 – Confidentiality Armando Luiz Rovai and André Luis Caetano Silva

221

Article 15 – Enter into Force Daniel F. Jacob Nogueira

227

About the Authors

237

Annex 1 – CAM-CCBC Conflict of Interest and Availability Questionnaire

245

Annex 2 – CAM-CCBC Code of Ethics (Arbitrator)

249

viii

Foreword by Jan Paulsson

Adriana Braghetta

Eleonora Coelho

Patrícia S. Kobayashi

Ana Gerdau de Borja

Erika Levin

Rafael Villar Gagliardi

Olivia A. Haddad

Fabio Alonso Vieira

Thiago Marinho Nunes

André Luis Caetano Silva

Frederico José Straube

Yuri Pedroza Leite

Arnoldo Wald

Gilberto Giusti

Armando Luiz Rovai

Haroldo M.D. Verçosa

Bryan Longo

Isabela Lacreta

Carlos Suplicy Forbes

José Carlos de Magalhães

César A. Guimarães Pereira Louise B. Barrington Claudio Finkelstein

Luciano Benetti Timm

Clávio Valença Filho

Marcelo Ricardo Escobar

Daniel F. Jacob Nogueira

Marcos Paulo de Almeida Salles

Douglas Catarucci

Maíra de Melo Vieira

Eduardo Ono Terashima

Napoleão Casado Filho

ix

Foreword Jan Paulsson – President of ICCA The prominent role of the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada in the context of international commercial arbitration in Brazil is already well established, but its recognition will be enhanced by the fact that it will serve as the relevant set of rules to be applied in the 2017 edition of the Vis Moot Competition. This means that thousands of law students around the world will be working with these Rules in their fictional commercial dispute, as they prepare for the highest level of competition in Vienna. The Vis Moot may well be considered a sociological phenomenon in the field of private international law, as it has annually generated waves of highly motivated young lawyers, all trained to view the legal problems of international trade through the same prism of norm and method – and later to be found advising and representing clients all over the world. In current years, nearly 300 teams (around 2,500 individuals) have come to Vienna each spring from seventy countries. They constitute a significant segment of the new global community of legal practitioners, and their influence will undoubtedly be considerable. The Brazilian Law on Arbitration specifically provides in Article 5 that if an arbitration agreement refers to the rules of a standing institution, any case thereunder will be initiated and conducted in accordance with them. Yet this does not mean that national law can be ignored. For one thing, there may be gaps or ambiguities that call for suppletive rules of disposition or of interpretation. For another, there may be contentions to the effect that mandatory laws have not been observed, and that this requires judicial correction. Nor does it mean that the arbitration agreement can be ignored, because its text may contain autonomous provisions that must co-exist with the institutional rules (for better or worse, depending on the intelligence and foresight of the drafters). In other words, practitioners must be keenly attentive to the interplay of contract/rules/law. The present commentary provides a detailed road map of the international arbitral process as contemplated from a Brazilian perspective and through the particular prism of the rules of Brazil’s pre-eminent arbitral institution. It thus provides the English reader with a valuable opportunity to consider how international arbitration is meant to function in Brazil. With due reservation for the vicissitudes of judicial incidents – in what legal system can one dispense with that reservation? – the commentary will, broadly speaking, be reassuringly familiar. Whatever the caveat of alleged ‘cultural differences’ (which generally might in truth be said above all to reflect the opposition of the culture of claimants

xi

Foreword

versus the culture of defendants), the organization of due process is dictated by the same practical concerns and concepts of fairness.

xii

Preface Frederico José Straube – Former President of CAM-CCBC Initial Analysis of CAM/CCBC’s New Rules

1

Introduction: Review of the Rules

After thirty-two years of existence, it was time for change. The New Rules of the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada serve as the foundation for our CAM/CCBC’s internationalization projects. The previous alteration of the Rules, approved on 15 July 1998, took place as the result of a normative requirement, given that its scope needed to be adapted to the then just approved Brazilian Arbitration Act. Nowadays, the situation is quite different. Law No. 9.307, enacted in 1996, has been in effect for fifteen years and introduced a new culture, increasingly more consolidated in the use of more adequate means for conflict resolution, among which arbitration stands out as especially relevant. With higher demands, we also experienced an increase in complexity and the actual possibility of using major Brazilian cities, including São Paulo, as the seat of international arbitrations. This article’s objective is to show the basic outlines that oriented the alteration, as well as to portray the main alterations incorporated into CAM/CCBC’s new Rules, as approved on 1 September 2011, with all its articles to fully come into force beginning 1 January 2012. We shall begin by focusing on the Rules of 1998, showing below the historical development of the alterations effected, while highlighting the main alterations introduced.

1.1

The Previous Rules

As stated in the introduction above, the review of CAM/CCBC’s Rules, as approved in 1998 (“Rules of 1998”), increasingly became a necessity, given that it was drawn up only two years after the enactment of Law No. 9.307/1996. During this period, the law was deemed constitutional, eliminating all major barriers to the institute’s development in Brazil, and one saw our entry into the realm of international arbitrations, particularly with the ratification of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, in 2002.

1

Frederico José Straube – Former President of CAM-CCBC

In light of the major changes that took place, little by little the arbitration scenario developed in Brazil, with direct repercussions on our entity, resulting in that of 25 processes instituted until 2002, we evolved to 275 arbitrations at the current year-end. Graph 1 Arbitrations instituted in CAM/CCBC until 22 December 2011

The CAM/CCBC has currently exceeded the mark of fifty proceedings instituted in our Center per year, involving a dispute amount of R$ 8 billion. Year

Amount (R$)*

Nr. Arbitrations

Average (R$)

1988 and 1999

104,097,674.74

8

13,012,209.34

2000

290,593,264.20

5

58,118,652.84

2001

29,985,658.91

1

29,985,658.91

2002

135,351,681.52

11

12,304,698.32

2003

7,468,503.12

5

1,493,700.62

2004

106,257,218.53

11

9,659,747.14

2005

49,411,327.70

13

3,800,871.36

2006

205,009,284.31

21

9,762,346.87

2007

250,652,579.63

18

13,925,143.31

2

Preface

Year

Amount (R$)*

Nr. Arbitrations

Average (R$)

2008

4,493,497,621.16

27

166,425,837.82

2.009

1,643,215,918.94

49

33,535,018.75

2.010

620,361,810.90

48

12,924,204.39

2.011

712,558,964.86

58

12,285,499.39

GRAND TOTAL

8,648,461,508.52

275

31,448,950.94

* The table is based on the nominal amounts stated by parties, on the date of distribution, updated by the IGPM index to October/2011. Exchange rates: 1 U.S. dollar = R$ 1.71; € 2.31.]

In light of the new needs, activities aimed at altering the Rules began in mid-2009, involving groups of renowned arbitration experts, whose work contributions resulted in CAM/CCBC’s new Rules of 2012.

1.2

Groups and Commissions

CAM/CCBC’s 2012 Rules is the result of the work of three major commissions, comprising arbitrators and attorneys who stand out for their activities in our Arbitration Center, and who jointly make up a considerable part of the Brazilian arbitration community.1 The first commission consisted of arbitrators from our List of Arbitrators, led by Prof. Dr. José Carlos de Magalhães, which came up with a set of recommendations to adapt the 1998 Rules. In parallel, a second commission of young arbitration experts, led by Dr. Adriana Braghetta, also submitted a draft. The Center’s Executive Committee, based on these two recommendations, drafted a third document, combining the suggestions submitted by the two groups, which was in turn forwarded to a prestigious final review commission. Its distinguished members submitted their considerations and suggestions, which were in most cases incorporated into the final text. Finally, following the joint efforts of arbitrators, attorneys and collaborators of our Arbitration Center, one came up with the final wording approved by the Extraordinary Meeting of the Brazil-Canada Chamber of Commerce, held on 1 September 2011, whose main aspects I shall comment on below (“Rules of 2012”).

1

Reviewers and glossers of this norm surely exceeded fifty arbitration experts.

3

Frederico José Straube – Former President of CAM-CCBC

1.3

Review Guidelines

The assumed starting instance was the Rules of 1998, then in effect in CAM/CCBC, which entailed several qualities, among which were its flexibility, thereby consolidating the guiding principle by which modifications would be introduced only to the extent necessary, in compliance with the following guidelines: – To preserve, whenever possible, the wording of the current Rules, except for cases in which alterations were necessary in terms of substance, or to allow for more clearness and objectivity of the text. – To not only update the Rules, but also to include new provisions, as required by conflicts submitted to our administration at the current time. – To consider institutes and solutions already viewed as accepted and established, resorting to the analysis of previous CAM/CCBC experiences and to those of other arbitration institutions.

1.4

Approval

I owe a special gratitude to my dedicated colleagues of CCBC’s Executive Committee, who kindly made time available to discuss at length subject themes that in general lie outside their fields of knowledge. By the same token, I wish to thank the Brazil-Canada Chamber of Commerce, which, on 1 September 2011, approved CAM/CCBC’s new Rules. Having expressed due acknowledgments of gratitude, we shall proceed to analyse the alterations, beginning with a comparative overall view and the structural changes, to then comment on more practical issues. 1998

2012 Chapter I – The CAM/CCBC

Section 1 – Submission to the Present Rules

Article 1 – Scope of Application of the Rules

Section 2 – Object and Composition of the Cen- Article 2 – Name, Head Office, Purpose and ter Composition of the CAM/CCBC Section 3 – Panel of Arbitrators

Article 3 – List of Arbitrators

Section 4 – Headquarters

(see Art. 2 on head office of CAM/CCBC)(see Art. 9 on seat of arbitration) Chapter II – The Arbitration Proceeding

Section 5 – Institution of Arbitration

Article 4 – Commencement of the Arbitration

Section 6 – Arbitration Tribunal

Article 5 – Arbitral Tribunal

Section 7 – Parties and Attorneys

(see Art. 6.1)

4

Preface

1998

2012

Section 8 – Notifications and Terms

Article 6 – Notifications and Time Periods

Section 9 – Procedure

Article 7 – Procedure

(no equivalent)

Article 8 – Provisional Measures

(see Section 4, item 4.2 on seat of arbitration)

Article 9 – Seat of Arbitration, Applicable Law and Language

Section 10 –Award

Article 10 – Arbitral Award

Section 11 – Fulfillment of Award

Article 11 – Compliance with the Arbitral Award Chapter III – Costs and Expenses

Section 12 – Fees, Charges, Compensation and Article 12 – Arbitration Expenses Expenses Chapter IV – General Provisions Section 13 – Interpretation

Article 13 – Interpretation

(see Arts. 9.8 and 9.9)

Article 14 – Confidentiality

Section 14 – Effectiveness

Article 15 – Enter into Force

2

Executive Committee, Advisory Committee and List of Arbitrators

In 1998, the few proceedings managed by the CAM/CCBC did not justify the creation of a committee, whether to assure due compliance with the Rules or in relation to the measures evidently necessary for setting up Arbitral Tribunals. However, in the last three years, the number of cases and their complexity have started requiring a better division of work from the Executive Committee as well as the setting up of a collegiate body to provide subsidies for certain Administrative Resolutions.

2.1

The Executive Committee

Therefore, in light of the new needs of the CAM/CCBC, given its growth and continued development, it was timely to increase the number of Vice Presidents. Nowadays, the Executive Committee consists of one President, five Vice Presidents and one General Secretary, whose purpose is to boost CAM/CCBC’s playing while also allowing the reconciliation of the regular activities of these professionals with those of the position in the Committee. Moreover, the more significant number shall allow the Vice Presidents to act as true ambassadors of the CAM/CCBC and of arbitration before other countries, because, as it happens in the present, it entails the appointment of arbitrators with various nationalities.

5

Frederico José Straube – Former President of CAM-CCBC

2.2

The Advisory Committee

In order to enable a greater exchange of ideas and experiences so as to establish greater guidelines for the CAM/CCBC and to implement them, the Advisory Committee was also created. The Advisory Committee is a governing body of the CAM/CCBC, consisting of its former presidents, as permanent members, and of at least five representatives of the List of Arbitrators,2 whose assignment is to assist the CAM/CCBC’s President with respect to some of the more sensitive aspects related to managing the entity.3 One does not intend here to expose all the possibilities inherent to this collegiate organ, because it may be called upon to manifest itself whenever necessary. However, from the onset, the Rules foresees the following cases: i.) the appointment of arbitrators to integrate the List of Arbitrators.4 ii.) the difficult assignment of replacing any member of the List of Arbitrators within the said List of Arbitrators.5 iii.) the elaboration of the CAM/CCBC’s questionnaire on conflict of interest and availability.6 iv.) the setting up of multinational Arbitral Tribunals.7

2

3

4

5 6

7

CAM/CCBC’s Rules of 2012: 2.4. The CAM/CCBC governing bodies are: (b) The Advisory Committee, consisting of the former Presidents of the CAM/CCBC, as permanent members, and of at least five (5) representatives of the List of Arbitrators, chosen by the permanent members, with a term in office of two (2) years, with reelection being allowed. CAM/CCBC’s Rules of 2012: 2.11. The Advisory Committee shall assist the CAM/CCBC’s President in his or her duties, whenever he or she so requests, as well as suggest measures that strengthen the institution’s prestige and the good quality of its services. CAM/CCBC’s Rules of 2012: 2.12. The Advisory Committee will meet regularly one (1) time every four months and, extraordinarily, whenever convened by the President or by two (2) Vice Presidents. CAM/CCBC’s Rules of 2012: 3.1. The List of Arbitrators, composed of up to one hundred (100) members, is constituted of professionals domiciled in Brazil or abroad, with flawless reputation and recognized legal expertise, who are appointed by the President of the CAM/CCBC, with the Advisory Committee being heard, for a period of five (5) years, with reappointment allowed. CAM/CCBC’s Rules of 2012: 3.2. The President of the CAM/CCBC, with the Advisory Committee being heard, can replace any member of the List of Arbitrators. CAM/CCBC’s Rules of 2012: 4.6.1. The Questionnaire will be prepared by the CAM/CCBC’s Executive Committee, together with the Advisory Committee. Its purpose will be to gather information about the arbitrators’ impartiality and independence, as well as time availability and other information related to their duty of disclosure. CAM/CCBC’s Rules of 2012: 4.15. In proceedings in which one of the parties has its head office or domicile abroad, either of them can request that the third arbitrator be of a nationality different from those of the parties involved. The President of the CAM/CCBC, with the Advisory Committee being heard, will evaluate the necessity or convenience of granting the request in each particular case.

6

Preface

2.3

CAM/CCBC’s List of Arbitrators

The CAM/CCBC’s List of Arbitrators, which has existed since the foundation of our Arbitration Center, along with its role in setting up Arbitral Tribunals, underwent significant alterations. This is so because the Rules of 1998, with no exception, required that the President of the Arbitral Tribunal belonged to the CAM/CCBC’s List of Arbitrators. This restriction would not be the object of controversy were the list not made up of only thirty arbitrators. Thus, seeking to make the issue flexible, the new 2012 Rules not only creates an exception to the appointment of the Arbitral Tribunal, but also increases the number of CAM/CCBC-recommended arbitrators to one hundred. One should emphasize that the initiative seeks to contribute to the internationalization of our Arbitration Center, given that the expressive number of arbitrators shall comprise professionals of several nationalities, including names appointed by partner institutions such as: the “Centro de Arbitraje y Mediación – Camara de Comercio de Santiago,” of Chile, the “Camera Arbitrale di Milano, Camera di Commercio di Milano,” of Italy, and the “Câmara de Arbitragem da Associação Comercial de Lisboa,” of Portugal. The second substantial alteration is the very nature of the List of Arbitrators, given that, with the new Rules, it ceases to be a CAM/CCBC organ. The separation, which has actually already materialized in the Arbitration Center’s practice, avoids misunderstandings as to the actual intended holder of jurisdictional powers and further emphasizes the administrative role played by the arbitration institution.

3

3.1

Commencement of the Arbitration: Appointment of Arbitrators and Challenges

Appointment of Arbitrators

As the general rule, the CAM/CCBC’s 2012 Rules upholds three-party tribunals, comprising two arbitrators appointed by the parties, along with a third, appointed by the two previously appointed arbitrators. At this point, in comparison with the Rules approved in 1998, the new rule entails only two alterations. The first, mentioned above, relates to the exception of selecting professionals who do not integrate the CAM/CCBC’s List of Arbitrators to perform as the President of the Arbitral Tribunal, whereas the second refers to the obligation to appoint an alternate arbitrator, which ceases to be a requirement and becomes an option available to a party.

7

Frederico José Straube – Former President of CAM-CCBC

Both measures directly result from practice, with the first allowing appointing arbitrators not listed in the List of Arbitrators, and the second doing away with unnecessary conflicts of interest involving arbitrators. With respect to the first, it is important to emphasize that the exception has two requisites: (i) provided the alternative choice is supported by plausible reasons; and (ii) that the appointment be approved by the CAM/CCBC’s President. At this point, I believe an explanation is required. The restriction resulting from the fact that the President’s appointment may apply only to names pertaining to the List of Arbitrators allows the Arbitral Tribunal to always comprise at least one professional who shall have the required legal knowledge to ensure that the essential principles of any process shall be respected. According to the adopted formula, all constituted Arbitral Tribunals shall have the figure of a presiding arbitrator who serves as the guardian guarantor of the due process of law and of equality of the parties, as set forth in Article 21, paragraph 2 of the Brazilian Arbitration Act. The second alteration, on the other hand, I believe, requires no further explanations, given that the appointment of alternate arbitrators has been rejected by the very parties themselves. As already stated, the main reason for suppression is to avoid unnecessary ties of arbitrators to the controversy or the parties, possibly damaging for a subsequent appointment whenever appropriate. With respect to sole arbitrators, the same selection formula was upheld, with the addition of the necessary explanations concerning the appointment of arbitrators not pertaining to CAM/CCBC’s List of Arbitrators. I should like to emphasize, however, that the requirement of submission of a résumé, followed by the approval of the CAM/CCBC’s President for a professional not pertaining to the List of Arbitrators was upheld, whether in regard to the composition of the Arbitral Tribunal or in relation to a sole arbitrator.

3.2

Composition of the Arbitral Tribunal in Multiparty Arbitrations

Outside the general rule, and considering the contribution of doctrine and international precedents, the CAM/CCBC’s new Rules offers a solution for the constitution of the Arbitral Tribunal in multiparty arbitrations. In particular, the general rule creates inequality in cases involving more than two opposing poles in the procedural relationship, given that it allows a petitioner to appoint its arbitrator, while compelling all respondents to seek agreement on such appointment.

8

Preface

In the attempt to maintain equality in a multiparty arbitration, the adopted solution delegates to the institution, represented by its President, all appointments, including that of the President of the Arbitral Tribunal.

3.3

Pre-arbitration Litigation and Challenges

In addition to the alterations detailed above, concerning the appointments of arbitrators, and considering the experience of the CAM/CCBC with respect to incidents that may arise prior to the constitution of the Arbitral Tribunal, the new Rules constitutes an attempt to ordinate the procedure that one has agreed to denominate pre-arbitration litigation. The detailing, which has proven necessary in recent years, shall certainly provide increased security to parties and appointed arbitrators, avoiding the exchange of uncoordinated manifestations by parties. Furthermore, this measure seeks to reduce the period viewed as that of proceedings’ maximum instability, which encompasses the period between filing the Request for Arbitration and the date of the signing of the Terms of Reference. When one assesses the proceedings analysed by the CAM/CCBC, one observes an increasing trend in the referred period:

9

Frederico José Straube – Former President of CAM-CCBC

Graph 2 Development of arbitrations instituted in the CAM/CCBC per year and in the period encompassing receipt of the Notice for Commencement of Arbitration Proceeding and the signing of the Terms of Reference

Pursuant to the procedure already adopted by the CAM/CCBC, once the Request for Arbitration is filed, the parties shall be notified to appoint an arbitrator within fifteen days. This was not altered by the new Rules. As a means of clarification and with a view to providing equal opportunities to parties, the respondent party shall henceforth be notified not only to appoint an arbitrator, but also to submit a summary of a possible subject matter pertaining to its request and the respective amount, as well as its comments concerning seat of arbitration, language, law or legal norms applicable to the arbitration pursuant to the terms of the contract.8 Some alterations were also made with respect to the manner in which arbitrators shall be elected, as previously set forth in the above item 3.1; Once the arbitrators shall have been appointed, the CAM/CCBC’s Secretariat Office shall inform the parties and the arbitrators about the choices made, on which occasion the

8

CAM/CCBC’s Rules of 2012: 4.3. The Secretariat of the CAM/CCBC will send a copy of the notice and respective documents that support it to the other party, requesting that, within fifteen (15) days, it describe in brief any matter that may be the subject of its claim and the respective amount, as well as comments regarding the seat of arbitration, language, law or rules of law applicable to the arbitration under the contract.

10

Preface

said arbitrators shall be requested to fill out the CAM/CCBC’s Questionnaire on Conflicts of Interest and Availability, within a ten-day period. The answers in the Questionnaires and possible relevant facts shall be forwarded to the parties, on which occasion they shall be granted a ten-day period for manifestation. We are convinced this shall be one of the alterations with the most important contribution to the efficiency of the arbitration proceeding. This is so because its objective is to collect information about the arbitrators’ impartiality and independence, as well as about their availability, time-wise, along with all other information concerning their revelation obligation, allowing that a more transparent and frank relationship among the role players of the proceeding shall be established. Furthermore, with the answers to the questionnaires at hand, the parties may present possible objections related to independence, impartiality, availability or any other relevant subject matter, which clarifications may be provided by the arbitrators as deemed necessary. One should emphasize that all such manifestations in dialogical format are intended to avoid the unnecessary challenging of an arbitrator, which even so may be submitted in the event a party shall have doubts as to the arbitrator’s impartiality. Only after the time period to submit such manifestations is over shall the Secretariat Office notify the already designated arbitrators in order to appoint the President of the Arbitral Tribunal, who shall also fill out the questionnaire, following the procedure described above. In cases involving omission or lack of an agreement on an appointment, the President of the CAM/CCBC shall act as the appointing authority, pursuant to the same terms of the 1998 Rules. A final provision was included in the new Rules, to adapt to the CAM/CCBC’s internationalization objectives. This involves Article 4.15, which, in proceedings in which one of the parties has its seat or domicile abroad, affords one of the parties the possibility to request that the third arbitrator be of a different nationality than that of the involved parties. In such cases, the CAM/CCBC’s President, after consultation with the Advisory Committee, shall assess the need for or convenience of accepting such request in a concrete case.

4

4.1

Consolidation of Demands and Prior Analysis of the Validity of the Arbitration Agreement

Analysis of Issues Prior to the Constitution of the Arbitral Tribunal

The new wording of the CAM/CCBC’s Rules also foresees the possibility of examining objections about the existence, validity or efficacy of the Arbitration Agreement prior to

11

Frederico José Straube – Former President of CAM-CCBC

the constitution the Arbitral Tribunal, as well as requests related to the connection of demands. Such possibility is greatly reduced in scope and by no means seeks to suppress the powers granted to the arbitrator in assessing its own jurisdiction, as is well stated by the Kompetenz-Kompetenz principle. However, its inclusion was evidently and increasingly more necessary, affording legitimacy to the prima facie analysis performed by the CAM/CCBC’s President whenever requested by the parties. One should emphasize that the analysed subject matters are limited to those “that can be immediately resolved, without the production of evidence.”9 Another issue covered by the Rules, which may also be analysed by the CAM/CCBC’s President, is the consolidation of proceedings. In proceedings governed by the old norm, the possibility of combining proceedings was viewed in a more conservative manner, restricted to cases in which there was express concurrence of all parties involved. However, practice and efficiency of the arbitration proceeding required the subject matter to be the object of a regulatory provision, allowing the combination of demands even without the concurrence of all parties involved. The measure is quite restrictive, applicable only in very specific cases, in which one observes the identity of demands and parties in a very preliminary phase of the proceedings. Thus, with the new wording, the CAM/CCBC’s Office of the President shall be able to consolidate proceedings in cases when: (i) the object or the reason for requesting an arbitration in progress in the CAM/CCBC is the same; or (ii) if between two arbitrations there shall be identity of parties and of reason for request, but the object of one of them, due to it being broader, shall encompass that of the others. The limitation is sufficiently significant to conclude that the article is unsuitable to initiate arbitration proceedings whose scope shall be to make the proceeding more expensive or shall constitute mere artifices to unnecessarily increase the complexity of the dispute. Finally, the consolidation of proceedings determined by CAM/CCBC’s President must occur prior to the signing of the Terms of Reference, thereby avoiding that the decision be made in cases in which there already shall exist an Arbitral Tribunal constituted to find a solution for the issue. Again, the limitation occurs because of the application of the Kompetenz-Kompetenz principle, further restricting cases in which the CAM/CCBC’s President may analyse an 9

CAM/CCBC Rules of 2012: 4.5 Before the Arbitral Tribunal is constituted, the President of the CAM/CCBC will examine objections regarding the existence, validity or effectiveness of the arbitration agreement that can be immediately resolved, without the production of evidence, and will examine requests regarding joinder of claims, under article 4.20. In both cases, the Arbitral Tribunal, once it is constituted, will decide on its jurisdiction, confirming or modifying the decision previously made.

12

Preface

issue, and hence, allowing the Arbitral Tribunal to decide whether or not a meeting on proceedings shall be appropriate. In both cases, whether in the prima facie analysis of the existence, validity or efficacy of the Arbitration Agreement or in the consolidation of demands, the Arbitral Tribunal, having been constituted, shall rule on its jurisdiction, ratifying or modifying the previous ruling.

5

Provisional Measures

One of the issues requiring attention in the CAM/CCBC’s new Rules are the so-called provisional measures. The subject matter, albeit still in a very generic manner, is governed by the Arbitration Act, which in paragraph 4, Article 22, of Law No. 9.307/1996, allows an arbitrator to request assistance from a public court in determining the compulsory execution of a provisional measure: Art. 22. The arbitrator or the Arbitral Tribunal may hear testimony of the parties, hear witnesses and determine the realization of expert investigations or the collecting of other evidence as deemed necessary, provided requested by the parties or officially requested. §2 In the event of non-compliance with the summoning to testify in person, without just cause, the arbitrator or the Arbitral Tribunal shall take the behavior of the party at default into consideration upon issuing a ruling; if it shall be the absence of a witness, under the same circumstances, the arbitrator or the President of the Arbitral Tribunal may request of the Judiciary Authority that it subpoena the renitent witness, while proving the existence of the Arbitration Agreement. §4 Except as set forth in §2, in the event that a coercive measure or court injunction shall be required, arbitrators may request them of the Judiciary Branch body that would originally have been competent to decide the case. In other words, an arbitrator may approve provisional measures to seek preservation of a right, or any relief deemed necessary, it sufficing that, to that end, he/she shall submit a due request to a public justice, the true holder of the right to coercio merun. It appears to us that the postulation of coercive measures or injunctions before arbitrators is not an obligation, but rather, an option available to a party that, in a pragmatically simple manner, may adopt the option most suited to seeking such injunction.

13

Frederico José Straube – Former President of CAM-CCBC

While in no way intending to open intensive discussions about ‘efficiency’ or ‘convenience,’ I wish to refer to the explanation provided by Dr. Clavio Valença on the subject matter: (…) if the private jurisdictional provider cannot – and at times may not – handle tutelage of urgency with the same efficacy and celerity as a public justice, then one should admit return to the origin of jurisdictional power. Such is the only form to prevent the possibility of denial of justice. A public justice, defender of the public order and of access to universal jurisdiction, cannot shirk intervening. (…)10 Thus, in an effort to harmonize conducts, in the CAM/CCBC’s new Rules, Article 8 was included, with four sub-articles. The measures aim at: 1. Consolidating the competence attribution of arbitrators for the concession of injunctive, coercive and anticipatory measures. 2. Clarifying that until the Arbitral Tribunal is constituted, or in urgent cases, the parties may request injunctive or coercive measures of the competent judicial authority. 3. Clarifying that it shall be incumbent on the Arbitral Tribunal to uphold, modify or revoke the previously afforded measure. 4. Clarifying that the request submitted by one of the parties to a judicial authority to obtain provisional measures, or the execution of similar measures ordered by an Arbitral Tribunal, shall not be deemed a violation or waiver of the Arbitration Agreement and shall not compromise the Arbitral Tribunal’s competence. In summary, the provisions were drawn up with the intent to much more clarify rather than regulate, following the most consecrated guidelines of the doctrine, and, increasingly, of Brazilian jurisprudence.

6

Notices and Time Periods

The manner in which to set time periods was one of the alterations incorporated into the new text, which was useful both to the parties and to the Arbitration Center. According to the 1998 Rules, the time periods were set on the date of notification of a party, in calendar days.

10 Valença Filho, Clávio. Tutela Judicial de Urgência e a Lide Objeto de Convenção de Arbitragem. In. Revista Brasileira de Arbitragem, vol. 07, 2005, pp. 8-29.

14

Preface

One should observe that this unique manner, as set forth in the old rule, caused attorneys and parties some inconvenience, since they were more accustomed to considering only working days at the beginning and at the end of the time periods. Therefore, the rule was adapted to be similar to the rules of other institutions and even to the Code of Civil Procedure.

7

The Procedure

The regulated arbitration procedure was modified only to adapt to the practice adopted by CAM/CCBC. The new Article 7 stands out for flexibility. Provisions that unnecessarily detailed the procedure were eliminated, facilitating the understanding of parties and arbitrators with respect to the high degree of freedom granted by the new arbitration procedure. Additionally, pursuant to the practice already adopted and following the suggestions of attorneys and arbitrators, the regulated time periods were extended. For better understanding, below is a comparison of the effected alterations, article by article: 1998

2012

9.1. Once instituted the arbitration, the chairperson of the Arbitration Tribunal may call the parties and the other arbitrators for a preliminary hearing, whereat a secretary ad hoc shall be appointed. The parties shall be clarified in connection with the proceedings, and the necessary decisions to regulate the development of arbitration shall be taken.

7.1. Upon commencement of the arbitration, as provided in Art. 4.14, the Secretariat of the CAM/CCBC will notify the parties and the arbitrators for the signing of the Terms of Reference, which must take place within 30 days.7.1.1. The Terms of Reference can establish the initial timetable for the proceedings, established by agreement among the parties and the Arbitral Tribunal.

9.2. The parties shall present their written allegations, indicating the evidences they intend to produce, within a 10 day period, counted from the hearing date, if any, or from the notification date when sent with such objective.

7.2. The arbitration briefs will be presented by the time agreed to by the parties or, if none is agreed to, that established by the Arbitral Tribunal. If none is established, they must be presented concurrently within at most 30 days from the date the meeting to sign the Terms of Reference is held.

9.3. During the 5 days following the receipt of the allegations of the parties, the Center shall send the respective counterparts to the arbitrators and to the respective opposite parties, who shall present their statements within another 10 (ten) day period.

7.3. During the 5 days after receiving the parties’ arbitration briefs, the Secretariat of the CAM/CCBC will send the respective copies to the arbitrators and to the parties, the latter of which will present their respective answers within 20 days, unless another time period is established in the Terms of Reference.7.3.1. Rebuttals and Surrebuttals can be presented, at the discretion of the parties and of the Arbitral Tribunal, in the manner and by the times established in Art. 7.3.

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Frederico José Straube – Former President of CAM-CCBC

1998

2012

9.4. Within a 5 day period from the receipt of the statements referred to in the previous article, the Arbitration Tribunal shall evaluate the state of the proceedings and determine, if necessary, the production of expert evidence. The parties can nominate technical assistants, within a subsequent five day period after being notified of the expert evidence presentation.

7.4. Within 10 days from receipt of the documents mentioned above, the Arbitral Tribunal will evaluate the status of the proceedings and order, if judged necessary, the production of evidence.

9.5. The parties can submit all the evidences they deem convenient in order to instruct the proceedings and to enlighten the arbitrators. Yet, the parties shall present any other available evidences that any member of the Arbitration Tribunal may consider necessary for the understanding and settlement of the dispute. It is up the Arbitration Tribunal to accept any evidence deemed as convenient, necessary or relevant.

7.4.1. It will be the responsibility of the Arbitral Tribunal to grant and establish the burden of evidence it considers useful, necessary and appropriate in the manner and order held to be convenient under the circumstances.

9.6. All the evidences shall be presented to the EXCLUDED Arbitration Tribunal, that shall notify the other party so as it can manifest thereon. 9.7. The Center shall provide at the request of EXCLUDED one or both parties, a counterpart of the term of depositions, as well as interpreters or translators services whenever necessary. The party or parties that have requested such measures shall cover the amount of the estimated cost in advance to the Treasury of the Center, according to what is contemplated in Section V. 9.8. The arbitration procedure is strictly confiden- See Interpretation tial, and only the people who have a legitimate interest in it shall take part in the proceedings. At the hearings the chairperson of the Arbitration Tribunal shall exert best efforts in order that any witness be conducted out of the hearing place during the depositions of the parties or of other witnesses. 9.9. It is forbidden to members of the Center, the See Interpretation arbitrators and the parties to disclose any information they may have had access to during the performance of their duties or in view of their participation in the arbitration proceedings. 9.10. The procedure shall be carried on in case of absence of any of the parties, provided some, being duly notified, fails to present or fails to obtain the adjournment of the hearing. The award shall not, in any hypotheses, be substantiated in the absence of a party.

7.5. The proceedings will continue in the absence of any of the parties provided that, having been properly notified, that party does not appear.7.5.1 The arbitration award cannot be based on the default of a party.

9.11. Once the Arbitration Tribunal considers EXCLUDED necessary a diligence out of the arbitration place for its conviction, the chairperson of the Arbitration Tribunal shall notify the parties about the date, hour and place where such diligence shall

16

Preface

1998

2012

take place, so that they can follow it if they want to. 9.12. Once the diligence is over, the chairperson EXCLUDED of the Arbitration Tribunal shall draw up a term, within a three day period, containing the reproduction of the events and the conclusions of the Arbitration Tribunal, notifying the parties, which can pronounce themselves about it. 9.13. In case oral evidence is needed the chairper- EXCLUDED son of the Arbitration Tribunal shall call the parties and the other arbitrators for the instruction hearing in day, hour and place previously fixed. 9.14. The parties shall be called at least 10(ten) days prior to the date set.

EXCLUDED

9.15. In case of expert evidence, the instruction hearing shall be summoned in a period not exceeding 30 days from the delivery of the expert’s report. In case no expert evidence has been requested, the instruction hearing, if necessary, shall take place within a thirty-day period, to be counted from the end of the period mentioned in article 9.3.

7.6. Aspects of a technical nature involved in the arbitration proceedings can be the subject of expert examination or clarifications presented by specialists appointed by the parties, who can be convened to testify at a hearing, as decided by the Arbitral Tribunal.

9.16. Once the instruction hearing is closed, the Arbitration Tribunal shall grant a period of up to 10 days for the parties to present their final allegations.

7.7. When the evidentiary phase is concluded, the Arbitral Tribunal will establish a time of up to 30 days for the parties to present their closing arguments.

No corresponding item

7.8. The Arbitral Tribunal will adopt the necessary and convenient measures for the appropriate conduct of the proceedings, observing the right to fully defend oneself and the right to dispute the allegations of the other party, as well as the equal treatment of the parties.

8

Seat of Arbitration, Applicable Law and Language

To reflect the changes already shown above, in particular as related to the adaptation of the new Rules to the prospect of internationalization, provisions related to the seat of arbitrations, the choice of applicable law and of language were altered or included. The alterations notwithstanding, it is important to emphasize that the rules were changed only to the extent necessary to handle international arbitrations. Thus, the new Rules allows arbitrations to occur anywhere in Brazil or abroad, whereas in the absence of designation of a seat of arbitration, or absence of consensus thereupon, the CAM/CCBC’s President may, if necessary, set it on a provisional basis, whereas the Arbitral Tribunal shall, once it shall have been installed, make the definitive decision

17

Frederico José Straube – Former President of CAM-CCBC

concerning the seat of arbitration, after hearing the parties. For further clarification, the very Article 9 in its item 3 sets forth that acts related to arbitration proceedings may occur at a venue other than the seat of arbitration, at the discretion of the Arbitral Tribunal. By the same token, the new rule leaves it up to the parties to set language and applicable law. In relation to the choice of applicable law and pursuant to flexibility so naturally inherent to arbitration proceedings, the 2012 Rules sought to adopt a considerably encompassing form, by using the expression “rules of law.” This provision exceeds national laws and rules of law, for instance, allowing the adoption of international rules of law, treaties and market customs and traditions. One should point out that it shall be up to the Arbitral Tribunal to decide which rules of law shall apply in the event that parties shall not concur, with the exception of equity that shall be expressly allowed, whether in the Arbitration Agreement or in the Terms of Reference.

9

Arbitral Award

Pursuant to the principles adopted in all other provisions of the Rules, time periods were increased in the same manner in which issues such as the possibility to authorize the pronunciation of a partial award were included. The twenty days for issuance of an arbitral award were replaced by sixty days, extendable by thirty days, counted from receipt of the final allegations. The term set forth in the initial Rules had already been significantly expanded, in comparison with the term set by the Arbitration Act, which foresees six months, counted from the commencement of the arbitration, provided there shall be no agreement to the contrary. Art. 23. The arbitral award shall be issued within the period set forth by the parties. If nothing to that end shall have been agreed upon, the term for issuance of the award shall be of six months, counted from the commencement of the arbitration or from the replacement of the arbitrator. Learning from this experience, the expanded term allows arbitrators a more adequate period for issuance of the award. Another term extended by the new rule, which shall surely bring significant benefits to parties and arbitrators, is as related to explanations about contradiction, omission or obscurity of the arbitral award.

18

Preface

It should be emphasized that both the term for submittal and the term for reply to a request for explanations were extended, thereby also increasing the term set forth in the Arbitration Act. Thus, a period of fifteen days was granted, counted from the date of receipt of the arbitral award to the submittal of clarifications, and ten days after the notification for submittal of a reply by the Arbitral Tribunal. Furthermore, seeking to avoid unnecessary discussions with respect to the final award result, while even attempting to foster spontaneous compliance with the final decision, the Rules entails incentives to the pronunciation of the award by unanimity, as well as to maintain the possibility of informing other similar entities about non-compliance with an arbitral award.

10

Conclusion

We trust it shall have become clear in this presentation that the new Rules seeks to uphold the flexibility and operationality that characterized the previous rules. Such qualities, no doubt, contributed in a determinant manner, together with other CAM/CCBC peculiarities, to the consolidation of our CAM/CCBC and our continued presence on the stage of national arbitration. The implemented alterations were the object of profound assessment, in a manner such as to respond to the needs resulting from the very complexity that gradually characterized issues submitted to arbitration, in terms of its procedure. The interest and intent of remaining up to date with respect to advances in doctrine and international jurisprudence and the need to match up to other arbitration entities with activities in the international setting, did, however, not make us change merely out of curiosity and due to the simple idea that what is new is always necessarily better. All novelties incorporated into the new Rules served to compensate omissions and gaps, as evidenced by our valued experience, and they also reflect equilibrium and weighing in such a manner as to contribute to and warrant, for all users, security, flexibility and predictability to make them feel comfortable and peaceful when submitting their quarrels to us. Finally, let it be said that agility in handling proceedings was preserved and valued.

19

Brazil’s Role in the World of International Arbitration Louise B. Barrington* As South America’s largest country and one of the world’s largest economies, Brazil is a ‘powerhouse’ of South America, enjoying impressive financial progress and growth. Even in the past few years, during which growth has slowed and even stagnated, Brazil’s 204 million people and impressive natural resources have made it a force to be reckoned with. Brazil arrived rather belatedly at the arbitration table. Political factors have played a role in the late development of arbitration in Brazil. After attaining independence from its Portuguese colonial masters in 1822, the new Kingdom suffered a tumultuous century, first under a dysfunctional monarchy, then seesawing between military dictatorships, republican military rule, juntas, and social strife until 1984. Only in the last decades of the twentieth century, under its 1988 constitution, has Brazil enjoyed relative political stability, albeit punctuated by a parade of short-lived civilian presidents. At the time the New York Convention of 1958 was first opened for signature, Brazil’s internal political problems were at the forefront, and facilitation of international trade was hardly the top priority on any government agenda. Despite its giant economy, Brazil’s markets were – and remain to a great extent – largely domestic. Of Brazil’s gross domestic product of US$ 3,264 billion in 2014 (seventh in the world),1 international trade still accounts for only about 25% – another reason for the lack of enthusiasm for a convention designed primarily to bolster international trade. In keeping with the Calvo Doctrine, popular for much of the twentieth century, Brazil’s protectionist policy required disputes with foreign investors to be adjudicated in the host state, where courts were perceived as hostile to the investors. Brazil was considered the ‘black sheep’ of arbitration, with a poor reputation for respecting foreign arbitration and arbitral awards. But at the end of the twentieth century, hungry for capital, Brazil and its South American neighbours eventually began to relax their hostility and make overtures to welcome foreign investors. In the 1990s, the climate began to change. Brazil signed on to the Panama Convention in 1995 as well as a number of other regional arbitration treaties. In 1996, the government passed a new, Model Law-inspired Arbitration Act designed to encourage parties to use arbitration as a neutral and efficient alternative to the Brazilian courts. However, a fiveyear constitutional wrangle over the obligation of state courts to recognize and enforce * 1

FCIArb, Founder and Director of the Vis East Moot. World Bank Report.

21

Louise B. Barrington

arbitration agreements stalled acceptance of the new provisions; in order to proceed with arbitration, the parties still needed to sign an arbitration agreement (compromisso) after a dispute had arisen, and deal with the old double exequatur system. Only in 2001 did the Brazilian Supreme Court declare the Arbitration Act constitutionally valid, removing the brakes for parties wishing to act on arbitration clauses contained in their contracts, and paving the way for Brazil’s 2002 adhesion to the New York Convention – long after all its South American neighbours. With foreign-assisted development of Brazilian commodities, infrastructure and oil and gas resources, accompanied by reforms to its fiscal and economic policies, Brazil entered a period of unprecedented expansion at the turn of the 21st century that earned its reputation as one of the BRICS stars. Substantial Brazilian investment abroad contributed to the increased popularity of arbitration as well. Those good times, alas, have changed. But despite recent economic stagnation in Brazil (or perhaps because of it?), Brazil is one of the fastest growing markets for arbitration. The positive side of the situation is the rise in foreign direct investment from cash-rich partners such as Japan. Despite their marked lack of appetite for ICSID (International Center for Settlement of Investment Disputes) membership and bilateral investment treaties, Brazilians are embracing arbitration for commercial disputes. Brazil now ranks among the top five in terms of the number of parties to ICC arbitrations, and there is a marked trend to insert arbitration clauses into international contracts, whether for construction projects, oil and gas exploration and exploitation, shareholder disputes or trade transactions. This trend is due in part to the evolving attitude of the Brazilian judges, who, far from seeing arbitration as a threat to their own powers, now welcome arbitration to reduce delays and unclog the massive backlogs in Brazil’s overcrowded courts. Casting aside past prejudices, Brazilian judges have over the past two decades earned a different reputation, this time for their punctilious application of the Act and the New York Convention terms. The 2012 case of Itaruma v. PCBIOS2 is an example of this modern approach. Following the example of other arbitration-savvy jurisdictions (such as France, the UK, Hong Kong) Brazilian courts are currently developing specialized courts in each state to deal with arbitration-related cases. Parties may conduct arbitration either ad hoc, or with the assistance of a supervisory institution. Parties are free to choose the rules of their preferred institution, or ad hoc procedures, and can appoint any legally capable individual as arbitrator. The Brazil-Canada Chamber of Commerce (CAM-CCBC), with its 2012 Rules of Arbitration, has an enviable reputation as the foremost among Brazil’s many dispute resolution institutions. CAMCCBC has administered arbitrations since 1979, and offers a tried and trusted procedure adapted to international standards of practice, with the flexibility to meet the needs of 2

Supreme Court judgment of 12 June 2012 dealing with interim measures in international arbitration.

22

Brazil’s Role in the World of International Arbitration

modern business. Brazilian legislation recognizes the principles of severability and competence-competence and sets out an exhaustive list of grounds for setting aside or refusing enforcement of an award. Law schools in Brazil offer courses in international commercial arbitration, and Brazilian teams are enthusiastic participants in the Vis International Arbitration Moot and Vis East Moot each year. This year’s new Arbitration Act, which entered into force on 27 July, builds on the 1996 Act. It reflects the pro-arbitration stance of the courts, incorporates best practices and expressly permits the government to enter into arbitration agreements. After a slow and laboured birth, arbitration in Brazil has come of age. Brazil can now proudly declare itself to be an ‘arbitration-friendly’ jurisdiction, both in terms of enforcement of awards from other countries and as a sophisticated, modern, multicultural seat for international arbitrations. Today, Brazil is poised to play an even greater role in the world of international commercial arbitration. Despite the recent slowdown in its economic progress, Brazil’s youthful and growing middle class and entrepreneurial spirit bode well for its continued development and expansion. Both legislators and the judiciary have demonstrated their acceptance of and support for arbitration. As the world’s largest Portuguese-speaking nation, Brazil is likely to secure and maintain its leadership role among Latin countries and emerging economies who may otherwise hesitate to embrace what they perceive as European and North American values. Internal stability and the rule of law encourage foreign investors to bring capital into the country. In the words of International Finance Corporation’s (IFC’s) Latin American head Gabriel Goldschmidt, “There is a lot of appetite for Brazilian investments. Brazil continues to attract the biggest chunk of Latin American investors… As well as being a very large economy, it has the rule of law – its institutions are working.”3 And, as Brazil’s economy shifts from commodities and natural resources towards modern manufacturing and an increasing value of foreign trade, we can expect a corresponding need for arbitration to resolve the inevitable disputes that will arise in connection with that trade. Parties from Brazil and abroad can now feel confident that their legal rights will receive expert attention and a fair procedure based on world-class legislation and the rules of CAM-CCBC. As well as being a powerhouse in South America, Brazil is poised to become a leading light in the world of international commercial arbitration.

3

Quoted in Euromoney, November 2015.

23

Chapter I – The CAM/CCBC

Article 1 – Scope of Application of the Rules Ana Olivia A. Haddad and Eleonora Coelho 1.1. These Rules are binding on parties who have decided to submit a dispute to the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada, which is abbreviated as CAM/CCBC. 1.2. Any variation to these Rules that may have been agreed to by the parties in their respective proceedings will apply only to the specific case and so long as it does not affect any provision regarding the administrative organization of the CAM/CCBC nor the conduct of its duties.

1

Introduction

Arbitration in Brazil has made great strides1 since the enactment of Law No. 9.307/1996 (“Arbitration Law”), and mainly since the law was declared constitutional by the Federal Supreme Court (STF) in 2001.2 The country’s accession in 2002 to the Convention on Recognition and Enforcement of Foreign Arbitral Awards of 1958 (New York Convention), 1

2

A study conducted annually by Selma Ferreira Lemes shows that in 2013 there were 147 arbitration cases in the main chambers in the country, involving some R$ 3 billion, in comparison with only 21 cases involving claims worth R$ 247 million in 2005: “Arbitragens envolveram R$ 3 bilhões em 2013”, Valor Econômico, 27 January 2014. Available at , consulted on 27 June 2014. This is also demonstrated by the statistics published annually by the International Chamber of Commerce (ICC): in 1996, the number of arbitrations administered by the ICC with at least one Brazilian party was only three, while in 2006 Brazil, with, ranked fourth in the world and first in Latin America in number of cases, a position that held steady in 2012 with 82 cases, only behind the United States (145), Germany (132) and France (124) (information available in the ICC International Court of Arbitration Bulletin for 1997, 2007 and 2013, respectively). Further on the matter: “If one were to consider the number of cases registered with the ICC in the last decade, the conclusion with regard to Brazil is clear: an enormous increase in the number of cases, leading to a corresponding growth in the number of arbitrations with Brazil as the place of arbitration and with the involvement of Brazilian arbitrators as never seen before.” Roos, Cristian Conejero and Grion, Renato Stephan, Arbitrating in Brazil: The ICC Experience, in Muniz, Joaquim T. de Paiva and Basilio, Ana Teresa Palhares (eds.), Arbitration Law of Brazil: Practice and Procedure, Juris Publishing, New York, 2006, p. APP C-13. STF, Foreign Award No. 5.206 (Regimental Appeal in Foreign Award, Kingdom of Spain), Reporting Justice Sepúlveda Pertence, en banc decision, issued 12 December 2001. Note: A regimental appeal (agravo regimental) is a motion for en banc reconsideration of a decision by the reporting judge. Cases at the appellate level are first assigned to a reporting judge, whose job is to summarize the case for the other judges of the panel/chamber/full court and write a leading opinion, which may or may not prevail in the final vote. The reporting judge, acting alone, can also issue certain interim rulings and remedies, subject to review by the full panel/chamber/court through the regimental appeal mechanism.

27

Ana Olivia A. Haddad and Eleonora Coelho

by means of Decree No. 4,311, also contributed to the advance of arbitration, along with the general support for the mechanism by the judiciary through wise interpretation and application of the Arbitration Law.3 Despite this success, an effort is afoot to further advance the use of arbitration in the country. In 2013, a special committee of jurists was appointed by the Senate for the purpose of modernizing the Arbitration Law.4 That committee offered suggestions for amendment of the law, which led to the enactment of Law No. 13.129/2015. The alterations promoted by Law No. 13.129/2015, for the most part, only formalized positions already urged in the doctrine from legal scholars and adopted in the jurisprudence from the courts, to expand the scope for use of arbitration.5 The most important aspects are: (i) the possibility of entities of the direct and indirect public administration using arbitration; (ii) the tolling of the time bar by the act of requesting arbitration6; (iii) the possibility of rendering partial awards; (iv) the specification of rules on issuing urgent interim measures by the judiciary before commencement of arbitration and (v) the possibility of withdrawal of a dissident shareholder or partner (right of appraisal) in case of the inclusion of an arbitration clause in a company’s bylaws or articles of organization. This favorable scenario is also the fruit of the contribution of many professionals active in the field, through scholarly articles, presentations at conferences, teaching of classes on arbitration at law schools and participation at national and international moot competitions. In this context, arbitration institutions have played a key role, acting to disseminate knowledge, encourage academic production and promote events and presentations. Besides this, the existence of competent institutions to administer cases efficiently has increased the trust of users in the mechanism.

3

4

5

6

In this respect, Professor Albert Jan Van de Berg praised the Superior Tribunal of Justice for its application and interpretation of the Arbitration Law, at an event held in that court’s auditorium in 2012. See “STJ ajuda o Brasil a consolidar confiança na arbitragem,” available at the site , consulted on 11 June 2014. Note: The Superior Tribunal de Justiça (STJ) is the highest court for nonconstitutional matters, with responsibility for harmonizing the interpretation of federal laws by the state and federal appellate courts. It also has original jurisdiction over recognizing foreign judicial and arbitral awards. Called a Special External Committee, created by Request 702 of 2012 by Senator Renan Calheiros, for the purpose of “preparing a draft bill for a new Law of Arbitration and Mediation, within 180 (one hundred eighty) days.” As had been promised by the chairman of the committee, Judge Luís Felipe Salomão of the STJ, who was quoted in a story in the Valor Econômico newspaper: “There’s no turning back, at least while I’m heading the work to draft the bill (…). The idea is to tighten the screws, to improve the mechanism and avoid problems of interpretation by the courts.” Source: “Lei de Arbitragem poderá ser alterada.” Valor Econômico, 3 April 2013. Available at , Consulted on 8 March 2014. There are two ways of tolling the statutory limitation period in Brazilian Law: interruption, which sets it back to zero, whence it immediately starts to run again (only possible once); and suspension, which holds it in abeyance for as long as the reason lasts (and can occur more than once).

28

Article 1 – Scope of Application of the Rules

The Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (“CAM/CCBC” or “Center”) is in the vanguard, having been created in 1979 when arbitration was still incipient in Brazil. Today it is among the best arbitration institutions in Brazil, and, indeed, in the world.7 To stay abreast of the evolution of alternative dispute resolution in the country, in 2012 the CAM/CCBC updated its rules, in line with the latest practices in the world. Therefore, in light of the growth of arbitration in Brazil and the standout position occupied by the CAM/CCBC, this book is a welcome addition to the literature on arbitration. The task entrusted to us is to analyze from a practical and objective standpoint the first article of the CAM/CCBC Rules, which covers the field of application and the liberty of the parties to derogate from provisions of the Rules in arbitral proceedings managed by the Center. Therefore, this analysis will cover: (i) differences between institutional and ad hoc arbitration; (ii) the choice of CAM/CCBC as the arbitration institution and the types of arbitration clauses (‘full’, ‘empty’ and pathological) and (iii) the limits on adopting procedural rules other than those of the CAM/CCBC in arbitrations managed by it.

2

Institutional and Ad hoc Arbitration

There are two ways to conduct arbitration: institutional and ad hoc. In the former, the procedure is governed and managed according to the rules of a specialized institution, defined in advance in the contract, while in the latter the parties make their own rules without any institutional support.8 Thus, the main functions of arbitral institutions are to administer and regulate arbitral proceedings. The administrative duties include the secretarial work of receiving and sending submissions and generally intermediating in the flow of communications involving the parties, the arbitrators and experts; scheduling and organizing hearings; managing financial matters, 7

8

In 2013 it was announced that the rules to be used in The Willem C. Vis International Commercial Arbitration Moot – the most important arbitration competition in the world – would be those of the CAM/CCBC, recognizing the importance of this institution in the international scenario. “Em decisão inédita, Vis Moot terá regras do CAM-CCBC,” available at , consulted on 10 June 2014. “‘Ad hoc’ is a phrase used to imply that something is for a particular situation or purpose. In selecting ad hoc arbitration, parties forgo the procedural support and supervision typically provided by an arbitral institution. Instead, the parties will have to make their own decisions, either before or after a dispute arises, about the procedures that are to govern the resolution of their dispute and how the costs of the dispute will be shared. The responsibility for running any arbitration accordingly lies with the parties and, once it has been appointed, the arbitral tribunal.” Enock, Roger and Melia, Alexandra, Ad Hoc Arbitrations, in Lew, Julian D. M.; Bor, Harris, et al. (eds.), Arbitration in England, with chapters on Scotland and Ireland, Kluwer Law International, Alphen aan den Rijn, 2013, p. 89.

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Ana Olivia A. Haddad and Eleonora Coelho among other tasks.9 The role of institutions is separate from that of the arbitral tribunal, and they do not exercise any influence over the judgment of the case.10 In this respect: The institutions specialized in administering arbitral proceedings – and other extrajudicial forms of dispute resolution – must be considered service providers to the parties. As previously mentioned, these institutions offer technical and logistical support to users – managing the proceeding and accompanying all its acts, from the request for arbitration to the period following the delivery of the award to the parties – besides lending credibility to the proceeding through their reputation and acceptance in the legal and business communities. This is truly an activity that offers methods and organization for the correct development of the arbitral proceeding.11 Their regulatory function is particularly important in Brazil since the Arbitration Law sets out basic principles instead of detailed procedural rules. In this situation, the institutions’ own procedural rules provide the essential framework for a predictable and secure procedure.12 For example, the institutions provide rules on: (i) appointment of the arbitrators (some also have lists with suggested names); (ii) how challenges to the impartiality or qualification of arbitrators will be processed and decided; (iii) the procedure to obtain urgent remedies (some institutions’ rules contain the figure of ‘emergency arbitrator’) and (iv) the formal requirements for validity of the award and the deadline for issuing it, among many others. Hence, the chief advantages of institutional over ad hoc arbitration are legal security, predictability, efficiency and transparency.13 9 The Center also stands out for its work in the area of mediation, but the focus in this paper is on arbitration. 10 “The arbitral institution does not interfere in the judgment of the dispute. Rather it collaborates so that the procedure is regular and speedy.” Lemes, Selma M. Ferreira, Arbitragem Institucional e Ad Hoc, in Martins, Pedro Batista; Lemes, Selma M. Ferreira and Carmona, Carlos Alberto (eds.), Aspectos Fundamentais da Lei de Arbitragem, Ed. Forense, Rio de Janeiro, 1999, p. 324. 11 Neves, Flávia Bittar, Arbitragem institucional: fatores críticos na escolha da instituição arbitral, in Guilherme, Luiz Fernando do Vale Almeida (coord.), Aspectos Práticos da Arbitragem, Ed. Quartier Latin, São Paulo, 2006, p. 258. 12 “The number of arbitration centers is growing and the correct application of the rules precludes the danger, always latent, of obstruction of the parties or lack of zeal of the arbitrators, offering assurance that the arbitral proceeding will follow its normal course. (…) Institutional arbitrations continue to be preferred for their facility and predictability, such as the procedure in case of refusal of an arbitrator, ways established to submit the request for arbitration and the evidentiary procedure.” Lemes, Selma M. Ferreira, op. cit., pp. 335 and 337. 13 “Nevertheless, it is important to make a preliminary evaluation during the drafting of the contract of the types of conflicts that can arise and the level of understanding of the parties to gauge what types of arbitration would be most suitable and appropriate. However, when opting for ad hoc arbitration, the parties should specify in the arbitration clause the number of arbitrators they want, how to choose them, the time frame for the proceeding, and so on. (…) Experience demonstrates that when there is dissention after a request

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Furthermore, the choice of an institution’s rules reduces the chances of the filing of ‘parasitic’ lawsuits. The reason is that in ad hoc arbitrations, if one of the parties refuses to participate or appoint an arbitrator and there are no provisions in this respect in the arbitration clause, it will be necessary to apply to the judiciary, through the action established in Articles 6 and 7 of the Arbitration Law. Another important feature of institutional rules is that the case will go forward even in the absence of one of the parties,14 and if one party fails to appoint an arbitrator, the institution will do so15 (as allowed by Art. 13, §3, of the Arbitration Law), making the arbitral process faster and avoiding the need to seek recourse in the state courts. Based on these considerations, choosing institutional arbitration is strongly advisable, as long as it is economically feasible. This seems to be the general consensus of the international business community, as reflected in a survey conducted by Queen Mary University of London in 2006, in which 76% of the respondents said they preferred institutional arbitration.16 Finally, the great contribution of institutions to the development of arbitration deserves mention. For example, since 2009 the CAM/CCBC has maintained working arrangements with peer entities around the world for exchange of experiences, conduct of studies and holding of seminars and other events.17

3

The Choice of the CAM/CCBC, Its Rules and Types of Arbitration Clauses

The choice of institution to manage resolution of a dispute should be made on the basis of various factors, such as the amount involved, the method of appointing arbitrators, whether the institution has a list of recommended arbitrators and whether the nature of

14

15

16

17

for arbitration has already been filed, it’s very hard for the parties to agree on the procedural rules.” Lemes, Selma M. Ferreira, op. cit., p. 335. According to Art. 4.19 of the CAM/CCBC Rules: “The absence of any of the parties regularly convened to appear at the initial meeting or its refusal to sign the Terms of Reference will not prevent the normal course of the arbitration.” According to Art. 4.12 of the CAM/CCBC Rules: “4.12. If either of the parties fails to appoint an arbitrator or the arbitrators appointed by the party fail to appoint the third arbitrator, the President of the CAM/CCBC will make this appointment from among the members of the List of Arbitrators.” “Online respondents were asked whether they generally opt for arbitration under the rules of an arbitration institution or whether they mutually agree their own (ad hoc) process. A clear majority, 76%, reported that they opt for institutional arbitration. (…) the 24% opting for ad hoc proceedings are primarily larger corporations with more experience of international arbitration.” “International arbitration: Corporate attitudes and practices – 2006,” available at , Consulted on 6 June 2014. More information is available at . Consulted on 16 June 2014.

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Ana Olivia A. Haddad and Eleonora Coelho the dispute requires specialized expertise of some type.18 However, the most important factor in choosing the institution is the set of rules, because once the arbitration starts, the parties will be bound to those rules. Article 1.1 of the CAM/CCBC Rules is clear in this sense: These Rules are binding on parties who have decided to submit a dispute to the Center for Arbitration and Mediation of the Chamber of Commerce BrazilCanada, which is abbreviated as CAM/CCBC. Therefore, at the first moment the parties have broad leeway to choose the most suitable institution. But once this choice has been made, the applicable principle is pacta sunt servanda. In other words, the rules of the chosen institution become law between the parties, save for some derogations that can occur by mutual consent between the parties (as seen in title 4, “Alterations of the Rules and Flexibility of the Arbitral Procedure”, below). Furthermore, if the parties choose the CAM/CCBC Rules without mentioning the institution that will apply them – and without clear indication of ad hoc arbitration – the interpretation will be that the CAM/CCBC is responsible for administering the case.19 In most cases, the choice of institution is made in the arbitration clause, since after a dispute arises it will usually be hard for the parties to reach agreement on this matter. Therefore, just as important as the choice of institution is the clear wording of the arbitration clause, to avoid problems of interpretation at the start or during the proceeding. Indeed, poorly written clauses can defeat the whole purpose of arbitration, which is to avoid the typically slow judicial process, because one or both parties will likely feel the need to go to court to obtain interim measures or engage in other sparring. Besides this, a sloppy arbitration clause can create problems during the arbitration; for instance, if the parties set out procedural rules in the clause that turn out to be incompatible with the rules of the chosen institution or are not suitable for the particular conflict. Therefore, investing in a well-drafted arbitration clause by consulting specialists can mean substantial savings in time and money in the future. Depending on the elements contained in the arbitration clauses, Brazilian legal scholars in general classify them as ‘empty’ (vazia) or ‘full’ (cheia). Empty clauses lack sufficient

18 In this respect, see: Neves, Flávia Bittar, op. cit. 19 In this sense: “In fact, adopting the rules of a determined institution for the procedure is the same, in our view, of attributing administration of the arbitral proceeding to that institution. This interpretation is in line with the interpretive principles good faith and useful effect, customarily utilized in analyzing arbitration clauses – especially because it does not appear to be coherent with good sense for the parties to rely on the rules of a determined institution while entrusting the administration of the arbitration to outsiders.” Alvarenga, Maria Isabel de Almeida and Carvalho, Eliane Cristina, A cláusulas que se reporta às regras de um órgão arbitral institucional, in Guilherme, Luiz Fernando do Vale Almeida (coord.), Aspectos Práticos da Arbitragem, Ed. Quartier Latin, São Paulo, 2006, pp. 195-196.

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details on how the arbitration will initiate. In the not uncommon situation of recalcitrance of the putative respondent, it will be necessary for the claimant to apply to the judiciary to supply the missing elements and order the respondent to sign the submission instrument, as per Articles 6 and 7 of the Arbitration Law.20 In contrast, full clauses either fully spell out all the necessary rules for the commencement of arbitration or indicate the institution that will administer the proceeding. This latter action alone is generally sufficient to classify the clause as ‘full,’ because most institutions provide clear rules on the procedure for commencing arbitration.21 However, this does not always happen. In certain situations, even when the institution is indicated it is possible to have an empty clause, such as when the parties (i) indicate an institution that does not exist or the indication is ambiguous; or (ii) they indicate one chamber and specify the rules of another. There are also the so-called “pathological clauses,” which may be caused by several reasons such as confusing mediation with arbitration, indicating arbitration as an optional procedure, stipulating defective mechanisms to choose the arbitrators.22 At the extreme, such clauses can be totally invalid, when from their interpretation it is not possible to assess the will of the parties to choose arbitration,23 or can require judicial interpretation for validity by supplying sufficient elements to commence the arbitration. However, even if the pathological clause contains some defects, it is not always necessary to call on the judiciary to resolve the matter if, for example, it at least adequately specifies the form of appointing the arbitrator or tribunal. The reason is that once this has been accomplished, the arbitrators have the power to decide on their jurisdiction and fill in any 20 “Nevertheless, Art. 7 is intended to regulate the establishment of the arbitration when there is an ‘empty clause’ or ‘pathological clause’, but this provision was created to regulate exceptional or anomalous situations, and it is the duty of legal practitioners to strive to reduce the occurrence of clauses of this nature. This means that precision and clarity are fundamental elements in the drafting of arbitration clauses. Therefore, only in this way will we be assuring that the expectations of the parties are effectively materialized.” Nunes Pinto, José Emílio, A cláusula compromissória à luz do Código Civil, in Revista de Arbitragem e Mediação, Ed. RT, January-March 2005, p. 39. 21 “But for this, and even to be named as a full clause and enable reliance on the more direct effects, it is essential for the rules of the arbitral entity, be it institutional or specialized, to include the possibility of establishing the arbitration even when the other party is absent (remissive full clause) or that that mechanism be contemplated in the clause itself (dispositive full clause).” Martins, Pedro Batista, Apontamentos sobre a Lei de Arbitragem, Ed. Forense, Rio de Janeiro, 2008, p. 106. 22 The expression “pathological clauses” was coined by Frederic Eisemamm in an article published in 1974 called “Les clauses d’arbitrage pathologiques”. Lemes, Selma M. Ferreira, Cláusulas Arbitrais Ambíguas ou Contraditórias e a Interpretação da Vontade das Partes, in Martins, Pedro Batista and Garcez, José Maria Rossani (coords.), Reflexões sobre arbitragem: in memoriam do Desembargador Cláudio Vianna de Lima, LTR, São Paulo, 2002, p. 188. 23 Such as when the parties use the title ‘arbitration clause’ but describe a procedure similar to mediation. Selma Lemes indicates some interpretive criteria that can be used to ascertain the desire of the parties to arbitrate, such as (i) interpretation according to good faith; (ii) principle of the useful effect of the arbitration clause, and (iii) rejection of the principle of strict or restricted interpretation. Lemes, Selma M. Ferreira, op. cit., pp. 196 and 200-202.

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gaps, according the principle of kompentenz-kompentenz, established in Article 8 of the Arbitration Law.

3.1

Indication of a Nonexistent Institution or Ambiguous Indication

When finding an arbitration clause that names a nonexistent institution – such as the ‘Chamber of the Brazilian Arbitration Committee’24 – or that incorrectly or ambiguously identifies it – such as ‘Center for Arbitration of the City of São Paulo’25 – it will be necessary to interpret the desire of the parties. For this purpose, Selma Lemes states that analysis of the record of the precontractual negotiations and other documents is essential.26 If the institution indicated does not exist and the parties cannot agree on a solution, the clause will be empty and it will be necessary to apply to the judiciary. If, however, the name of the institution is ambiguous and the parties disagree over the choice, the interpretation of the clause will be up to the arbitral tribunal, once established. In this respect, if a request for arbitration is filed with the CAM/CCBC, the Center itself will conduct a prima facie analysis of the existence of a valid submission instrument. However, the final decision rests with the arbitral tribunal based on the kompentenz-kompentenz principle (Art. 4.5 of its Rules27). When the arbitration clause is ambiguous, it is even possible for each party to seek arbitration from different institutions regarding the same dispute. In this case, there will be a conflict between arbitral tribunals established under the auspices of different institutions, with the possibility of contradictory decisions when both assume jurisdiction. When such an impasse arises, many commentators argue that only a judicial court will be competent to interpret the arbitration clause and decide on the competent arbitral tribunal/institution.28 24 The Brazilian Arbitration Committee is a nonprofit association with the main purpose of studying arbitration and other nonjudicial methods of resolving disputes. It does not have a center that manages arbitration or mediation cases. 25 Although the city of São Paulo has many institutions that manage arbitration cases, there is no specific one with the name indicated above. 26 Lemes, Selma M. Ferreira, op. cit., pp. 203-207. 27 “4.5. Before the Arbitral Tribunal is constituted, the President of the CAM/CCBC will examine objections regarding the existence, validity or effectiveness of the arbitration agreement that can be immediately resolved, without the production of evidence, and will examine requests regarding joinder of claims, under Art. 4.20. In both cases, the Arbitral Tribunal, once it is constituted, will decide on its jurisdiction, confirming or modifying the decision previously made.” 28 In this sense: “There can only be one arbitral court with jurisdiction over the dispute. For this reason, the first-instance judge, acting originally, who is a third party in relation to the arbitration under way, shall have natural competence to resolve the dispute (only in relation to definition of jurisdiction between the arbitral courts to hear the case), for which purpose the judge must observe the obligation to do assumed by the parties in the arbitration submission instrument.” Rocha, Caio César Vieira, Conflito Positivo de Competência entre Árbitro e Magistrado, in Revista de Arbitragem e Mediação, No. 34, 2012, p. 273.

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In this sense, in judging Conflict of Competence No. 113.260, the Superior Tribunal of Justice (STJ) held, by majority, that “In cases of interpretation of arbitration clauses in purchase and sale agreements, alleged conflicts of competence between arbitration chambers have to be resolved by the first-instance court.” Although that case did not originate from an ambiguous arbitration clause,29 we believe the interpretation given by the STJ was correct and is applicable in such situations, by not considering a ‘conflict of competence’ to be present as defined in Article 105, I, “d,” of the Brazilian Constitution, but still providing a practical solution to avoid parallel proceedings. On the other hand, if the apparent conflict of competence is between an arbitral tribunal and a judicial court, the principle of kompentenz-kompentenz should prevail, with recourse to the judiciary only fitting after issuance of the arbitral award, through a suit for annulment.

3.2

Indication of One Institution and Choice of Another Institution’s Rules

When the parties choose one arbitral institution but specify that this institution apply the rules of another one, it is first necessary to verify whether the institution chosen allows this practice. If so, the clause will be considered full, and the arbitration will go forward as agreed. However, if the chosen institution does not permit this, it will probably refuse the case. That behavior is perfectly justifiable because institutions are private parties and third parties in the contractual relationship between the contenders, so they are not bound by the contractual provisions and thus not obliged to apply rules other than their own.30 In the case of the CAM/CCBC, Article 1 of its Rules establishes that the choice of the Center requires application of those Rules. In light of the above, it is possible to note the huge importance of knowing the rules of the institution to be chosen in the arbitration clause or submission instrument, because as of that moment, the parties may well be bound to its rules. Nevertheless, although the CAM/CCBC Rules are always applicable when the parties choose the Center as the institu29 In this case the arbitration clause indicated the FIESP/CIESP Arbitration Chamber as the institution. However, after filing the request for arbitration, the claimant failed to pay the costs, so the case was shelved. Then the claimant paid the fees, and the case was reactivated. However, in the meantime, the original respondent had filed its own arbitration request with the Arbitral Chamber of the Chamber of Commerce, Industry and Services of São Paulo (CACI-SP), under the allegation that the nonpayment of the costs implied desistance of the claimant from the intention to conduct the arbitration before the FIESP Chamber. The matter of conflict of competence was put to the STJ, which felicitously denied competence, holding that the dispute was merely one of contractual interpretation, something under the remit of the first-instance court. 30 “If contractual autonomy is just as much a source of law as the legislative intent, then contractual transactions and arbitration clauses are endowed with the same normative status as the law, of course with efficacy limited to the parties. As such, they possess coercive power and must be accepted by the parties.” Silva, Eduardo Silva da, Código Civil e Arbitragem: entre a liberdade e a responsabilidade, in Revista de Arbitragem e Mediação, Ed. RT, April-June 2005, p. 61.

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tion, this does not mean the parties cannot modify some of these provisions, as examined next.

4

Alterations of the Rules and Flexibility of the Arbitral Procedure

Arbitration has two characteristics of overarching importance. The first is that arbitration is based on the autonomy of will of the parties, while the second is that it is flexible in comparison with judicial resolution of disputes.31 The possibility of choosing the institution and rules is clearly one aspect of the autonomy of the will. On the other hand, the existence of a set of binding rules, although intended to provide greater legal security and predictability to the parties, can reduce the inherent flexibility of the arbitral procedure. To combine predictability and legal security with flexibility, the CAM/CCBC allows parties to alter some provisions of its Rules to adapt them to the needs of the case. However, the modifications allowed by the CAM/CCBC are not broad and must be limited to assure the efficacy of the proceeding. In this respect, Article 1.2 of the Rules does not allow any modifications that would imply changes in its administrative organization: 1.2. Any variation to these Rules that may have been agreed to by the parties in their respective proceedings will apply only to the specific case and so long as it does not affect any provision regarding the administrative organization of the CAM/CCBC or the conduct of its duties. In other words, the CAM/CCBC Rules can be said to contain ‘entrenched clauses’ that cannot be derogated from or altered by the parties. Although no exemplary or comprehensive list of these untouchable provisions is provided, some examples are: (i) Article 2, which covers the “name, head office, purpose and composition of the CAM/CCBC”; (ii) Article 3, on the organization of the List of Arbitrators and (iii) Article 12, on the costs and expenses of the arbitration. The reason such provisions are immutable is that arbitral institutions are private entities that have the freedom to organize themselves in the way perceived best to pursue their economic activities. Therefore, although the arbitral institution is not responsible for judging the dispute, its greater or lesser efficacy will obviously reflect on the proceeding.

31 “The fundamental point of arbitration is the liberty of the parties to establish the way their disputes will be resolved. That freedom involves the procedure to be adopted by the arbitrators and the substantive law to be applied to solve the matter (…)” Carmona, Carlos Alberto, Arbitragem e Processo – um comentário à Lei 9.307/96, Ed. Atlas, 3rd ed., 2009, p. 64.

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In this light, it is totally legitimate to establish a set of minimum rules that will assure the quality and effectiveness of the cases managed by the institution and, in the final analysis, its professional success. Allowing the parties to derogate from any of the entrenched clauses could have a significant influence on the conduct of the proceeding and consequently the institution’s credibility. It is even possible for the institution to be held civilly liable for damages caused to the parties in conducting the case32; hence, the importance of establishing minimum standards for fair administration of the proceeding. Finally, having a set of ‘entrenched clauses’ serves to individualize institutions, distinguishing them from their peers and facilitating the choice of the parties, which can analyze which set of rules best suits their needs. Therefore, if the parties choose the CAM/CCBC but stipulate alterations in the rules contained in the aforementioned articles, the Center can decline the case. On the other hand, the rules contained, for example, in Article 6, regarding notices and time limits, as well as in Article 7,33 on the procedure, are for the most part dispositive, and can thus be modified or derogated from by the parties. As can be seen, choosing the CAM/CCBC as the institution responsible for administering the resolution of the dispute assures predictability and legal security along with good flexibility.

5

Conclusion

Arbitration has become firmly established in Brazil as a mechanism for faster and fairer resolution of certain types of conflicts, with firm legal security. This is a benefit to the country as a whole, because it strengthens the attraction of foreign investments that promote the economic growth.

32 “Finally, still on the theme of civil liability, the situation of the arbitral institution must be addressed: will it also be liable for losses and damages in the situations seen above? There will be cases where this liability is patent because of the irregular exercise of the activities entrusted to the institution: failure to appoint arbitrators, appointment of arbitrators that are precluded from exercising the function, appointment of arbitrators that do not satisfy the technical qualifications agreed previously by the parties, etc., all leading to possible setting aside of the arbitral award or delay of the decision.” Carmona, Carlos Alberto, Aspectos Fundamentais da Lei de Arbitragem, Ed. Forense, Rio de Janeiro, 1999, p. 266. 33 The current President of the CAM/CCBC, Frederico Straube, commented on the alteration made in Art. 7 in 2012: “The new article 7 can be characterized by its flexibility. Provisions that unnecessarily detailed the procedure were eliminated, facilitating understanding by the parties and arbitrators regarding the high degree of freedom afforded by the arbitral procedure.” Straube, Frederico, Uma primeira análise do Novo Regulamento do CAM/CCBC, in Revista de Arbitragem e Mediação, Ed. RT, January-March 2012.

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The development of the mechanism has been facilitated by the existence of solid and reliable arbitral institutions like the CAM/CCBC, which work to disseminate knowledge about alternative dispute resolution and to inspire confidence in users. In choosing any institution to manage the proceeding, the parties should consider various factors, among which the set of rules stands out. The reason is that once the choice of institution is made, the parties will be automatically bound by the respective rules, although many institutions allow some modifications by the parties, as in the case of the CAM/CCBC. Therefore, it can be stated that in choosing the CAM/CCBC, the parties will be relying on modern and solid rules that give security and predictability, but at the same time are adaptable to the particularities of the specific case, which is essential for a just resolution of the dispute.

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Article 2 – Name, Head Office, Purpose and Composition of the CAM/CCBC Marcos Paulo de Almeida Salles 2.1. The CAM/CCBC will operate under this name and have its head office in the city of São Paulo, state of São Paulo, without prejudice to the possibility that it administrates proceedings that take place at any other location in Brazil or abroad, as provided in article 9.1 of these Rules. 2.2. By performing the acts and services provided for in these Rules, the CAM/CCBC’s purpose is to administer arbitration, mediation and other dispute resolution proceedings that are submitted to it by the interested parties, regardless of whether or not they are members of the Chamber of Commerce Brazil-Canada, hereinafter referred to simply as the Chamber, and regardless of their nationality, domicile or origin. 2.3. The CAM/CCBC can become a member of associations or bodies that represent arbitration or mediation institutions, or associate with other counterpart institutions in Brazil and abroad, and maintain exchange agreements with them. 2.4. The CAM/CCBC governing bodies are: (a) The Executive Committee, consisting of one (1) President, five (5) Vice Presidents and one (1) General Secretary, who are responsible for its administration, in keeping with the specific duties established in these Rules. (b) The Advisory Committee, consisting of the former Presidents of the CAM/CCBC, as permanent members, and of at least five (5) representatives of the List of Arbitrators, chosen by the permanent members, with a term in office of two (2) years, with reelection being allowed. 2.5. The President of the CAM/CCBC will be elected by the General Meeting of the Chamber to a term in office of two (2) years, with reelection allowed, and the other members of the Executive Committee will be appointed by the President. 2.6. The duties of the President of the CAM/CCBC are to: (a) Represent the CAM/CCBC; (b) Convene and chair the meetings of the Executive Committee and convene the meetings of the Advisory Committee; (c) Issue Administrative Resolutions; (d) Approve Rules and norms related to other methods of alternative dispute resolution; (e) Apply these Rules and have them applied;

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(f) Issue complementary rules to resolve doubts and provide guidance for the application of these Rules, including in cases of gaps; (g) Appoint arbitrators in ad hoc arbitrations, upon request from interested parties; (h) Appoint arbitrators in the cases provided for in these Rules; (i) Decide on the extension of time periods that do not fall within the authority of the Arbitral Tribunal, as well as those in reference to the appointment of arbitrators and mediators; (j) Appoint arbitrators, mediators and specialists to be members of the respective lists of professionals; (k) Perform other duties provided for in these Rules. 2.7. The President of the CAM/CCBC can, without prejudice to the authority of the Advisory Committee, form Commissions to conduct studies and make specific recommendations for the purpose of developing and improving the CAM/CCBC’s activities. 2.8. It falls upon the President of the CAM/CCBC to hear the Advisory Committee in the cases expressly referred to in these Rules. The President can convene the Advisory Committee whenever he or she believes it necessary. 2.8.1. The Advisory Committee can also be convened by two (2) Vice Presidents, jointly, in instances where the Advisory Committee should be heard and has not been regularly convened by the President. 2.9. The Vice Presidents’ duties are to: (a) Substitute for the President of the CAM/CCBC, as designated by the President, when he or she is absent or prevented from performing his or her duties; (b) Assist the President in the performance of his or her duties; (c) Convene the meetings of the Advisory Committee, in the situations and manner provided for in article 2.8.1.; (d) Perform duties assigned to them by the President. 2.10. The General Secretary’s duties are to: (a) Maintain, under his or her responsibility, the CAM/CCBC’s records and documents; (b) Be responsible for the supervision and coordination of the CAM/CCBC’s administrative activities; (c) See to the progress of the proceedings administered by the CAM/CCBC, especially in regard to meeting deadlines, as well as to perform the duties that are given him or her by the President; (d) Take part, as a subsidiary duty, in the organization of events connected with spreading awareness of arbitration and of the CAM/CCBC’s activities, as well as in other administrative tasks, such as the Quality Management System. 2.11. The Advisory Committee shall assist the CAM/CCBC’s President in his or her duties, whenever he or she so requests, as well as suggest measures that strengthen the institution’s prestige and the good quality of its services.

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Article 2 – Name, Head Office, Purpose and Composition of the CAM/CCBC

2.12. The Advisory Committee will meet regularly one (1) time every four months and, extraordinarily, whenever convened by the President or by two (2) Vice Presidents. I was honored to have been invited by the distinguished arbitrator and colleague Frederico José Straube, with whom I have had the pleasure to work for years as President of the Arbitration and Mediation Center of the Chamber of Commerce Brazil-Canada – CAM/CCBC (in Portuguese, CAM/CCBC is the acronym of Centro de Arbitragem e Mediação da Câmara de Comércio Brasil Canadá), to review this collective work, which is the initial part of the new Rules of the CAM/CCBC and the purpose of his fruitful management. I undertake to analyze herein the purpose of the parties when defining the institution to be chosen to compose the arbitration agreement, considering that its Rules shall be taken into account on the basis of the content of its set of rules, as it shall regulate the entire arbitration proceeding from its commencement to the decision expected by the parties. Therefore, it is a procedure intended for the use of arbitration jurisdiction administered by the CAM-CCBC, when this institution is chosen by the interested parties. Targeting a more didactic review, I intend to focus my attention on Article 2 of the new Rules without, however, failing to pass by its adjacent Articles 1 and 3, which complete the legislator’s intention to start it with the title subjection to these Rules.

Article 1 The legislators follow the institutional arbitration proceeding system, which has been processed by means of the ‘new’ Rules of the CAM/CCBC since 1 January 2012. The parties to the arbitration agreement are thus legitimated from its indication as the specialized institution, named Arbitration and Mediation Center of the Brazil-Canada Chamber of Commerce, in the City of São Paulo since 1979, under the acronym CAM/CCBC. It is easily noticed that it is necessary to read Articles 1 to 3 together, as the harmony among them implies the initial triangle of the adoption of the institutional arbitration system of resolution of disputes of a property and available nature. The choice of arbitral jurisdiction of a private nature is legally supported by the Brazilian Law and is based on the consensus of the interested parties to be subject to the dispute resolution system by means of an entity that provides the community with its organizing and administrative practice based on a regulatory platform, whose procedural system Rules shows the way to obtain the expected opinion. The choice of specific Institutional Rules is voluntary and related to the procedural rules contained therein, with or without any ad hoc changes. Therefore, the institutional

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arbitration proceeding is carried out with the mandatory support of the procedural rules established by the institution, whose chosen Rules are legitimized by the specific Brazilian Law, Federal Law No. 9307/96 – Arbitration Law. Some flexibility is allowed by the relatively informal fulfillment of the intention of the interested parties to attribute to a third party (singular or plural) the decisions of disputes arising out of their coexistence (even if there is no written agreement until the time the dispute arises, but only an implicit or oral agreement or an agreement based on the customary law) to seek resolution by means of an arbitration expressly and especially implemented, supported by internal procedural regulations of an institutional entity, whose Rules may be previously chosen and analyzed. Considering that the subject matter of the dispute is decided on a definite basis (and, as such, not subject to appeal to any other judging authority) by means of arbitrators who are capable and trusted by the parties, the search for resolution starts with the legal support of the rules of Law No. 9307/96 (Art. 13).1 The Rules are clear from the start that its text shall be chosen and preferably complied with, but consensual changes thereto may be adopted among the parties and the arbitrators, with due regard for the limits set forth in subarticle 1.2. The notes about Article 1 of the Rules are provided as the standard rules of choice, solely opened to the scope of the purpose. Thus, the rules of subarticle 1.2 are limitative and at the same time are subject to the intent or need of the parties, and I emphasize how open are the rules that serve them, together with the procedure of the institution. It should be emphasized that the consensus among the parties and arbitrators, within the limits permitted by Law No. 9307/76 and by the chosen Rules and entity, enable the parties and the arbitrators to modify situations that are previously established in the Rules, which shall not lead to questioning of the result. In other words, the rules of Article 1.2, which concern the subjection to the binding Rules, also enable changes, modus in rebus, as long as the specialty to the case at hand is highlighted. Although the arbitration does not establish any requirement for a lawyer to protect the legal interests of each of the interested parties, it is necessary to define the convenience of their presence, among other reasons, to take advantage of their professional skills for the claim arising out of the formalism involved in the arbitration award, so as to prevent the nullities set forth in Article 32 of Law No. 9307/76.

1

“Article 13 – an arbitrator may be anyone who is capable and has the trust of the parties,” which supplements “article 1 – The persons who are capable of contracting may resort to arbitration in order to resolve any litigations relating to alienable property rights” – i.e., rights, goods, etc. that incorporate the property of the interested parties without any legal restrictions as regards the alienability thereof.

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Article 2 – Name, Head Office, Purpose and Composition of the CAM/CCBC

Article 2 We point out first that the highlight of Article 2, “Name, venue, purpose and composition of the CAM/CCBC,” deserves the acknowledgment of the legal capacity of the CAM as a nonpersonified entity, which is however composed of bodies and duties that provide it with organicity rather than composition, which means that composition shall be understood as bodies (2.4) of the CAM/CCBC, inserting in the prerogatives of its President the duty to represent it [2.6(a)] within the limits of the bylaws of the sponsoring entity. In this case, the sponsoring entity decided to grant powers to the President of the CAM/CCBC to carry out, as a member of the Board of Directors of the Sponsoring Entity, the direct defense of the interests of the Arbitration Center, including that of receiving service of process, without prejudice to the liability of the sponsoring entity to support the structure of the sponsored entity CAM/CCBC. Second, what do Arbitral Rules mean? We restart from the same point: – there shall be a consensus between the interested parties in relation to the comfort or advantages of the arbitration proceeding, i.e., nobody who is a party to the ‘arbitration agreement’ may claim to be surprised by its use and understand that the initiative of one party to seek the implementation of the arbitration is ‘insolence,’ ‘discourtesy,’ or ‘disrespect’… it is only the exercise of the prerogative authorized by the arbitration agreement entered into by and between the parties upon the contracting of the obligation that indistinctively enables them to wish to see the doubt (or the default) submitted to the ‘pretorial’ solution of the arbitrator, once the adoption of the arbitration system of jurisdiction is deemed convenient upon completion of the subjacent agreement or even subsequently. In view of this scenario of ethical elaboration, the law deems the arbitration agreement to be the irreversible and irrevocable definition of adoption of this resolution system; it is the commitment of consensual adoption of the arbitration system of resolution of disputes, and it is appropriate to comment on the figures of Article 2 and its subarticles 2.1 to 2.12 analyzed within this context of consensual intentions. The consensus is the epicenter of the arbitration! Since 1976, with grounds on the Brazilian Civil Code and Code of Civil Procedure in effect at the time (Civil Code of 1916 and Code of Civil Procedure of 1973), the BrazilCanada Chamber of Commerce in São Paulo decided to embrace the need to outline the possibility to have in its organization chart a special commission designed to bring to Brazil an instrument of commercial arbitration – domestic and international – to support and act for interested parties that wish to resolve their disputes and that are not located only in the Northern hemisphere. The metropolises of the Brazilian Southeastern region were already capable of having an institution, an entity of this specialty. In an effort to gather several experiences in International Law, even before the Commercial or Procedural Law, a group of renowned professors and lawyers resolved to accept

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the opportunity opened by the CAM/CCBC to have an arbitration commission back in 1979. By that time, we only faced evolution, an increased curiosity from students and practitioners. Until 1996, we had only the possibility of a new law that could better match the purposes of arbitration, but when Law No. 9307/96, which was long prepared and matured, was promulgated, enacted and published, everything changed. It was a new world to light the aura of the private jurisdiction, rendering an arbitration award within the limits of the scope of its purpose, defined by the parties. It was the strengthening of the consensus in adopting the arbitration system of private jurisdiction, temporary and specific, based on a single jurisdiction. For that purpose, in 1995 the CCBC attributed to its arbitration commission the status of arbitration center, to act as an arbitration institution containing procedural arbitration Rules to be classified as a provider of institutional arbitration, in order to organize the procedure. After over twenty years of full operation and highly positive marginal growth, the CAM/CCBC started considering new Rules to formalize the internationalization of the entity, given that the position of the sponsoring entity in foreign trade should also encompass its arbitration center. Thus, the new Rules of the institutional arbitration proceeding of the CAM/CCBC arises, globally disseminating this acronym as a symbol of publicly available careful and quality institutional arbitration. It was therefore necessary to expand the physical space and the number of arbitrators with legal knowledge, the conference centers, the places to receive the claims for implementation of the institutional arbitral tribunal, based on the CAM/CCBC Rules by means of an efficient Secretary’s office that was multiple in relation to each arbitration proceeding, as well as to contain areas for hearings that are compatible with its proposal (hearing center). The development of the studies about space and circulation layouts that imply specific conditions in view of the confidentiality of the arbitration proceeding resulted in new studies about the expansions required, expansions that also needed to take into account the dimension of the new rules required for maintaining the organicity, efficiency and quality to the institution. Article 2 of the new Rules was chosen, succeeding the mandatory legitimation of Article 1, to be the bridge established to reach the person who decides, judges, renders the arbitration award, with the full support of the entity and its distinctive signs. 1. The name CAM/CCBC was considered the best to distinguish it as a private institutional entity under CCBC’s control and maintenance. CAM/CCBC is its assumed name, which ratifies its connection with the sponsoring entity and at the same time undertakes to organize arbitrations and mediations with autonomy.

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Article 2 – Name, Head Office, Purpose and Composition of the CAM/CCBC

2. As the AMC is an unincorporated entity, it is subordinated to its sponsoring entity, BCCC, and as such, its headquarters shall be at all times where it is located. This does not represent any relationship with the place to be chosen by the parties to attribute ‘nationality’ to the judgment. For that reason, nothing prevents the opening of offices or facilities as branches of the sponsoring entity for the exercise of the incumbency of arbitral management. Its territory is unlimited, in Brazil and abroad, as the arbitrators are allowed to contact them wherever so permitted by the communications. Nothing excludes the due process and the respect for the right to adversary proceeding in the course of the arbitration proceeding, of full equality between the parties and independence of the arbitrators. 3. Important items of this Article 2 are the need and the coexistence of the accurate description of the purposes of the arbitral institution, in order to avoid the ultra vires activities. In other words, the limits of the services institutionally provided in administrating the arbitration proceeding shall be exceeded within the scope of its procedure of formation and discussion of the pieces of evidence, without interfering with the exclusive work and opinion of the arbitrators. The jurisdiction is solely acknowledged by the entity within the limits of the law and the compliance with the procedures established in the Instrument of Arbitration in which, by defining the parties and the purpose of the Arbitration, the arbitrators shall carry it out within the limit and the scope intended by the parties to the arbitration agreement. The institution is the custodian of the consensual statements contained in the arbitration agreement. That said, the latter sets the limits of the objective jurisdiction of the consensually legitimated institution to facilitate the arbitrators’ works by permanently supporting them to respect the right to adversary proceeding and the due process. Therefore, even without changing its legal headquarters, which is the place to which any requests for implementation of the arbitration shall be addressed, the ‘arbitration venue’ shall be the place established by mutual agreement between the parties in their search for resolution of the dispute, authorizing any ‘nationality’ for the arbitration award. In other words, the arbitration venue is national when the place where the award is rendered and the courts where it shall be enforced are in the same sovereignty, and it is international when the sovereignty of the enforcement of the award is not that where the award is rendered. We should keep in mind that each sovereignty may represent distinct legal systems, being incumbent upon the legal system of the enforcement to impose the rules of acknowledgment of the decision act. It is the act of ratification of a foreign judgment,2 as referred to by Law No. 9307/96, in compliance with the New York Convention to which

2

It has been an exclusive incumbency of the Superior Court of Justice in Brazil since constitutional amendment No. 45.

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Brazil has recently adhered. It was the influence of the Uncitral model, which was properly addressed by the bill of Law No. 9307/96,3 highlighted in the current scenario. Subarticle 2.3 expands to the international setting the cohesive capacity of the provision of management services of the arbitration proceeding, especially based on the possibility enabled by the arbitration panel to act jointly with arbitrators residing at different places, without any distance limitation, as long as they can be virtually connected among themselves and all of them in relation to the arbitration award. Such possibility is vital to the efficiency of the arbitration institution, especially as regards the promptness of the procedure. In view of this possibility, it is important to the interested parties to previously establish the place where the award shall be rendered, due to the guidelines of the New York Convention, to which the parties intend to resort in order to enforce the award. This fact can be nationally or internationally accommodated for its restraining or enforcing effects, aiming at compliance with the awards. From Article 2.4. to the last Article (2.12), the Rules address the social bodies of the CAM/CCBC that are necessary to enable the sponsoring entity to engage in dialogue with the AMC in an organized manner, whether within the scope of the internal relationships or in search of the best results for those whose focus is on the alternative means of resolution of disputes available. It is extremely important to understand that this organization, as the arbitration agreement, which is previously agreed upon by means of the arbitration clause or in due time by means of the arbitration commitment, subjects the parties to its award. Any cancellation of the arbitration agreement is reached solely by means of consensus. If there is commitment, the exercise of the jurisdiction by means of the award to be rendered by the Arbitral Tribunal shall be prevented under the standardization provided by the Rules. The legal business of the institutional arbitration is presented under a three-part plan as: a) The arbitration institution and its administrative procedural duties; b) The parties that adhere and agree to be subject to the arbitration system of private jurisdiction chosen by consensus; and c) The arbitrator(s) freely chosen by the interested parties and appointed as provided for by Law No. 9307/96. It is therefore necessary that each of the parties be able to outline the different legal relationships that allow them to obtain the intended and expected decision result. Based on the organization chart, obligation relationships are established to converge to a single specialist the relationship between the interested parties and the preparation of

3

Bill No. 7108/14 is currently pending before the Brazilian House of Representatives, which updates aspects of the Law after it has been in effect for over twenty years.

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Article 2 – Name, Head Office, Purpose and Composition of the CAM/CCBC

the arbitration costs or expenses, as well as the remuneration of the arbitrators (and occasional experts) or any others who help form the decision of the arbitrators by means of the interference of the CAM/CCBC, which receives provision deposits of specific destination, which prevents the arbitrators or experts from losing their independence. There shall be no causal link among the arbitrators and the parties that constrains them with inappropriate subordinations, resulting in a zone of conflict of interests among the parties and the arbitrators that may deprive them of impartiality. Focusing on this indispensable posture, the CAM/CCBC was organized as a complex of bodies composed of an executive president who represents the CAM/CCBC within the limits of his/her authority and liability to perform all acts set forth in subarticle 2.6, from subitems (a) to (k). In order to fulfill this term of office, the President of the AMC is elected by the Annual Shareholders Meeting of the BCCC, and such President is liable for the appointment of the other members of the executive body. The President’s office of the AMC, composed of the President elected by the sponsoring entity and five other Vice Presidents appointed by the President, is supported by an Advisory Board permanently composed of all former presidents and by five or more directors elected by them. These are experienced in arbitration, are not necessarily domiciled or resident at the place of the BCCC headquarters, their term of office is of two years, and reelection is permitted. By joining these intellectual jurists and practitioners of the arbitral jurisdiction, the Board is a permanent source of opinions about the facts, supplementing the standardization proposed in the Rules, always deserving institutional solutions compatible with the practice and safety of the arbitration. Subarticle 2.7 attributes to the President of the AMC the prerogative to resort to advisors to perform his/her difficult task of the arbitration procedures, considering the triangular structure presented herein, which implies a subtle and diplomatic harmonization of ‘powers’, acting as a true ‘moderating power,’ in the interests of the arbitration. The body of support to the President may be called by himself/herself or by any two Vice Presidents jointly. In order to be always informed of the status of the CAM/CCBC, the advisory body is called at the end of each fiscal year for the three annual meetings, one per quarter, thus avoiding the formalities of the special meetings (subarticle 2.12). The General Secretary holds a specific incumbency, whose liability includes all elements required for the development of the bureaucratic work involved in the formalism of the Brazilian Law, concerning not only the structure of the arbitration award in the Brazilian Law, but also, and especially, the support provided by the executive secretary, who oversees the entire arbitral proceedings until the expiration of the jurisdiction of the arbitrators. An important responsibility is filing the procedures during the proceedings and maintaining them filed after the end of the case, given that the activities of the AMC are always subject

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to the possibility of requisition inherent in the formation of the judicial proceeding that may be incumbent upon the state jurisdiction to be subsequently invoked by either party. Therefore, one can see that the General Secretary is the conductor of all this orchestra, which is tuned by the quality standards adopted. In the defense of these standards, the AMC decided to improve them by adopting the ISO 9001 certificate, in respect of the users of the services provided by the CAM/CCBC. The bylaws of the BCCC attribute to the Vice President in arbitration the duties of an ombudsman.

Article 3 As I explained at the beginning of this unpretentious analysis, it is relatively little didactic to focus on the structure presented in Article 2 without addressing Article 1 and making some considerations about Article 3 of the new CAM/CCBC Rules. Therefore, this article deals with the individual position of each arbitration institution that presents itself to carry out the management of an Arbitration Proceeding. It was clear in the previous topic that there is a perfect separation between the act of choosing the Rules of an entity as a procedure rule and the choice of arbitrators (or arbitrator) who shall ultimately render an award expected by the parties that elected the private jurisdiction. Therefore, one consideration is to adopt the institutional arbitration system, indicating a certain set of Rules that outline the proceeding, without the concern for the parties, after the choice of the arbitrator, to establish their ad hoc itinerary, i.e., a customized one for a certain specific legal situation, without loss of the legitimacy granted by law in the obtainment of the award expected by the parties. On the other hand, the primary duty of the Arbitrator is to deserve the trust of the parties, and as such, his/her choice shall be persons who can assure their declared independence, in addition to their expertise about the main subject, diligence and willingness to decide and discretion, which means confidentiality. Those qualities are justified by the fact that the arbitration proceeding is a fact of private jurisdiction, based on the ethical behavior of the parties and arbitrators, which carries with it the objective good faith that accompanies them since the completion of the subjacent agreement in which the arbitration agreement is established. Nevertheless, the result of the judgment is the award and, in order to be valid and effective, it shall present a typified form to demonstrate its existence. And, at this time, the arbitration entity that is not involved in the decision of the Tribunal (or of the single arbitrator) lacks legitimacy to evaluate whether the decision is rendered in the form of an

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Article 2 – Name, Head Office, Purpose and Composition of the CAM/CCBC

arbitration award that, under the Brazilian legal system, is composed of mandatory and successive parts in order not to be subject to nullity or annulment.4 The mandatory requirements of the arbitration award are: report; statement of reasons of the decision; provision (together with liquidation) and date and place of rendering of the award. As these are indispensable elements, over time some institutions have the habit of collecting experts in the activity, by listing them in a chart whose qualities are concluded from the acknowledgment of the Advisory Board. Considering this acknowledgment of qualities in light of the need for the legal knowledge to format the award, it may be convenient that the institutions recommend that the odd member of the Arbitral Tribunal be a name contained in the list of the jurists. The rule of subarticle 3.1 establishes the maximum number of listed members, whose occasional renewal takes place every five years, in view of the vacancies occurred, as provided for by item 3.2. Likewise, the list is used by the President of the Arbitration Center when carrying out the supplementary or subsidiary appointment of arbitrators, as well as pursuant to subarticle 4.9, to the arbitrators for the exclusive appointment of the arbitrator who shall be the President of the Arbitral Tribunal (or the single arbitrator).

Conclusion Considering the evolution I witnessed of the applicability of a private jurisdiction that is necessarily consensual between the parties to an agreement, as the contractual/jurisdictional nature of the arbitration, which causes resorting to the judiciary to be postponed as a subsequent step, I decided to start with the historical environment that has most benefited from this specific method of resolution of disputes which, such as in the international agreements, has been extensively applied. I felt inspired by the work developed until now by Luiz Olavo Baptista in courts without state sovereignty, such as in the case of international contracts or international agreements that seek to mitigate such absence. I therefore sought to obtain the support of this distinguished Professor in order to develop this brief study about the construal and integration of agreements in the light of their subjection to the arbitration method of providing its specific relief, in such a manner as to generate legal effects by the power of the acknowledgment of the foreign award as it has been benefited by the domestic award. Luiz OIavo5 points out that:

4 5

Law No. 9307/76 – Art. 33. Baptista, Luiz Olavo, “Contratos Internacionais,” Lex Magister, São Paulo, 2011, p. 18 A.

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The arbitration clause is distinguished for being generic, aiming at resolving an undefined number of divergences, while the arbitration commitment is specific and aims at the resolution of one or more already existing and defined disputes. It is the future conditional tense as opposed to the present tense. Inspired by that, we may say that the arbitration clause works on a future controversial fact that the parties decided to elect as the resolution method upon the completion of the subjacent agreement, i.e., the option to maintain the agreement subject to the requirement to naturally resort where any disputes subject to arbitration appear during the performance of the agreement. In other words, the arbitration commitment is solely the prior decision of the parties to irrevocably adopt the arbitration jurisdiction by means of the clause establishing the jurisdiction (‘cláusula cheia’) or not establishing the jurisdiction (‘cláusula vazia’), but mandatory since the completion of the agreement and with its use legitimated by the appointment of the arbitrators ‘ex lege.’ The opposite situation occurs when the intent of the parties to be subject to an award arises without the prior establishment of the arbitration agreement, which is solely agreed when the dispute appears during the performance of the agreement. In this case, the arbitration commitment is then entered into in a separate instrument, which shall take to the arbitration these facts or all of those that may be subject to arbitration. Note that, in both cases, the arbitration agreement is an independent fact that remains valid and effective until all disputes originated from the agreement have been resolved, including its full termination without expiration of the arbitration agreement, which shall continue to generate its own effects. This is a collective work, based on the latest Rules of the CAM/CCBC (Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada), which serves as the adjective law that shall be respected by anyone who intends to resort to it as a rule of specific and mandatory procedure to take part in the arbitration jurisdiction. The Rules shall be prepared by an institution legitimated for the organization and management of an arbitration proceeding that fulfills the intentions of the parties electing the arbitration jurisdiction, in order to obtain a decision rendered as a result of the legal prevention. Therefore, it means that the interested parties are not deprived of their full autonomy to compose the arbitration panel, by choosing and indicating capable individuals of age, trusted by them, in an odd number, from one to infinity, instead of being subject to a draw within the scope of the state judiciary. Accordingly, those are the grounds that legitimate the arbitral jurisdiction, i.e., full freedom of the parties to choose those to whom they shall be submitted in the decision, expressed as the arbitration award.

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Article 2 – Name, Head Office, Purpose and Composition of the CAM/CCBC

Once the arbitration agreement is in effect, the party interested in the of the agreement shall submit a request to the CAM/CCBC stating its intention to form the tribunal to submit the dispute to the committed institutional arbitral jurisdiction for the proper measures. The institutional arbitration to be managed by the CAM/CCBC enables the parties to analyze, among them, the expertise of each of the persons that they intend to appoint as arbitrators, informing their intention to verify the availability and independence of the arbitrators. The committed proceeding between the parties starts with the express acknowledgment of the contractual rules that govern the three-sided agreement among the parties, the arbitrators and the institution in which the Tribunal already appears with jurisdiction, potentially having grounds, i.e., the principle of competence/competence that attributes to it the power of decision on the entire matter of knowledge and provisional remedy, that implies the organization of the implemented arbitration. The hermeneutics, as an interpretative method, shall be present by permeating the resolution way of thinking to be stated by the arbitrator, who always makes us think about the ‘reason why.’ In the first place, owing to the fact that the Law guides us to a conclusion that may or shall be weighted as an objective rule that shall be started to be read as a rule applied to a certain factual situation and, at that moment, the height of the objective rule is left behind to validate it in a subjective manner for the interested parties. The timing is no longer merely construal, but especially of its understanding as applicability of the statement to the verified facts. Within the chosen Law, the rules that would be considered applicable may be shown to be distant, not enabling the consolidation of its provision as the fact per se. Then, there appears the need to analyze the intended legal business as it had been undertaken by the parties, when what is preliminarily sought is the integration of the intents to a text that may be classified in the legal rule by analogical means, seeking in the elected rule the possibility of resolution of the dispute. As properly emphasized by Eros Grau,6 “the rule is produced by the interpreter, not only based on elements obtained in the normative wording (‘what should be’) but also based on elements of the case to which it shall be applied, i.e., based on the reality data (‘what is’).” The arbitrator, by starting with the most detailed knowledge possible, with the reading of the wording of the agreement subjacent to the arbitration, being aware of the applicable law and language, shall seek the construal by taking into account these elements present in the consensus to the subordination to the arbitration award, as the grounds of the

6

Grau, Eros Roberto, “Interpretação/Aplicação do Direito,” 2nd ed., Malheiros, São Paulo, 2003, p. 31.

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arbitration award. It is a project of reading, construal and application as previous elements for understanding the fact. However, it is appropriate to add the analysis of the subjacent agreement, not by the literal, grammatical or any other method, but by the effort of integration of the agreement to the parties and to its scope in order to enable the flow, as close as possible to the formation of the convincement of the arbitrator, integrating the intentions consensually stated in the establishment of the legal business that adopted the legal system of the arbitration as the resolution of any disputes arising out of the agreement or of its performance. Integrating does not mean to classify the legal act as a typical fact, the result of which cannot be the expected one, but that it shall be considered as a part of the agreement wording, parallel to the requirements of the expectation. Therefore, the feeling of equality or equitability is then applied between the parties in order for the decision to be reasonable. If between heaven and hell there is always purgatory, why not pay proper attention to it? And so proceeds the arbitrator …

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Article 3 – List of Arbitrators Thiago Marinho Nunes* 3.1. The List of Arbitrators, composed of up to one hundred (100) members, is constituted of professionals domiciled in Brazil or abroad, with flawless reputation and recognized legal expertise, who are appointed by the President of the CAM/CCBC, with the Advisory Committee being heard, for a period of five (5) years, with reappointment allowed. 3.2. The President of the CAM/CCBC, with the Advisory Committee being heard, can replace any member of the List of Arbitrators.

1

Introduction

Brazil is an up and coming country for international arbitration.1 The number of procedures has greatly increased since the promulgation of the Brazilian Arbitration Act enacted in 1996 along with the evolution of Brazilian jurisprudence, since the landmark decision held in 2001 by the Brazilian Supreme Court, which had declared the constitutionality of the Brazilian Arbitration Act.2 Recent statistics show an increase both in the number of arbitrations seated in Brazil, and in the number of Brazilian parties to international arbitrations. International arbitration is likely to develop further in Brazil. The country’s legal framework is modernized to fulfill today’s business needs. Brazil’s adhesion to the New York Convention in 2002 consolidated the modern arbitration culture and environment, and the Brazilian Judiciary – namely the Superior Court of Justice – is committed to arbitration, binding parties to comply with arbitration clauses and enforcing arbitral decisions. Further on, Brazil has solid arbitral institutions. The most traditional one is the Center of Arbitration and Mediation of the Brazil-Canada Chamber of Commerce (CAM-CCBC). Created in 1979, the pioneering CAM-CCBC has become the most respected Brazilian

* 1

2

The author would like to thank Ms. Ligia Oliveira and Ana Paula Barbosa Mageste, associates at Mattos Muriel & Kestener law firm, for their assistance in developing research for this study. As per Arnold Wald and Selma Lemes: “International commercial arbitration has increased in the last 20 years due to economical, political, cultural and juridical reasons. Globalization increased commercial trade and international investments worldwide, having more intensely benefited emerging economies. Brazil ceased to play a peripheral role, having become one of the ten largest economies in the world and, at the same time, consolidating its leadership in South America. Instead of eventually receiving investments, Brazil became an international partner and an investor in several foreign countries.” (Wald, Arnoldo; Lemes, Selma. Arbitragem comercial internacional: a Convenção de Nova Iorque e o direito brasileiro. São Paulo: Saraiva, 2011. p. 9.) Sentença Estrangeira Contestada No. 5.206-7 – Reino Unido da Espanha, Rel. Min. Sepúlveda Pertence.

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arbitral institution. It is safe to say that the aforementioned institution is the national arbitration center best fit to handle international arbitrations today in Brazil.3 Aware of the rising number of international disputes and their complexity, CAM-CCBC updated its Arbitration Rules in 2012. CAM-CCBC’s Arbitration Rules has maintained one of its ‘assets’ – a differential characteristic – which is the List of Arbitrators. Section 3 reads as follows: Section 3 – List of Arbitrators 3.1. The List of Arbitrators, composed of up to one hundred (100) members, is constituted of professionals domiciled in Brazil or abroad, with flawless reputation and recognized legal expertise, who are appointed by the President of the CAM/CCBC, with the Advisory Committee being heard, for a period of five (5) years, with reappointment allowed. 3.2. The President of the CAM/CCBC, with the Advisory Committee being heard, can replace any member of the List of Arbitrators. The commentaries on Section 3 presented herein are aimed at emphasizing (1) the importance of a List of Arbitrators as a qualification mechanism of Arbitral Tribunals and (2) the interesting example of CAM-CCBC’s Arbitration Rules in the constitution of Arbitral Tribunals.

2

Lists of Arbitrators as a Qualification Mechanism of Arbitral Tribunals

Parties’ freedom to appoint arbitrators has been recognized as one of the hallmarks of arbitration, as well as one of its benefits.4 Indeed, Redfern and Hunter emphasize that the

3

4

“Today, the country [Brazil] is highly regarded worldwide and, for that to happen, it is not enough having a good arbitration law. Above all, it is necessary having Judiciary’s support, which gives credibility to this method, in order to attract international arbitrations. Fortunately, Brazil has both, added to the CAM-CCBC’s excellent reputation and to the cost-benefit it offers, all of which give strength so that the internationalization movement is successful.” (Pinto, José Emílio Nunes. Publicação especial sobre Arbitragem da Revista BrasilCanadá. São Paulo: Câmara de Comércio Brasil-Canadá, 2010. pp. 24-25.) Parties’ opportunity to appoint its arbitrator is embodied in a large number of arbitration acts, notably in UNCITRAL Model Law, which sets forth in its Art. 11(3): “in an arbitration with three arbitrators, each party shall appoint one arbitrator (…)”.

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Article 3 – List of Arbitrators choice of Arbitral Tribunal is critical to the success of the arbitral process.5 Therefore, the constitution of the Arbitral Tribunal is definitely a key issue. Charles N. Brower states that parties’ appointments are adequate for several reasons.6 First, the parties would be in the best position to identify the knowledge, skills and expertise desired in an arbitrator, for they are the ones that better know the nuances of their case. Second, parties would tend to have greater faith in arbitral proceedings if they participated in the constitution of the Arbitral Tribunal. Finally, parties’ role constituting the Arbitral Tribunal would legitimate the decision rendered and possibly prevent the award from being challenged. If parties opt for an institutional arbitration, relying on an arbitral institution to organize the proceedings,7 the Rules of Arbitration will determine the method of constitution of the Arbitral Tribunal – whether or not there will be unilateral appointments, who may be appointed as arbitrator, etc. Some of those institutions offer a List of Arbitrators, which can be binding or not. A Binding List of Arbitrators requires all nominees to be found on a list of qualified arbitrators. In other words, parties can appoint as arbitrators only members of that list. There are several examples of binding lists of arbitrators: the Arbitration Court attached to the Czech Chamber of Commerce (CAC) (as per Section 3.1),8 International Arbitration

5

6

7 8

“Once a decision to refer a dispute to arbitration has been made, choosing the right arbitral tribunal is critical to the success of the arbitral process. It is an important choice not only for the parties to the particular dispute, but also for the reputation and standing of the process itself. It is, above all, the quality of the arbitral tribunal that makes or breaks the arbitration and it is one of the unique distinguishing factors of arbitration as opposed to national judicial proceedings.” (Blackaby, Nigel; Partasides, Constantine; Redfern, Alan; Hunter, Martin. Redfern and Hunter on International Arbitration. New York: Oxford University Press, 2009. p. 246.) Brower, Charles N. The (Abbreviated) Case for Party Appointments in International Arbitration. American Bar Association, Section of International Law, International Arbitration Committee, 2013, Volume 1, Issue 1. pp. 10-13. As per Arts. 5º and 13, §3, of the Brazilian Arbitration Act. “Section 3(1) Disputes shall be resolved only by arbitrators registered on the listofarbitrators as of the date of commencement of the proceedings. On request of a party, the Board may decide on registration of an arbitrator exclusively for a given dispute (ad hoc). This shall not apply to a sole arbitrator or presiding arbitrator.”

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Thiago Marinho Nunes Chamber of Paris (CAP) (as per Section 6)9 and the Centre of Conciliation and Arbitration of the Argentine-Brazilian Chamber of São Paulo (as per Section 3.2.1).10 A Nonbinding List of Arbitrators does not require appointments to be made within the List of Arbitrators. However, the rules might encourage nomination of members of its list, as does the World Intellectual Property Organization (WIPO) Arbitration Rules for Film and Media as per Section 14.11 In doing so, the institution establishes an expected standard for the Arbitral Tribunal and offers prequalified suggestions on the choice of Arbitral Tribunal. Nonetheless, it maintains parties’ prerogative to appoint whoever they see fit. According to Carlos Alberto Carmona, both parties and lawyers are often misinformed about arbitral institutions’ List of Arbitrators.12 Carmona emphasizes it is important to analyze the List of Arbitrators before choosing an arbitral institution, with an evaluation of whether the members of that List of Arbitrators possess the skills, expertise and reputation desired. In recent years, a debate arose regarding the reliability of unilateral appointments in order to constitute an impartial Arbitral Tribunal, one that would be worthy of both parties’ trust.13 Compliant with most pieces of legislation, the appointment of the arbitrators is unilateral. In other words, either the parties reach an agreement on having a sole arbitrator to judge the controversy or each party shall appoint a different arbitrator, and usually, these two arbitrators will select in mutual agreement someone who will chair the panel. Nonetheless, it is expected that all arbitrators shall be and shall remain free from bias throughout the proceedings.

9

10 11

12 13

“6. The Arbitral Tribunals shall be formed by Arbitrators who are either nominated or appointed according to Articles 15, 18 or 35 herein. When Arbitrators are appointed by the International Arbitration Chamber of Paris, they are selected, without prejudice to the exception provided for in Article 9, from the Single List of Arbitrators drawn up according to the provisions of Article 8 herein. The parties have the right to appoint an arbitrator who is not on the list of the International Arbitration Chamber of Paris, provided that said arbitrator adheres to the Code of Ethics of the International Arbitration Chamber of Paris and meets the conditions laid down in Article 7. The appointment of this arbitrator is within the competence of the Chairman of the International Arbitration Chamber of Paris.” “3.2.1 The General Secretary will request each party to appoint an arbitrator member of the List of Arbitrators of the Centre of Conciliation and Arbitration of the Chamber.” “14 (a) the center shall maintain, in its discretion, and publish a special list of neutrals, comprising arbitrators, mediators and experts with specific knowledge in film and media disputes. (b) neutrals shall be appointed from that list. However, in appropriate circumstances (e.g., where the parties make such nomination), neutrals with relevant qualifications may also be appointed from outside that list.” Carmona, Carlos Alberto. Arbitragem e Processo: um comentário à Lei 9.307/96. São Paulo: Atlas, 2009. p. 234. The original concept that legitimates arbitration requires that both parties should trust the arbitrators. Art. 13 of the Brazilian Arbitration Act sets forth that “any individual with legal capacity, trusted by the parties, may be appointed as arbitrator.”

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Article 3 – List of Arbitrators

Most of these pieces of legislation mention the term ‘trust’ for the appointment of the panelists, that is, the arbitrator may be any person who has the trust of the parties. Article 13, paragraph 6th of Brazilian Arbitration Act sets forth that “in performing his duty, the arbitrator shall proceed diligently, efficiently, independently and shall be free and remain free from bias”. Likewise, International Bar Association (IBA) Rules of Ethics for International Arbitrators sets forth that “international arbitrators should be impartial, independent, competent, diligent and discreet.” In a recent and acclaimed speech at the University of Miami in 2010,14 Jan Paulsson questioned the merits of party-appointed arbitrators. Paulsson states that the reasons for parties’ attachment to the practice of unilateral appointments are ill-conceived: Disputants tend to be interested in one thing only: winning. They exercise their right of unilateral appointment, like everything else, with that overriding objective in view. The result is speculation about ways and means to shape a favorable tribunal, or at least to avoid a tribunal favorable to the other side – which is logically assumed to be speculating with the same fervor, and toward the same end. Forgotten is the search for an arbitrator trusted by both sides. Further on, Paulsson noticed that dissenting opinions or defeated votes from members of the Arbitral Tribunals were almost invariably rendered by the arbitrators appointed by the losing party.15 In this scenario, Paulsson states that unilateral appointments create a problem of inconsistency with one of the fundamental premises of arbitration: the confidence trust in the arbitrators.16 Therefore, Paulsson suggests the following: The best way to avoid such incidents is clearly to forbid or at least rigorously police the practice of unilateral appointments. This would involve a significant change in prevailing practice of unilateral appointments (…) The only decent solution – heed this voice in the desert! – is thus that any arbitrator, no matter the size of the tribunal, should be chosen jointly or selected by a neutral body. 14 Paulsson, Jan. Moral hazard in international dispute resolution. Inaugural lecture as holder of the Michael R. Klein distinguished scholar chair. University of Miami School of Law. 29 April 2010. Available on Access on 25 April 2014. 15 According to Jan Paulsson: “Two recent studies of international commercial arbitrations have revealed that dissenting opinions were almost invariably (in more than 95% of the cases) written by the arbitrator nominated by the losing party” (Paulsson, Jan. Op. cit.). 16 “The fact that dissenting arbitrators are nearly always those who have been appointed by the party aggrieved by the majority decision does not in and of itself point to a failure of ethics. It may simply be that the appointing party has made an accurate reading of how its nominee is likely to view certain propositions of law or circumstances of fact. The problem is that the inevitability of such calculations proves that unilateral appointments are inconsistent with the fundamental premise of arbitration: mutual confidence in arbitrators” (Paulsson, Jan. Op. cit.).

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Thiago Marinho Nunes

Paulsson believes institutional appointments would enable the achievement of a qualified and truly impartial Arbitral Tribunal. Paulsson’s article in American Bar Association’s Section of International Law17 pointed out that institutional appointments are a feature of the London Court of International Arbitration (LCIA) Rules of Arbitration, as per the combined effect of Sections 5.518 and 7.1.19

3

Constitution of the Arbitral Tribunal: CAM-CCBC’s Arbitration 20 Rules Interesting Example

Arbitration centers tend to become all very similar, and arbitration rules tend to follow a similar pattern.21 It is necessary to find specificities that, case by case, will make it possible to choose among them. A good example of a ‘distinctive ring’ is the scrutiny of the arbitration sentence specified in ICC’s Arbitration Rules,22 which undoubtedly offers great security for the parties that contend in the arbitration, attesting to the quality of the award. Among the various arbitration rules provided by Brazilian institutions, CAM-CCBC’s is noteworthy. If, on the one hand, the Arbitration Rules of the institution do not provide the scrutiny of the award as the ICC does, on the other hand, there is a notable concern with the constitution of the Arbitral Tribunal, a key issue of any arbitration. Unilateral appointments are still the most common practice. Brazilian Arbitration Act provides that the parties shall appoint one or more arbitrators, keeping the arbitration tribunal always in an odd number.23 However, considering that the law further allows parties the adoption of the rules of an arbitration institution to govern the procedure,24 17 Paulsson, Jan. Must we live with unilateral appointments? American Bar Association, Section of International Law, International Arbitration Committee, 2013, Volume 1, Issue 1. pp. 5-9. 18 “5.5 The LCIA Court alone is empowered to appoint arbitrators. The LCIA Court will appoint arbitrators with due regard for any particular method or criteria of selection agreed in writing by the parties. In selecting arbitrators consideration will be given to the nature of the transaction, the nature and circumstances of the dispute, the nationality, location and languages of the parties and (if more than two) the number of parties.” 19 “7.1 If the parties have agreed that any arbitrator is to be appointed by one or more of them or by any third person, that agreement shall be treated as an agreement to nominate an arbitrator for all purposes. Such nominee may only be appointed by the LCIA Court as arbitrator subject to his prior compliance with Article 5.3. The LCIA Court may refuse to appoint any such nominee if it determines that he is not suitable or independent or impartial.” 20 For further information on this subject, please see: Nunes, Thiago Marinho; Silva, Eduardo da; Guerrero, Luis Fernando.O Brasil como sede de arbitragens internacionais: a capacitação técnica das câmaras arbitrais brasileiras. Revista de Arbitragem e Mediação, São Paulo, Jul/Set 2012, ano 9, n. 34. pp. 119-158. 21 “The rules of these arbitral institutions tend to follow a broadly similar pattern.” Blackaby, Nigel; Partasides, Constantine; Redfern, Alan; Hunter, Martin. Redfern and Hunter on International Arbitration. New York: Oxford University Press, 2009. p. 55. 22 Art. 27 of the 2011 ICC’s Arbitration Rules. 23 Art. 13 of Brazilian Arbitration Act sets forth: “The parties shall appoint one or more arbitrators, always in an odd number, being able to appoint, also, their respective substitutes.” 24 As per Arts. 5 and 13, §3, of the Brazilian Arbitration Act.

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Article 3 – List of Arbitrators

the composition of the Arbitral Tribunal will be based on it. And, with regard to this specific point, the Arbitration Rules provided by CAM-CCBC offer comfort and security to the parties. Indeed, pursuant to the Arbitration Rules of the aforementioned center, it is certain that the parties may appoint arbitrators of their choice,25 but whoever chairs the panel will preferably be one of the members of CAM-CCBC’s List of Arbitrators (Section 4.9.2).26 Even more emblematic is the fact that, once the inertia of the parties regarding the appointment of arbitrators (specifically in the case of a sole arbitrator) is proven, the President of CAM-CCBC shall appoint the arbitrator, and the choice should be made on the basis of CAM-CCBC’s List of Arbitrators (Section 4.12).27 This provision guarantees that the selection process of the appointed arbitrator will be untainted. Parties can be assured that, in the hypothesis of a pathological situation, the arbitrator appointed by CAM-CCBC will be a member of a prequalified List of Arbitrators. Another role of the List of Arbitrators is noteworthy. The trial of a possible Removal Incident of an arbitrator that is considered disabled or questionable by one of the litigating parties shall be decided by a committee of three arbitrators (indicated by the President of CAM-CCBC), which will be chosen from this List of Arbitrators (Section 5.4).28 It is another procedural rule that generates security to the parties, guaranteeing the effectiveness of the arbitration procedure and of the future ruling.

25 Subject, however, to confirmation by the President of CAM-CCBC, as it is stated in Section 4.4.1: “The parties may freely indicate the arbitrators that will compose the Arbitration Tribunal. However, if the indication is not of a professional that is part of the List of Arbitrators, it must be accompanied by the resume of the candidate, which will be subjected to approval of the President of CAM-CCBC.” 26 “4.9.2 On an exceptional basis and based on a reasoned justification and approval of the President of the CAM/CCBC, the arbitrators chosen by the parties can appoint a person who is not a member of the List of Arbitrators as President of the Arbitral Tribunal.” 27 “4.12. If either of the parties fails to appoint an arbitrator or the arbitrators appointed by the party fail to appoint the third arbitrator, the President of the CAM/CCBC will make this appointment from among the members of the List of Arbitrators.” 28 “5.4. The parties can challenge the arbitrators for lack of independence or impartiality or for other justified reason within fifteen (15) days from awareness of the fact. The challenge will be decided by a Special Committee composed of three (3) members of the List of Arbitrators appointed by the President of the CAM/CCBC.”

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Thiago Marinho Nunes Therefore, CAM-CCBC’s Arbitration Rules, unlike other institutions,29 retains this type of ‘asset’ or differential,30 providing a mechanism for qualification of the Arbitral Tribunal, given that its President – the arbitrator who must take control of the proceedings –31 is likely to be one of the members of CAM-CCBC’s List of Arbitrators. This is precisely the point of balance provided by this regulation, and that fits consistently in international arbitration. It can be seen, indeed, that the arbitration institution somehow ensures the tranquility of processing, as the two other arbitrators, who do not chair the processing of the deed, may be experts in specific areas of the dispute and not even Brazilian. The rule is, thus, significant: it contributes toward ensuring an adequate treatment of procedural and bureaucratic matters, relating to the local law, by virtue of the intervention of the President of the Arbitral Tribunal. These issues are, as a rule, the ones that most disturb the arbitral proceedings. Similarly, arbitration with international features feels welcomed by the presence and participation of arbitrators accustomed to the many possible themes, including those that pertain specifically to international themes.

4

Conclusion

Given the recent strengthening of arbitration in Brazil and also worldwide, multiple arbitration institutions have sought for inserting special provisions in their arbitration rules, creating real ‘assets’ for the benefit of the arbitration community.

29 It is this difference that is cleared up by Eduardo Silva regarding, generally speaking, the advantages given by the institutional arbitration: “To overcome the many technical and judicial difficulties of implementing the arbitral clause, the support given by the arbitration institutions is integral. (…) These institutions are characterized by a profound specialization in the exams of matters pertaining to international commerce, possessing an ample body of arbitrators credited by both parties. When controversy occurs, and if there is an arbitration clause that links to an institution, the arbitrators may be immediately nominated by it” (Silva, Eduardo da. Arbitragem e direito da empresa: dogmática e implementação da cláusula compromissória. São Paulo: RT, 2003. p. 150.) 30 A completely neutral solution in the constitution of the Arbitral Tribunal, according to Jan Paulsson, would be exemplified in the method imposed by the Court of Arbitration of Sport (CAS). According to him, “The CAS solution is to require all nominees to be found on a list of qualified arbitrators. It is of crucial importance that this be lengthy and inclusive, containing names from all over the world. (In 2008, there were 267 arbitrators on the CAS list). Any party is free to choose the arbitrator it considers the best of its case. However selfish its motivations, it is restricted to this list of prequalified individuals – and it knows that the same is true for its opponent” (Paulsson, Jan. Op. cit.) 31 “In addition to the importance of choosing the right arbitrator for appropriate knowledge of the relevant substantive area of law, it is particularly important for parties to recognize the importance of experience in arbitration, particularly for a sole arbitrator or the presiding arbitrator, who must effectively take control of the proceedings.” (Blackaby, Nigel; Partasides, Constantine; Redfern, Alan; Hunter, Martin. Redfern and Hunter on International Arbitration. New York: Oxford University Press, 2009. p. 246.)

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Article 3 – List of Arbitrators

Hence, some institutions have developed a List of Arbitrators linked to their respective arbitration rules. In some cases, arbitration institutions restrict parties’ choice to the names of such a list; in others, the latter is deemed just a reference to arbitration players. In this regard, CAM-CCBC’s provisions for choosing the arbitrators of arbitration proceedings have been greatly instrumental in fulfilling its role in Brazilian arbitration culture. Once its Arbitration Rules determine that only the President of the Arbitral Tribunal may preferably be a member of the List of Arbitrators of its own, CAM-CCBC fosters, at the same time, the cornerstones of arbitration as a whole: the parties’ autonomy and the accurate exercising of jurisdiction.

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Chapter II – The Arbitration Proceedings

Article 4 – Commencement of the Arbitration Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi 4.1. The party desiring to commence an arbitration will notify the CAM/CCBC, through its President, in person or by registered mail, providing sufficient copies for all the parties, arbitrators and the Secretariat of the CAM/CCBC to receive a copy, enclosing: (a) A document that contains the arbitration agreement, providing for choice of the CAM/CCBC’s to administer the proceedings; (b) A power of attorney for any lawyers providing for adequate representation; (d) A summary statement of the matter that will be the subject of the arbitration; (d) The estimated amount in dispute; (e) The full name and details of the parties involved in the arbitration; and (f) A statement of the seat, language, law or rules of law applicable to the arbitration under the contract.1 Article 4.1 of the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (CAM/CCBC) rules deals with the commencement of an arbitral proceeding. Assuming an arbitration agreement signed by the parties, whenever a dispute arises out of such contractual relationship, the damaged party should notify the CAM/CCBC’s President, requesting the commencement of an arbitration. Such a notification must contain all the information and documents listed in Article 4.1. Having said this, there are specific issues that deserve closer analysis, as follows. Naturally, under the provision set forth by Article 4.1(c), the claimant may determine and describe the scope of the dispute at his own will; however, regard must be given to the minimum level of information that the claimant must provide to ensure the validity of his notification. According to Professors Lew, Mistelis and Kröll, such notification must clearly inform all the parties involved in the dispute that a specific dispute is being submitted to arbitration. In other words, the respondent(s) must be able to make an informed choice whether it (they) agree(s) to arbitrate the dispute or not. Thus, the respondent(s) must be sufficiently informed about the nature of the dispute and not solely that a dispute has been initiated.2

1 2

Comments by Eduardo Ono Terashima and Rafael Villar Gagliardi. See more in Julian D.M. Lew, Loukas A. Mistelis and Stefan M. Kröll, Comparative International Commercial Arbitration, The Hague: Kluwer Law International, 2003, p. 515.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi In CAM/CCBC’s proceedings, the request for arbitration must also contain a copy of the arbitration agreement specifically appointing CAM/CCBC as the arbitral institution responsible for the administration and management of the procedure. This is of paramount importance since, without such an evidence, the CAM/CCBC will not be able to take the measures needed to commence arbitration, resulting in undesired delays. It is worth noting that the amount involved in the dispute is useful information to the respondent. It is a fact that in many cases the claimant will not have enough elements to calculate the amount involved in the claim when filing the request for arbitration. However, the claimant shall provide at least an estimate of such an amount to assist the respondent in making an informed choice as to whether to arbitrate or not. Besides that, according to Article 4.1(f), the request for arbitration must contain express reference to “the seat, language, law or rules of law applicable to the arbitration.” Such provisions, in most cases, may be obtained directly from the arbitration agreement or the contract itself. Nevertheless, in view of its great importance to the arbitration, CAM/CCBC Rules requires the claimant to make a clear statement about such issues at the outset of the arbitration. Finally, a valid request for arbitration gives rise to different legal consequences.3 For instance, once an arbitration has commenced, the claimant will not be entitled to withdraw his claim without the prior consent of all the parties involved in the dispute. Besides that, many arbitrators use the commencement of arbitration as the date the interest described in the award should accrue. Another legal consequence that arises from the request of arbitration is its impact on time limits issues. As one is aware, in most countries, the request for arbitration stops the running of time limits applicable to the claim (statutory and contractual). This means that a valid and timely request for arbitration is capable of setting aside the time limit issues. Furthermore, ensuring that the request for arbitration is timely filed guarantees that the arbitral tribunal will render a valid and enforceable decision on the merits of the case. On the other hand, when problems regarding the validity of the request for arbitration arises, the time limits issues may be relevant. For example, the claimant sends a notice requesting the commencement of an arbitration without the copy of the arbitration agreement. It is his last day before his claim is barred by a limitation period. Even if days later the claimant amends his request for arbitration, he will be running the risk of having an arbitral award declaring that the claim is statute barred under the applicable law. 4.2. The party will attach proof of payment of the Registration Fee together with the notice, in accordance with article 12.5 of the Rules.4

3 4

See more in Julian D.M. Lew, Loukas A. Mistelis and Stefan M. Kröll, op. cit., pp. 506-514. Comments by Eduardo Ono Terashima and Rafael Villar Gagliardi.

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Article 4 – Commencement of the Arbitration

Arbitration constitutes a private dispute resolution method, by which parties remove from the Court Systems the power to ultimately decide a certain dispute on the merits. Although it certainly bears a jurisdictional element,5 the fact remains that it is private and arbitration institutions and centers provide private services – of paramount importance – when they administer arbitration proceedings. As one should expect, this service comes at a price, payable by the parties, each one initially bearing its own expenses, which may be allocated by the arbitral tribunal later on in the award. Article 4.2 of the CAM/CCBC Rules dictates that the claimant must attach proof of payment of the Registration Fee to the Notice that is to be sent to the President of the CAM/CCBC, according to the terms of Article 4.1 of the Rules, requesting commencement of the arbitration proceedings. Payment of the Registration Fee must be made in accordance with Article 12.5 of the Rules and the Table of Expenses. The Registration Fee is not subject to setoff nor shall it be reimbursed. The provision serves yet another purpose, which is that of discouraging manifestly inappropriate requests. For instance, a party might wish to misuse arbitration, such as starting frivolous proceedings merely to reach a good settlement, perhaps taking advantage of a delicate position of the respondent, such as being a listed company that will be affected by the news of the existence of the dispute, or undergoing a merger process that may also have a material adverse effect in the evaluation of the target price. 4.3. The Secretariat of the CAM/CCBC will send a copy of the notice and respective documents that support it to the other party, requesting that, within fifteen (15) days, it describe in brief any matter that may be the subject of its claim and the respective amount, as well as comments regarding the seat of arbitration, language, law or rules of law applicable to the arbitration under the contract.6 Displaying strict adherence to the due process of law clause, Article 4.3 dictates that the Secretariat of the CAM/CCBC shall send a copy of the notice of commencement of arbitration, as described in Article 4.1 of the Rules, to the respondent(s). The notice shall be accompanied with copies of all the supporting documents delivered to the CAM/CCBC by the party that requested commencement of the arbitration. This is designed to allow respondent(s) to be fully aware of the state of the proceedings until receipt of the notice. The notice must also invite respondent(s) to make a brief description of any matters that may be subject to counterclaim(s) and the corresponding amount(s). In addition and within the same term, respondent(s) shall be invited to make any comments regarding 5

6

A discussion about the nature of arbitration, either contractual, jurisdictional or even a third way, would not within the scope of the Commentary to this provision. It suffices to say that, whatever its nature, the jurisdictional element is a strong one in arbitration. Comments by Eduardo Ono Terashima and Rafael Villar Gagliardi.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi indication of seat of arbitration, language, law or rules of law applicable to the arbitration under the contract, which comprises the exact content of Article 4.1(f) of the Rules. Naturally, the aim of this last part of the provision is to maintain balance in the proceedings, as respondent(s) must be given the opportunity to object or to put forward any dissenting positions regarding these specific and crucial elements of any arbitration. 4.4. The Secretariat of the CAM/CCBC will send both parties a copy of these Rules and the list of the names of the members of the List of Arbitrators, inviting them to, within fifteen (15) days, each appoint one (1) arbitrator and, optionally, one (1) alternate to constitute the Arbitral Tribunal. 4.4.1. The parties can freely appoint the arbitrators who will constitute the Arbitral Tribunal. However, if a professional who is not a member of the List of Arbitrators is appointed, the appointment must be accompanied by that person’s résumé, which will be submitted for the approval of the President of the CAM/CCBC.7 After the notice of arbitration is sent to the respondent(s) (see Art. 4.3), there are two paths the proceedings may take: (1) if the parties raised any objections to the existence, validity or effectiveness of the arbitration agreement, then such questions shall be submitted to the President of the CAM/CCBC for a prima facie decision (see Art. 4.5); (2) if no such objections are made, then the parties may proceed to the appointment of arbitrators. At this stage in the proceedings, one important question must be raised: have the parties agreed that the arbitration proceedings should be conducted by a sole arbitrator? If the answer is affirmative, then the process for appointment of the sole arbitrator must be observed (see Art. 4.13). However, if the parties expressly opted for the arbitral tribunal to be formed by three arbitrators, or if they were silent as to the number of arbitrators in their arbitration agreements, then the process established in Article 4.4 is initiated. The rules provide no express solution in case the parties chose a multiple number of arbitrators different than three. If Brazil is the seat of arbitration, Brazilian Arbitration Law provides a default rule that an arbitral tribunal must be formed by an odd number of arbitrators.8 Whenever parties have agreed on an even number of arbitrators, those arbitrators are entitled to appoint another arbitrator and, failing such appointment, the State courts may be called upon to appoint this arbitrator.9

7 8 9

Comments by Bryan Longo and Napoleão Casado Filho. Brazilian Arbitration Law (Law No. 9.307/1996) – Art. 13, §1: “The arbitral Tribunal shall be composed of an uneven number of arbitrators. The Parties are free to appoint substitute arbitrators.” Brazilian Arbitration Law (Law No. 9.307/1996) – Art. 13, §2: “When parties have agreed on an even number of arbitrators, the arbitrators are deemed to be entitled to appoint an additional arbitrator. Failing such agreement, the parties shall request the State Court which originally would have jurisdiction to hear the case to appoint such arbitrator, following to the possible extent, the procedure foreseen in Article 7 of this Law.”

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Article 4 – Commencement of the Arbitration

It is, however, arguable whether CAM/CCBC would undertake to administer arbitration proceedings where the number of arbitrators is different than one or three. In our view, this would have to be decided on a case-by-case analysis under Article 2.6(f), or under Article 4.5, if a party raises such question as a matter of validity or effectiveness of the arbitration agreement (which would include questions of arbitration agreements that are allegedly “inoperative or incapable of being performed” under Article II.3 of the 1958 New York Convention). The same rationale would apply if the parties have chosen a different method for the selection of the arbitrators. In the silence of the parties, however, after the respondent(s) reply to the notice of arbitration, the parties will then be asked to appoint an arbitrator and, optionally, an alternate. There is no obligation, under CAM/CCBC Rules, that the party-appointed arbitrator must be a member of the List of Arbitrators. Nonetheless, if a party appoints an arbitrator whose name is not in the List of Arbitrators, the appointment must be accompanied by the arbitrator’s resumé, and the appointment shall be submitted to the President of CAM/CCBC for approval. So although there is a wide range of freedom in appointing an arbitrator under CAM/CCBC Rules, this freedom is governed by the rules and controlled by the Center. Actually, it is expected that the party-appointed arbitrator shall be somebody “with flawless reputation and recognized legal expertise,” as all the members of the List of Arbitrators are. Thus, the appointment is submitted to an approval process that is meant to ensure that only arbitrators with a good knowledge of arbitration proceedings and the trust of the parties will conduct all arbitration proceedings administered by CAM/CCBC. It is important to state that the President’s decision on approving a party-appointed arbitrator does not mean that the other party may not challenge the arbitrator in the proper moment (see Art. 4.8). However, the decision that does not approve the appointment of an arbitrator is final and binding, and the party shall be invited to appoint another arbitrator, preferably from the List of Arbitrators. It is understood that this second appointment should occur within ten days, in analogy to Article 4.10. We may imagine a hypothetical situation where a party insists on appointing an Arbitrator who has already been rejected by the President or who appoints subsequent arbitrators who are not in the List and who do not possess “flawless reputation and recognized legal expertise.”10 10 It should be clarified that the requirement of “flawless reputation and recognized legal expertise,” which is considered to be fulfilled by every member of the List of Arbitrators, according to Art. 3.1, is a general

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi We submit that this conduct shall be interpreted by the President of CAM/CCBC as abusive and he/she must continue with the proceedings, appointing the arbitrator in place of the defaulting party (see Arts. 4.12 and 4.16). The appointment of an alternate arbitrator is not mandatory, but it is advisable, especially when the parties are appointing arbitrators who are not members of the List. In this scenario, in case the parties’ first choice is rejected by the President of CAM/CCBC, it may directly proceed to the analysis of the party`s second choice, in a more time-efficient manner. 4.5. Before the Arbitral Tribunal is constituted, the President of the CAM/CCBC will examine objections regarding the existence, validity or effectiveness of the arbitration agreement that can be immediately resolved, without the production of evidence, and will examine requests regarding joinder of claims, under article 4.20. In both cases, the Arbitral Tribunal, once it is constituted, will decide on its jurisdiction, confirming or modifying the decision previously made. 11 The prima facie exam of the arbitration agreement and the modulation of the competencecompetence principle: Article 4.5 of the CAM/CCBC new Arbitration Rules

1

Introduction

Some readers may be surprised at the use of the expression “modulation of the competencecompetence principle” in the title of this article. Nevertheless, we do not intend to weaken or reduce the importance of this key principle and its essential role in the Brazilian arbitration system. Instead, we aim at analyzing some situations in which the competence-competence principle may not be applied. In this article, we make a nonexhaustive analysis of situations in which the facts or circumstances of the case may justify a modulation of the competence-competence principle, adopting the prima facie exam of the arbitration agreement as the starting point and emblematic example of this discussion. The new Arbitration Rules of the CAM/CCBC, in force since 1 January 2012, expressly provide for this mechanism in its Article 4.5, in a particularly pioneering initiative in Brazil. We will demonstrate that the CAM/CCBC, by including this provision in its new Arbitration Rules, adopted a constructive and premier approach vis-à-vis not only the

requirement that must be fulfilled by any arbitrator under the CAM/CCBC rules. The requirement of legal expertise, however, may be set aside in exceptional cases, in which a different expertise is required, and such requirement is justified to the President of the CAM/CCBC at the time the appointment is made. 11 Comments by Arnoldo Wald, Ana Gerdau de Borja and Maíra de Melo Vieira.

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Article 4 – Commencement of the Arbitration

arbitral proceedings that it administers, but also the arbitration system set forth in the Brazilian Arbitration Law (Law No. 9.307, of 1996), especially with regard to the apparently absolute character of the competence-competence principle in Brazil.

2

The Positive and Negative Effects of the Arbitration Agreement and the Competence-Competence Principle in Brazilian Law

It is widely known that the arbitration clause (“cláusula compromissória”) and the submission to arbitrate (“compromisso arbitral”) are both different types of the arbitration agreement (“convenção de arbitragem”) through which the parties submit any present or future disputes to arbitration (Arts. 3,12 413 and 914 of Law No. 9.307, of 1996). The arbitration agreement has both a positive and a negative effect. The positive effect corresponds to the obligation of the parties to submit any disputes to arbitration, thereby preventing (at least a priori) any recourse to State courts. The negative effect consists in the lack of jurisdiction of State courts to decide the dispute in light of the existence of an arbitration agreement, so that any lawsuit brought by any of the parties before State courts must be immediately terminated without a ruling on the merits. Both effects of the arbitration agreement are key elements of the competence-competence principle, and are expressly set forth in the Brazilian Arbitration Law. With regard to the positive effect, according to Law No. 9.307, of 1996, whenever there is an arbitration agreement, any disputes arising between the parties shall be resolved through arbitration. In case of a “blank” arbitration clause,15 any of the parties may resort to State courts in order to enforce it and oblige the resisting party to submit the dispute to arbitration (Art. 7 of Law No. 9.307, of 1996).16

12 Art. 3, Law No. 9.307, of 1996: “The interested parties may submit the settlement of their disputes to an arbitral tribunal by virtue of an arbitration agreement, which may be in the form of either an arbitration clause or a submission to arbitration (acte de compromis).” 13 Art. 4, caput, Law No. 9.307, of 1996: “The arbitration clause is the agreement whereby contracting parties oblige themselves to settle through arbitration all disputes that may arise relating to the contract.” 14 Art. 9, caput, Law No. 9.307, of 1996: “The submission to arbitration is the judicial or extrajudicial agreement through which parties submit a dispute to arbitration by one or more persons.” 15 The Brazilian Supreme Court (“Supremo Tribunal Federal”, “STF”) used the expression “‘blank’ arbitration clause” when deciding the constitutionality of Law No. 9.307, of 1996. The “blank” arbitration clause does not contain all the elements necessary for the immediate constitution of the arbitral tribunal (Art. 5), so that the execution of a submission to arbitrate (“compromisso arbitral”) (Art. 6) or a lawsuit seeking the enforcement of the “blank” arbitration clause (Art. 7) is necessary. See: STF, Plenary, AgRg-SE 5.206-7/ES, Rep. Justice Sepúlveda Pertence, decided on 12 December 2001. 16 Art. 7, caput, Law No. 9.307, of 1996: “If there is an arbitration clause but resistance as to the commencement of the arbitral proceedings, the interested party may request the Court to summon the other party to appear in Court so that the submission to arbitration may be signed; the Judge shall order a special hearing for this purpose.”

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi The negative effect of the arbitration agreement completes the positive one. Article 267, VII of the Brazilian Code of Civil Procedure17 provides for the dismissal of a lawsuit without a ruling on the merits at the request of any of the parties in light of the existence of an arbitration agreement.18 As a rule, Brazilian courts have strictly applied both effects of the arbitration agreement, either by dismissing lawsuits brought before State courts without a ruling on the merits (Art. 267, VII, of the Code of Civil Procedure), either by enforcing a “blank” arbitration agreement, in case of resistance of any of the parties to submit the dispute to arbitration (Art. 7 of Law No. 9.307, of 1996),19 or by acknowledging conflicts of jurisdiction arising between different arbitral institutions.20 The positive and negative effects of the arbitration agreement are applicable, in principle, even in case of doubts about its existence, validity or effectiveness, from both objective and subjective perspectives (respectively relating to what type of dispute can be submitted to arbitration and who could and should be a party to the arbitral proceedings). This is so because the arbitrator has a chronological priority to decide about those issues, regardless of the jurisdiction of State courts to address them a posteriori, i.e., in case of arbitration seated in Brazil, by means of a lawsuit seeking to set aside the arbitral award

17 Art. 267, VII, Brazilian Code of Civil Procedure: “The case is dismissed, without resolution of merits: (…) VII – for arbitration agreement” 18 The negative effect of the arbitration agreement has also been adopted in Brazil through the ratification of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (‘New York Convention’) (Decree No. 4,311, of 2002). However, differently from the Brazilian Arbitration Law, the New York Convention expressly provides for an exception to this rule, which occurrence shall be verified on a case-by-case basis through a prima facie exam of the arbitration agreement. We will analyze this provision in detail infra. 19 See, for instance: Superior Court of Justice (“STJ”), 4th Panel, Special Appeal (“REsp”) No. 1,082,498/MT, Rep. Justice Luis Felipe Salomão, decided on 20 November 2012; STJ, 2nd Panel, REsp No. 606,345/RS, Rep. Justice João Otávio de Noronha, decided on 17 May 2007, Official Gazette (“DJ”) of 8 June 2007; STJ, 2nd Panel, REsp No. 612,439/RS, Rep. Justice João Otávio de Noronha, decided on 25 October 2005, DJ of 14 September 2006; STJ, 1st Section, Writ of Mandamus (“MS”) No. 11,308/DF, Rep. Justice Luiz Fux, decided on 9 April 2008, DJ of 9 April 2008; Court of Appeal of São Paulo (“TJSP”), Special Chamber of Business Law, Appeal (“AC”) No. 0015713-69.2008.8.26.0152, Rep. Judge José Reynaldo, decided on 27 September 2011; TJSP, 27th Chamber of Private Law, AC No. 9125681-12.2009.8.26.0000, Rep. Judge Berenice Marcondes Cesar, decided on 29 May 2012; Court of Appeal of Minas Gerais (“TJMG”), 16th Chamber of Private Law, AC No. 1.0521.08.078470-0/001, Rep. Judge José Marcos Vieira, decided on 21 January 2011; Court of Appeal of Rio de Janeiro (“TJRJ”), 15th Chamber of Private Law, Interlocutory Appeal (“AgIn”) No. 2009.002.27205, Rep. Judge Celso Ferreira Filho, decided on 25 August 2009; TJRJ, 6th Chamber of Private Law, AC No. 28808/2001, Rep. Judge Gilberto Rêgo, decided on 30 April 2002; Court of Appeal of Rio Grande do Sul (“TJRS”), 17th Chamber of Private Law, AC No. 70036347342, Rep. Judge Elaine Harzheim Macedo, decided on 15 July 2010; TJRS, 15th Chamber of Private Law, AC No. 70034593863, Rep. Judge Niwton Carpes da Silva, decided on 6 July 2011. 20 See the Dissenting Opinion of Justice Nancy Andrighi, which Justice Luis Felipe Salomão followed, in STJ, 2nd Section, Conflict of Jurisdiction (“CC”) No. 113,260/SP, Rep. Justice (for the prevailing Opinion) João Otávio de Noronha, decided on 8 September 2010, DJ of 7 April 2011, Revista de Arbitragem e Mediação, No. 27, Oct./Dec. 2010, p. 337 et seq.

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or to challenge its enforcement (Art. 33 of Law No. 9.307, of 1996), or, in case of an arbitration seated abroad, in the context of a request for recognition and enforcement of the foreign arbitral award. This is the competence-competence principle (kompetenz-kompetenz), which is a corollary of the severability of the arbitration agreement,21 almost universally accepted in comparative law (with some variations from country to country)22 and enshrined in Articles 8, sole paragraph,23 and 20 of Law No. 9.307, of 1996.24 Those legal provisions expressly provide for the ‘chronological priority’ of the arbitrator to decide on any issues or objections relating to the arbitration agreement. Therefore, as Pedro Batista Martins points out, the arbitrator is “the first judge to decide on his/her own jurisdiction.”25 Like the arbitration agreement, under Brazilian Law, the competencecompetence principle also has a positive and a negative effect, both imposing the priority and exclusive jurisdiction of the arbitrator to decide any issues relating to the existence, validity and effectiveness of the arbitration agreement until the rendering of the arbitral award.26 As a rule, Brazilian Law does not provide for any exceptions to the competence-competence principle, so that the latter has a general character and is “directly and automatically applicable,” in accordance with a recent decision of Justice Luis Felipe Salomão of the STJ.27 The purpose of this rule and the intention of the lawmakers when establishing it are crystal clear: to guarantee legal stability and efficiency, both of which are pillars of the

21 Art. 8, caput, Law No. 9.307, of 1996: “The arbitration clause is autonomous from the contract in which it is included, meaning that the nullity of the latter does not necessarily imply the nullity of the arbitration clause” (providing for the severability of the arbitration agreement in relation to the underlying contract). 22 See Gary B. Born, International Commercial Arbitration, Alphen aan den Rijn, The Netherlands: Kluwer Law International, 2009, p. 854 et seq. (on the universality of the competence-competence principle in international and comparative law and the several local particularities). 23 Art. 8, sole paragraph, Law No. 9.307, of 1996: “The arbitrator is competent to decide, ex officio or at the parties’ request, the issues concerning the existence, validity and effectiveness of the arbitration agreement, as well as of the contract containing the arbitration clause.” 24 Art. 20, caput, Law No. 9.307, of 1996: “A party wishing to raise issues as to the jurisdiction, suspicion or impediment of an arbitrator or arbitrators, or as to the nullity, invalidity or ineffectiveness of the arbitration agreement, must do so at the first possible opportunity after the commencement of the arbitral proceedings.” 25 Pedro Batista Martins, Apontamentos sobre a Lei de Arbitragem, Rio de Janeiro: Forense, 2008, p. 137 (free translation from the Portuguese original). 26 See Emmanuel Gaillard, “O efeito negativo da competência-competência”, Revista Brasileira de Arbitragem, No. 24, Oct./Dec. 2009, pp. 220-222 (“In its positive effect, such principle [competence-competence] provides the arbitrator with jurisdiction to decide any objections in relation to his/her own jurisdiction (…). In its negative effect, the competence-competence principle applies to State courts. It is a continuation of the negative effect of the arbitration agreement, preventing State courts from deciding, at the request of one of the parties in a dispute, any issues relating to the existence or to the validity of the arbitration agreement before the arbitrators do it, in spite of the existence, at least prima facie, of an arbitration agreement.”) (free translation from the Portuguese original). 27 STJ, 4th Panel, REsp No. 1.278.852/MG, Rep. Justice Luis Felipe Salomão, decided on 21 May 2013, DJ of 19 June 2013.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi effectiveness and success of arbitration. It would be nonsense to request the parties to spend years litigating before State courts in order to enforce an arbitration agreement previously executed in good faith to eventually arbitrate the dispute, when the future arbitral award will possibly have already lost part or all of its utility.28 Brazilian courts have also strictly applied the legal provisions concerning the competence-competence principle, thereby affirming the chronological priority of the arbitrator or arbitral tribunal to decide on any issues regarding his/her own jurisdiction in light of any doubts on or challenges to the arbitration agreement, before or after the commencement of the arbitral proceedings, and without prejudice to their later analysis by State courts, pursuant to Article 33 of Law No. 9.307, of 1996.29

3

The Prima Facie Exam of the Arbitration Agreement: Modulation of the Competence-Competence Principle

As noted above, Brazilian Law provides for the absolute jurisdiction of the arbitrator or of the arbitral tribunal to decide on any issues regarding its own jurisdiction over the case, with chronological priority and exclusivity until the end of the arbitral proceedings, with no exceptions. Nonetheless, there might be some heterodox situations in which an extensive construction of the law may be justified, in order to achieve more efficiency in the resolution of the dispute. Moreover, the applicable arbitration rules may also provide for a modulation of that rule. Such extensive construction of the law or modulation of the competence-competence principle allows State courts or the institution administering the arbitration (as the case may be) to analyze and decide objections to the existence, validity or effectiveness of the arbitration agreement before the arbitrator or the arbitral tribunal does so, or even after 28 See Francisco González de Cossío, “La Ironía de Competénce-Compétence”, in Miguel Ángel FernándezBallesteros and David Arias (Eds.), Liber Amicorum Bernardo Cremades, Madrid: La Rey/Wolters Kluwer, 2010, pp. 522-523. 29 See, for instance: STJ, 4th Panel, REsp No. 1,278,852/MG, Rep. Justice Luis Felipe Salomão, decided on 21 May 2013, DJ of 19 June 2013; STJ, 3rd Panel, REsp No. 1,302,900/MG, Rep. Justice Sidnei Beneti, decided on 9 October 2012, DJ of 16 October 2012; STJ, 3rd Panel, REsp No. 1,288,251/MG, Rep. Justice Sidnei Beneti, decided on 9 October 2012, DJ of 16 October 2012; STJ, 3rd Panel, REsp No. 1,279,194/MG, Rep. Justice Sidnei Beneti, decided on 9 October 2012, DJ of 16 October 2012; STJ, 3rd Panel, REsp No. 1,327,820/MG, Rep. Justice Sidnei Beneti, decided on 9 October 2012, DJ of 16 October 2012; STJ, 3rd Panel, REsp No. 1,311,597/MG, Rep. Justice Sidnei Beneti, decided on 9 October 2012, DJ of 16 October 2012; STJ, REsp No. 1,283,388/MG, Rep. Justice Ricardo Villas Bôas Cueva (monocratic decision), decided on 22 October 2012, DJ of 26 October 2012; STJ, REsp No. 1,327,085/MG, Rep. Justice Ricardo Villas Boas Cueva (monocratic decision), decided on 22 October 2012, DJ of 26 October 2012; STJ, Interim Measure (“MC”) No. 14,295/SP, Rep. Justice Nancy Andrighi (monocratic decision), decided on 9 June 2008, DJ of 13 June 2008; STJ, MC No. 17,868/BA, Rep. Justice Paulo de Tarso Sanseverino, decided on 6 June 2011, DJ of 1 July 2011; STJ, 1st Section, MS No. 11,308/DF, Rep. Justice Luiz Fux, decided on 9 April 2008, DJ of 9 April 2008.

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that, but before the end of the arbitral proceedings. The main mechanism for that is the prima facie exam of the arbitration agreement by State courts, the arbitral institution or one of its instrumentalities.

3.1

The Prima Facie Exam of the Arbitration Agreement by State Courts

Brazilian scholars and State courts have sustained a modulation of the competence-competence principle in Brazil in some special cases, in order to allow State courts to decide on objections to the existence, validity or effectiveness of the arbitration agreement before the arbitrator or the arbitral tribunal. In such special cases, State courts are entitled to decide on those objections, as well as on any challenges to the independence or impartiality of the arbitrator(s), immediately following the arbitrator or arbitral tribunal’s decision on the issue and before the rendering of the arbitral award, or even before the commencement of the arbitral proceedings.30 We understand that this possibility must be limited to a prima facie exam, so as to allow State courts to immediately verify, at the request of one of the parties, any ostensive or manifest defect or illegality regarding the existence, validity or effectiveness of the arbitration agreement.31 Evidently, an ostensive or manifest defect or illegality is one that can be verified independently of the production of any evidence (or even of the evidence already produced). Otherwise, the alleged defect or illegality will not be ostensive or manifest, and cannot be subject to State courts by means of a prima facie exam. Although the prima facie exam of the arbitration agreement by State courts is not expressly set forth in Law No. 9.307, of 1996, it has been admitted in Brazilian Law through the ratification of the New York Convention. Pursuant to Article II(3) of the New York Convention, “[t]he court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.”32 30 See, for instance: Alexandre Abby and André Luís Monteiro, “Da relativização do Princípio da KompetenzKompetenz”, Revista de Direito da Associação dos Procuradores do Novo Estado do Rio de Janeiro, vol. XVIII, 2006, p. 205 et seq.; Welber Barral, A arbitragem e seus mitos, Florianópolis: OAB/SC, 2000, pp. 3334; Ana Tereza Palhares Basílio and Joaquim de Paiva Muniz, “Pedido de suspensão de procedimento arbitral. Extinção do processo sem julgamento do mérito. Interposição de agravo de instrumento e de recurso de apelação. Respeito à Lei de Arbitragem. Atividade jurisdicional do Tribunal Arbitral”, (comentário de jurisprudência), Revista de Arbitragem e Mediação, No. 2, May/Aug. 2004, p. 272 et seq. 31 See also: Arnoldo Wald, “A interpretação da Convenção de Nova Iorque no direito comparado”, Revista de Direito Bancário, do Mercado de Capitais e da Arbitragem, No. 22, Oct./Dec. 2003, p. 360 e 366. 32 Art. 8(1) of the UNCITRAL Model Law (which has inspired the Brazilian Arbitration Law, even though the latter did not adopt this specific rule) contains a similar provision (“A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi The New York Convention does not use the expression ‘prima facie’ or any other equivalent to that. Nevertheless, most Brazilian and foreign scholars (despite some exceptions, resulting from the more restrictive position adopted in some countries33) understand that Article II (3) shall not be construed broadly. Instead, it would be limited to a prima facie analysis of the arbitration agreement, aiming at really manifest and obvious defects that unequivocally evidence that the arbitration agreement does not exist or that it is null and void, ineffective, inoperable or incapable of being performed.34 It is noteworthy that Albert Jan Van den Berg has adopted this limited approach in his draft revised text of the New York Convention, also known as the Dublin Convention (because it was first presented to the public during the ICCA Conference in Dublin in 2008). The revised New York Convention would make clear that the exception currently set forth in Article II(3) is limited to a prima facie verification of the arbitration agreement; otherwise, its negative effect shall prevail.35 submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed”). 33 For instance, the United States and Germany, where State courts have a larger power of interference with regard to any objections to the existence, validity or effectiveness of the arbitration agreement, even before the issue is brought before or decided by the arbitrator or arbitral tribunal. See C. Ryan Reetz, “The limits of the competence-competence doctrine in United States courts”, Dispute Resolution International, Vol. 5, No. 1, May 2011, p. 5 et seq.; George A. Bermann, “Le rôle respectif des cours et des arbitres dans la détermination de la compétence arbitrale”, Revista de Arbitragem e Mediação, No. 31, Oct./Dec. 2011, p. 155; Carmen Tiburcio, “O princípio da kompetenz-kompetenz revisto pelo Supremo Tribunal Federal de Justiça alemão (Bundesgerichtshof)”, in Selma Ferreira Lemes, Carlos Alberto Carmona and Pedro Batista Martins (Eds.), Arbitragem: estudos em homenagem ao Prof. Guido Fernando da Silva Soares, in memoriam, São Paulo: Atlas, 2007, p. 425 et seq. See also Gary B. Born, op. cit., vol. 1, p. 877 et seq. (in general, for the particularities applying to the competence-competence principle in other jurisdictions, including with regard to the prima facie exam, such as the UK, Canada, Switzerland, India, Australia, New Zealand and Hong Kong). 34 See, among others: R. Doak Bishop, Wade M. Coriell and Marcelo Medina Campos, “The ‘null and void’ provision of the New York Convention”, in Emmanuel Gaillard and Domenico di Pietro (Eds.), Enforcement of arbitration agreements and international arbitral awards – The New York Convention in practice, Londres: Cameron, May 2008, pp. 283-285; Pedro Batista Martins, “Artigo II(3): arbitrabilidade e as ressalvas constantes do artigo II(3), da Convenção de Nova Iorque”, in Arnoldo Wald and Selma Ferreira Lemes (coord.), Arbitragem comercial internacional: a Convenção de Nova Iorque e o Direito Brasileiro, São Paulo: Saraiva, 2011, p. 127 et seq., and “Poder Judiciário – Princípio da autonomia da cláusula compromissória – Princípio da competência-competência – Convenção de Nova Iorque – Outorga de poderes para firmar a cláusula compromissória – Determinação da lei aplicável ao conflito – Julgamento pelo tribunal arbitral”, Revista de Arbitragem e Mediação, No. 7, Oct./Dec. 2005, p. 173 et seq.; José Emílio Nunes Pinto, Rodrigo Garcia da Fonseca, “Convenção de Nova Iorque: atualização ou interpretação?”, Revista de Arbitragem e Mediação, No. 18, Jul./Sep. 2008, pp. 56-59. 35 The proposed revised text reads as follows: “Art. 2 – Enforcement of Arbitration Agreement 1. If a dispute is brought before a court of a Contracting State which the parties have agreed to submit to arbitration, the court shall, at the request of a party, refer the dispute to arbitration, subject to the conditions set forth in this article. 2. The court shall not refer the dispute to arbitration if the party against whom the arbitration agreement is invoked asserts and proves that:

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Hence, as Pedro Batista Martins once more properly notes, in his commentaries to Article II(3) of the New York Convention, “it can be stated that the occurrence of any of the situations comprehended in the exception at hand cannot be subject of a broad and unlimited exam by State courts. Instead, the analysis is narrow, since it concerns a legal situation which is evident at first sight. In other words, one shall prove the allegation of lack of arbitral jurisdiction with data and elements which are evident and convincing at a glance. We are the field of a sovereign probability.”36 The strict interpretation of Article II(3) of the New York Convention is also adopted in other legal systems with a stronger arbitration tradition, such as in France. French Law provides for a prima facie exam of the arbitration agreement by State courts, which can immediately acknowledge any manifest defects regarding the existence, validity or effectiveness of the arbitration agreement.37 In this case, there is a modulation of the competencecompetence principle, which has, in France, the same chronological nature provided under Brazilian Law. According to French courts, a defect is manifest only where it can be verified through an ordinary prima facie analysis of the arbitration agreement by the judge, without an indepth examination of any evidence or complex issues of merits. Otherwise, the arbitrator or arbitral tribunal shall decide with priority on any jurisdictional matter, without prejudice to an ulterior analysis by the State courts, after the rendering of the arbitral award,38 as it is in Brazil. Carlos Alberto Carmona summarizes the subject in light of Law No. 9.307, of 1996 as follows:

(a) the other party has requested the referral subsequent to the submission of its first statement on the substance of the dispute in the court proceedings; or (b) there is prima facie nor valid arbitration agreement under the law of the country where the award will be made; (c) arbitration of the dispute would violate international public policy as prevailing in the country where the agreement is invoked. (…)” (Albert Jan Van den Berg, “Hypothetical Draft Convention on the International Enforcement of Arbitration Agreements and Awards”, available at , last access on 15 July 2013). 36 Pedro Batista Martins, op. cit., p. 130. 37 Art. 1448 of the French Code de Procédure Civile (as modified by Decree No. 2011-48, of 13 January 2011, revising French Law on arbitration), reads as follows: “Lorsqu’un litige relevant d’une convention d’arbitrage est porté devant une juridiction de l’Etat, celle-ci se déclare incompétente sauf si le tribunal arbitral n’est pas encore saisi et si la convention d’arbitrage est manifestement nulle ou manifestement inapplicable.”). The same rule already existed before 2011, derived from multiple court decisions on the matter. See Matthieu de Boissésson, “La nouvelle convention d’arbitrage”, in Thomas Clay (Dir.), Le nouveau droit français de l’arbitrage, Paris: Lextenso, 2011, pp. 86-87; Dominique Vidal, Droit français de l’arbitrage interne et international, Paris: Gualino/Lextenso, 2012, pp. 65-66; Gary B. Born, op. cit., 2009, pp. 900-904, especially pp. 901-902. 38 See Philippe Fouchard, Emmanuel Gaillard and Berthold Goldman, Traité de l’arbitrage commercial international, Paris: Litec, 1996, pp. 421-422; Bertrand Moreau, “Chronique de jurisprudence française”, Revue de l’arbitrage, 2004/4, p. 933.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi Scholars so far do not have a firm position on the identification of what exactly are the limits of the investigative powers of the judge regarding the invalidity of the arbitration agreement. Emmanuel Gaillard suggests that the judge shall only declare the invalidity of the arbitration agreement where the defect is recognizable prima facie, i.e., immediately, with no need for further examination. It seems that the honorable Parisian professor is right, since the limitation of the cognitive powers of the judge exclusively to those aspects which can be detected immediately, without further inquiry (thus, summary cognition), is compatible with the kompetenz-kompetenz principle under Brazilian Law. In that case, the judge could declare the invalidity of an arbitration agreement lacking any of its essential requirements, or the impossibility to enforce an arbitration agreement relating to a dispute involving an inalienable right; but [the judge] shall not order the production of evidence to verify the scope of the arbitration agreement or to assess whether any of the contractors would have been forced or induced to enter into the arbitration agreement.39 The Court of Appeal of the State of São Paulo (TJSP) has expressly affirmed this position in a case opposing construction and insurance companies with regard to losses that occurred during the construction of the Jirau Hydroelectric Power Plant, in the Brazilian State of Rondônia. In the case, the insurance companies initiated arbitral proceedings in London, based on a clause of the insurance policy providing for arbitration seated in London. In turn, the construction companies filed a lawsuit before Brazilian State courts, seeking to set aside the arbitration clause and the stay of the arbitration, since the arbitration agreement did not obey Brazilian Law, applicable pursuant to the choice of law clause set forth in the contract. The first degree judge granted interim relief in order to stay the arbitration in London until a final judgment was rendered in Brazil on the validity of the arbitration agreement, which was confirmed, by majority, by the Court of Appeal. The Judge Rapporteur Paulo Alcides expressly acknowledged the admissibility of the prima facie exam of the arbitration agreement by State courts in his prevailing majority opinion, as an exception to the competence-competence principle, in line with Carlos Alberto Carmona’s scholarly writing quoted earlier. According to him, this would justify, in the case at stake, the suspension of the arbitration proceedings in London until Brazilian courts definitively rule on the issue.40 39 Carlos Alberto Carmona, Arbitragem e processo, 3rd ed., São Paulo: Atlas, 2009, p. 177, free translation of the Portuguese original. 40 TJSP, 6th Chamber of Private Law, AgIn No. 0304979-49.2011.8.26.0000, Rep. Judge Paulo Alcides, decided on 19 April 2012 (concluding, after quoting Carlos Alberto Carmona: “[The] flaws in the contractual provisions, as noted above, give rise to more than reasonable doubt, sufficient to eliminate the effects of the so-

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Also recently, the STJ held that the State courts shall not intervene whenever there is a ‘full’ arbitration clause with no ambiguities.41 On the other hand, the STJ admitted that whenever there is a jurisdictional conflict between a State court and an arbitral tribunal, any of the interested parties can file a motion before the STJ to resolve the conflict (“conflito de competência”).42 In some countries, this position has already been considered contrary to arbitration. Nevertheless, in Brazil, even though it can also represent a modulation of the competence-competence principle, it actually aims at preserving the arbitration against undue interferences of judges, who are often sitting outside of the major cities and have little knowledge of arbitration.

3.2

The Prima Facie Exam of the Arbitration Agreement by the Arbitral Institution

The prima facie exam of the arbitration agreement can also be an assignment of the arbitral institution, in the exercise of a power expressly provided for in its arbitration rules, which the parties have adopted to regulate the arbitral proceedings. The prima facie exam of the arbitral institution aims at appraising, through a previous analysis, the existence of a valid arbitration agreement, so that, once requested, the institution can proceed with the arbitration. The prima facie exam of the arbitration agreement by the arbitral institution, following the request for arbitration and before the constitution of the arbitral tribunal, is traditionally provided for in the arbitration rules of important international institutions, such as the called ‘negative effectiveness of the arbitration agreement’, and exceptionally justify the moderation of the competence principle set forth in Art. 8, sole paragraph, of Law No. 9.307 of 1996, according to which the arbitrator shall decide on his/her own jurisdiction” [free translation]). See the decision and commentaries of Arnoldo Wald, Revista de Arbitragem e Mediação, No. 34, Jul./Sep. 2012, pp. 407-423. See also: Arnoldo Wald, Ana Gerdau de Borja and Maíra de Melo Vieira, “Brazil as ‘Belle of the Ball’: The Brazilian Courts’ Pro-Arbitration Stance (2011-2012)”, The Paris Journal of International Arbitration/Les Cahiers de l’Arbitrage, 2013/2, pp. 394-395. The insurance companies filed a complaint (“Reclamação”) against this decision before the STJ, which dismissed it without prejudice and affirmed the dismissal in appeal (STJ, Special Court, AgRgReclamação No. 9.030, Rep. Justice Ari Pargendler, unanimous, decided on 20 March 2013). 41 STJ, 4th Panel, REsp No. 1,278,852/MG, Rep. Justice Luis Felipe Salomão, decided on 21 May 2013, DJ of 19 June 2013. This decision provides an important nuance, by noting that the competence-competence principle and the negative effect of the arbitration agreement are applicable whenever in presence of a ‘full’ arbitration clause. On the other hand, in case of a ‘blank’ arbitration agreement, as well as in other exceptional cases, such as the conflict of jurisdiction between State courts and arbitral tribunals, noted supra, the competence-competence principle may not be applicable (in favor of Art. 7 of Law No. 9.307, of 1996) or may be modulated (respectively, as the case may be). See: Maíra de Melo Vieira, “Execução específica de cláusula compromissória vazia e competência-competência: revisitando regras elementares à luz da decisão do STJ no REsp n° 1.082.498/MT”, Revista de Arbitragem e Mediação, No. 38, Jul./Sep. 2013 (printing). 42 STJ, Special Court, CC No. 111,230/DF, Rep. Justice Nancy Andrighi, decided on 8 May 2013. Justice Luis Felipe Salomão followed the opinion of the Reporting Justice. Their opinions will be published in Revista de Arbitragem e Mediação, No. 39. The full decision has not been officially published to this date.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi International Court of Arbitration of the International Chamber of Commerce (ICC)43 and the Arbitration Institute of the Stockholm Chamber of Commerce (SCC).44 As with regard to the prima facie exam by State courts, in the context of those institutions, there have also been doubts about what should be the scope and limits of the prima facie exam of the arbitration agreement. Again in the latter case, a liberal position has prevailed, according to which the arbitration shall proceed, except in case of inexistence or manifest defect of the arbitration agreement (for instance, the arbitration agreement provides for ad hoc arbitration or for arbitration administrated by another institution). In all other cases, the arbitrator or arbitral tribunal shall decide on the matter.45 The prevalence of this position is explained and justified in view of the impact of this decision on the jurisdiction of the arbitrator(s) and on the competence-competence principle. Indeed, in case the arbitral institution decides not to proceed with the arbitration, in light of the inexistence or of a manifest defect of the arbitration agreement, the issue will not even be submitted to the arbitral tribunal. In such a case, the only alternatives available to the party who initiated the arbitration would be either to resort to State courts in order to obtain a decision on the merits of the dispute or to file a suit in order to affirm the existence, validity or effectiveness of the arbitration agreement and the arbitral institution that shall administer the proceedings. This hypothesis emphasizes the exceptional character of the prima facie exam by the arbitral institution in relation to the competence-competence principle. Although the matter has not been further examined in Brazil so far, it has been subject to an important debate among scholars and in State courts in other countries, especially in France, particularly in light of the ICC Arbitration Rules, regarding the powers of the arbitral institution to do the prima facie exam of the arbitration agreement and make such a decision.46 As noted, the main reason for those debates was the fact that, besides modu43 See Yves Derains and Eric A. Schwartz, A guide to the new ICC Rules of Arbitration, The Hague/London/Boston: Kluwer Law International, 1998, p. 79 et seq. (about the prima facie exam by the ICC). 44 See David Ramsjö and Siri Strömberg, “Manifest lack of jurisdiction? A selection of decisions of the Arbitration Institute of the Stockholm Chamber of Commerce concerning the prima facie existence of an arbitration agreement (2005-2009)”, Stockholm International Arbitration Review, 2009/2, p. 55 et seq.; Felipe Mutis Tellez, “Prima facie decisions on jurisdiction of the Arbitration Institute of the Stockholm Chamber of Commerce: towards consolidation of a ‘pro arbitration’ approach”, available at , last access on 19 July 2013 (about the prima facie exam by the SCC). The Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings of the International Centre for Settlement of Investment Disputes (“ICSID”) also provide for a type of prima facie exam of the arbitration agreement by the institution, allowing the Secretary General to refuse to proceed with the arbitration in cases where the dispute is “manifestly outside the jurisdiction of the Centre” (Art. 6(1)(b)). 45 Id. (see footnotes 32 and 33). 46 See Philippe Fouchard, “Les institutions permanentes d’arbitrage devant le juge étatique (à propos d’une jurisprudence récente)”, Revue de l’Arbitrage, 1987/3, pp. 225-274; Isabelle Hautot, “Les pouvoirs de la Cour d’arbitrage de la CCI de décider ou non d’organiser l’arbitrage”, ASA Bulletin, vol. 8, 1990/1, pp. 12-31; Eduardo Silva-Romero, “Les apports de la doctrine et de la jurisprudence françaises à l’arbitrage de la

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lating the competence-competence principle, such decision could have a jurisdiction nature and, as such, could be made only by the arbitrator(s). The role of the institution, on the other hand, would be merely administrative. Nowadays, it is widely accepted that the prima facie decision by the arbitral institution has an administrative and discretionary nature, since it concerns the power of the arbitral institution to administer the proceedings (from both subjective and objective perspectives).47 In this context, French courts have defined the role of the arbitral institution and of its arbitration rules. Both the Cour de Cassation and the French courts of appeal have held that the ICC only organizes and administers the proceedings, providing a proper structure for the arbitration to run efficiently, in accordance with the procedural rules chosen by the parties.48 Moreover, international scholars recognize that arbitral institutions are not actors in the arbitration. They only provide the structure and prepare the stage for the real actors (the arbitrators).49 They do not have any jurisdictional powers and do not intervene in the arbitrators’ role. In turn, the relationship between the arbitral institution and the parties to the arbitration is deemed to be that of an organization, service rendering, representation or even collaboration agreement. The arbitral institution practices administrative acts, acting as the ‘police of the arbitral proceedings’ and ensuring their proper functioning. Therefore, in the event that the arbitral institution decides that the arbitral proceedings shall not continue, this decision is final and not subject to judicial review. Hence, an ulterior lawsuit seeking the enforcement of the arbitral award shall necessarily point to a different arbitral institution to administer the proceedings. Further, from a practical standpoint, the arbitration efficiency and legal stability would justify the prima facie exam by the arbitral institution, as well as other powers assigned to the latter as the administrator of the proceedings (for example, the power to decide any challenges to the independence or impartiality of an arbitrator). This debate has influenced the revision of the ICC Arbitration Rules in force since 2012. Differently from the 1998 ICC Rules, the 2012 ICC Rules, although not eliminating the prima facie exam of the arbitration agreement by the Court, have considerably limited the cases in which the latter will take place. Currently, the Secretary General acts as a ‘gatekeeper,’ being the first to analyze any jurisdictional objections based on the existence,

Chambre de commerce internationale”, Revue de l’Arbitrage, 2005/2, pp. 420-437; Mizère Philippe, “Les pouvoirs de l’arbitre et de la Cour d’arbitrage de la CCI relatifs à leur compétence”, Revue de l’Arbitrage, 2006/3, pp. 591-616. 47 See Id. 48 See Id. See also: Yves Derains and Eric Schwartz, op. cit., p. 84; Cour de Cassation, 1e civ, de Prémont c. Société Trioplast AB, j. 11 March 2009, Revue de l’Arbitrage, No. 1/2009, pp. 240-241. 49 Charles Jarrosson, “Le rôle respectif de l’institution, de l’arbitre et des parties dans l’arbitrage international”, Revue de l’Arbitrage, No. 2/1990, p. 394.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi validity or effectiveness of the arbitration agreement (Art. 6(3), 2012 ICC Rules50). Only in the cases where the Secretary General considers that the objection may be grounded will he submit the issue to the Court for a prima facie exam. In any case, the 2012 ICC Rules make clear that the Court will not step into the merits of the allegations of any party to the dispute when making this assessment (Art. 6(4), 2012 ICC Rules51). This change, besides giving more efficiency to the arbitral proceedings, evidences that the rule, which is clear in the reading of new Article 6(3) and in line with the established practice of the Court, is to proceed with the arbitration, so that the arbitral tribunal decides any objections on jurisdiction. Only in exceptional cases, where the prima facie exam reveals a serious doubt regarding the choice of the parties for the ICC arbitration, will the Court be called to analyze the matter and can eventually decide to terminate the proceedings.52 The particularly limited scope of the prima facie exam by the Court also evidences its exceptional nature and, more importantly, that of the decision not to proceed with the arbitration. It suffices that the Court be convinced of the ‘possible existence’ of an ICC arbitration agreement to proceed with the arbitration (same rule provided in the 1998 version). This is obviously a particularly low threshold, once it does not even require any certainty about the existence of an ICC arbitration agreement. The mere possibility of its existence is enough for the arbitration to proceed. The new ICC Rules thus reinforce that only evident and unequivocal cases of inexistence of an ICC arbitration agreement can justify a decision of the Court not to proceed with the arbitration. Such attitude mitigates the exceptionality of the prima facie exam by the 50 Art. 6(3), 2012 ICC Rules: “3. If any party against which a claim has been made does not submit an Answer, or raises one or more pleas concerning the existence, validity or scope of the arbitration agreement or concerning whether all of the claims made in the arbitration may be determined together in a single arbitration, the arbitration shall proceed and any question of jurisdiction or of whether the claims may be determined together in that arbitration shall be decided directly by the arbitral tribunal, unless the Secretary General refers the matter to the Court for its decision pursuant to Article 6(4).” 51 Art. 6(4), 2012 ICC Rules: “In all cases referred to the Court under Article 6(3), the Court shall decide whether and to what extent the arbitration shall proceed. The arbitration shall proceed if and to the extent that the Court is prima facie satisfied that an arbitration agreement under the Rules may exist. In particular: (i) where there are more than two parties to the arbitration, the arbitration shall proceed between those of the parties, including any additional parties joined pursuant to Article 7, with respect to which the Court is prima facie satisfied that an arbitration agreement under the Rules that binds them all may exist; and (ii) where claims pursuant to Article 9 are made under more than one arbitration agreement, the arbitration shall proceed as to those claims with respect to which the Court is prima facie satisfied (a) that the arbitration agreements under which those claims are made may be compatible, and (b) that all parties to the arbitration may have agreed that those claims can be determined together in a single arbitration. The Court’s decision pursuant to Article 6(4) is without prejudice to the admissibility or merits of any party’s plea or pleas.” 52 See Jacob Grierson and Annet van Hooft, Arbitrating under the 2012 ICC Rules, Alphen aan den Rijn: Kluwer Law International, 2012, pp. 7-10; Nathalie Voser, “Overview of the most important changes in the revised ICC Arbitration Rules”, ASA Bulletin, vol. 29, 2011/4, pp. 787-791; Pierre Mayer, “Le nouveau règlement d’arbitrage de la Chambre de commerce internationale (CCI)”, Revue de l’Arbitrage, 2011/4, pp. 902-907.

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institution vis-à-vis the competence-competence principle and the powers of the arbitrator or arbitral tribunal to decide on any jurisdictional issues.

4

Article 4.5 of the 2012 CCBC Arbitration Rules

One of the main innovations of the 2012 CAM/CCBC Arbitration Rules is precisely the provision that empowers the President of the CAM/CCBC to do a prima facie verification of the arbitration agreement, before the constitution of the arbitral tribunal, whenever respondent raises any objections related to its existence, validity or effectiveness. Article 4.5 of the new CAM/CCBC Arbitration Rules reads as follows: 4.5. Before the Arbitral Tribunal is constituted, the President of the CAM/CCBC will examine objections regarding the existence, validity or effectiveness of the arbitration agreement that can be immediately resolved, without the production of evidence, and will examine requests regarding joinder of claims, under article 4.20. In both cases, the Arbitral Tribunal, once it is constituted, will decide on its jurisdiction, confirming or modifying the decision previously made. This is a pioneering provision among Brazilian arbitral institutions, and represents an important step in the process of sophistication and internationalization of the CAM/CCBC. It also brings the CAM/CCBC arbitral procedure even closer to those already consolidated in international arbitral institutions, such as the ICC and the SCC, aside from providing more certainty and efficiency to CAM/CCBC arbitration. The fact that Law No. 9.307, of 1996, does not expressly provide for the prima facie exam or any other type of modulation of the competence-competence principle (by State courts or the arbitral institution) also highlights the innovative essence of this provision. In Brazil, discussions regarding the scope and limits of this exam are still relatively incipient, and Article 4.5 of the 2012 CCBC Arbitration Rules will certainly contribute to this debate. Indeed, the CAM/CCBC is one of the main and most used arbitral institutions in Brazil. As a result, studies and debates concerning the prima facie verification of the arbitration agreement under Brazilian Law and institutional rules tend to multiply. The inclusion of this provision in the 2012 CCBC Arbitration Rules has, thus, a very positive impact, not only on CAM/CCBC arbitration, but also, more broadly, on arbitration doctrine and practice in Brazil as a whole. The prima facie verification by the President of the CAM/CCBC has a relatively large scope: it is not limited to the mere verification of the existence of an arbitration agreement with an unequivocal choice of CAM/CCBC as the institution administering the arbitration. On the contrary, it encompasses any objections related to the existence, validity or effec-

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi tiveness of the arbitration agreement. Hence, CAM/CCBC has adopted a rule similar to that already consolidated in the ICC. The latter has deviated from its initially restricted purpose when first providing the prima facie exam in order to allow a broader verification by the Court, encompassing several types of flaws that could taint the arbitration agreement, including that with regard to subjective and objective arbitrability.53 The wording of Article 4.5 of the 2012 CCBC Arbitration Rules is unclear about the treatment to be afforded to the arbitration in the event that the President of the CAM/CCBC concludes that there really is a defect totally or partially tainting the arbitral proceedings and preventing them from moving forward as initially requested (for instance, there is not an unequivocal choice of CAM/CCBC as the institution administering the arbitration; one of the respondents did not sign the contract containing the CAM/CCBC arbitration clause; the claims submitted to arbitration relate to two or more contracts, one or more of which does/do not provide for a CAM/CCBC arbitration agreement). In that latter case, one may question whether the express provision in Article 4.5 of the new CAM/CCBC Arbitration Rules shall prevail, so that the arbitral tribunal will be constituted in any case and readdress the matter, regardless of the flaws tainting the arbitration agreement; or, alternatively, whether the CAM/CCBC will adopt the same practice already consolidated in the ICC and in the SSC and immediately terminate the proceedings (even if termination is only partial, related to one or more parties or claims). In our opinion, the former solution mentioned above would deprive the prima facie verification of the arbitration agreement by the President of the CAM/CCBC of any real purpose. In all cases, the arbitration would continue, and the matter would be subject to the analysis and decision of the arbitral tribunal. Therefore, in such a scenario, it would be much more efficient for the arbitral tribunal to directly decide on those issues and eliminate the prima facie verification by the institution. Consequently, it seems to us that it was not the intention of the new CAM/CCBC Rules, so that, similarly to the ICC practice, the President’s decision according to which the arbitration shall not proceed shall be final and immediately lead to the (total or partial) termination of the proceedings. As a result, the matter will not be submitted to the arbitral tribunal at this point, even though it might be submitted to State courts at the request of one of the parties. At any rate, it is likely that, in practice, the President of the CAM/CCBC will, in most cases, decide that the arbitration shall continue and any complex aspects of the dispute, related to either jurisdiction or arbitrability, end up readdressed and effectively decided by the arbitral tribunal, as already occurs in the ICC and the SCC. This is actually the rule arising out of Article 4.5 of the new CCBC Arbitration Rules (similarly to Article 6(3) of

53 See Yves Derains and Eric Schwartz, op. cit.; Pierre Mayer, op. cit.; Philippe Fouchard, op. cit.

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the new ICC Rules), which affirms the competence-competence principle in all but exceptional cases.54 Likewise, also similarly to the ICC, although the prima facie verification by the President of the CAM/CCBC has a relatively broad scope, it must be generic, i.e., it is limited to “matters that can be resolved instantly, needlessly of production of evidence” (Art. 4.5). As a consequence, any other matters that depend on the production of evidence or further debate shall, in principle, be submitted directly to the arbitral tribunal. One last issue under Brazilian Law, particularly in light of our considerations supra on the competence-competence principle and the possibility of a prima facie verification of the arbitration agreement by State courts: where the arbitration rules chosen by the parties to regulate the proceedings (such as the CAM/CCBC Rules) provide for the prima facie verification of the arbitration agreement by the arbitral institution, would there still be room for a similar exam by State courts? Where there is a ‘full’ arbitration agreement and there are no ostensive illegalities, State courts shall not interfere, except to grant interim relief before the constitution of the arbitral tribunal or in the context of a lawsuit seeking to set aside the arbitral award. In case of doubt, it is advisable that the parties respect the authority of the arbitral institution – in this case, of the President of the CAM/CCBC – to decide about the continuation of the arbitration.

5

Concluding Remarks

In view of the considerations above, it is doubtless that Article 4.5 of the 2012 CCBC Arbitration Rules is a remarkably important device for the modernization and internationalization of CCBC arbitration, besides providing it with more legal certainty and efficiency. Furthermore, it also prevents the waste of time and resources in cases where there is a clear and undeniable defect related to the existence, validity or effectiveness of the arbitration agreement. As French scholars and courts have already repeatedly acknowledged, these advantages justify and legitimate the prima facie verification by the arbitral institution, regardless of the modulation of the competence-competence principle that it represents. A serious and rigorous verification will, as a rule, favor, whenever possible, the powers of the arbitral tribunal to address any matters involving its jurisdiction and the arbitrability of the dispute, and will eventually contribute to a solid and flawless arbitration. It is, therefore, an important and pioneering innovation that, as stated before, tends to enrich the arbitral practice not only in the context of CAM/CCBC, but also in Brazil. 54 See also Frederico José Straube, “Uma primeira análise do novo Regulamento do CAM/CCBC”, Revista de Arbitragem e Mediação, No. 32, Jan./Mar. 2012, pp. 239-240.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi 4.6. The Secretariat of the CAM/CCBC will inform the Parties and the arbitrators of the appointments made. At the same time, the arbitrators who are appointed will be asked to fill out CAM/CCBC’s Conflict of Interest and Availability Questionnaire, referred to simply as the Questionnaire, within ten (10) days. 4.6.1. The Questionnaire will be prepared by the CAM/CCBC’s Executive Committee, together with the Advisory Committee. Its purpose will be to gather information about the arbitrators’ impartiality and independence, as well as time availability and other information related to their duty of disclosure.55 It is a duty of the Executive Secretariat to inform the parties and the arbitrators about appointments that have been made. This is made through a Notice of Appointment. The Notice of Appointment sent to the Arbitrators is accompanied by the CAM/CCBC’s Conflict of Interest and Availability Questionnaire (‘Questionnaire’), which is intended to assess, through the arbitrators’ answers, their independence and their impartiality. (The full Questionnaire is available in Annex I.) These are key issues in arbitration, especially in international ones. In theory, the arbitral tribunal should be formed by neutral third parties, which should have no relationship with the parties. However, as the arbitration practice is still formed by a ‘small world’ of practitioners and arbitrators, it is quite common to verify some relationship between arbitrators, parties and/or their lawyers. When a relationship is identified, we must assess whether there is a conflict of interest. A conflict of interest in an arbitration proceeding, in general terms, constitutes a fact or a circumstance in which a party who is in the position of deciding a case has a material interest in the outcome of the case. This can be an actual conflict of interest – i.e., the arbitrator holds the majority of the shares of a company that is party to the arbitration; or a conflict inferred by the circumstances.56 For this reason, before filling the Questionnaire, the appointed arbitrator has an obligation to read the CAM/CCBC Code of Ethics and to commit himself to observing it. It is also expected that he/she should disclose any circumstance that may impact his/her independence and impartiality, or any fact that may be considered a conflict of interest. As there are a wide variety of situations that could amount to a conflict of interest, it is expected that at least a situation inserted in either the Red List or the Orange List of the

55 Comments by Bryan Longo and Napoleão Casado Filho. 56 Leela Kumar, The Independence and impartiality of Arbitrators in International Commercial Arbitration. Electronic copy available at: . Access on 20 June 2015.

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Article 4 – Commencement of the Arbitration IBA Guidelines on Conflict of Interest in International Arbitration57 should be disclosed by the arbitrator when answering the Questionnaire. This obligation is related to the common understanding that the arbitrator shall not only be independent and impartial but also seem independent and impartial.58 Another issue of utmost importance is the time availability of the arbitrator, especially in the Brazilian context. In some countries, one of the expected benefits parties desire when they choose arbitration as the mechanism for their dispute resolution is to avoid the time-consuming and never-ending procedures of their national courts. Actually, there is a general expectation that arbitration proceedings shall run in a time-efficient way, avoiding unnecessary costs to the parties and solving, as soon as possible, their conflict. Thus, arbitrators shall commit themselves to the proceedings, affirming that they have “time and effort required to satisfy the expectations of the parties, thereby warranting celerity in processing the proceeding and preventing the unduly increase of expenditures.” This time availability is one of the prerequisites for performing the role of arbitrator under the CAM/CCBC Code of Ethics (Provision 2). Lastly, it should be understood that failure to fill out the Questionnaire would constitute a refusal by the arbitrator of his/her appointment. In this case, and if no alternate arbitrator has been chosen, the party that appointed the arbitrator (or the party in the name of whom the appointment was made) would be granted ten additional days to make a new appointment, analogously to Article 4.10. 4.7. The answers to the Questionnaires and any material facts will be sent to the Parties, after which they will have ten (10) days to submit comments.59 After the arbitrators answer the Questionnaires, those answers, accompanied by all material facts provided by the arbitrators, are sent to the parties. Most importantly, the résumés of

57 An important difference between those Guidelines and the Questionnaire is that the second does not provide a time limit for disclosure, meaning that relevant information that extrapolates the IBA Guidelines’ 3-year period must also be revealed to the parties. 58 We suggest the reading of: Emilio Cárdenas and David W. Rivkin, “A Growing Challenge for Ethics in International Arbitration”, in Gerald Aksen, Karl-Heinz Böckstiegel, Michael J. Mustill, Paolo Michele Patocchi and Anne Marie Whitesell (Eds.), Global Reflections on International Law, Commerce and Dispute Resolution – Liber Amicorum in Honour of Robert Briner, Paris: ICC, 2005, p. 195. You may also refer to: Julian Bordacahar, “The Double Requirement that the Arbitrator Be Independent and Impartial”, in Global Arbitration News, 27 February 2015 – available at: . And also: Caroline Verbruggen, “The Arbitrator – As a Neutral Third Party”, in Young ICCA Blog, 22 January 2011 – available at: . Access on 20 June 2015. 59 Comments by Bryan Longo and Napoleão Casado Filho.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi the appointed arbitrator from outside the List of Arbitrators are also submitted to the parties. Article 4.7 establishes the parties’ right to comment on the Arbitrators’ Questionnaires. It is important to note that such right to comment is broader than the right to object to the arbitrator’s appointment. Comments would include requests for clarifications or corrections that the parties deem useful for an informed decision on the acceptance of the arbitrators. For this reason, the parties may choose to comment, even if they do not have any intention to object to the appointment of one arbitrator. Failure to comment, however, would constitute a failure to object, and clearly amount to a full acceptance by the silent party. For this reason, it must be noted that, although comments are not limited to objections, they definitely include those objections. Once the comments are received by CAM/CCBC, they will be then submitted to the arbitrators for response, which will be made through a supplementary filling of the Questionnaire, which would again be submitted to the parties according to Article 4.7. According to the revised answers to the Questionnaire, the parties may choose to make new comments or even to object to the appointment of an arbitrator. It must be noted that the party’s failure to comment on the first Questionnaire submitted by an arbitrator does not preclude the same party from commenting on new information presented at the second Questionnaire. When it is clear that the party’s comments (not including objections) are being used as delaying tactics, however, the President of CAM/CCBC should then refuse to submit those comments to the arbitrators, continuing with the proceedings under the authority of Article 2.6(f). 4.8. If the parties raise an objection related to the independence, impartiality or any material issue in regard to an arbitrator, the arbitrator involved will have ten (10) days to submit comments, after which the parties will have ten (10) days to present any challenge, which will be processed under article 5.4.60 After the arbitrators answers the Comments/Objections made by a party, the party will have another ten days to submit a challenge to the arbitrator’s appointment. Any challenge based on the facts that have been known by the parties through the Questionnaire and the subsequent comments/objections shall be made within this time limit. Failure to do so would constitute an acceptance of the arbitrator, and of all the relevant facts presented by him/her, by the defaulting party.

60 Comments by Bryan Longo and Napoleão Casado Filho.

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However, if the arbitrator does not disclose a relevant fact and the parties only gain knowledge of it after the expiration of the time periods in Articles 4.7 and 4.8, the general rule for challenging an arbitrator set forth under Article 5.4 of the CAM/CCBC Rules applies, and the party will have fifteen days from the awareness of the fact to challenge the arbitrator. In any case, a Special Committee shall decide the challenge, in accordance with Article 5.4. Another important aspect of Article 4.8 is that it provides the right to make objections related to “any material issue,” which, in our view, includes the question whether the arbitrator possesses “flawless reputation and recognized legal expertise.” For this reason, even if a person who is not a member of the List of Arbitrators has his/her appointment approved by the President of CAM/CCBC, this would not preclude the other party from raising an objection related to the arbitrator’s reputation and/or legal expertise. 4.9. Upon expiration of the time periods in articles 4.7 and 4.8, the Secretariat of the CAM/CCBC will notify the arbitrators appointed by the parties, who must, within fifteen (15) days, choose the third arbitrator from among the members of the List of Arbitrators, to act as President of the Arbitral Tribunal. 4.9.1. The expression ‘Arbitral Tribunal’ applies without distinction to a Sole Arbitrator and an Arbitral Tribunal. 4.9.2. On an exceptional basis and based on a reasoned justification and approval of the President of the CAM/CCBC, the arbitrators chosen by the parties can appoint a person who is not a member of the List of Arbitrators as President of the Arbitral Tribunal.61 Article 4.9 establishes the time period of fifteen days for the Co-arbitrators to appoint the President of the arbitral tribunal (the arbitrator also commonly referred to as Chair or Presiding Arbitrator). If no appointment is made within this time period, Article 4.12 applies, and the President of CAM/CCBC shall appoint such an arbitrator. As a rule, the Presiding Arbitrator must be a member of the List of Arbitrators. A person from outside the list may be chosen, however, as long as this appointment is approved by the President of CAM/CCBC, after it receives, from the arbitrators or from the parties, a reasoned justification on the need for such an appointment. Notwithstanding, it is understood that the President of the arbitral tribunal should have legal expertise, especially to guarantee that any award rendered would be enforceable under the relevant applicable laws. 61 Comments by Bryan Longo and Napoleão Casado Filho.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi In this case, Article 4.4.1 shall also apply, and a résumé of the President of the arbitral tribunal will also be submitted to the parties, together with the Questionnaire, as established in Article 4.11. Finally, Article 4.9.1 provides an important interpretation rule, applicable to all Articles of the CAM/CCBC Rules. In other words, the rule states that the expression ‘arbitral tribunal’ should be replaced by the expression ‘sole arbitrator’ whenever the arbitration proceedings are to be conducted by a single person. For this reason, it is understood that every Article applicable to arbitration proceedings under an arbitral tribunal shall also be applicable to proceedings under a sole arbitrator, with the exception of Article 4.4 and Articles 4.6 and 4.7, to the extent that those Articles deal with the appointment of Co-Arbitrators. (The Questionnaire/Comments mechanism shall apply normally.) 4.10. In the event of a successful challenge to or the resignation of an appointed arbitrator, the Secretariat of the CAM/CCBC will notify the party to make a new appointment within ten (10) days.62 Article 4.10 is very clear and straightforward. It establishes the time period for the appointment of a substitute arbitrator by the party whose chosen arbitrator has been successfully challenged. Question may arise whenever such party had previously appointed an alternate arbitrator. In our view, the alternate arbitrator choice remains effective throughout the entire arbitration proceeding. For this reason, the Executive Secretariat would first proceed with the procedure of Articles 4.6 through 4.8 with the alternate arbitrator and, only if this person is not confirmed as a party to the arbitral tribunal would Article 4.10 apply. 4.11. The Secretariat of the CAM/CCBC will inform the Parties and the arbitrators regarding the appointment of the arbitrator who will act as President of the Arbitral Tribunal, requesting that the appointed arbitrator state his or her acceptance in the manner and by the time provided for in article 4.6.63 The appointment of the President of the arbitral tribunal is subject to the same procedure to which the appointment of the Co-Arbitrators is submitted. Although Articles 4.7 and 4.8 are not expressly referred to in Article 4.11, it is quite clear that those are part of the “manner and time provided for in article 4.6.”

62 Comments by Bryan Longo and Napoleão Casado Filho. 63 Comments by Bryan Longo and Napoleão Casado Filho.

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To this extent, the President of the arbitral tribunal shall not only fill the Questionnaire under Article 4.6, but shall also be subjected to comments by the parties under Article 4.7 and may be challenged by any party under the same reasoning of Article 4.8. 4.12. If either of the parties fails to appoint an arbitrator or the arbitrators appointed by the party fail to appoint the third arbitrator, the President of the CAM/CCBC will make this appointment from among the members of the List of Arbitrators.64 Article 4.12 provides a default rule that applies whenever there is a failure on the appointment of an arbitrator in an arbitral tribunal (the rule for Sole Arbitrator is established in Art. 4.13), regardless of whether it is a Co-Arbitrator or the President of the arbitral tribunal. It should be noted that this rule is quite different than the rule provided in Article 4.16 of the Rules, as Article 4.12 applies only in arbitration proceedings between two parties – one claimant and one respondent. For this reason, there is no doubt that an award rendered through the application of Article 4.12 would be fully recognizable and enforceable, despite the fact that only one party actually appointed its own arbitrator. First, no connection could be made between this hypothetical case and the famous Dutco case.65 Not only did Dutco deal with a complex arbitration, with multiple parties appearing as respondents, but also the court decision that set aside Dutco`s award was not based on the presumption that each party had to have the right to appoint its own arbitrator, but actually came to the conclusion that the parties should receive “equal treatment” throughout the formation of the arbitral tribunal (see Art. 4.16 for more insight on the Dutco case). Article 4.12 provides no unequal treatment. It provides a default rule that allows the arbitration to proceed whenever a party fails to appear in the proceedings or when a party fails to appoint an arbitrator under Article 4.4. Furthermore, if the parties agreed on the CAM/CCBC rules, then the Rules are a part of their own arbitration agreement. For this reason, giving effect to Article 4.12 is the same as giving effect to the parties’ will, expressed in their agreement.66

64 Comments by Bryan Longo and Napoleão Casado Filho. 65 Cass. 1e civ., 7 January 1992, B.K.M.I v. Dutco, 1992 Bull Civ. I; English translation available at XVIII Y.B. Com. Arb. 140 (1993); 7 Int’l Arb. Rep. B1 (Feb. 1992). 66 As Gary Born states, while dealing with the hypothesis of an arbitration agreement that allowed the other party to nominate both Co-arbitrators in case the opposing party failed to appoint his own arbitrator, “such arrangements grant both parties the same opportunities to appoint an arbitrator, subject to the same consequences if they fail to do so” (International Commercial Arbitration, Kluwer Law International, 3rd Ed., 2014, p. 1691).

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi Apart from an allegation that the party was not duly notified of the arbitration proceedings, and that therefore Article 4.12 was unduly applied, no argument may be raised that Article 4.12 provides unequal treatment to the parties. 4.13. If the arbitration agreement states that the arbitration proceedings will be conducted by a sole arbitrator, the sole arbitrator must be appointed by agreement between the parties, within fifteen (15) days from notification by the Secretariat. Upon expiration of this time period, if the parties fail to appoint the sole arbitrator or to agree on his or her appointment, the President of the CAM/CCBC will appoint the sole arbitrator, with observance of article 4.12. 4.13.1. The parties can freely appoint the sole arbitrator. However, if a person who is not a member of the List of Arbitrators is appointed, the appointment must be accompanied by the person’s résumé, which will be submitted for the approval of the President of the CAM/CCBC. 4.13.2. The commencement and conduct of an arbitration with a sole arbitrator will follow the same procedures under these Rules as for an arbitration conducted by an Arbitral Tribunal.67 As established by Article 4.13.2., the commencement of the Arbitration with a sole arbitrator shall follow the same procedures under the Rules as it would be followed in a case with an arbitral tribunal. Of course, some adjustments must be made. First and foremost, Article 4.13 provides a substitute version of Article 4.4 for cases where parties have agreed on a sole arbitrator. Instead of notifying both parties so that each party appoints its own Co-arbitrator, the parties shall be notified under Article 4.13 to jointly appoint the sole arbitrator. If they successfully do so, then the procedure goes directly to Article 4.11. In any event, the parties’ right to an independent and impartial arbitral tribunal is safeguarded by Article 5.4. This does not mean, however, that the President of CAM/CCBC must confirm the arbitrator jointly appointed by the parties. Whenever the sole arbitrator is selected from outside the List of Arbitrators, the President of CAM/CCBC must approve such appointment. As stated in the Comments for Article 4.4, the freedom of arbitrator selection within the CAM/CCBC Rules is governed by the Rules and controlled by the President of CAM/CCBC, in an effort to provide a guarantee of quality to the arbitration proceedings. If the parties’ appointed arbitrator is not approved, parties should have another chance at choosing their sole arbitrator. 67 Comments by Bryan Longo and Napoleão Casado Filho.

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Only if the parties do not agree on a name for their sole arbitrator, regardless of whether it is their first round of selection or their fifth, may the President of CAM/CCBC intervene and directly select the sole arbitrator under Article 4.13. Arbitration is a creature of contract, fully based on party autonomy. Therefore, while the parties are in agreement, their agreement should be observed to the maximum possible extent. Under these rules, this should mean allowing them an extra round of arbitrator selection. In exceptional cases, however, where the parties keep on insisting on nonapprovable arbitrators, the President of the CAM/CCBC should, in our view, select the arbitrator and submit such selection to the parties. Of course, this is a clearly hypothetical scenario. Proceeding to the next step, whenever the President of CAM/CCBC selects the sole arbitrator, Articles 4.6 to 4.8 shall apply. Not only does this guarantee that the parties are fully informed on the relevant facts about their arbitrator, but it is also more time efficient to have a possible challenge made before the actual proceedings begin, rather than halting them further down the road to analyze the arbitrator’s independence and impartiality. 4.14. The Secretariat will notify the arbitrators to sign the Statement of Independence within ten (10) days, which will demonstrate formal acceptance of the arbitrators’ duties, for all purposes, and the parties will be notified for the preparation of the Terms of Reference.68 The signature of the Statement of Independence is a very important step in the Arbitral proceedings under CAM/CCBC Rules. After this document is signed, the arbitrator is formally committed to the proceedings and to the CAM/CCBC Code of Ethics. The legal consequence of this document is that the arbitrator assumes his/her duties, and, from then on, the relevant steps from the proceedings will be conducted by the arbitrators themselves, with the assistance of CAM/CCBC’s Secretariat. It should be noted that under the Brazilian Arbitration Act, the acceptance by the arbitrators is considered to be the actual moment when the arbitration proceeding is commenced, which may be relevant for matters of time limitations.69 For arbitrations seated in Brazil, and administered by CAM/CCBC, this step would occur with the signature of the Statement of Independence.

68 Comments by Bryan Longo and Napoleão Casado Filho. 69 Brazilian Arbitration Act (Law No. 9.307/1996), Art. 19: “The arbitration shall be deemed to be commenced when the appointment is accepted by the sole arbitrator or by the arbitrators, if several.”

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi 4.15. In proceedings in which one of the parties has its head office or domicile abroad, either of them can request that the third arbitrator be of a nationality different from those of the parties involved. The President of the CAM/CCBC, with the Advisory Committee being heard, will evaluate the necessity or convenience of granting the request in each particular case.70 The provision of Article 4.15 is very important to the internationalization process the Center has passed through in the last ten years. It may be noted that there was no such provision in the 1998 CAM/CCBC Rules. Nationality, by itself, is not a valid criterion for undermining the parties’ confidence on the independence and impartiality of the arbitrators. However, some parties may not trust an arbitrator from the same nationality as one of the opposing parties. Although such a request is submitted to the President of the CAM/CCBC (with prior hearing from the Advisory Committee), it is highly probable that the appointment will be directed to an arbitrator from a nationality different from that of the parties involved. After all, if nationality is an important issue to that party, the arbitration center shall make every effort to give confidence to the parties and legitimacy to the arbitral tribunal. Considering the CAM/CCBC List of Arbitrators, this should not be a difficult task, as there are plenty of highly respected international arbitrators from over fourteen different nationalities. 4.16. In arbitration cases with multiple parties as claimants and/or respondents, if there is no consensus regarding the appointment of an arbitrator by the parties, the President of the CAM/CCBC shall appoint all the members of the Arbitral Tribunal, designating one of them to act as President, with observance of the requirements of article 4.12 of these Rules.71 Article 4.16 of the Rules deals with the issue of multiparty arbitration, i.e., cases in which there are two or more named parties on either one or both sides of the dispute. About this subject, it has been said that “irrespective of the attention that the topic has already received, it continues to fascinate and to challenge practitioners, courts and arbitral institutions … [in part because] multiparty arbitration is not a single subject but a multiplicity of different and continually evolving topics.”72 Of all the different topics that may arise on the subject of multiparty arbitration, Article 4.16 deals specifically with the constitution of the arbitral tribunal in such cases. In fact, 70 Comments by Bryan Longo and Napoleão Casado Filho. 71 Comments by Eduardo Ono Terashima and Rafael Villar Gagliardi. 72 Eric A. Schwarts, “Concluding Remarks”, in Bernard Hanotiau and Eric A. Schwartz (Eds.), ICC Dossiers VII: Multiparty Arbitration, Paris: ICC Services Publications Department, 2010, p. 235.

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one fundamental aspect of the subject of multiparty arbitration is that of the constitution of the arbitral tribunal. It is a matter that challenges scholars, practitioners, arbitrators and arbitral institutions and, until this date, has yet to be given an acceptable comprehensive solution. On 7 January 1992, the French Cour de Cassation issued a ruling that reverberated worldwide. With the clear intention to create a precedent, it set aside an award resulting from proceedings initiated by Dutco against B.K.M.I. and Siemens, the three of them having participated in a consortium to build a cement factory. Dutco initiated arbitration proceedings and appointed one arbitrator, according to the applicable ICC Rules. Respondents were ordered by the ICC to jointly appoint one arbitrator, in spite of the parties’ objections, based on the view that their interests were not aligned and that this would entail an unbalanced treatment to the parties, since Dutco had the opportunity to appoint one arbitrator. The arbitral institution appointed the Presiding Arbitrator. The tribunal later confirmed the decision of the ICC, holding that it had been validly constituted. B.K.M.I. and Siemens challenged the award before French courts, arguing that nothing in the applicable rules forced them to be involved in multiparty proceedings and that the arbitral institution’s decision, confirmed by the decision of the arbitral tribunal, deprived them of their fundamental right to participate in the constitution of the tribunal, treating parties unequally in connection with such right. Although the lower court did not, the Cour de Cassation agreed with the claimants and set aside the award. It framed the rule that “the principle of equality in the designation of the arbitrators is a matter which concerns public policy, which can only be waived after the dispute has arisen.”73 The Dutco case, as it came to be known and referred to internationally, called the attention of the arbitral community to the matter of multiparty arbitration, a phenomenon that is increasingly common in arbitration, in view of the growing complexity of global and business relations, directly reflected in agreements that provide for arbitration as the dispute resolution method. However, as Fouchard, Gaillard and Goldman indicate, some aspects of the Dutco case decision must be borne in mind. The institution administering the proceedings had alternatives to the decision of ordering both respondents to jointly appoint an arbitrator.74 It could have ordered the claimant to segregate its claims and to start proceedings against each of the respondents separately, thus avoiding the need for a joint appointment. It could also have asked the claimant to waive its right to appoint an arbitrator, so that the institution 73 Cass. 1e civ., 7 January 1992, B.K.M.I v. Dutco, 1992 Bull Civ. I; English translation available at XVIII Y.B. Com. Arb. 140 (1993); 7 Int’l Arb. Rep. B1 (Feb. 1992). 74 Emmanuel Gaillard and John Savage (Eds.), Fouchar Gaillard Goldmand on International Arbitration, The Hague: Kluwer International, 1999, p. 547.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi itself could appoint the three arbitrators that would seat in the tribunal. Both alternatives would have found support in the applicable rules.75 Moreover, contrary to some criticism made over the last years, the Dutco ruling did not establish that each party in arbitration had to have the right to appoint ‘its’ own arbitrator. There is no such conclusion in the written opinion of the French High Court. The Cour de Cassation established the rule that parties must be given absolute equal treatment when it comes to the constitution of the tribunal and that any waiver to the right to participate in the constitution of the tribunal must be exercised after the dispute has arisen.76 This is the principle framed by Article 4.16 of the CAM/CCBC Rules. It determines that, upon the presence of more than one party on either the claimant’s and/or the respondent’s side, the parties will be given the option to agree in the appointment of the arbitrators. If such an agreement is not possible, it will then be incumbent on the President of the CAM/CCBC to appoint all the members of the tribunal, also indicating the one that will serve as President. The President will do so subject to the provisions of Article 4.12 of the Rules, meaning that the arbitrator(s) will be chosen from the List of Arbitrators of the CAM/CCBC. In case the arbitration agreement provides for a sole arbitrator, the same principle will apply, as it stems from the joint interpretation of Articles 4.13 and 4.16. Parties will be given the right to jointly and in agreement appoint the sole arbitrator. Should they be unable to do so for any reason, it will be incumbent on the President of the CAM/CCBC to appoint the sole arbitrator, selecting from the List of Arbitrators of the institution. Redfern and Hunter make reference to the risk of an award issued by a tribunal constituted for the parties, rather than by the parties, being refused recognition and enforcement abroad under Article V(1)(d) of the New York Convention, according to which exequatur may be refused on proof that “the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place.”77 The argument would be that, according to the principle laid on the Dutco case, the agreement of the parties referring to the right to appoint an arbitrator and, failing the agreement of the parties, the automatic loss of such right, that would pass on to the arbitral institution, would be contrary to public policy, as it could be construed as a waiver exercised before the dispute had arisen.

75 The case was subject to ICC Rules that, at the time, required the International Court of Arbitration to make every effort “to make sure that the award is enforceable at law” (Art. 26). 76 Emmanuel Gaillard and John Savage, op. cit., p. 548. 77 Alan Redfern, Martin Hunter, Nigel Blackaby and Constantine Partasides, Redfern and Hunter on International Arbitration, Oxford: Oxford University Press, 2009, pp. 151-152. The Model Law has a similar provision, Art. 36(1)(A)(iv).

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Persuasive as it may be, it seems that the international public policy that is referred to in the New York Convention comprises critical issues that are, to a certain level, common to the global community and that reflect paramount values highly regarded worldwide. Therefore, it would not encompass the issue of validity of the waiver of the right to appoint an arbitrator before the dispute has arisen. Lex arbitrii may also play a relevant role in this context. The validity and enforceability of the contractual provision by which the parties would transfer the right to appoint the members of the arbitral tribunal to the arbitral institution, i.e., the President of the CAM/CCBC, may be analyzed through the content of the lex arbitrii. In Brazil, Federal Act 9.307/96, the Brazilian Arbitration Act (BAA), does not seem to support the argument of the invalidity of an arbitration agreement provision reflecting the rule provided for in Article 4.16. Much to the contrary, Article 5 of the BAA states that If the parties, in the arbitration agreement, make reference to any institutional arbitration body or specialized entity, the arbitration will be instituted and processed according to its rules, and parties can likewise determine in the agreement itself or in a separate document, the agreement mechanism for the institution of the arbitration.78 In addition, Article 13, §3, of the BAA, provides that “parties may agree to determine the process to choose the arbitrators or adopt the rules of an institutional arbitration body or specialized entity.”79 This view was confirmed in CEC III v. CCCO, EIT, Energ and Themag, decided by the Court of Appeals of the State of Rio de Janeiro (CEC III Case).80 The case will be reviewed in more detail later on, in the commentary to Article 4.20. However, the judgment by the lower court and the written opinion by the Court of Appeals of the State of Rio de Janeiro take the view that the right to participate in the constitution of the arbitral tribunal is not absolute and that, therefore, it would be subject to being waived, even before the dispute arises. Both provisions support the conclusion that parties may, before the dispute has arisen, agree to transfer the right to appoint the arbitrators to the arbitral institution, failing an

78 In the original Portuguese version: “Art. 5º Reportando-se as partes, na cláusula compromissória, às regras de algum órgão arbitral institucional ou entidade especializada, a arbitragem será instituída e processada de acordo com tais regras, podendo, igualmente, as partes estabelecer na própria cláusula, ou em outro documento, a forma convencionada para a instituição da arbitragem.” 79 Free translation of the original Portuguese version: “Art. 13 (…) §3º As partes poderão, de comum acordo, estabelecer o processo de escolha dos árbitros, ou adotar as regras de um órgão arbitral institucional ou entidade especializada.” 80 Case No. 0301553-55.2010.8.19.001, Court of Appeals of the State of Rio de Janeiro, 9th Civil Panel, 21 May 2013.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi agreement to have an appointment that would preserve party autonomy and the principle of equality in the constitution of the arbitral tribunal. 4.17. The parties will sign the Terms of Reference together with the arbitrators, a representative of the CAM/CCBC and two witnesses.81 Articles 4.18 and 4.19 of the Rules deal with the substantial matters concerning the Terms of Reference. Article 4.17 only regulates the formal requirements of this document. One important aspect of Article 4.17 is the legal nature of a contract signed by two witnesses under Brazilian Law. Brazilian Code of Civil Procedure characterizes such a contract as an enforceable instrument. For this reason, having two witnesses’ signatures on the Terms of Reference guarantees that the obligations of each party will be observed, as performance of such obligations may be directly requested by State courts. 4.18. The Terms of Reference will contain: (a) Name and details of the parties and arbitrators; (b) Seat of arbitration; (c) The transcription of the arbitration agreement; (d) If applicable, authorization for the arbitrators to decide ex aequo et bono; (e) The language in which the arbitration will be conducted; (f) Subject matter of the dispute; (g) Applicable law; (h) The claims of each of the parties; (i) Amount in dispute; (j) Express acceptance of liability for the payment of the administrative costs for the proceedings, expenses, experts’ fees and arbitrators’ fees upon request of the CAM/CCBC.82 Definition and functions of the Terms of Reference. The Terms of Reference is the core document of an arbitration since it defines and sets forth the subject matter and the rules to the whole arbitration proceeding. The Terms of Reference does not replace the arbitration agreement; instead, it offers parties the chance to reaffirm its will to submit their claim to an arbitral tribunal. In fact, generally, the Terms of Reference is a more specific document than the arbitration agreement.

81 Comments by Bryan Longo and Napoleão Casado Filho. 82 Comments by Eduardo Ono Terashima and Rafael Villar Gagliardi.

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In this sense, the Terms of Reference offers the parties the opportunity to fill in possible legal gaps, which may not be expressly addressed in the applicable law or in the CAM/CCBC Rules. The Terms of Reference, by providing a strict provisional timetable, stipulating dates to virtually all the submissions of the parties, assures the adequate flow of proceedings, which shall be fast and efficient. As one is aware, flexibility and time are important issues that parties look for in arbitration,83 a circumstance that highlights the role that the Terms of Reference has been playing within international arbitration proceedings. As already stated, the Terms of Reference is a means employed by arbitral tribunals to ensure fast and efficient development of the arbitration. The execution of the Terms of Reference. At the outset of an arbitration, parties must submit their request for arbitration, and arbitrators must confirm their impartiality and independence to appear and act on the proceeding. Thereafter, the arbitral tribunal triggers the discussion upon the signing of the Terms of Reference by requesting the parties to submit a draft of such a document with their preliminary comments regarding the main issues discussed in the arbitration. During such negotiation, parties to the Terms of Reference will have the opportunity to discuss issues related to the subject matter of the arbitration, the rules and procedural issues applicable to the case, the language, the seat, costs involved, among others. After this negotiation stage, the arbitral tribunal consolidates a preliminary version of the Terms of Reference and schedules a specific meeting for its signing by mutual consent of the parties and the arbitral tribunal. Mutual consent of the parties is of particular importance since it increases the likelihood of recognition and enforcement of the award. In other words, by signing the Terms of Reference, parties ratify their consent to arbitration itself, confirming the party autonomy principle. At this stage, more importantly, parties confirm that all the acts executed by the parties, the arbitral institutions and the arbitral tribunal so far, strictly comply with the law. This context favors the arbitral award since parties, after signing the Terms of Reference, would be precluded from challenging the validity of the arbitral award in the future on such grounds. For instance, assuming that the arbitral tribunal fully complied with the Terms of Reference, a party could not allege that it did not have the opportunity to present its case or that the arbitral tribunal breached the due process of law.

83 See more in Alan Redfern, Martin Hunter, Nigel Blackaby and Constantine Partasides, op. cit., pp. 31-43.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi 4.19. The absence of any of the parties regularly convened to appear at the initial meeting or its refusal to sign the Terms of Reference will not prevent the normal course of the arbitration.84 Article 4.19 of CAM/CCBC Rules is clear and sets forth an important principle of international arbitration, the party autonomy principle. In this context, once the parties have signed a valid arbitration agreement, expressly opting to have any dispute arising from their main agreement resolved by an arbitral tribunal, they will not be entitled to resile from it and will have to comply with a final and binding arbitral award. It is interesting to note that Article 4.19 of CAM/CCBC is clear when referring to a “party regularly convened,” in accordance with the Article V, I (b) of the New York Convention.85 Such a provision authorizes national courts to refuse the enforcement of an arbitral award in case the party against whom the enforcement is sought was not given proper notice of the arbitration proceeding. Another issue raised by Article 4.19 of CAM/CCBC is the comparison between the Terms of Reference and the arbitration agreement. In this sense, although the Terms of Reference is more specific than the arbitration agreement, when drafted correctly and duly signed by all the parties involved, the arbitration agreement alone suffices to bind parties to arbitration. In other words, the party who executed a valid arbitration agreement does not have to sign the Terms of Reference to be bound to arbitration. Naturally, when a party is absent from the arbitral proceeding or has refused to sign the Terms of Reference, for the sake of the validity of the award, the arbitral tribunal must strictly follow the procedural rules applicable to the case. The arbitral tribunal must also carefully analyze the case, especially the evidence and arguments submitted by the party, to assure the rendering of a valid arbitral award at the end of the arbitration. 4.20. If a request for the commencement of an Arbitration is submitted and has the same purpose or same cause of action as an arbitration currently proceeding at the CAM/CCBC or if the same parties and causes of action are present in two arbitrations, but the subject matter of one, because it is broader, includes that of the others, the President of the CAM/CCBC can, upon request of the parties, up to the time the Terms of Reference are signed, order joinder of the proceedings.86 84 Comments by Eduardo Ono Terashima and Rafael Villar Gagliardi. 85 Art. V, I: “Recognition and Enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:” (…) “(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case.” 86 Comments by Eduardo Ono Terashima and Rafael Villar Gagliardi.

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The problem of multiparty arbitration is dealt with in Article 4.16, and consists in facing two or more parties on either one or on both sides of the dispute. A different and more complex issue arises from the existence of different proceedings that may or may not involve the same parties and that may stem from the same contracts or even from connected or interdependent contracts. Consolidation is generally understood and dealt with in terms of merging, under the authority of one single arbitrator or tribunal, two or more different proceedings, initiated separately and that share, to a certain extent, issues of fact and/or law. This is the meaning given to the term in Article 10 of the ICC Rules.87 It entails the issue of determining whether and when it is desirable or even possible to consolidate parallel arbitration proceedings under one single procedure, presided by one single arbitral tribunal, that would have the authority to decide all the claims asserted by the parties. Nonetheless, Bernard Hanotiau points out that consolidation may also have a broader meaning, namely in the United States of America. In that country, consolidation also deals with the hypothesis of merging claims deriving from different contracts into one ‘consolidated’ arbitration procedure. As it becomes clear, there is some overlap with the notion of group of contracts.88 On the other hand, reunion of proceedings entails preserving each independent and separate procedure as originally filed, but submitting all of them to the authority of one single arbitrator or tribunal. It represents a middle ground solution between the perils of consolidation, as explained later in this section, and the threats posed by allowing related arbitration proceedings to be entertained and decided by different tribunals, generating loss of efficiency and mainly the risk of having conflicting decisions that may cause further discussions and challenges before national courts. It is submitted that Article 4.20 refers to joinder of proceedings with the meaning of reunion, as described above. It differs from the use of the term joinder by other rules, such as the ICC Rules. According to Article 7.1 of the ICC Rules, joinder refers to the application made by a third party not formally named in the arbitration agreement to join an ongoing

87 “Art. 10: Consolidation of Arbitrations. The Court may, at the request of a party, consolidate two or more arbitrations pending under the Rules into a single arbitration, where: a) the parties have agreed to consolidation; or b) all of the claims in the arbitrations are made under the same arbitration agreement; or c) where the claims in the arbitrations are made under more than one arbitration agreement, the arbitrations are between the same parties, the disputes in the arbitrations arise in connection with the same legal relationship, and the Court finds the arbitration agreements to be compatible. In deciding whether to consolidate, the Court may take into account any circumstances it considers to be relevant, including whether one or more arbitrators have been confirmed or appointed in more than one of the arbitrations and, if so, whether the same or different persons have been confirmed or appointed. When arbitrations are consolidated, they shall be consolidated into the arbitration that commenced first, unless otherwise agreed by all parties.” 88 Bernard Hanotiau, Complex Arbitrations: Multiparty, Multicontract, Multi-issue and Class Actions, The Hague: Kluwer Law International, 2005, p. 179.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi arbitration. For the purposes of ICC proceedings, “it means the situation where there is an arbitration underway and a party to that arbitration seeks to add a new party, that is to say, a party that was not named as such in the original request for arbitration.”89 It is increasingly common to find disputes that do not fall within the traditional structure of one party against the other, discharging claims against each other. This is all the more true in arbitration, which tends to attract the most complex transactions and deals, which also means attracting the most structurally complex disputes as well. Construction projects constitute a clear example of such complexity. Disputes that may involve the owner, contractor, subcontractor and even insurance companies and that may or may not be better served if heard together are far too numerous to be treated as exceptional. Unfortunately, parties often fail to deal with this issue when drafting arbitration agreements and, when they do deal with it, the number of possible situations that would need to be dealt with is so overwhelming that it would be difficult, if not impossible, to draw one single general principle or rule. Also unfortunately, it does not take long until (at least) one party realizes that it will be better off if joinder is denied or if proceedings are not consolidated, by reasons of either cost or strategy. In all such cases, there is a general and even intuitive understanding that having all the claims resolved in one single dispute or at least by one single jurisdictional body would be more efficient in terms of time and costs. This understanding comes from the fact that, ordinarily, concentrating different claims in one single dispute tends to reduce attorney fees, arbitrators’ fees, witness preparation and document collation efforts, travelling and lodging expenses, etc. Additionally, it would have the perceived advantage of avoiding the risk of conflicting decisions.90 However, consolidation and joinder pose disadvantages as well. First of all, reducing the number of arbitration proceedings may be cost and time effective in general. However, this does not hold true, for instance, for the party that has one single claim against one single party. For this specific party, the proceedings held with multiple claimants and/or respondents and multiple claims tend to generate a more complex, expensive and timeconsuming dispute. Not only that, this more complex dispute creates the challenges germane to multiparty arbitrations, as pointed out in the commentary to Article 4.16, especially regarding the constitution of the arbitral tribunal.91 There is also the matter of confidentiality, which may be breached, even on a small scale, if different parties are allowed to 89 Simon Greenberg, José Ricardo Feris and Christian Albanesi, “Consolidation, Joinder, Cross-Claims, Multiparty and Multicontract Arbitrations: Recent ICC Experience,” in Bernard Hanotiau and Eric A. Schwartz (Eds.), ICC Dossiers VII: Multiparty Arbitration, Paris: ICC Services Publications Department, 2010, pp. 36 and 172. 90 Alan Redfern, Martin Hunter, Nigel Blackaby and Constantine Partasides, op. cit., p. 149; Gary B. Born, “International Arbitration: Law and Practice”. The Hague: Kluwer Law International, Alphen aan den Rijn, 2012, p. 221. 91 Gary B. Born, op. cit., 2012, p. 222.

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participate in a specific dispute that is being entertained in a confidential manner. Finally, parties and arbitrators involved in consolidated proceedings are commonly required to deal with harmonization of issues like seat of arbitration, applicable rules of law and allocation of costs. National courts do not have to deal with this type of obstacles and with the dilemmas and conflicts that stem therefrom. There are many reasons that could justify this difference. Among them, two seem to stand out. First, contrary to arbitration, litigation in national courts is not based on party autonomy. It does not depend on consent.92 Second, unlike what happens in arbitration, national courts are usually organized hierarchically and, therefore, access to one higher level with the superior authority necessary to resolve conflicts of jurisdiction between two equally empowered jurisdictional bodies is available. This was actually pointed out by the Court of Appeals of the State of Rio de Janeiro in the CEC III Case decision93: Whereas, in the concrete case, there are controversies that may involve a constitution of more than one arbitral tribunal (or panel), because there is no hierarchy or pre-established rules that may present solutions for the resisted issues, the definition of criteria that make it possible to assure that the parties are not deprived from their rights is imperative. Before national courts, subject to limitations specifically provided for in each domestic legislation, it is generally possible to join additional parties or to consolidate separate sets of proceedings.94 Procedural legislation provides, as a rule, mechanisms to avoid or mitigate the risks of conflicting decisions on the same issues of law or fact.95 In arbitration, consolidation and joinder constitute more challenging matters, because of the reasons pointed out above. This is why it is possible to find so many different views among scholars and different principles set forth in judicial precedents.

92 The traditional notion of consent may be subject to be updated and adjusted to the needs of modern contract practice and global trade. For examples of such updated readings, see Bernard Hanotiau, “Consent to Arbitration: Do We Share a Common Vision?”, in Arbitration International, vol. 27, No. 4, The Hague: Kluwer Law International, 2011, pp. 539-554. 93 Case No. 0301553-55.2010.8.19.001, Court of Appeals of the State of Rio de Janeiro, 9th Civil Panel, 21 May 2013. Free translation of the Portuguese original as follows: “Existindo, no caso concreto, controvérsias que podem envolver a constituição de mais de um tribunal (ou painel) arbitral, por inexistir hierarquia ou regras pré-estabelecidas que possam apresentar soluções para as questões resistidas, impõe-se a definição de critérios que possam garantir que as partes não sejam prejudicadas nos seus direitos.” 94 Alan Redfern, Martin Hunter, Nigel Blackaby and Constantine Partasides, op. cit., pp. 149-150. 95 Brazilian Federal Rules of Civil Procedure (“Código de Processo Civil”, Federal Act No. 5.869/73), dedicates several articles to the issue, inter alia: 103 through 106, 109, 265, IV, 267, V.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi The UNCITRAL Model Law is silent on these issues, which it does not address. Therefore, the rule of thumb goes back to the matter of compatibility with the agreement to arbitrate. National laws have dealt with the issue by generally empowering tribunals and, more commonly, national courts with the authority to order consolidation or joinder of proceedings. Although solutions given in each specific case may vary, there is a certain degree of uniformity in requiring the parties’ agreement to order consolidation or joinder.96 The English Arbitration Act (1996) modified the Model Law to provide for the possibility of consolidation by order of tribunals, if parties have agreed to it.97 The same rule applies to requests for concurrent hearings. Hong Kong98 and New Zealand99 have also enacted legislation dealing with the matter. The same holds true for the Netherlands. Article 1.046 of the Dutch Code of Civil Procedure provides that If arbitral proceedings have been commenced before an arbitral tribunal in the Netherlands concerning a subject matter which is connected with the subject matter of arbitral proceedings commenced before another arbitral tribunal in the Netherlands, any of the parties may, unless the parties have agreed otherwise, request the President of the district Court in Amsterdam to order a consolidation of the proceedings. Contrary to what came to be decided in both The Government of the United Kingdom v. The Boeing Company and in Glencore, Ltd. v. Schnitzer Steel Products Co, the leading cases that overturned the early tendency of the US Case Law to allow consolidation even absent consent of the parties, Dutch Law allows consolidation by the court even in such situations. Courts are not allowed to order consolidation only if the parties have expressly agreed to exclude consolidation of arbitration proceedings. It has been submitted by a minority of scholars100 that in such cases, there may be an issue with enforcement of the arbitration award in foreign jurisdictions, under the 1958 New York Convention, because of the wording of Article V(1)(d), according to which recognition and enforcement of an award may be refused on proof that

96 97 98 99 100

Gary B. Born, op. cit., 2012, p. 223. Section 35. Hong Kong Arbitration Ordinance, Schedule 2, 2(1). New Zealand Arbitration Act, Schedule 2, §2. Alan Redfern, Martin Hunter, Nigel Blackaby and Constantine Partasides, op. cit., p. 158.

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the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place. However, so long as parties have at least agreed to arbitration and to the same arbitral jurisdiction, there is solid and strong support for an award to be recognized and enforced by a foreign court.101 Additionally, this issue will not arise if the arbitration agreement, either directly or by reference to rules chosen by the parties, provides for appointment of all members of the arbitral tribunal by the arbitral institution administering the proceedings, since this is the underlying issue when it comes to consolidation: in general, parties are deprived of the right to appoint an arbitrator, even though equal treatment remains unaltered, as none of the parties keeps such right, if the issue is properly managed by the administering institution. Taking a more liberal view, certain states’ statutes in the United States provide for consolidation regardless of consent of the parties and even when parties have expressly agreed to exclude such possibility, creating a type of public policy limit that would prevent parties from excluding the possibility of consolidation (and severance) of arbitration proceedings. This is the case of the State of Massachusetts: A party aggrieved by the failure or refusal of another to agree to consolidate one arbitration proceeding with another or others, for which the method of appointment of the arbitrator or arbitrators is the same, or to sever one arbitration proceeding from another or others, may apply to the superior court for an order for such consolidation or such severance. The court shall proceed summarily to the determination of the issue so raised… No provision in any arbitration agreement shall bar or prevent action by the court under this section.102 It is submitted that this approach is preempted by the United States’ Federal Arbitration Act, which requires enforcement of the parties’ arbitration agreement in accordance with its terms. It is also contrary to the 1958 New York Convention on Recognition and Enforcement of International Arbitration Awards, which contains the same requirement in Article V(1)(d), allowing the court of the country in which recognition and enforcement of a foreign award are being sought to deny such application in case the constitution of the arbitration tribunal or the arbitration procedure was not in accordance with the arbi101 Albert Jan van den Berg, “Consolidated Arbitrations and the 1958 New York Arbitration Convention”, Arbitration International, No. 2, 1986, p. 367; Alan Redfern, Martin Hunter, Nigel Blackaby and Constantine Partasides, op. cit., p. 158. 102 Mass. Gen. Laws Ann., C. 251, §2A. See Gary B. Born, op. cit., 2012, p. 226.

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi tration agreement or, in the absence thereof, of the law of the seat of the arbitration. Supporting this view, Stephen R. Bond emphasizes that while the policy-oriented goals of effective and efficient dispute resolution are highly appropriate from a systemic perspective, in a case-specific context they must yield to the clearly expressed will of the parties. To conclude otherwise is to make the best the enemy of the good and to threaten the foundation of consent upon which the international commercial arbitration system is based.103 It is established, at this point, that consolidation or joinder of parallel proceedings may be ordered by the court, as a result of an application made to that end. Courts of the State of New York have a long tradition of granting applications for consolidation of parallel proceedings that raised the same issues of fact or law.104 Nonetheless, more recent precedents from the federal district courts seem to indicate that consent by the parties would be essential for a court to grant consolidation. This was the decision of the Court of Appeals of the State of New York, reversing the decision rendered by District Court for the Southern District of New York, disallowing consolidation. It held that consolidation of arbitration proceedings stemming from separate agreements was not permissible absent consent of the parties, regardless of the fact that such proceedings addressed the same issues of fact or law.105 Brazilian Case Law reveals one relevant precedent dealing with the issue of parallel arbitration proceedings, known as the CEC III case,106 which has already been referred to in the commentary to Article 4.16 of the Rules. Consórcio Empreendedor Corumbá III, was the owner of a power plant to be built in Brazil by a consortium of three companies – EIT (Empresa Industrial Técnica S.A.), Energ Power S.A. and Themag Engenharia e Gerenciamento Ltda. Three different arbitration 103 Stephen R. Bond, “Dépeçage or Consolidation of the Disputes Resulting from Connected Agreements: The Role of the Arbitrator”, in Bernard Hanotiau and Eric A. Schwartz (Eds.), ICC Dossiers VII: Multiparty Arbitration, Paris: ICC Services Publications Department, 2010, p. 36. 104 Hanotiau, Bernard, op. cit., p. 185. 105 The Government of the United Kingdom v. The Boeing Company. 998 F.2d 68 (2nd Cir. 1993). See also Glencore, Ltd. v Schnitzer Steel Products Co. 189 F.3d (2nd Cir. 1999). In this case, the court went to the point of considering that, in the absence of an agreement between the parties allowing consolidation, it lacked authority even to order joint hearings. The court reasoned that procedural rules that allowed such measure for “actions pending before the court” would not be applicable to arbitration proceedings. 106 Case No. 0301553-55.2010.8.19.001, Court of Appeals of the State of Rio de Janeiro, 9th Civil Panel, 21 May 2013. For a transcription of the lower court judgment, see Revista de Arbitragem e Mediação (RArb) n. 38, Jul-Set/2013, São Paulo: Revista dos Tribunais, pp. 426-434. For a detailed analysis of the CEC III v. CCCO, EIT, Energ and Themag, please see Camila Biral Vieira da Cunha, “Algumas reflexões sobre a decisão judicial que trata da reunião de procedimentos arbitrais multiparte em um mesmo painel arbitral da lavra da 7ª Vara Empresarial – TJRJ (caso CEC III vs. CCCO, EIT, Energ e Themag)” in Revista de Arbitragem e Mediação (RArb) No. 38, jul-set/2013, São Paulo: Revista dos Tribunais, pp. 425-442.

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proceedings related to the EPC agreement were initiated. Two of them were multiparty arbitrations, and the remaining one was not. In the first two cases, parties were not able to appoint an arbitrator, as the whole tribunal would be appointed by the arbitral institution, according to the applicable rules. This meant that the cases would end up having different tribunals, for in the third case, parties were allowed to appoint arbitrators and, in all its appointments, the arbitral institution would not appoint arbitrators that had already been appointed by either one of the parties in any of the related proceedings, as this could generate allegations of unequal treatment or lack of impartiality. CEC III applied for joinder of proceedings before the arbitral institution. The application was denied. Upon constitution of the second arbitral tribunal, CEC III applied for an injunction before Brazilian courts, in order to stay the proceedings. As for the merits of the case, CEC III requested that the Court order the reunion of the different proceedings (not their consolidation, which would entail merging three proceedings into one single procedure) that were to be heard by one single arbitral tribunal, the members of which were to be appointed by the arbitral institution. The claim was granted by the Lower Court of the City of Rio de Janeiro, primarily on the grounds that the reunion sought by CEC III would avoid conflicting decisions and, therefore, would preserve the arbitration proceedings. The Court also held that the party’s right to appoint an arbitrator is not absolute, because the Brazilian Arbitration Act (Federal Act #9.307/96) itself provides for situations in which it is incumbent on the court to appoint the arbitrator(s), as did the very rules chosen by the parties. The ruling was later upheld by the Court of Appeals of the State of Rio de Janeiro, which emphasized that, had CEC III sought to obtain consolidation, the claim would be inadmissible; the relief sought by CEC III was granted because it requested simply that the court order all the different proceedings to be heard before one single arbitral tribunal, to be appointed by the arbitral institution.107 Albeit some dissenting opinions and precedents, the requirement of agreement by the parties is in line with the general views of courts and scholars that have dedicated time to study the issue at hand. Given that consent is necessary, how can it be proven? What kind of consent must a party give? What is the applicable test to determine whether or not consent has been given (at an earlier stage, for instance) or even whether the legitimate expectation that consent would not be denied was created by the behavior of one of the parties or the relevant circumstances of the case?

107 CEC III Case decision: “Lower Court judge drew a distinction between consolidation of arbitral proceedings (what would prevent intervention by the courts) and reunion of proceedings for judgment by the same arbitral tribunal (what would render the request by the plaintiff admissible by the courts).” Free translation of the Portuguese as follows: “Magistrado de primeiro grau que diferencia união dos procedimentos arbitrais (o que vedaria a interferência do Judiciário), de reunião de procedimentos para julgamento pelo mesmo painel arbitral (o que tornaria o pedido do autor possível de apreciação pelo Poder Judiciário).”

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi Naturally, the relevant facts and the conduct of the parties in each case will be important to allow a conclusion regarding whether or not consent was given (or ought to be given). This notwithstanding, some general comments are still necessary. Consent may be given either before or after the dispute arises – in the first case, by reference to the issue in the arbitration agreement or by simple reference to rules that deal with consolidation and/or joinder, and in the second case, by agreeing to or not opposing a request for consolidation or joinder, when called upon specifically to agree to or oppose such a request. Consent may also be express or implied, as “there is no reason, however, that agreement to consolidation (or joinder/intervention) cannot be implied.”108 This peculiar situation raises the issue put by one court as follows: “the court may have ‘no power to order consolidation … if the parties’ contract does not authorize it… but in deciding whether the contract does authorize it the court may resort to the usual methods of contract interpretation.”109 There will be a solid and convincing argument for an application for consolidation or joinder of claims based on the same arbitration agreement, inserted in the same underlying contract. Under normal circumstances and unless any specific issue arises, the fact that the parties’ rights, obligations and claims stem from one and the same agreement may not imply an automatic authorization for consolidation or joinder in any situation, but it surely suggests that the tribunal has the power to rule on issues of consolidation and joinder. Even application of substantive law would support the foregoing suggestion, by way of the application of rules such as the implied covenant of good faith and venire contra factum proprium doctrine (in legal systems with a Roman Law inheritance) and estoppel in its various forms (in Common Law countries). It is perfectly understandable that parties to one single underlying agreement containing one single arbitration agreement hold a legitimate expectation to have all of the claims arising out of such agreement decided jointly (inversely, a party cannot be said to be caught by surprise by consolidation or joinder in such a situation), and it is incumbent on the law to ensure, to the extent possible, that such an expectation is not lightly frustrated, i.e., that it does not conflict with a higher legal value or principle. When the parties execute different underlying contracts containing different arbitration agreements, the situation is less clear. If the different arbitration agreements are identical or share at least the key elements of the dispute (number of arbitrators, seat of arbitration, applicable law, applicable institutional rules), there remains a strong argument in favor of an implied consent to consolidation and joinder. If, on the other hand, the same key issues differ between the various arbitration agreements, the stronger view would appear to be that parties indicated an implied exclusion of consolidation and joinder. After all, had it

108 Gary B. Born, op. cit., 2012, p. 225. 109 Connecticut Gen. Life Ins. Co. v. Sun Life Assur. Co. of Canada, 210 F.3d 771 (7th Cir. 2000).

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been their common intent to allow consolidation or joinder, parties would have at least drafted similar arbitration agreements. Naturally and as already mentioned, these are guidelines that will be heavily influenced by the specifics of each case. Article 4.20 empowers the President of the CAM/CCBC to grant applications to order joinder of proceedings in the following situations: (a) a new arbitration procedure commences, and it has the same scope or cause of action of a preexisting CAM/CCBC arbitration procedure; (b) parties to two or more existing CAM/CCBC arbitration proceedings and the cause(s) of action thereof are the same, but the scope of one is broader than the scope of the other(s), in such a way that claims asserted in the latter are contained in the framework of the former(s). The cause of action comprises the fact or facts and the legal grounds upon which a certain claim is based. They constitute the foundation for the reliefs sought and, conversely, such reliefs, which reveal the scope of the claim, are the frame that must accommodate the award. Identifying the cause of action of a certain claim entails finding the answers to the following questions: why is such relief sought? What is the basis for such prayer for relief? It is beyond any doubt that the scope of Article 4.20 consists in avoiding, so far as possible, the risk of having conflicting decisions and providing parties to parallel arbitration proceedings with a mechanism to expeditiously obtain joinder of such proceedings and enjoy the efficiency to be gained with such joinder, so long as the other requirements set forth in such a provision are also met. For an application to be granted under Article 4.20, all the involved arbitration proceedings must be administered by the CAM/CCBC. The Rules do not provide for joinder of proceedings administered by different arbitration institutions, because such provisions would lack enforceability over any other institution. The same requirement can be seen in Articles 9110 and 10111 of the ICC Rules. Another requirement consists in the fact that reunion by the President of the CAM/CCBC is admissible only if the Terms of Reference have not been signed in any of the proceedings. The reason for such a limitation is twofold. First, it stems from the fact that, upon execution of the Terms of Reference, the Tribunal has already been constituted and the dispute is stabilized, meaning that the claims have been asserted by the parties and procedural ground rules (i.e., the rules of engagement) have already been agreed upon. For the same reason, Article 4.21 of the Rules allows only for changes, modifications or amendments to the claims and causes of action until the Terms of Reference are executed. 110 “Article 9: Multiple Contracts. Subject to the provisions of Articles 6(3)–6(7) and 23(4), claims arising out of or in connection with more than one contract may be made in a single arbitration, irrespective of whether such claims are made under one or more than one arbitration agreement under the Rules.” 111 “Article 10: Consolidation of Arbitrations. The Court may, at the request of a party, consolidate two or more arbitrations pending under the Rules into a single arbitration, where: (…).”

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Arnoldo Wald, Ana Gerdau Borja, Bryan Longo, Eduardo Ono Terashima, Maíra de Melo Vieira, Napoleão Casado Filho and Rafael Villar Gagliardi Second, and also in line with Article 4.21 of the Rules, once the Terms of Reference are executed, the authority of the President of the CAM/CCBC to decide requests for joinder, consolidation or reunion of proceedings ceases to exist, since the arbitral tribunal has already been constituted and empowered by the parties, also for the purposes of such applications, if admissible in the specific case. Therefore, such requests are to be decided by the arbitral tribunal, exercising its jurisdiction over the dispute. Only occasionally, when such matters arise early in the proceedings (i.e., before execution of the Terms of Reference), are they to be dealt with by the President of the CAM/CCBC. As already mentioned, different problems arise in cases of consolidation, joinder or reunion, especially when a respondent joins an ongoing arbitration procedure with a constituted tribunal. The same issue arises where an arbitration between two parties is already in place, with a constituted tribunal, and it is consolidated with a new arbitration between one of the parties of the first one and another party, with the tribunal of this new arbitration yet to be constituted. Both cases illustrate scenarios in which the principle laid down in the Dutco case pose serious problems in terms of securing equality of treatment for all the parties when dealing with the constitution of the arbitral tribunal in consolidated cases or in the event of joinders. Article 4.20 deals with this issue in such a manner that it limits the authority of the President of the CAM/CCBC to hear and grant applications for joinder of proceedings to cases in which the Terms of Reference are yet to be executed, meaning that the constitution of the tribunal has not taken place or at least has not been concluded. Article 4.20 of the Rules also provides for additional requirements for an application made under its terms to be allowed. First of all, there must be an application made to the President of the CAM/CCBC.112 It cannot be ordered ex officio, without request from the parties. Further, it must have the consent – either express or implied, according to what was stated above regarding this matter – by the parties, indicating that all parties must agree with or, at least, not oppose the application made, namely, that one or more arbitration proceedings be joined to the first one.113

112 Article 10 of the ICC Rules contains the same requirement. 113 Consent is also required for consolidation under the ICC Rules, according to Art. 10(a), (b) and (c). It is submitted that consent is considered to be implied when parties initiate different proceedings based on the same underlying contract or based on the same legal relationship with different but compatible arbitration agreements.

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4.21. The Parties can change, modify or amend the claims and causes of action until the date the Terms of Reference are signed.114 Article 4.21 of CAM/CCBC Rules once more highlights the importance of the Terms of Reference as the core document of the arbitration proceeding. As already mentioned, the main purposes of the Terms of Reference are to fix the subject matter of the arbitration, to specify the claims of the parties and to organize the arbitration. In this sense, once parties and arbitrators sign the Terms of Reference, they will be bound by the scope and limits of that specific arbitration. This means that the parties will not be able to modify their claims under that specific arbitration. Naturally, parties are allowed to commence new arbitration proceedings, in case they understand that the Terms of Reference did not encompass a certain issue. It is worth mentioning that the Terms of Reference is also binding upon the arbitral tribunal, which will have to comply with the provisions therein defined by the parties during the arbitration. If the arbitral tribunal takes action against the Terms of Reference, its award will be subject to a challenge within national courts.

114 Comments by Eduardo Ono Terashima and Rafael Villar Gagliardi.

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Article 5 – Arbitral Tribunal Carlos Suplicy Forbes and Patrícia S. Kobayashi

1

Introduction

Article 5 of the CAM-CCBC Arbitration Rules deals with the arbitral tribunal. It describes the requirements and duties imposed on a person appointed as an arbitrator and the procedure to follow should they need to be replaced. The CAM-CCBC Code of Ethics for Arbitrators, which has been in effect since 1998, was created to better detail Article 5’s ramifications, owing to the relevance of its subject. As we will see below, the text of Article 5 reflects wide-ranging academic work and valuable contributions that defined the parameters for evaluating arbitrators’ independence and impartiality. It is important to note that the institutional rules created for the administration of arbitration proceedings concentrate on the practical aspects. This is why Article 5 focuses on cases in which an arbitrator cannot serve because of conflicts of interest with the parties, while not dealing with related issues, such as the individual’s legal capacity to serve as an arbitrator. Article 5 can be divided into two essential parts: (i) the requirements and the duty of disclosure; (ii) resignation, challenge and replacement. In the first part, which is composed of Articles 5.1 to 5.3, the parties’ freedom to appoint an arbitrator is guaranteed, and the requirements for serving as an arbitrator, which have already been firmly established by the UNCITRAL Model Law,1 are detailed: independence and impartiality. An additional requirement was added to this list and has proved to be of vital importance for arbitration: the arbitrator’s availability. As a result of these principles, the duty to disclose any circumstances that could affect the arbitrator’s impartiality, independence and availability throughout the proceeding has been established. In the second part, composed of Articles 5.4 and 5.5, the Rules describe the procedures for the challenge, resignation and replacement of arbitrators.

1

UNCITRAL Model Law on International Commercial Arbitration of 1985, with amendments as adopted in 2006, Art. 12 Grounds for challenge: (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence. An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties unless they have already been informed of them by him.

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2

Arbitrator and Arbitral Tribunal

5.1. Members of the List of Arbitrators and/or others designated by the parties can be appointed as arbitrators, with the provisions of article 4.4.1 of these Rules, the CAM/CCBC Code of Ethics and the requirements of independence, impartiality and availability always being observed. 5.2. A person cannot be appointed as an arbitrator if he or she: (a) Is a party to the dispute; (b) Has participated in the resolution of the dispute as legal representative for one of the parties before a judicial authority, testified as a witness, served as an expert or presented an opinion; (c) Is a spouse or relative, whether by blood or marriage, as an ancestor, descendent or collaterally, to the third degree, of one of the parties; (d) Is a spouse or relative, whether by blood or marriage, as an ancestor, descendent or collaterally, to the second-degree, of the attorney or representative of one of the parties; (e) Participates in a management or administrative body of a corporate entity that is a party to the litigation or is a shareholder or partner; (f) Is a personal friend or enemy of one of the parties; (g) Is a creditor or debtor of one of the parties or of his or her spouse or of relatives, whether ancestors, descendents or collaterally, to the third degree; (h) Is a presumptive heir, legatee, employer or employee of one of the parties; (i) Receives gifts before or after the dispute begins, advises one of the parties regarding the subject matter of the case or provides funds to cover the expenses of the proceedings; (j) Has a direct or indirect interest in the decision of the dispute in favor of one of the parties; (k) Has served as a mediator or conciliator in the dispute before the commencement of arbitration, unless expressly agreed to by the parties; (l) Has an economic interest related to any of the parties or their lawyers, unless there is express agreement of all parties. Article 5.1 of the CAM-CCBC Arbitration Rules reaffirms the parties’ freedom to choose the person who will be responsible for resolving the dispute that is presented. The arbitrator may be a member of the CAM-CCBC List of Arbitrators or not – he or she must simply comply with the principles of impartiality, independence and availability. Articles 5.1 and 5.2 deal with the practical aspects of an arbitrator’s activity. They describe the basic requirements an arbitrator is expected to meet, followed by the reasons an arbitrator will be impeded or suspect. It is interesting to note that the 1998 CAM-CCBC Arbitration Rules did not contain a provision regarding an arbitrator’s impartiality or independence, merely making reference

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Article 5 – Arbitral Tribunal to cases of impediment or suspicion.2 The complexity of the cases and CAM-CCBC’s maturity have shown that including and following these provisions is necessary in order to guide both the parties and the arbitrators themselves during the proceedings.

2.1

Independence, Impartiality and Availability

Since the arbitrator is the individual in whom the parties place their trust3 to resolve a dispute, he or she must be independent, impartial and available. The arbitrator must be objectively free of any trace of dependence on either of the parties, whether as a relative, close friend, sworn enemy or economic dependant, even if under a more subjective analysis of the arbitrator’s conduct and convictions he or she may not have any propensity toward one party or the other or interest in the results of the dispute. The arbitrator must also have sufficient time to dedicate to the resolution of the dispute. Independence and impartiality are standards4 of behavior. The former is objectively verifiable by the absence of a relationship between the arbitrator and the parties. The latter manifests as a state of mind of the arbitrator and is therefore more difficult to prove.5 Availability as a requirement for an arbitrator’s activity is an expression of the CAMCCBC’s concern with the efficiency and celerity of the proceedings it administers in order to meet the parties’ expectations of the institution and the arbitrator they have chosen. An arbitrator is expected to have time available to analyze the documents and statements presented, prepare and conduct the hearings and issue a final decision.6 Availability is a 2 3

4

5

6

CAM-CCBC’s Arbitration Rules, approved in 1998, Art. 6.1: Members of the Center’s Panel of Arbitrators and/or others chosen by the parties, as contemplated by Art. 5.7 above, may be appointed arbitrators. Law No. 9.307/1996. Brazilian Arbitration Act, Art. 13. “Pode ser árbitro qualquer pessoa capaz e que tenha a confiança das partes”. [Free translation: “Any person with capacity and who has the confidence of the parties can be an arbitrator.”]. Selma Lemes clarifies: “A Confiança da parte depositada na pessoa do árbitro representa a certeza que este terá independência para julgar com imparcialidade, posto que a independência é um pré-requisito da imparcialidade.” [Free translation: “The party’s confidence placed in the person of the arbitrator represents the certainty that the arbitrator will have the independence to decide impartially, with independence being a prerequisite to impartiality.”] Lemes, Selma Maria Ferreira. O Dever de Revelação do Árbitro e a Ação de Anulação de Sentença Arbitral. In. Lemes, Selma and Balbino, Ines (eds.) Arbitragem: Temas Contemporâneos. São Paulo: Quartier Latin, 2012. p. 453. Lemes, Selma Maria Ferreira. Árbitro: princípios da independência e da imparcialidade: abordagem no direito internacional, nacional e comparado. Jurisprudência (Lei 9.307/96, sobre arbitragem) São Paulo: LTr, 2001. p. 53. Gaillard, Emmanuel and Savage, John (eds.). Fouchard Gaillard Goldman on International Commercial Arbitration. The Hague: Kluwer Law International, 1999. §1080. p. 564. “It is not easy to provide a comprehensive definition of the qualities of independence and impartiality required of arbitrators. Independence is a situation of fact or law, capable of objective verification. Impartiality, on the other hand, is more a mental state, which will necessarily be subjective.” Valdes, Juan Eduardo Figueroa. A Expectativa das Partes em Relação ao Árbitro e ao Processo Arbitral Internacional. In. Lemes, Selma and Balbino, Inez (Cood.). Arbitragem e Temas Contemporâneos. São Paulo:

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new subject that has already become old. CAM-CCBC has addressed it at all possible opportunities as a way of publicly showing its interest in the arbitrator’s evaluation of his or her availability to conduct the proceeding. Some examples of the CAM-CCBC’s care in this matter are reflected in Article 7.1,7 which establishes a deadline of thirty days to sign the Terms of Reference, and in Articles 10.1 and 10.1.1,8 which establish a deadline of sixty days from the receipt of final arguments to issue the arbitral award, which can be extended to up to thirty days. All of these measures not only reduce the estimated time for the arbitration proceeding, but they are also objective guidelines to serve as limits and help the arbitrators evaluate their own availability at the time they accept the position. Having dealt with these general requirements to serve as an arbitrator, we must now more closely examine the cases in which an arbitrator is impeded from serving that are established in advance in the Rules. These situations are described in Article 5.2, as well as in the ethical standards stated in the CAM-CCBC Code of Ethics for Arbitrators, which results from the application of Article 13(6) of the Brazilian Arbitration Act: “In the performance of his or her duties, an arbitrator must proceed impartially, independently, competently, diligently and discreetly.”

2.2

Impossibility of Serving

The next article, Article 5.2 of the CAM-CCBC Arbitration Rules, describes certain cases in which an arbitrator is impeded. The basic purpose of Article 5.2 is to serve as a preliminary guideline for the parties as they appoint the arbitrators and for the arbitrators

7

8

Ed. Quarter Latin, 2012. p. 363. Juan Eduardo Figueroa Valdes explains: “No que diz respeito à disponibilidade de tempo, isto significa estar em condições de atender uma reunião preparatória em um ou dois meses, a partir da nomeação; dispor entre os seis a dez meses seguintes dos dias necessários ou semanas para a audiência oral, assim como dispor, no período intermediário, do tempo necessário para a preparação da audiência e do estudo dos documentos e antecedentes.”. [Free translation: “In regard to available time, this means being able to attend a preparatory meeting in one or two months from the appointment; having the days or weeks necessary for the oral hearing available during the six to ten following months, as well as having the time available to prepare for the hearing and study the documents and preliminary matters during the intermediary period.”] CAM-CCBC’s Arbitration Rules, Art. 7.1: Upon commencement of the arbitration, as provided in Art. 4.14, the Secretariat of the CAM/CCBC will notify the parties and the arbitrators for the signing of the Terms of Reference, which must take place within thirty days. CAM-CCBC’s Arbitration Rules, Art. 10.1. The Arbitral Tribunal will issue the arbitral award within sixty days from receipt by the arbitrators of the final arguments presented by the parties (or of their notification that the referred time period has expired), unless another time period is established in the Terms of Reference or agreed to with the parties. 10.1.1. The time period in the article above can be extended by up to thirty days, at the discretion of the President of the Arbitral Tribunal.

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themselves as they first analyze any conflict of interest they may have if they serve in the proceeding. The CAM-CCBC Arbitration Rules also make a choice when they opt for this initial, rather than exhaustive, list of impediments. They import these cases of impediment and suspicion from those that apply to Brazilian judges under Articles 1349 and 13510 of the Brazilian Civil Procedure Code. The text, which is similar to the text of the former CAM-CCBC Arbitration Rules, was questioned during the 2012 revision. This was especially so since the situations listed in the twelve items of Article 5.2 could be replaced by the simple requirement of independence and impartiality, which is already provided for in Article 5.1. However, the purpose of this article is to create guidelines and make this difficult evaluation more specific, even if only partially. The text also serves a didactic purpose, creating an immediate correlation between arbitrators and judges. 9

Law No. 5,869 of 11 January 1973, Art. 134. “É defeso ao juiz exercer as suas funções no processo contencioso ou voluntário: I – de que for parte; II – em que interveio como mandatário da parte, oficiou como perito, funcionou como órgão do Ministério Público, ou prestou depoimento como testemunha; III – que conheceu em primeiro grau de jurisdição, tendo-lhe proferido sentença ou decisão; IV – quando nele estiver postulando, como advogado da parte, o seu cônjuge ou qualquer parente seu, consanguíneo ou afim, em linha reta; ou na linha colateral até o segundo grau; V – quando cônjuge, parente, consanguíneo ou afim, de alguma das partes, em linha reta ou, na colateral, até o terceiro grau; VI – quando for órgão de direção ou de administração de pessoa jurídica, parte na causa. Parágrafo único. No caso do no IV, o impedimento só se verifica quando o advogado já estava exercendo o patrocínio da causa; é, porém, vedado ao advogado pleitear no processo, a fim de criar o impedimento do juiz.” [Free translation: “It is prohibited for a judge to perform his or her duties in a litigious or voluntary case: I – To which he or she is a party; II – In which he or she has intervened as an attorney in fact of a party, served as an expert witness, worked as an agent of the Prosecutor’s Office, or testified as a witness; III – Over which he or she had jurisdiction at the trial court level, having entered a judgment or decision; IV – When he or she is participating, as an attorney for a party, or his or her spouse or any relative, whether by blood or marriage, who is a direct ancestor or descendant, or a collateral relative to the third degree is doing so; V. When he or she is a spouse, relative, whether by blood or marriage, of one of the parties, as an ancestor or descendant, or collaterally to the third degree; VI – When he or she is part of the management or administration of a corporate entity that is party to the case. Sole paragraph. In the case of IV, the impediment will only be found when the lawyer was already acting as an attorney in the case; it is, however, prohibited for an attorney to act in a case in order to create an impediment for the judge.”] 10 Law No. 5,869 of 11 January 1973, Art. 135. “Reputa-se fundada a suspeição de parcialidade do juiz, quando: I – amigo íntimo ou inimigo capital de qualquer das partes; II – alguma das partes for credora ou devedora do juiz, de seu cônjuge ou de parentes destes, em linha reta ou na colateral até o terceiro grau; III – herdeiro presuntivo, donatário ou empregador de alguma das partes; IV – receber dádivas antes ou depois de iniciado o processo; aconselhar alguma das partes acerca do objeto da causa, ou subministrar meios para atender às despesas do litígio; V – interessado no julgamento da causa em favor de uma das partes. Parágrafo único. Poderá ainda o juiz declarar-se suspeito por motivo íntimo.” [Free translation: “A suspicion of partiality by the judge will be considered founded when: I – He or she is a close friend or sworn enemy of any of the parties; II – One of the parties is a creditor or debtor of the judge, of his or her spouse or of their relatives, as an ancestor or descendant or a collateral relative to the third degree; III – Is a presumptive heir, donee or employer of one of the parties; IV – Has received benefits before or after the beginning of the case; advises one of the parties regarding the purpose of the case, or provides funds to meet the expenses of the litigation; V – Is interested in the decision of the case in favor of one of the parties. Sole paragraph. A judge can also declare him or herself suspect for private reasons.”]

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As we will see below, the CAM-CCBC Arbitration Rules give the parties freedom regarding the basis for a challenge. However, they seek to provide information that is sufficient for one to determine, in a systematic interpretation, what situations impede arbitrators from acting. The provisions of Article 5.2, the CAM-CCBC Code of Ethics and arbitration best practices form the basis for this evaluation. When looking at the twelve items that make up Article 5.2, it bears noting that certain subjects are emphasized and show greater rigor in the analysis of whether an arbitrator is impeded. One notes initially that there is no distinction between a suspicion and an impediment; all are listed as making it impossible for the arbitrator to serve. Additionally, provisions were included that go beyond the relationship between the arbitrator and the party. Among the relationships that are considered to impede an arbitrator from serving is a connection between the arbitrator and the attorneys working in the case. In this regard, the Rules are restricted to situations in which there is a family relationship11 of up to the second degree between an arbitrator and an attorney. Additionally, unless expressly waived by the parties when the arbitrator is appointed, situations in which a potential arbitrator has an economic interest in line with that of one of the attorneys will also impede the arbitrator.12 One sees that the article also addresses situations of a closer connection with the parties, with the attorneys or with the dispute. All of these can be summarized simply as a direct or indirect interest in the outcome of the case in favor of one of the parties, whether due to a family relationship, economic benefit, prior belief or another prior relationship of the arbitrator. In any case, enormous rigor is imposed on the arbitrator because there is an even larger expectation from the parties in regard to the professional who serves as arbitrator. The arbitrator is expected to be objectively and subjectively independent in relation to the parties to the dispute.

2.3

CAM-CCBC Code of Ethics 13

The CAM-CCBC Code of Ethics for Arbitrators was created to guide the actions of arbitrators who serve in proceedings administrated by the CAM-CCBC from the time before they are appointed, throughout the arbitral proceeding and after the arbitration award is issued. 11 CAM-CCBC’S Arbitration Rules, Art. 5.2(d) Is a spouse or relative, whether by blood or marriage, as an ancestor, descendent or collaterally, to the second-degree, of the attorney or representative of one of the parties. 12 CAM-CCBC’S Arbitration Rules, Art. 5.2(l) Has a direct or indirect interest in the decision of the dispute in favor of one of the parties. 13 A copy of CAM/CCBC Code of Ethics is attached to this Book (Annex II).

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The CAM-CCBC Code of Ethics is a guideline for the parties and their attorneys as they deal with the arbitrator or arbitrators who make up the arbitral tribunal. Written in the form of statements, the Code of Ethics is a set of recommended rules as guidelines, rules of conduct and rules on how to proceed that are to be adopted by the arbitrators and to serve as guidelines for CAM-CCBC and its users. The introduction to the Code of Ethics clarifies that it is not exhaustive and does not list all the actions that good sense and ethics would require on a case-by-case basis. The brief Code of Ethics is composed of five statements. These statements deal with (i) independence and impartiality; (ii) diligence and competence; (iii) the duty of confidentiality; (iv) the duty of disclosure and (v) acceptance of investiture. It closes with general provisions regarding the investiture of members of CAM-CCBC’s Board of Directors as arbitrators, as well as a recommendation to attorneys on how to interact with arbitrators at social and academic events. The wording of the Code of Ethics, which is intentionally open, is an invitation to constant reflection on the arbitrators’ actions. It makes important observations that explain a great deal about each of the institutes that should guide arbitrators as they conduct the arbitration proceedings. Recommendations such as “[r]evealing all the facts and circumstances that could give rise to doubts regarding their impartiality or independence, not only in regard to the way they feel, but also from the parties’ perspective, or in other words, they must put themselves in the parties’ place and ask themselves whether they would like to know a particular fact or not if they were a party,” which is contained in Statement 1, explain the process expected of an arbitrator at the time of disclosure in a more accessible way. Additionally, other explanations, such as “[a]voiding not only improper or doubtful conduct, but also the appearance of improper or doubtful conduct” and “an arbitrator should not resign, except in exceptional cases and for a serious reason that makes it impossible for him or her to perform his or her duties” are guidelines that will ensure the good conduct of the arbitration without the interference of unnecessary or even costly incidents resulting from the replacement of an arbitrator during the arbitration. The CAM-CCBC Code of Ethics brings together in a brief text the expectations imposed on arbitrators and more direct explanations for the parties regarding an arbitrator’s duties.14

14 It is recommended that the full text of the CAM-CCBC Code of Ethics for Arbitrators be read. It was drafted by a commission that was specially created for this purpose. The commission was coordinated by Prof. Selma Maria Ferreira Lemes. Prof. Lemes has reflected deeply on what the ideal conduct for an arbitrator would be. The essay “Árbitro. O padrão de conduta ideal” is the result of a seminar held in 1993 at the São Paulo Institute of Lawyers (Instituto dos Advogados de São Paulo), and its content has been published in the work “Arbitragem. Lei Brasileira e Praxe Internacional” under the coord. of Prof. Paulo Borba CASELLA (org.) (São Paulo, LTr, 1999, 2ª ed., 233/268).

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3

Ongoing Duty to Disclose

5.3. It falls upon the Arbitrator to disclose, at any time, if he or she is prevented from acting and to refuse the appointment or tender a resignation. Under Article 5.3 of the CAM-CCBC Arbitration Rules, once an arbitrator is appointed, he or she has an ongoing duty to disclose anything that arises that could impede him or her from serving and to refuse the appointment or resign. This is a duty that continues for the length of the arbitration proceeding. The arbitrator must therefore remain unimpeded, impartial and independent. Despite the delays and interruptions that disclosure could cause in the arbitration, the arbitrator is required to state issues that could, from the perspective of a reasonable man, affect his impartiality and independence as soon as they become known. This matter is considered by the Special Committee in the event of a challenge, and certainly creates a higher level of comfort for the parties and reinforces the arbitrators’ position. The effects of the disclosure are advantageous not only to the parties, creating an expectation of complete transparency from the arbitrators in relation to facts that could potentially affect their impartiality or independence, or for the Special Committee in its evaluation, but also, and even more, to the arbitrators themselves. Once a fact has been disclosed without objection, there is an actual waiver by the parties of a challenge to the arbitrator based on the fact that it has been disclosed.15 The Rules do not contain a provision regarding the manner in which these facts should be disclosed. However, a letter from the arbitrator to the CAM-CCBC Secretariat is sufficient. The case manager for the arbitration will be responsible for notifying the parties and other arbitrators regarding the content of the document.

4

Challenging an Arbitrator

5.4. The parties can challenge the arbitrators for lack of independence or impartiality or for other justified reason within fifteen (15) days from awareness of the fact. The challenge will be decided by a Special Committee composed of three (3) members of the List of Arbitrators appointed by the President of the CAM/CCBC. 15 “In order to avoid any risk of being declared in violation of the obligation of impartiality and Independence, a prospective arbitrator should disclose all the facts that could reasonably be considered to be grounds for disqualification. If he or she does so (and no objection is made), any subsequent challenge during or after the proceedings should be unsuccessful. The right to an independent and impartial arbitrator is deemed to have been waived in respect of objections founded upon facts contained in the disclosure statement.” Redfern, Alan; Hunter, Martin; Blackaby, Nigel and Partasides, Constantine. Law and Practice of International Commercial Arbitration. Oxford: Oxford University Press, 2009. p. 268.

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4.1

Procedure

The procedure to be used for challenging an arbitrator is only briefly dealt with in Article 5.4 of the Rules. This article simply establishes a deadline for presenting a challenge (“fifteen (15) days from awareness of the fact”) and names the body that will be responsible for evaluating it: the Special Committee. The formal challenge is, in fact, the final stage of a summary proceeding for objecting to an arbitrator. It follows the steps provided for in Article 4.8 of the Rules. Under this procedure, a party presents an objection to an arbitrator. This is followed by an opportunity for the arbitrator to provide any clarifying information he or she wishes within a deadline of ten days. If the objection continues, an additional deadline of ten days is given to present a formal challenge. Once the formal challenge is presented, the CAM-CCBC President will appoint a Special Committee, consisting of three members of the List of Arbitrators. The earlier CAM-CCBC rules, which were approved in 1998, gave a deadline of up to ten days for decisions on what was referred to as an incident of removal.16 However, experience has shown that the short deadline often needed to be extended. The new rule therefore does not provide a deadline for the Special Committee. In general, the CAMCCBC President sets the deadline when he or she establishes the Special Committee.

4.2

Basis for a Challenge

Article 5.4 of the CAM-CCBC Rules establishes three grounds for challenging an arbitrator: (i) lack of independence; (ii) lack of impartiality or (iii) for a justified reason. The text is subtly different from Article 12(1)17 of the UNCITRAL Arbitration Rules, as amended in 2010, since it adds an open item to the grounds for a challenge: justified reason. A more open ground is added to the list, even though the need for an objective basis is maintained.18 16 CAM-CCBC’s Arbitration Rules, approved in 1998, Art. 6.4. Whenever the arbitrator who becomes disqualified or under suspicion does not present resignation, any of the parties may request the removal which shall be unappealably judged within ten days by a Committee made up of three members of the Panel of Arbitrators appointed by the president of the Center. 17 UNCITRAL Arbitration Rules (as revised in 2010) “12(1) Any arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence.” (access on 3 May 2014 ). 18 “(a) The standard for impartiality and independence is objective. The inclusion of the word ‘justifiable’ in Art. 12(1), to define the kind of doubt required to sustain a challenge, reflects UNCITRAL’s clear intention of establishing an objective standard for impartiality and independence. While a party’s subjective concerns about an arbitrator’s bias may prompt a challenge, it is the objective reasonableness of these concerns that is ultimately determinative.” Caron, David D. and Caplan, Lee M., The UNCITRAL Arbitration Rules: A Commentary. Oxford: Oxford University Press, March 7, 2013. p. 207.

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This open basis seeks to make the article more flexible. It accepts that the basis for a challenge evolves together with arbitration best practices and is also in keeping with the requirements of the parties themselves for the arbitrator who is appointed. Therefore, the presentation of challenges based on observing situations that indicate the arbitrator has a predisposition toward one of the parties is also allowed, so long as they are justified. The application of the statements in the IBA Conflict of Interest Guidelines, for example, serves as an argument. A case that began in 2012 brought together three factors listed in the IBA Guidelines, in the red list, to provide the basis for a challenge: (i) the arbitrator represents or does consulting work for one of the parties or an affiliate of one of the parties; (ii) the arbitrator currently represents the lawyer or law firm as a legal consultant for one of the parties; (iii) the arbitrator regularly does consulting work for the party that nominated him, or one of its affiliates, but neither the arbitrator nor his company obtains material financial revenue from the activity. Considering the facts listed and finding that the existence of a close relationship between the arbitrator and a party had been proven, the Special Committee ruled in favor of the challenge and removed the arbitrator. In another case, other sources were sought for an objection to the appointment of an arbitrator. The case, which was filed with the CAM-CCBC in 2012, had an additional requirement for the arbitrator in the arbitration agreement: the arbitrator had to have specific experience with the matter covered by the contract. A party’s belief that the arbitrator in question did not possess these qualifications served as the basis for its challenge. However, this challenge was rejected.

5

Resignation and Removal

5.5. If in the course of the proceedings there should arise any cause that prevents an arbitrator from acting or if an arbitrator should die or become incapacitated, that arbitrator will be replaced by another arbitrator appointed by the same party. If the President of the Arbitral Tribunal should become prevented from acting, he or she will be replaced by another President appointed by the other arbitrators. In either case, if an appointment fails to be made, the President of the CAM/CCBC will make the appointment. Article 5.5 deals with cases in which an arbitrator must be replaced, whether because of an impediment that has arisen or the death or incapacity of an arbitrator during a case. In this situation, the party that initially appointed the arbitrator has the right to appoint his or her replacement. Likewise, if the President of the arbitral tribunal needs to be replaced,

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he or she will be appointed by the other arbitrators. In case of omission, it will be the CAMCCBC President’s responsibility to make the appointment.

6

Conclusion

The scope of Article 5 of the CAM-CCBC Arbitration Rules goes beyond merely stating the conditions for instating or removing members of the arbitral tribunal in the form of rules. The basic purpose of its wording is to guide the arbitrators and parties so that their relationship in the case is conducted efficiently, while ensuring that, whenever necessary, the proper evaluations are conducted. It also safeguards the procedural steps that ensure transparency and security in the case. It is the CAM-CCBC’s duty, based on its own rules, to provide the means to ensure that the arbitration proceeding is conducted in a timely manner.

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Article 6 – Notifications and Time Periods Haroldo M.D. Verçosa

1

Introduction

Despite the simplicity of the arbitration procedure, as regulated by the Brazilian Law, which must be embraced in its regulations by the chambers of arbitration that govern its institutional kind, there are some minimal and objective dispositions from CAM/CCBC regarding the topic of notifications and deadlines to be followed.

2

Analysis of the Regulation Terms

6.1. Unless expressly provided otherwise, all communications, notices or the like will be made to the representatives appointed by the party, at the addresses informed by the representatives. With even more emphasis than given within the Judiciary, during the arbitration process permanent communication is established between the arbitration chamber (both Secretariat and Presidency), the parties and the arbitrators, according to the regulations of the CAM/CCBC in the article in discussion. Indeed, the law is flexible by nature, granting the parties the alternative to make modifications in this regard by the time they sign the Terms of Reference. The arbitration process allows for direct action of the parties in defense of their interests, not requiring the use of attorneys. On the other hand, having the parties’ hired attorneys during the course of arbitration, naturally all notifications and summons will be performed through their persons. If their representatives are not attorneys, they will not be allowed to perform activities for which specific legal competence belongs to those professionals, according to the law. 6.2. For all purposes of these Rules, the communications, notices or the like will be made by letter, fax, e-mail or equivalent means, with confirmation of receipt. The form of the said procedural acts is achieved alternatively by one of the means referred to, always accompanied by the confirmation receipt. With regard to e-mail communications, this requirement is not considered met by the so-called automatic reply of the kind set up by the recipients during their absence from the office, for instance. The confirmation

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receipt is required to be a reply to the e-mail received, authentic and specific, even if short and simple (‘Received, thank you’). 6.3. Any and all documents addressed to the Arbitral Tribunal will be sent to the Secretariat of the CAM/CCBC, with sufficient copies for each arbitrator and representative of the parties, as well as an additional copy for the CAM/CCBC case file, unless otherwise agreed by the parties. It is nothing more than a simple calculation to be performed by the parties. In case there are other person or persons who are not parties but whom the arbitration concerns, it can be established that they also be sent a copy. The reference to the representatives of the parties concerns those who were specifically named by them. As a means to safeguard their parties’ interests, it is common practice for law offices to name more than one lawyer with power of attorney, but the requirement in question is considered met if the documentation reaches only one of them. 6.4. The time periods provided in these Rules can be extended, at the discretion of the Arbitral Tribunal. As it happens, the deadlines established by these regulations are not mandatory, and the Arbitral Tribunal has the power to extend them (although never to reduce them), whenever it decides to do so when faced with unforeseen circumstances or a specific need. A decision in this regard shall be fully justified and formalized via a procedural order from the Arbitral Tribunal, the President having the competency to do so individually in exercise of his prerogatives and in agreement with the additional arbitrators. 6.5. If no time period is stated in these Rules or established by the Arbitral Tribunal, the time period will be ten (10) days. This way it is ascertained that a safety element is in place for the eventual gaps in the regulations. 6.6. A time period is counted in calendar days and will be counted so as to exclude the day of receipt of the notice and include the day on which the deadline expires. This directive follows the tradition of the procedural Brazilian Law. 6.6.1. A time period only begins to run on the first business day after notice.

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Hence the need for perfect establishment of the day of receipt, according to the means employed to carry them out. 6.6.2. A time period will be considered to extend to the next business day if it expires on a day during which the CAM/CCBC is not open for business. In the event of certain legal holidays or extraordinary occurrences, it is a prerogative of the CAM/CCBC to determine the suspension of office hours as well as the period in which it will occur, which shall be duly informed to the parties as well as the Arbitral Tribunal; after which, the above directive shall be applied.

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Article 7 – Procedure Cesar A. Guimarães Pereira and Erika Levin 7.1. Upon commencement of the arbitration, as provided in article 4.14, the Secretariat of the CAM/CCBC will notify the parties and the arbitrators for the signing of the Terms of Reference, which must take place within thirty (30) days. 7.1.1. The Terms of Reference can establish the initial timetable for the proceedings, established by agreement among the parties and the Arbitral Tribunal. 7.2. The arbitration briefs will be presented by the time agreed to by the parties or, if none is agreed to, that established by the Arbitral Tribunal. If none is established, they must be presented concurrently within at most thirty (30) days from the date the meeting to sign the Terms of Reference is held. 7.3. During the five (5) days after receiving the parties’ arbitration briefs, the Secretariat of the CAM/CCBC will send the respective copies to the arbitrators and to the parties, the latter of which will present their respective answers within twenty (20) days, unless another time period is established in the Terms of Reference. 7.3.1. Rebuttals and Surrebuttals can be presented, at the discretion of the parties and of the Arbitral Tribunal, in the manner and by the times established in article 7.3. 7.4. Within ten (10) days from receipt of the documents mentioned above, the Arbitral Tribunal will evaluate the status of the proceedings and order, if judged necessary, the production of evidence. 7.4.1. It will be the responsibility of the Arbitral Tribunal to grant and establish the burden of evidence it considers useful, necessary and appropriate in the manner and order held to be convenient under the circumstances. 7.5. The proceedings will continue in the absence of any of the parties provided that, having been properly notified, that party does not appear. 7.5.1. The arbitration award cannot be based on the default of a party. 7.6. Aspects of a technical nature involved in the arbitration proceedings can be the subject of expert examination or clarifications presented by specialists appointed by the parties, who can be convened to testify at a hearing, as decided by the Arbitral Tribunal. 7.7. When the evidentiary phase is concluded, the Arbitral Tribunal will establish a time of up to thirty (30) days for the parties to present their closing arguments. 7.8. The Arbitral Tribunal will adopt the necessary and convenient measures for the appropriate conduct of the proceedings, observing the right to fully defend oneself and the right to dispute the allegations of the other party, as well as the equal treatment of the parties.

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1

Introduction

The 2012 CAM/CCBC Rules entered into force after almost fifteen years of experience in the application of the former rules. While the 1998 CAM/CCBC Rules were in force, Brazil’s Supreme Court (STF) ruled on the constitutionality of the 1996 Arbitration Act (Law No. 9.307).1 This boosted arbitration practice in Brazil. The sheer number of arbitrations initiated at the CAM/CCBC reveals this increase in the practical use of this ADR (Alternative Dispute Resolution) method. Only one arbitral proceeding commenced in 1998, while sixty-three new ones were initiated in 2011.2 As Frederico Straube points out, the 2012 Rules are marked by flexibility of the procedure as compared with the former ones.3 This is achieved by eliminating detailed procedural steps and by leaving more space for the parties and the arbitral tribunal to arrange the procedure as it best fits the needs of each case. In addition, the default time periods were extended. These changes acknowledge the importance of the initial steps of the proceedings and avoid an attempt to reduce the duration of the proceedings by sacrificing the parties’ ability to effectively present their case.

2

Procedural Flexibility

The Rules contain one important exception to party autonomy in framing the procedure. Article 1.2 requires that any derogation or variation from the Rules not “affect any provision regarding the administrative organization of the CAM/CCBC nor the conduct of its duties.” The parties are generally free to adapt to their needs the procedure set by the Rules, but this freedom is not unlimited.4 The CAM/CCBC has an administrative role in the procedure, and Article 1.2 avoids variations that could affect its core administrative role. There is a contractual arrangement between the parties and the arbitral institution under which the institution performs its dispute management activities.5 An arbitral institution is not obliged to accept essential diversions from its rules. Its activities are organized under

1 2

3 4

5

SE 5206 AgR, Relator(a): Min. Sepúlveda Pertence, Tribunal Pleno, j. 12 December 2001, DJ 30 April 2004, p. 29. Straube, Frederico José. Uma primeira análise do novo regulamento do CAM/CCBC. Revista de Arbitragem e Mediação. Vol. 9. No. 32. 2012. pp. 227-248. Frederico Straube has been the president of the CAM/CCBC since 2008 and led the transition into the 2012 Rules and the internationalization of the institution (cf. , last access 31 October 2014). Ibidem. About limits to party autonomy, cf. Waincymer, Jeffrey. Procedure and Evidence in International Arbitration. Alphen aan den Rijn: Wolters Kluwer. 2012. pp. 754-755. Also Born, Gary. International Commercial Arbitration. Alphen aan den Rijn: Wolters Kluwer. Vol. 2. 2nd ed. 2014. pp. 2140-2144. Schütze, Rolf A. (Ed.). Institutional Arbitration: Article-by-Article Commentary. München: Verlag C. H. Beck o HG. 2012.

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the assumption that the parties and arbitrators will substantially follow its rules. In the CAM/CCBC’s case, the Rules clearly provide that the procedure is generally flexible and adaptable, and only exceptionally will a diversion be considered to be in breach of Article 1.2. The importance of Article 1.2 may be more directly linked to other aspects of the Rules rather than the procedure governed by Article 7. Two examples can shed light on this topic. The parties may be unable to change the system for assessment of arbitrators’ conflicts provided for in Article 5.4 of the Rules. Any challenge will be submitted to a Special Committee, regardless of what the parties may have agreed in their arbitration agreement. They may also be unable to completely exclude the institution’s role in the appointment of arbitrators that are not listed in its reference roster of arbitrators (Arts. 4.4.1, 4.9.2 and 4.13.1). The changes made in 2015 to Law No. 9.3076 acknowledge the relevance of the institution and are consistent with the CAM/CCBC 2012 Rules. Turning now to the procedure under Article 7, some traits of the Rules may be considered as being outside the parties’ right to exclude or derogate, as they are directly connected to the CAM/CCBC’s administrative role or even to the arbitral tribunal’s own responsibilities. This gives the institution and the tribunal the possibility of refusing certain diversions from the original procedural steps. A simple example is a possible agreement by the parties to drastically reduce the time for the tribunal to decide on the production of evidence. If this takes place after the tribunal has accepted its appointment, any change will depend on the tribunal`s concurrence. Otherwise, this would be a unilateral change to the terms under which the tribunal had accepted its duties. Problems concerning the steps of Article 7 are unlikely to appear in practice. Another extreme example is a possible exclusion of the Terms of Reference (Art. 7.1). As they frame the dispute and establish important issues for the management of the proceedings, including the obligation to pay costs and fees, one could see them as essential. However, if the parties expressly agree to skip this step with the agreement of the institution and the tribunal, there will be no defect in the proceedings. They may become less effective, but not invalid.7 This is an important conclusion because Article 32, IV, of Law No. 9.307,8 similarly to Article 34(2)(a)(iii) of the UNCITRAL Model Law on International Commercial

6

7

8

In May 2015, Law No. 13.129 changed Art. 13, §4, of Law No. 9.307 to allow the parties to freely appoint arbitrators outside an institution’s roster. The new provision reserves for the “institution’s competent bodies” the “control over the appointment” and orders the institutional rules to be applied in case of an impasse or in multiparty arbitrations. Cf. Gertel, Cristiane Amaral de Oliveira; Fernandes, Julio Cesar; Kömel, Luiza Helena Cardoso. Condutas e Procedimentos. In: Basso, Maristela; Polido, Fabrício Bertini Pasquot (Eds.) Arbitragem Comercial – Princípios, Instituições e Procedimentos. A prática no CAM-CCBC. São Paulo: Marcial Pons. 2013. p. 259, with reference to TJSP (São Paulo Court of Appeal) case law. Available in English at , last access 31 October 2014.

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3

Terms of Reference

The Rules adopt the option of providing for Terms of Reference, as do most institutional rules in one form or another. Article 4.18 defines its contents, which encompass the basic characteristics of the dispute that will give guidance to the arbitral tribunal in the proceedings. In accordance with Article 4.14, the arbitrators will sign their respective Statements of Independence. Article 7.1 defines the completion of the Statements of Independence as the “commencement of the arbitration.” However, the moment of signature of the Terms of Reference is often the first time the parties will jointly be in contact with the arbitral tribunal. Article 7.1 provides that the CAM/CCBC will give notice to the parties to sign the Terms of Reference. There is no express requirement about how this signature should take place. It is customary, however, that the signature occurs in a meeting or conference

9

As amended in 2006, available at , last access 31 October 2014. 10 In accordance with Art. 1 of the Law No. 9.307, parties who are free to contract may submit to arbitration their “disposable [alienable, freely transferable, waivable] patrimonial rights.” The parties can arbitrate the disputes they can solve by contract and without being legally bound to submit to the court system.

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between the arbitral tribunal and the parties. Article 7.2 confirms that by providing that the time for submission of the statements of claim counts from the date of the meeting to sign the Terms of Reference. It is also common for the Secretariat to submit to the parties after conferring with the arbitral tribunal a draft of the Terms of Reference for a round of comments and suggestions. These may be presented by exchange of communications prior to the meeting or at this occasion. The Terms of Reference are not a mere formality in the proceeding. In addition to the important effects discussed in the commentary to Article 4.18, the signature of the Terms of Reference is one of the best moments to obtain the agreement of the parties to procedural choices the arbitral tribunal intends the parties to make. On the one hand, by then the arbitral tribunal will already have had contact with the parties’ initial contentions and with some of the important documents of the case. It will then be in a position to cooperate with the parties to find the best possible procedural arrangement. On the other hand, the parties are early enough into the proceedings to still be willing to compromise about certain procedural issues. According to Article 7.1, the Terms of Reference must be signed within thirty days from the date of notice to the parties. Evidently, this period can be shortened, as it is a maximum recommended period to avoid unreasonable delays. It is not a minimum delay between the date of notice and the date of signature, so a party cannot claim any defect due to the fact that it was not given a thirty days notice prior to the date of signature of the Terms of Reference. The arbitral tribunal or the President of the CAM/CCBC can also reasonably extend it if needed. In practice, the Terms of Reference are often signed remotely by exchange of signed copies or by other virtual means to gain time and avoid the costs of a physical meeting.

4

Initial Schedule and Scheduling Conference

Article 7.1.1 suggests that the Terms of Reference already contain the “initial timetable for the proceedings.” The Rules do not provide specifically for a scheduling conference, but this suggestion indirectly recommends that one take place prior to the signature of the Terms of Reference. This will allow the parties to discuss their respective needs at least with regard to the initial steps of the proceedings, up to the phase described in Article 7.3.1. Practice among arbitral tribunals varies with regard to whether to discuss in the scheduling conference aspects relating to the procedure as a whole or to leave the evidencegathering issues for a second scheduling conference immediately after the submission of replies and rejoinders. Tribunals that favor the latter take into consideration that by then they will be fully aware of the parties’ evidentiary intentions and in a better position to entertain their requests on how to proceed. A single scheduling conference can be appro-

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priate when the facts are sufficiently clear from the notice of arbitration (Art. 4.1) and the respective answer (Art. 4.3). It is also recommended if the arbitral tribunal understands that a minimum agreement on a procedural schedule and other provisions is needed at the outset, before the exchange of briefs makes it more difficult for the parties to agree on these details. The arbitral tribunal has the power to direct the proceedings, and the agreement of the parties is not required (Art. 7.8).11 However, by eliciting the parties’ concurrence, the arbitral tribunal enhances the legitimacy of the proceedings and, ultimately, the chances of voluntary compliance with the future award. In addition, Gary Born points out that “In most international arbitrations (…) the parties will expect to be, and must be, consulted on many (if not all) procedural matters and given an opportunity to present their views; a tribunal’s failure to do so would arguably expose its award to annulment or non-recognition.”12 The Terms of Reference and the corresponding initial procedural schedule may provide for procedural steps that are different from the ones indicated in Articles 7.2 and 7.3 of the Rules. There are two basic formats for the phase in which the parties present their claims and respond to each other’s. They may be submitted as simultaneous claims and subsequent answers from both parties, or they can be presented in a successive order. The ICC 2012 Rules (Arts. 4 and 5)13 and the UNCITRAL 2010 Arbitration Rules (Arts. 20 to 22)14 provide for successive briefs, following what is generally found in procedures before national courts. The basic sequence is a statement of claim by claimant, a statement of defense (and counterclaim if this is the case) by respondent, a reply (and possible defense against the counterclaim), a rejoinder (and possibly reply regarding the counterclaim) and a possible rejoinder about the counterclaim. This scheme is generally spread over a longer period of time. However, it can be more efficient when only the claimant is expected to have initial claims and the respondent is expected to merely deny the claimant’s contentions. Otherwise, the respondent may have the burden of possibly responding to claims and contentions that may never be raised.

11 About the arbitral tribunal’s discretion to determine procedures, cf. Born, Gary. op. cit. pp. 2144-2154. 12 Idem, p. 2236. 13 Available at , last access on 31 October 2014. 14 The 2013 update of the UNCITRAL Rules already include the rules concerning transparency in international arbitration (available at , last access on 31 October 2014).

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5

Standard (Default) Procedure under the CAM/CCBC Rules

If the parties do not agree or the arbitral tribunal does not order otherwise, Article 7.2 provides that the parties will submit their arbitration briefs (statements of claim) simultaneously.15 The default time period is thirty days from the date of the meeting to sign the Terms of Reference. In case these are signed by any other means, the arbitral tribunal must define how to consider the time period for the initial claims. The derogation of such default procedure does not require the agreement of the parties. Article 7.2 expressly provides that if the parties do not agree on a time for submission, the arbitral tribunal may establish it. The reference to time encompasses also the manner, whether jointly or consecutively. Article 7.2 only applies if no other arrangement has been established. The arbitration briefs (statements of claim) will be communicated to the opposing parties within five days of receipt by the Secretariat of the CAM/CCBC. In case of a common deadline such as the one provided for in Article 7.2, the Terms of Reference should provide that the briefs be directed to the Secretariat only, not to the opposing party. The Secretariat will communicate the briefs to the opposing parties no sooner than the next day after the expiration of the deadline. This avoids the undesirable situation of both parties trying to avoid being the first to submit its brief and giving the opposition some purported advantage. Article 7.3 also defers to the procedural determinations made in the Terms of Reference regarding defenses, replies and rejoinders – in the language of the Rules, “Answers,” “Rebuttals” and “Surrebuttals.” This confirms that as a matter of course the Terms of Reference will generally contain the initial schedule as suggested by Article 7.1.1. Each party’s Answer must be submitted in twenty days. Specifically with regard to Rebuttals and Surrebuttals, Article 7.3.1 allows them “at the discretion of the parties and of the Arbitral Tribunal.” Although this should be agreed upon in the initial schedule, the arbitral tribunal may exclude Rebuttals and Surrebuttals and end the initial phase of the proceedings with the Answers. If these additional briefs are admitted, the default time period for their submission is also twenty days (Art. 7.3.1). The Rules do not contain any requirements about the minimum contents of the briefs. This is consistent with the desired flexibility of the procedure. The parties are allowed to submit their reasons and documentary evidence as they may desire, subject only to the

15 Blackaby et al also point out that simultaneous submissions may be more adequate when there is disagreement between the parties about which should be the claimant due to reciprocal claims, which is common when there is a state party involved: “This usually happens where there is a disagreement about which party should be claimant, with neither party wishing to be categorized as respondent. In practice, it is most likely to occur where a government is a party, and considers that its dignity would be offended if it were to be cast in the role of respondent” (Blackaby, Nigel; Partasides, Constantine; Redfern, Alan; Hunter, Martin. Redfern and Hunter on International Arbitration. Oxford: Oxford University Press. 5th ed. 2009. pp. 381-382).

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conditions established in the Terms of Reference or procedural orders made by the arbitral tribunal. The provisions concerning evidence-gathering (Arts. 7.4 and 7.6) do not expressly address the production of documents. This will be examined in more detail below, but it should be stressed now that the Terms of Reference may have a crucial role in this regard as well. The parties may have different approaches to documentary evidence, especially if represented by counsel with less familiarity with production of documents in domestic or international arbitration. The Brazilian Civil Procedure Code provides that documentary evidence must be primarily produced together with the equivalent to the statement of claim and the statement of defense.16 These different expectations may create an imbalance when parties with different expectations and levels of experience must file simultaneous arbitration briefs. The tribunal may find that one party has produced its documents, while the other has reserved them for the evidentiary phase. The arbitral tribunal should be sensitive to this issue and consider whether to discuss it with the parties at the definition of the initial schedule. A distinct feature of the CAM/CCBC Rules is the specific provision contained in Administrative Resolution No. 03/2014 relating to the “Interpretation and application of the CAM/CCBC Rules – Arbitration involving Brazilian state parties.” For the purpose of this commentary to Article 7, the only relevant provision is that of Provision 5, which reads: “The participation of amicus curiae in the proceedings is allowed, provided that it is previously authorized by the Arbitral Tribunal, who shall have discretion and consider in its determination the relevance of the subject matter and the representativeness of the applicant.” According to the commentary contained in the Resolution, the amicus will not become a party nor will it be bound by the award. This provision allows in theory that a wide range of possible stakeholders, including regulatory agencies and state bodies, file motions seeking leave to join as amicus.17 This provision is possibly inspired by the UNCITRAL rules on transparency in investment arbitration enacted in 2013.18

16 Arts. 396 to 399 and 382 of Brazil’s Civil Procedure Code. 17 About amicus curiae briefs in investment arbitration and other situations in which public interests are involved, cf. Waincymer, Jeffrey. op. cit. pp. 818-820. 18 In Brazil, CAMFIEP has a similar provision in its Rules in force as of January 2014 (Art. 26). However, that provision is limited to the admission as amicus only of the relevant regulatory agency in case a regulated party is involved in the arbitration and depending on the submission agreement (available at , last access on 31 October 2014).

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6

Determination about Evidence

Article 7.4 commands that within ten days of the final brief, possibly a Surrebuttal, the arbitral tribunal will make a determination about the production of evidence.19 At this stage, some tribunals opt for a preliminary hearing in which the parties are given the opportunity to make an oral presentation of their respective cases. This is designed to give the arbitral tribunal more detailed knowledge about the facts to make a more informed determination on what evidence is necessary and which party has the burden to produce it. The CAM/CCBC Rules can accommodate this option. However, there must be either agreement by the parties or a determination by the arbitration tribunal under Articles 7.2 and 7.3, possibly reflected in the Terms of Reference or the initial timetable. Otherwise Article 7.4 will apply to command a determination by the arbitral tribunal within the period of ten days. The resolution by the arbitral tribunal concerning production of evidence is one of the most sensitive and relevant determinations in arbitration. An excessively lax determination may give an unfair advantage to a party seeking to drag the proceedings and prevent an award. If the order is too harsh against the production of evidence, there may be due process concerns – which can ultimately also be used as a tool by a party seeking to avoid an effective award. The CAM/CCBC Rules give the arbitral tribunal the necessary procedural powers to prevent unnecessary, frivolous evidence-gathering, and to at the same time ensure that the interested party will have the opportunity to present its case. Consistently with civil law practice, Article 7.4 provides that “… the Arbitral Tribunal will evaluate the status of the proceedings and order, if judged necessary, the production of evidence.” Other provisions in the Rules (namely Arts. 7.4.1 and 7.6) convey the impression that the arbitral tribunal is primarily bound by the evidentiary initiatives of the parties. Article 7.6, for instance, states that technical issues can be solved by “specialists appointed by the parties”; at least in its language, there is no reference to tribunal-appointed experts. A more literalistic interpretation of Article 7.4 could lead to the conclusion that the tribunal will at that moment only assess the status of the case and determine whether (i) to render an award without any additional evidence or (ii) to allow the parties to produce their evidence. In this interpretation, the phrase “order the production of evidence” does not entitle the arbitral tribunal to act on its own motion. It is unable to order the production of documents not requested by either party, to call its own witnesses or to appoint an expert, for instance.

19 For a detailed analysis of the various forms of evidence vis-à-vis CAM/CCBC Rules, cf. Gertel, Cristiane Amaral de Oliveira; Fernandes, Julio Cesar; Kömel, Luiza Helena Cardoso. op. cit. pp. 260-285.

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However, this literalistic interpretation does not seem consistent with the duties assigned to the arbitral tribunal to order the production of evidence that it considers “necessary.” Although the arbitral tribunal should obviously refrain from assuming the defense of one of the parties (frequently the party represented by less knowledgeable counsel or a party that is in default) to the detriment of the other, it is not completely bound by the evidentiary choices made by the party. Article 7.4 must be interpreted as allowing the arbitral tribunal to exceptionally order the production of evidence sua sponte. This cannot be the source of surprising behavior by the arbitral tribunal. The tribunal should discuss the possible evidence – and underlying facts – with the parties instead of unilaterally making assumptions and ordering evidence to possibly confirm them. Therefore, if the tribunal considers that it has found a fact or evidence that is decisive but was not discussed by the parties, it should disclose it to them and allow the parties to comment or even to request additional evidence. As a general rule, the tribunal must abide by the requests of evidence made by the parties, and only exceptionally and with appropriate caution act on its own motion. This is the conclusion from Article 7.4.1 as well. This provision establishes the standards for the tribunal’s determination concerning evidence. First of all, it is important to avoid a possible confusion. The provision reads that the arbitral tribunal must “grant and establish the burden of evidence.” The provision means “granting” a party’s request to produce evidence and “establishing” (determining) what evidence the tribunal considers useful, necessary and appropriate (adequate). The notion of “establishing the burden of evidence” or “determining the useful, necessary and adequate evidence” can have important consequences and may amount to a distinct feature of CAM/CCBC’s rules. It makes the procedural step of Article 7.4.1 a crucial one, since it creates a link between the determination of the important evidence and the assignment of the burden of proof. By issuing such determination, the tribunal will make it clear to the parties which one has the burden to produce the evidence identified as useful, necessary and adequate. As a consequence, this will define the standard of proof to be used by the tribunal in its award. After the evidence matrix is established at the Article 7.4.1 stage, the determination of what facts were proven and which party should prevail can become more objective. This is a useful guidance for the arbitral tribunal. However, the award is not bound or limited by this earlier determination. The arbitrators are free to revisit the issues provided they do not go beyond the boundaries of the matter and do not surprise the parties with issues that were not subject to discussion. This can be an effective tool to enhance foreseeability of the proceedings for the parties and give guidance on how to gather and submit their evidence.

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7

Types of Evidence

The Rules only address specifically the technical evidence in Article 7.6. Other forms of evidence – witness testimony, party statements, documents, inspection by the tribunal – are admitted generally under Article 7.4. Given this broad treatment of the issue, the CAM/CCBC Rules are consistent with the use of international guidelines for the production of evidence, such as the IBA Rules on the Taking of Evidence in International Arbitration20 and the Chartered Institute Protocols.21

7.1

Documentary Evidence

As pointed out earlier, the Rules do not define a specific moment or format for the production of documentary evidence. They also do not attempt to give any treatment to the issue of the so-called US-style discovery.22 However, the parties may agree on specific features for their arbitral proceedings either in their submission agreement or by having language to that effect in the Terms of Reference. General practice in Brazilian civil procedural law is for each party to produce the documents that prove their case23 together with their statements of claim and defense. Documents in the possession of hostile third parties can be searched and seized by court order, provided they can be specifically identified and other conditions are met.24 In 2012, a Government Transparency Act came into force. This allows an administrative search of documents by category, not only by individual description.25 This may in time create a practice that may resemble in some way a pretrial discovery proceeding. However, this is still limited to government documents and has not become a widespread tool. Regardless of this domestic practice concerning documentary evidence, the CAM/CCBC Rules are sufficiently flexible to allow the parties to make their own arrangement concerning document production. It is possible, for instance, to adopt the UNCITRAL rules as a ref-

20 Available at , last access on 31 October 2014. About the IBA Rules, cf. Ashford, Peter. The IBA Rules on the Taking of Evidence in International Arbitration. Cambridge: Cambridge University Press. 2013. See also Kurkela, Matti S.; Turunen, Santtu. Due Process in International Commercial Arbitration. Oxford: Oxford University Press. 2nd ed. 2010. 21 A list of CIArb’s protocols and guidelines is available at , last access on 31 October 2014. 22 About discovery, cf. El Ahdab, Jalal; Bouchenaki, Amal. Discovery in International Arbitration: A Foreign Creature for Civil Lawyers? In: ICCA, Arbitration Advocacy in Changing Times. Wolters Kluwer. The Netherlands, 2011. pp. 65-113. 23 Arts. 396 to 399 of Brazil CPC. 24 Art. 382 of Brazil CPC. 25 Law No. 12.527, enacted in November 2011.

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Cesar A. Guimarães Pereira and Erika Levin erence and adopt requests to produce,26 or to agree on exchange of documents based on a Redfern schedule.27

7.2

Witness Testimony

In contrast to the 1998 Rules, the 2012 CAM/CCBC Rules do not expressly deal with the organization of the hearings or with oral testimony. This is also left to the freedom of the parties and the power of the arbitral tribunal to organize the proceedings. International guidelines from the IBA (Rules on the Taking of Evidence and the guidelines on Party Representation28) and the CIArb Protocols are also useful in this regard, particularly in international arbitration.29 The much discussed distinction30 in the way common lawyers and civil lawyers engage with witnesses and prepare for hearings is in a way reflected in the IBA 2013 guidelines on Party Representation. It is important to point out that the use of such guidelines should be provided for in the Terms of Reference. The parties will choose to allow or exclude their use either as rules or for guidance.

7.3

Technical Experts

The only type of evidence expressly provided for in the Rules is the examination by experts, governed by Article 7.6. Three issues must be specifically addressed to adequately interpret the provision. First, the language of the provision mentions “aspects of a technical nature.” Second, it deals only with “specialists appointed by the parties.” Finally, the experts can be “convened to testify at a hearing, as decided by the Arbitral Tribunal.” By referring to technical issues, the Rules merely stress the aspect that such experts provide the arbitral tribunal with knowledge about issues of which the arbitrators do not have full command and are not expected to have. This final caveat is important. If the arbitrators are expected by the parties to be sufficiently knowledgeable in a certain area, the lack of knowledge is a defect, not a natural condition that must be resolved with the assistance of experts.

26 Art. 27(3) of the UNCITRAL Rules. 27 Blackaby, Nigel; Partasides, Constantine; Redfern, Alan; Hunter, Martin. op. cit. pp. 395-396. paras 6.1136.115. 28 Available at , last access on 31 October 2014. 29 Cf. Waincymer, Jeffrey. op. cit. pp. 426-438. 30 Cf. Gertel, Cristiane Amaral de Oliveira; Fernandes, Julio Cesar; Kömel, Luiza Helena Cardoso; Condutas e Procedimentos. op. cit. p. 264. Also Blackaby, Nigel; Partasides, Constantine; Redfern, Alan; Hunter, Martin. op. cit. para 6.88.

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Therefore, the CAM/CCBC Rules do not contain any limitation on the subject matter of the expert examination. For instance, legal experts are admissible in the situations in which they may be necessary, such as with regard to foreign law. Article 7.6 also mentions that the experts must be party-appointed. This could create doubts about the possibility of a tribunal-appointed expert. It does not seem that the CAM/CCBC Rules can be read in such a literalistic manner.31 As already seen, most forms of evidence-gathering are not expressly provided for in the Rules. However, it would be wrong to read into this that they are not admissible. The correct conclusion is that the arbitral tribunal may appoint an expert regardless of Article 7.6. However, one must attribute some meaning to the language of Article 7.6. The arbitral tribunal must first allow the parties to appoint experts and, if needed, appoint a tribunal-appointed expert or engage the parties in the appointment of a tribunal-appointed expert or give reasons why these procedures are inadequate for the case. To avoid any doubt, if the arbitral tribunal has the intention to appoint an expert, it is recommended that this is expressly indicated in the Terms of Reference so as to reflect the agreement of the parties. The configuration of Article 7.6 favors mechanisms such as witness conferencing and the so-called Sachs Protocol,32 according to which each party will appoint an expert and they will both issue a joint report. Article 7.6 expressly provides for the oral testimony of the experts in a hearing if so ordered by the arbitral tribunal. The IBA rules on the taking of evidence provide good guidance with regard to this issue. The arbitral tribunal will generally grant a request by either party for an expert to give oral testimony in a hearing. Only in very exceptional cases will such a request be denied.

8

Default, Contempt and Effects on the Proceeding

Article 7.5 deals with default and contempt. In these situations, a party will have been duly given notice to appear in the arbitration or to take any specific action – such as attending a hearing or complying with another evidentiary order – but fails to appear or comply. In judicial proceedings, default can lead to severe consequences, although such effects are generally mitigated by considerations of procedural fairness and a court’s duty to seek out the actual truth in the parties’ allegations. To avoid any doubt, arbitration rules generally

31 Cf. Gertel, Cristiane Amaral de Oliveira; Fernandes, Julio Cesar; Kömel, Luiza Helena Cardoso. op. cit. pp. 278-280 concur and admit tribunal-appointed experts under the Rules. 32 Idem, pp. 280-282. About the Sachs Protocol, cf. Sachs, Klaus; Schmidt-Ahrendts, Nils. Protocol on Expert Teaming: A New Approach to Expert Evidence. In: ICCA, Arbitration Advocacy in Changing Times. Wolters Kluwer. The Netherlands 2011. pp. 144-145.

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exclude any such effect of default and provide that default or contempt is not in itself grounds for a decision in favor of the opposing party. CAM/CCBC Rules are consistent with general practice in this regard. Article 7.5 provides that “The proceedings will continue in the absence of any of the parties provided that, having been duly notified, that party does not appear,” and Article 7.5.1 expressly acknowledges, “The arbitration award cannot be based on the default of a party.”33

9

Conclusion of Evidentiary Phase and Closing Arguments

The Rules do not provide for the closing of the procedure, as do the UNCITRAL Rules.34 However, Article 7.7 mentions a step in which “… the evidentiary phase is concluded.” It is important for the arbitral tribunal to expressly close the evidentiary phase and obtain the parties’ confirmation that no additional evidence is needed. This will prevent either party from later claiming any alleged due process defect based on the lack of evidence production. Article 7.7 of the Rules seems to favor closing arguments or posthearing submissions in writing, since it provides for a time period of up to thirty days for the parties to present their closing arguments. This does not prevent the parties or the arbitral tribunal from agreeing on a different procedure, such as oral closing arguments at the end of the hearing.

10

Procedural Powers of the Arbitral Tribunal

Article 7.8 grants the arbitral tribunal procedural powers to keep the order of the proceedings. These powers are granted by (i) providing for the remedies that the arbitrators can adopt and (ii) establishing the purposes that the tribunal must advance by exercising such powers. According to the language of the provision, the tribunal may “… adopt the necessary and convenient measures for the appropriate conduct of the proceedings” in order to uphold the “… right to fully defend oneself and the right to dispute the allegations of the other party, as well as the equal treatment of the parties.” This is an essential provision to allow the arbitral tribunal to sanction the parties or their counsel for improper behavior.

33 See CIARb’s Protocol on awards in the absence of party participation offers guidance with regard to this issue (available at , last access on 31 October 2014). 34 “Article 31. 1. The arbitral tribunal may inquire of the parties if they have any further proof to offer or witnesses to be heard or submissions to make and, if there are none, it may declare the hearings closed. 2. The arbitral tribunal may, if it considers it necessary owing to exceptional circumstances, decide, on its own initiative or upon application of a party, to reopen the hearings at any time before the award is made.”

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Article 8 – Provisional Measures Clávio Valença Filho and Isabela Lacreta 8.1. Unless the parties have otherwise agreed, the Arbitral Tribunal can grant provisional measures, both injunctive and anticipatory, that can, at the discretion of the Arbitral Tribunal, be subject to the provision of guarantees by the requesting party. 8.2. If there is an urgent matter and the Arbitral Tribunal has not yet been constituted, the parties can seek provisional or injunctive measures from the competent judicial authority, if another manner has not been expressly agreed by them. In this case, the parties must inform the CAM/CCBC of the decisions. 8.3. As soon as the Arbitral Tribunal is constituted, it will have the authority to uphold, amend or revoke the previously granted measures. 8.4. A request made by one of the parties to a judicial authority to obtain these measures, or the enforcement of similar measures granted by an Arbitral Tribunal, will not be considered a violation of, or waiver to, the arbitration agreement and will not interfere with the jurisdiction of the Arbitral Tribunal.

1

Interim and Provisional Measures in Arbitration Proceedings: An Analysis of Article 8 of the CAM/CCBC’s 2012 Arbitration Rules

Article 8 of the Center of Arbitration and Mediation of the Chamber of Commerce Brazil Canada’s (CAM/CCBC) 2012 Arbitration Rules helps to understand the respective roles of judges and arbitrators faced with a request for urgent measures. It is widely accepted that arbitrators have the jurisdiction to grant interim or provisional measures.1 Its effectiveness may, however, depend upon the intervention of the courts, whenever the situation requires the use of imperium merum2; also, when the urgency of the case obliges them to prevent a denial of justice.

1 2

Cf. Art. 22, of the Brazilian Arbitration Act (Law No. 9.307/1996). There is a misconstrued notion that only state courts have imperium. Although it might be true that arbitral tribunals cannot order parties to execute their final decision, they do have the power to grant interim and provisional measures. This is because the absence of imperium is not absolute. The arbitrator remains with the imperium mixtum, the part of the imperium that is intrinsically connected with the jurisdictio. The imperium merum, the hard core of the imperium, remains solely with the state courts. See Charles Jarrosson, Reflexions sur l’imperium, in Etudes offertes à Pierre Bellet (Lousanne: Faculté de droit de Lousanne) 1991, p. 245 et seq.

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Although the parties or the institutional procedural rules chosen to regulate the arbitral proceedings may be free to impose limits to the arbitrator’s jurisdiction, neither the parties nor the said rules are empowered to inflict limits to the jurisdiction of national courts without the consent of his own national legal system.3 The prudent arbitrator will necessarily have in mind such interrelation between the powers he is given to grant or revoke interim and provisional measures and the intensity of the negative effect of the arbitration agreement regarding the judge of urgencies in each national legal system. In a situation where an arbitrator has to interact with a Brazilian state court, the legal framework featured by the Brazilian Court of Appeals and recently consolidated by a Superior Court of Justice4 will be applicable. In this scenario, the introduction of Article 8 in the new CAM/CCBC’s Arbitration Rules comes as a timely answer. The Brazilian legal system knows three categories of urgent measures: the cautelar, the cognição sumária satisfativa, and the antecipação de tutela. While a cautelar measure does not enter into the merits of the controversy, which approximates it to ‘interim measures’ in countries featuring Anglo-American legal systems, the two other types – cognição sumária satisfativa and antecipação de tutela – allow the anticipation of certain aspects of the merits and thus resemble Anglo-American ‘provisional measures.’ Under Brazilian law, arbitrators have the jurisdiction to grant both interim and provisional measures. These powers derive from statutory provisions contained in Article 22 of the Brazilian Arbitration Act5 and are commonly the basis of rulings of arbitrators acting pursuant to Brazilian law.6 Courts must intervene if necessary to ensure the enforcement of interim and provisional measures rendered by arbitrators.7 The difference between the cognição sumária satisfativa and antecipação de tutela provisional measures is that the cognição sumária satisfativa may be brought only if it is linked to a related action, either future or current, upon which the merits are discussed in 3 4 5 6

7

For example, under Italian law, the arbitrator is not allowed to grant interim or provisional measures, as set forth in Art. 818 of the Italian Civil Procedure Code. The Superior Tribunal de Justiça (STJ) is a superior court that is responsible for the uniformization of the application of federal law; it is the Brazilian equivalent to the French Cour de Cassation. Cf. Art. 22, of the Brazilian Arbitration Act. Brasil. Tribunal Regional Federal da 2ª Região. Agravo de Instrumento n. 2003.02.01.010784-6. 1st Chamber. Comercializadora Brasileira de Energia Emergencial – CBEE v. Companhia Energética de Petrolina – CEP. Reporting Judge: Carreira Alvim, 26 de october, 2004. Revista Brasileira de Arbitragem 7 (2005): 166 e Revista de Mediação e Arbitragem 6 (2005): 218, commented by D. Armelim. Available at : ‘I – admite-se o recurso à justiça estatal apenas quando ainda não instituída a arbitragem, dado o caráter urgente da medida. II – Havendo convenção arbitral, é competente o tribunal arbitral para apreciar o mérito do litígio, cabendo-lhe, igualmente, decidir se antecipa ou não os efeitos da tutela antecipatória. III Agravo parcialmente provido’. In this sense, C. Alberto Carmona, ‘Arbitragem e Processo: um comentário à Lei nº 9.307/96’ Page 271 ‘Se apenas o árbitro está autorizado a proferir provimento final, toca também a ele – e apenas a ele – decidir se antecipará ou não algum, alguns ou todos os efeitos que sua decisão irá produzir! Não haverá necessidade de encontrar na convenção de arbitragem autorização para que os árbitros antecipem tutela, pois tal autorização está implícita (…)’. Cf. Art. 22, 4o, of the Brazilian Arbitration Act.

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depth, while with the antecipação de tutela, arguments addressing the provisional remedy and the final decision on the merits must be brought in the same lawsuit. The jurisdictional authority is charged with deciding whether to anticipate the merits of the case through a provisional measure and its further final adjudication. In this regard, this type of provisional measure has features similar to the référé-provision procedural measure under French and Belgian laws.8 Unlike the treatment given to provisional measures in Anglo-American courts, where a grant of provisional relief is subject to a balancing of equities, Brazilian law imposes other standards to be met on a prima facie basis. First, periculum in mora must be found: the object of the litigation must be at risk of perishing before a final decision on the merits can be rendered. Second, the existence of fumus boni juris must be found, defined as the ‘appearance of good law.’ It is necessary to persuade the jurisdictional authority that the party has a reasonable claim on the merits, as derived from the arguments and evidence produced at the moment the urgent measure is requested. These two requirements are Brazilian judicial standards and are commonly reproduced by arbitrators acting under Brazilian law. They are not, however, sufficient to confer jurisdiction upon Brazilian courts if jurisdiction has previously been granted to the arbitrator, through the stipulation of an arbitration agreement. In Itarumã Participações S.A. v. PCBIOS,9 the Superior Tribunal de Justiça (STJ) ruled that the negative effect of the arbitration agreement on the jurisdiction of Brazilian courts to grant urgent matters also requires a momentary lack of arbitrator or his incapability: [….] 2. Pending the constitution of the arbitral tribunal it is admitted that the party seeks state courts to issue an interim measure to ensure a positive outcome of the arbitration. 3. As soon as the temporary circumstances that justified the emergency intervention of the state courts are overcome, considering that the entering into of the arbitration agreement implies the derogation of the State jurisdiction, the court’s records must be promptly forwarded to the arbitral tribunal so that it can take over the process, maintaining, changing or revoking the granted measure.

8 9

See Emmanuel Gaillard and John Savage (eds.), Fouchard Gaillard Goldman on International Commercial Arbitration (The Hague: Kluwer Law International, 1999). Brasil. Superior Tribunal de Justiça. Special Appeal (Recurso Especial) No. 1,297,974 – RJ (2011/0240991-9).

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4. In situations where the arbitral tribunal is momentarily unable to manifest itself, the rules of jurisdiction are not provisionally observed. In such situations, the request for interim or provisional measures shall be submitted to the judicial court. However, such jurisdiction is precarious and shall not be extended, subsisting only to the examination of the request of the measure. […] This ruling is well reflected in Article 8 of the new CAM/CCBC Arbitration Rules, as it may be presented as the private counterpart of the STJ ruling. While the wording of the ruling is mostly directed to regulate the actions of Brazilian courts, the addressee of the rule contained in Article 8 is the arbitrator. For instance, while item 2 of the ruling states that courts have jurisdiction on urgent matters before the arbitrator is empowered, Article 8.2 establishes that such jurisdiction belongs to the arbitrator after the arbitrator is empowered. Applying the same logic, while item 3 of the ruling states that court’s records of urgent measures must be promptly forwarded to the arbitral tribunal so that it can take over the procedure as soon as the arbitrator is in conditions to perform its duties, allowing the arbitrator to reanalyze the granted measure, Article 8.3 states merely that the arbitrator has the jurisdiction to revoke urgent measures granted by national courts. This complementary feature of the texts contained in Article 8 and the wording of the STJ’s decision in the Itarumã case is in harmony with the idea that jurisdiction may belong to the arbitrator or to the courts and never to both of them, as it can be found in some legal systems affiliated to the recommendations from the UNCITRAL Model Law, which is grounded upon the idea of concurrent jurisdiction between the arbitrator and the court, as imported from classic French law, where the interested party had absolute freedom of choice between the arbitrator and the juge de référé.10,11 The allocation of duties between the arbitrator and the court is a matter that must be decided pursuant to the rules on the negative effects of the arbitration agreement. It is not a matter of identifying the competent authority, but of identifying who is the authority: 10 The said model, so-called concurrent competences, is recommended by Art. 8 of the United Nations Commission on International Trade Law (UNCITRAL) Model Law. ‘It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure.’ Before the STJ decision in Itarumã at least two second instance decisions accepted the model of concurrent competence: (a) Brasil. Tribunal de Justiça de São Paulo. 2nd Chamber AI No. 285.741-4/6, Altran do Brasil S/A v. José Fernando Parra e outro. (b) Brasil. Tribunal de Justiça de Minas Gerias. 5th Chamber, No. 393.297-8, GMK Equipamentos Industriais LTDA. v. Daimler Cryler do Brasil Ltda, Reporting Judge: Mariné da Cunha, 15 May 2003, in Revista Brasileira de Arbitragem, No. 7 (2005): 134. 11 The new French Civil Procedure Code has modified this model of attribution of competence, assigning a more defined competence to the new figure of the juge d’appui when faced with interim and provisional measure, cf. Arts. 145 and 1449 of the Code. Emmanuel Gaillard, ‘Le nouveau droit français de l’arbitrage interne et internacional’, .

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the arbitrator or the courts. If there is no arbitration agreement, the courts will be the competent authority, while in the presence of such agreement, the arbitrator will be the competent authority. Nevertheless, the risk of a denial of justice may, under exceptional circumstances, justify the return of jurisdiction over urgent matters from the arbitrator to the courts. The rationale behind the exceptional retreat of jurisdiction from the arbitrator to the courts is the possibility of a denial of justice. Denial of justice may occur in the event an urgent situation arises before the arbitrator is impaneled. This happens due to the fact that conferring jurisdiction upon an arbitrator requires two steps: first, court jurisdiction is set aside as a negative effect of the arbitration agreement; second, the arbitrator is only invested with jurisdiction akin to that of a court when the arbitral procedure is initiated. Anything to occur between these two steps could not be redressed: there would be neither court nor arbitral jurisdiction available to rescue a plaintiff. Where the urgency of a situation is such that the parties to a dispute do not have time to initiate an arbitration, the courts must intervene, or the interested party will be denied justice. At least two Brazilian appellate courts have confirmed this view. First, the Court of Appeals of the State of Rio Grande do Sul (Tribunal de Justiça do Rio Grande do Sul) so ruled in order to justify an interim measure.12 Second, the São Paulo Court of Appeals compelled performance of a distribution agreement based on a report presented by Honorable Reis Kuntz: according to Article 19 of the Brazilian Arbitration Law, “the arbitration shall be considered initiated when the arbitrators accept their nomination.” Before that moment, there is no arbitral jurisdiction. It would be unlawful to refuse the interested party access to the courts, as this would violate the constitutional principle of universal access to the courts (Art. 5, XXXV, Brazilian Federal Constitution).13 Following this rationale, Article 8.2 seems to draw a timeline to allow the parties to search for judiciary relief only to the extent that there is no arbitral tribunal impaneled. In this particular aspect, the new Article 8.2 might become a source of disharmony. The courts’ authority to grant interim or provisional measures does not necessarily end at the moment that the arbitrator is impaneled, as it is not sufficient to fully prevent a denial of justice. This situation may occur if the arbitrator lacks jurisdiction to intervene in an effective manner, as, for instance, where arbitral proceedings have been suspended or the arbitrator is incapacitated or absent for some reason. It may also be the case if the 12 Brasil. Tribunal de Justiça do Rio Grande do Sul. Agravo de Instumento No. 70004506424. 2nd Civil Chamber. AES Uruguaiana Empreendimentos v. Companhia Estadual de Energia Elétrica. Reporting Jusge: Teresinha de Oliveira Silva, 13 November 2002 , 27 February 2008. 13 Brasil. Tribunal de Justiça de São Paulo. Agravo de Instrumento No. 245.257-4/4. 1st Chamber of Private Law. Akzo Nobel Ltda v. Distrivet Ltda. Reporting Judge: Reis Kuntz, 31 October 2002. in Revista Brasileira de Arbitragem 7 (2005): 123 & Revista de Mediação e Arbitragem 1 (2004): 215, commentaries by C. A. da Silveira Lobo and R.M. Ney.

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effectiveness of the remedies resulting from the provisional or interim measure requires the intervention of third parties not bound by the arbitration agreement, or if it directly affects the rights of such third parties. Finally, the court has the authority to grant interim or provisional measures where the urgency of the situation does not allow one to wait for the rendering of a hybrid remedy granted in two phases: one, before the arbitrator, and another, of an enforceable nature, before the courts, as provided in Article 22, §4º of the Brazilian Arbitration Act.14 This opinion is also shared by Justice Sidney Benetti of the Superior Court of Justice, who has spoken of “the suitability of precautionary pre-trial measures and, exceptionally, incidental ones, during arbitral proceedings as being justified by the Brazilian Code of Civil Procedure (Art. 796 et seq.) and the Federal Constitution (Art. 5, XXXV),”15 as affirmed by the Courts of Appeals – a court that has jurisdiction over relevant seats of arbitration within Brazil. In this sense, the impaneling of arbitrators did not prevent the Minas Gerais Court of Appeals from confirming an order to compel discovery of accounting documents and company records.16 São Paulo Court of Appeals has also addressed the matter on at least three different occasions. In the first case, the court confirmed an order to seize a company’s

14 In this regard see, Arnoldo Wald, ‘Affectio Societatis na Sociedade de Pessoas e no Acordo de Acionistas. Rompimento. Resolução do Acordo de Acionistas. Aprovação do Quotista. Direito de Bloqueio. Ofensa à Lei 8.884/94. Direito de Preferência. Cabimento de Medida Cautelar Preparatória Perante o Poder Judiciário Antes de Instaurado Juízo Arbitral. Competência do Juízo’, in Revista de Mediação e Arbitragem 4 (2005): 220. 15 Sidney Benetti, “Arbitragem e tutela de urgência”, Revista do Advogado, Ano XXVI, n. 87, 2006, p. 100. ‘São cabíveis a tutela cautelar preparatória e, em casos excepcionais, a incidental, durante o procedimento arbitral, por fundado direto do CPC (arts. 796 e segs.) e na Constituição Federal (CF, art. 5º, XXXV)(…)’. 16 Brasil. Tribunal de Alçada de Minas Gerais. Agravo de Instrumento No. 273.072-3. 11th Civil Chamber c/c Agravo de Instrumento No. 262.252-4. Sociedade Hospitalar de Uberlândia LTDA. v. Ademar Margonari de Carvalho e outro. Reporting Judge: Edílson Fernandes, 24 February 1999. Free translation: “thus, the relative lack of competence argued by way of a motion to deny jurisdiction disrespects Art. 5º, XXXV, Federal Constitution, that guarantees the access to the Judiciary Power for the submission of issues concerning hard or threat to associates right to refuse the exhibition of files, mail and documents of the company, all necessary to the assessment of its assets, as well as the precautionary measure to the arbitral or the judicial procedure, or even to secure its rights before a further installment of an arbitral procedure.” , 27 February 2008.

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If a court hearing urgent matters has jurisdiction due to public order concerns (specifically, due to the risk of a denial of justice, which is a paradigm of Brazilian public order), notwithstanding the existence of an arbitration clause, the unstable nature of such jurisdiction is merely a reflection of the principle of “atualidade” (current thinking) that guides notions of public order. As it becomes less likely that justice will be denied, the risk of infringing public order policies diminishes and the motive for returning jurisdiction from the arbitrator to the courts likewise loses force.21 Since the jurisdiction of courts cannot be waived or delegated for certain proceedings such as the direct enforcement of remedies, denial of justice may also come from this need of imperium merum. The direct enforcement of remedies by the courts ensures the enforcement of jurisdictional decisions, irrespective of any action by the affected parties. In this sense, if the effectiveness of a remedy granted through a provisory measure so requires, the action of the sovereign substitutes that of a reluctant party. Requests for information of real estate registries, seizures, impoundment, search and seizure procedures, and precautionary measures to compel discovery, among others, are examples of remedies that may require the assistance of courts in order to be effective.22

245.257-4/4. Akzo Nobel Ltda. v. Distrivet Ltda. Reis Kuntz, j. 31 October 2002: ‘Ora bem: interpretando-se teleologicamente as disposições do inc. VII, do Art. 267 do CPC, conclui-se inarredavelmente que a extinção do processo, sem julgamento do mérito, no caso de ação cautelar preparatória de procedimento arbitral, é medida que se impõe somente após a efetiva instituição desse referido juízo. Pois, como mencionado, até a efetiva instituição da arbitragem, não seria razoável nem mesmo juridicamente admissível obstar ao interessado a formulação de pedido urgente de natureza cautelar, cuja apreciação, na falta de árbitro, incumbe ao órgão do Poder Judiciário que seria, originariamente, competente para julgar a causa. Essa a interpretação que decorre da análise dos art.s 796 e 800, do CPC, em consonância com o art. 22, §4°, da Lei de Arbitragem’, supra note, at 215, commented by C.A. da Silveira Lobo e R.M.R Ney. 21 Regarding the possibility of tacit waive the submission of this specific dispute to arbitration, without, however, fully waiving the arbitration agreement, see the following decision: BRAZIL. Tribunal de Justiça de São Paulo. 4ª C. Dir. Priv. Agr. Ins. 406.570-4/5. Top Sports Ventures v. TV Ômega LTDA. Rel. Enio Zulian, j. 18 August 2005, Revista de Medição e Arbitragem 8 (2006): 250, with comments of Martin Della Valle. See also, BRAZIL. Tribunal de Justiça do Rio de Janeiro. 4ª C. Civ. Ap. Civ. 15960/4. El Paso Rio Claro LTDA. v. Inepar S/A Indústria e Construções. Rel. Sidney Hartung, j. 05 October 2004 in Revista de Mediação e Arbitragem 7 (2005): 260. ‘Ementa: … O fato de não ter havido arbitragem em conflito anterior entre as partes não caracteriza a dispensabilidade deste compromisso’. In relation to the understanding that the frequent waive to disputes composing the main object of the arbitration triggers the waiver to the arbitration agreement itself and not only a reduction in its object, see: 4ª Vara Empresarial da Comarca do Rio de Janeiro. Proc. 2006.001.014953-3. Latcem S.A. v. Companhia Nacional de Cimento Portland CNCP. Rel. Márcia de Andrade Pumar, j. 29 December 2006. 22 Pedro A. Batista Martins, ‘Da Ausência de Poderes Coercitivos e Cautelares do Árbitro’, in Pedro A. Batista Martins, Carlos Alberto Carmona and Selma Lemes, Aspectos Fundamentais da Lei de Arbitragem (São Paulo: Forense, 1999), p. 362. In this sense, Art. 22, par. 4, Brazilian Arbitration Act orders the state judge to share imperium merum: ‘havendo necessidade de medidas coercitivas ou cautelares, os árbitros poderão solicitá-las ao órgão do Poder Judiciário que seria, originariamente, competente para julgar a causa’, inclusive in regard to ad futurum installments and, especially in regard to the compulsory conduction of recalcitrant witnesses. See also op. cit. 4.

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However, the arbitrator has the authority to determine measures of indirect enforcement, such as daily fines (astreintes) since they are based on the imperium mixtum. On the other hand, the arbitrator is prevented from ordering injunctions. Article 8.3 of the new CAM/CCBC Arbitration Rules prescribes that the arbitrator has the authority to revoke a judicial interim or provisional measure. Of course this provision can be valid only to the extent that the court’s national legal system accepts it. In the Brazilian legal system, this permission comes first from the lack of exhaustive production of evidence when analyzing any decision by which an interim or provisional measure is granted; this prevents the decision from becoming res judicata. Thus, it can be revoked. Second, as the arbitrator is the only jurisdictional authority competent to hear the merits of the case, s/he may, at any time, set aside the court’s ruling, either by issuing an award or by means of an interlocutory order grounded upon the arbitrator’s own evaluation of the requirements of the measure.23 In this sense, the Court of Appeals for the State of Minas Gerais had the opportunity to rule on the court’s obligation to send the interim measure files to the arbitrator in order to allow him/her to rule on whether to maintain the precautionary order. This opinion was recently confirmed by the STJ, in the Itarumã v. PCBIOS, when Justice Nancy Andrighi stressed the precarious nature of the judiciary’s jurisdiction on urgent matters.24 When the motion for an interim measure is filed prior to the appointment of the arbitrators, the court must rule on the claim. The court must transfer the case records to the arbitrators immediately after the commencement of the arbitration proceedings. Thereafter, the arbitrators must decide whether to uphold the order for interim relief granted by the court or to modify or revoke it. Transmission of the file to the arbitrators must occur on an ex officio basis.25 23 In this sense: C.A.S. Lobo and R.M. Rangel, ‘Revogação de Medida Liminar Judicial pelo Juízo Arbitral’, in R.R. de Almeida (coord.), Arbitragem Interna e Internacional: Questões Práticas. (São Paulo: Renovar, 2003), p. 253; C.A. Carmona, ‘Medidas Cautelares em Processo Arbitral: a Solução da Lei Brasileira e as Experiências Estrangeiras’, in I° Seminário Internacional Sobre Direito Arbitral (Belo Horizonte: Câmara de Arbitragem de Minas Gerais, 2003), p. 111; C. Alberto Carmona, ‘Arbitragem e Processo: um comentário à Lei nº 9.307/96’; J.A. Almeida, Processo Arbitral (Belo Horizonte: Del Rey, 2002), p. 118. In the contrary sense: for those who the arbitrator cannot revoke the effects of the interim measure, see: A. Wald, ‘A Recente Evolução da Arbitragem no Direito Brasileiro (1996-2001)’, in Reflexões sobre Arbitragem: in memoriam do Desembargador Cláudio Vianna de Lima (São Paulo: LTr, 2002), p. 158. J.D. Figueira Júnior, Arbitragem, Jurisdição e Execução, 2ª ed. (São Paulo: RT, 1999), p. 224. The former author considers that the sovereignty of the state courts would be harmed by the revocatory arbitral act. 24 Op cit. 11. 25 Brasil. Tribunal de Justiça de Minas Gerais. 12ª C. Civ. Agr. Inst. 1.0480.06.083392-2/001. Viação Pássaro Branco Ltda. v. Espólio de Antônio José Duarte Monteiro. Rel. Domingos Coelho j. 14 February 2007, Diário Oficial do Estado de Minas Gerais, 03 March 2007. BRASIL. Tribunal de Justiça de Minas Gerais. 4ª C. Civ. Agr. Inst. 2.0000.00.410533-5/000(1). Inepar Equipamentos e Montagens S.A. v. SMS Demag Ltda. Rel. Avilmar de Ávila, j. 27 August 2003: ‘Não obstante a eleição da arbitragem como meio de solução de conflitos, a ação cautelar de sustação de protesto, se ainda não instaurado o juízo arbitral, poderá ser ajuizada perante

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Although the order containing a provisional measure may be revoked at any time, it is also true that its effects may become irreversible in certain circumstances. In cases where the court compels a party to pay in advance monies and the party thereafter becomes insolvent or removes funds without leaving enough assets to ensure enforcement of the arbitration award, the provisional measure will likely have practical effects equivalent to an award. Thus, in such cases, the court will effectively divest the arbitrator of jurisdiction and deprive the arbitration agreement of its substance. In order to protect the jurisdiction of the arbitrator from provisional orders granted by judicial courts that are, practically speaking, irreversible, such court orders must be strengthened by companion orders compelling the moving party to provide guarantees necessary to ensure the return of the matter to a pre-order status. This approach has been taken by several courts in Europe as a consequence of adherence to the Brussels Convention of 1958 (currently replaced by European Union Regulation No. 44/2001), as decided by the Court of Justice of the European Union in the famous Van Unden case.26 In that case, the Court of Justice decided that a provisional payment ordered pursuant to Dutch law (kort geding) was a means of anticipating payments, thus infringing upon the arbitrator’s jurisdiction over the merits, especially if the court order becomes irreversible in a practical sense. In order to maintain the provisional nature of the payment, the Court stressed the need for the presentation of guarantees sufficient to permit the affected party to be reimbursed for the anticipated amounts.27 There are no legal obstacles to the adoption of this solution by operators under Brazilian law, courts or arbitrators. The Brazilian Arbitration Law has recently been amended, as a result of a project developed by a commission of scholars.

o juiz estatal, que, comunicado da instauração do juízo arbitral, providenciará a remessa dos autos para a devida apreciação da manutenção ou não da tutela concedida’, Diário Oficial do Estado de Minas Gerais, 13 September 2003; Brasil. Tribunal de Justiça de Minas Gerais. 5ª C. Civ. Ap. Civ. 2.0000.00.393297-8/000(1). GKW – Fredenhagen S.A. Equipamentos Industriais v. Daimler Chrysler do Brasil LTDA. Rel. Eduardo Mariné da Cunha, j. 15 May 2003: ‘Como a renúncia, com força definitiva, à via judicial é excepcionada em relação às demandas cautelares, o acesso à jurisdição, em tais casos, é permitido, sendo a hipótese de se acolher os pedidos de sustação de protesto e imposição de obrigação de não encaminhar duplicatas para protesto, ao passo que a controvérsia acerca da exigibilidade ou inexigibilidade das mesmas deve ser objeto de processo de arbitragem’, RBA 7 (2005): 134. . 18 August 2007. 26 CJCE. C-391/95. Van Uden Maritime BV v. Kommanditgesellschaft in Firma Deco-line. J. 17 November 1998, Rev. arb. (Paris: Litec, 1999), 152, commented by H. Gaudemet-Tallon; Rev. crit. (1999): 340, commented by J. Normand. 27 In the same sense, see: CJCE. C-99/96. Internship Yachting Sneek BV v. Hans-Hermann Mietz. J. 27 April 1999. Regarding the subject: Marmise & Wilderspin, ‘Le Régime Jurisprudentiel des Mesures Provisoires à la Lumière des Arrêts Van Uden et Mietz’, Rev. crit. (1999): 669.

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The reformed Chapter IV is dedicated to interim and urgent measures, bringing to code what was already applied in practice or by the case law. Its Article 22-A allows a party to seek the courts to require interim or urgent measures, burdening the said party with the obligation to file the request for arbitration within thirty days from the effectiveness of the decision. An important innovation brought by Chapter IV – in a matter that was previously dealt with by the Itarumã case28 – is the one contained in Article 22-B by which as of the empowerment of the arbitrations only the arbitral tribunal has powers to uphold, modify or revoke the interim or urgent measure granted by a court; also, any new requirement for interim or urgent measures should be made directly to the arbitrators. The introduction of this article is a sign of appreciation and reinforcement of the kompetenz-kompetenz principle, by granting to the arbitrator the power of decision.

28 Op. cit. 11.

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Article 9 – Seat of Arbitration, Applicable Law, and Language Adriana Braghetta, Claudio Finkelstein and Fabio Alonso Vieira 9.1. The arbitration can be seated at any place in Brazil or abroad. The seat or place of arbitration defines its nationality. The Brazilian Law, in the sole paragraph of its provision 34, regulates: “A foreign award is an award rendered outside the national territory.” That is to say, if the award is rendered in Brazil, it will be considered a national award and, therefore, a judicial title. If rendered abroad, the award is subject to (and only to) homologation by the Superior Court of Justice (STJ – Superior Tribunal de Justiça). One of the relevant consequences of the seat or place of arbitration is to determine the jurisdiction of the request to set aside the arbitral award, according to provisions 32 and 33 of the Brazilian Arbitration Law and also in accordance with the New York Convention.1 Apart from the above, the mandatory aspects of arbitration law of the seat must be complied with, and the seat will be relevant in determining the law applicable to the validity of the arbitral agreement, in case there is no law chosen by the parties.2 For all these aspects, the parties generally choose seats that have an appropriate arbitral law (aligned with the UNCITRAL Model Law), have ratified the relevant treaties – especially the New York Convention Treaty – and have a strong judiciary that can adequately and technically apply the law and treaties. The choice may also take into consideration other aspects such as neutrality, the location of the parties, and logistical considerations.

1

2

“The courts having jurisdiction to set aside an award are only the courts of the State where the award was made or is determined to have been made, i.e., where the arbitration had its seat. These courts are described as having “supervisory” or “primary” jurisdiction over the award. In contrast, the courts before which an award is sought to be recognized and enforced are described as having “enforcement” or “secondary” jurisdiction over the award, limited to determining the existence of Convention grounds for refusal of recognition or enforcement.” Guide to the New York Convention. In: . Article V 1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority proof that: (a) The parties to the agreement referred to in Art. 2 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

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We recommend that parties harmonize the wording “seat,” “place of arbitration,” and “place where the award is rendered.” The CAM-CCBC Rules, in Article 10.4 “d,”3 attempts to avoid problems in that regard by ruling that the seat shall be part of the award. Provision 31.3 of the ICC Rules also expresses the international practice in this respect: “The award shall be deemed to be made at the place of the arbitration and on the date stated therein.” According to provision 9.1, the CAM-CCBC is properly prepared to administer not only domestic, but also international arbitrations. 9.2. If the parties have not indicated the seat of the arbitration, if there is not agreement regarding the seat or if the designation is incomplete or obscure, the President of the CAM/CCBC can, if necessary, determine the seat on a provisional basis, falling upon the Arbitral Tribunal, once it is constituted, to definitively decide regarding the seat of the arbitration, after the parties have been heard. If the parties have not chosen the seat or in case there is any ambiguity or doubt and parties cannot reach a consensus, the CAM-CCBC Rules say that its President may provisionally fix a seat until a final decision from the arbitral tribunal, after comments from the parties. The CAM-CCBC is aligned with the international practice to create a method to choose the seat, failing indication from the parties. The CAM-CCBC Rules properly did not choose a particular seat a priori (as opposed to the LCIA Rules4). The CAM-CCBC preserves the option to select the most suitable seat according to each case. Considering all the relevant legal aspects of the seat, it is convenient for the parties to decide themselves in the arbitral agreement or afterward. 9.3. The acts of the arbitration proceedings can occur at a place different from the seat of the arbitration, at the discretion of the Arbitral Tribunal. Another rule common to all experienced arbitral institutions is the possibility that any act of the proceedings, such as hearings and meetings, may take place in any location other than the arbitral seat. This is a common and well-used practice. It allows the arbitral tribunal to conduct the proceedings in the most efficient way considering costs associated with the location of the 3 4

10.4. The arbitration award must contain: (…) (d) The day, month and year on which it was issued and the seat of the arbitration. London is already recognized as one of the main seats around the globe, which explains the wording of Art. 16 of the LCIA Rule: “Seat of Arbitration and Place of Hearings. 16.1 The parties may agree in writing the seat (or legal place) of their arbitration. Failing such a choice, the seat of arbitration shall be London, unless and until the LCIA Court determines in view of all the circumstances, and after having given the parties an opportunity to make written comment, that another seat is more appropriate.”

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parties, lawyers, witnesses, and also accommodation, logistics, visa requirements, among others. According to provision 9.3, the arbitral tribunal does not need to consult the parties prior to deciding that the proceedings will take place somewhere other than the seat. 9.4. The parties will be able to choose the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute. In case of omission or divergence, it falls upon the Arbitral Tribunal to decide in this regard. 9.4.1. Permission for the Arbitral Tribunal to decide ex aequo et bono must be expressed either in the arbitration agreement or in the Terms of Reference

1

Substantive Law Governing the Contract: an Introduction

The first distinction between substantive and procedural laws was made by Balduinus of the ‘glossator school’ in the thirteenth century. He construed the distinction between norms that were ‘ad ordinandum litem’ – the rules by which the judge conducted the proceedings – and those that were ‘ad decidendum litem’ – the rules by which the judge resolved the dispute before the courts.5 After universal doctrine and case law have accepted such distinction construed by Balduinus, and since questions related to procedure issues have been settled, the main mission of the arbitral tribunal is to establish or determine the material facts to the dispute. According to Martin Hunter, “it does this by examining the agreement between the parties, by considering other relevant documents (including correspondence, minutes of meeting, and so on), and by hearing witnesses if necessary.”6 In view of this, the arbitral tribunal builds the award based on the relevant material law and also, if authorized by the parties, on what seems to be fair, reasonable and equitable. The choice of substantive law governing the merits of any dispute arising under the contract is, of course, an issue of great importance, whose significance goes beyond arbitration, and one that often gets overlooked by the contracting parties. No legal relationship or contract occurs in a legal vacuum. Even without any express mention of the parties, any legal relationship is negotiated, concluded, and executed within the legal framework that governs it, well known as ‘the substantive law, ‘the applicable law or ‘the governing law of the contract.’ As a consequence, even before any dispute has arisen,

5 6

Richard Garnett, Substance and Procedure in Private International Law, Oxford: Oxford University Press, 2012, p. 6. Nigel Blackby and Constantine Partasides with Alan Redfer and Martin Hunter, Redfer and Hunter on International Arbitration, 5th edition, Oxford: Oxford University Press, 2009, p. 193.

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the substantive law will determine the way in which the contract was drafted and subsequently performed. However, the full significance of the choice of substantive law may become apparent to the parties only once a dispute arises and combative-based method of resolution is considered. This Section 9(4) touchstone is party autonomy, which means respect to the choice of the parties as agreed in the arbitration agreement or in positions taken before the arbitral tribunal. If the parties fail to choose or to demonstrate their position, arbitrators may enjoy a broad discretion limited only to mandatory rules of the place of arbitration or of the enforcement,7 or public policy.

2

Section 9(4)

The 2012 version of the CAM/CCBC Arbitration Rules provides in its Section 9.4 that “the parties will be able to choose the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute. In case of omission or divergence, it falls upon the Arbitral Tribunal to decide in this regard.” At first glance, the revised rules are a major step forward from the wording adopted in the previous version of the CAM/CCBC Rules, which did not specifically provide for the prerogative of the parties to choose the law applicable to the substance of their dispute, nor that the arbitral tribunal would be bound by the parties’ decision to apply a given set of rules to their dispute. Also, the previous version of the CAM/CCBC Rules did not provide for the discretion of the tribunal to determine the rules applicable to the dispute in case the parties failed to specify the substantive law they wished to see applied to their dispute. This usually led to challenges on which substantive law or rules of law the tribunal should apply, usually followed by lengthy discussions. Under the 1998 version of the CAM/CCBC Arbitration Rules, should there be no choice of substantive law by the parties, the determination of the substantive law would be carried out only in the Terms of Reference, i.e. only after the dispute has arisen and after an initial request for arbitration is presented to CAM/CCBC.8 Needless to say, such architecture presented major difficulties, since reaching any agreement once the parties display a combative stance is considerably harder.

7 8

Martin F. Gusy, James M. Hosking and Franz T. Schwarz, A Guide to the ICDR International Arbitration Rules, Oxford: Oxford University Press, 2011, p. 246. See Section 5.8 of the 1998 CAM/CCBC Arbitration Rules.

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In that regard, the revised version of the CAM/CCBC Arbitration Rules follows the trend adopted by other institutions throughout the world,9 recognizing the parties’ autonomy and expressly providing for the authorization under the arbitration rules for the parties to determine which rules of law are to be applied to their dispute by the arbitral tribunal.

2.1

Party Autonomy

The freedom of the parties to choose the law to be applied to the merits of the dispute is now widely accepted worldwide. First established by academic writers and further developed by national courts, the doctrine of party autonomy has gained broad acceptance in national systems of law and international conventions, such as the Rome Convention, Washington Convention, and UNCITRAL Rules. In accordance with Julian Lew, “[…] despite their differences, common law, civil law and socialist countries have all equally been affected by the movement towards the rule allowing the parties to choose the law to govern their contractual relations.”10 Party autonomy means that international arbitration is a form of dispute resolution where many of the foundations are negotiable rather than imposed, and, therefore, the choices for the parties are multiplied. Special emphasis is given to the right of the parties to freely dispose of their controversies through voluntary agreement. This liberty implies the freedom to devise any kind of procedure for the resolution of disputes, including the voluntary submission to binding determination by a third party and, for the matters analyzed hereby, the choice of substantive rules or rules of law to be applied by that third party. In that regard, party autonomy confers upon the parties a sense of ‘ownership’ in the resolution of their disputes, an important factor for the high degree of party satisfaction commonly achieved by alternative methods and the main reason why parties – once they have agreed to a solution – in general are found to comply more often and more readily with the results as compared with binding procedures. It is often said that the parties to a contract make their own law. Hence, limited by mandatory rules and by public policy, the parties are free to agree upon the substantive provisions to be applied to matters related to validity, application and interpretation of their agreement, either as the main set of rules or as an interpretative tool for supplementing the express provisions of their agreement.

9

See Section 21 of the 2012 ICC Rules of Arbitration; Section 28 of the AAA Rules of Arbitration; and Sections 22.3 and 22.4 of the LCIA Rules of Arbitration. 10 Julian Lew, Applicable Law in International Commercial Arbitration, New York: Oceana Publications and Leiden: Sigthoff & Noorthoff, 1978, p. 75.

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Thus, the arbitral tribunal does not ordinarily have to assess whether the parties’ choice concerning the applicable law is well founded or has any particular connection with the subject matter of the dispute. It has only to respect it.11 Obviously, as will be further demonstrated below, the arbitral tribunal may deny applying a specific set of rules of law if it finds that such a set of rules of law violates mandatory rules and/or public policy in a given jurisdiction.12

2.2

Rules of Law

Despite the fact that the CAM/CCBC has followed the global trend, but apart from the arbitration rules of other institutions, such as International Centre for Dispute Resolution, and the UNCITRAL Model Law, Article 9(4) omitted the terminology ‘substantive law’ and decided to keep only the expression ‘rules of law.’ The expression ‘rules of law’ is broader than ‘substantive law,’ and it is generally used to define the body of rules applicable to the substance of a dispute subjected to arbitration. It has become increasingly common throughout the arbitral literature over the past decades, and is now present in many national arbitration laws,13 and in the latest versions of the international arbitration rules of the International Chamber of Commerce, London Court of International Arbitration, World Intellectual Property Organization, and other arbitration institutions. The introduction of the expression ‘rules of law’ in the UNCITRAL Model Law was once a source of controversy,14 since it was deemed ambiguous and proposed to uncertainty and divergent interpretation. Ultimately, a compromise was reached by the working group that granted the parties the prerogative to agree to the application of ‘rules of law,’ but, in the event of their failure to agree, restricted the arbitral tribunal’s choice to “the law determined by the conflict of laws rules which it considers applicable.” For the drafters of the UNCITRAL Model Law, the expression ‘rules of law,’ moreover, was interpreted relatively narrowly, comprising only “the national law of any State, (…) the national laws of different States (…), a given national law but (…) [excluding] the 11 Should the tribunal fail to apply the rules of law set forth by the parties, an eventual award may be set aside in some jurisdictions. For instance, see In the Matter of the Arbitration of Certain Controversies between Chromalloy Aeroservices and the Arab Republic of Egypt, 939 F. Supp. 907 (D.D.C. 1996). On the other hand, other jurisdictions may not require such compliance in order to recognize an award. See ICCA Congress Series No. 7 (Kluwer 1996), pp. 380, 388-389. 12 In the Soleimany v. Soleimany case, the English Court of Appeal refused to enforce an award where the transaction was not illegal under the applicable law, but was illegal under English Law (1999, QB 785). 13 This occurrence is partly due to the presence of the expression in Art. 28 of the UNCITRAL Model Law. See, for instance, Art. 2, para. 1, of the 1996 Brazilian Arbitration Act. 14 Howard M. Holtzmann and Joseph E, Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary, Deventer: Kluwer Law and Taxation Publishers, 1989, pp. 766-768.

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provisions on a specific topic (…), rules embodied in a convention or similar legal text elaborated on the international level, even if not yet in force” but not “general legal principles” or “law developed in arbitration awards,” for which, in the view of the drafters, such rules would not be reasonably definite.15 Following the Model Law’s promulgation, however, a trend has been observed to give the expression ‘rules of law’ a broader meaning. Also, the use of the expression has gained more widespread acceptance. As a consequence, the expression is now often described as encompassing “legal rules pertaining to notions of a transnational law, lex mercatoria, general principles of law … or the … UNIDROIT Principles”16 of International Commercial Contracts or even the Vienna Convention on the Sales of Goods. In that regard, the Preamble to the 2010 version of the UNIDROIT Principles expressly states that they may be applied when the parties have agreed that their contract would be governed by “general principles of law, the lex mercatoria or the like” or “when the parties have not chosen the law governing their contract” and also “to interpret or supplement” international uniform law instruments or domestic law.17 In view of the above, the choices that may be available to the parties include: (a) national law; (b) public international law, including the general principles of law; (c) concurrent laws, including international development law, such as lex mercatoria, codified terms and practices and trade usages; and (d) equity and good conscience.

2.3

Absence of Agreement

A troublesome scenario also arises in the case where the parties fail to provide the rules of law they wish to apply to the settlement of their disputes, or where the parties only provide for the rules of law that are only applicable to part of their dispute.18 As previously mentioned, the 1998 version of the CCBC Arbitration Rules did not expressly provide for the tribunal’s competence to, in such cases, determine the applicable set of rules of law. On the other hand, the 2012 version stipulates, on the second sentence of Section 9.4, that “in case of omission or divergence, it falls upon the Arbitral Tribunal to decide in this regard.” As it is noticeable, the CAM/CCBC Rules do not mention what parameters the tribunal should address in order to make such a decision. From the wording of Section 9.4, it would

15 Howard M. Holtzmann and Joseph E. Neuhaus, op. cit., pp. 768. 16 See Marc Blessing, “Regulations in Arbitration Rules on Choice of Law”, in Albert Jan van den Berg (ed.), ICCA Congress Series No. 7, Alphen aan den Rijn: Kluwer, 1996, p. 391. 17 . 18 In that scenario, the choice of a law intended to govern the contract will not necessarily extend to claims of an extracontractual nature, or to matters related to parties’ capacity to execute the contract, despite the fact that this matter is, nevertheless, part of the scope of the parties’ arbitration.

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appear that the arbitral tribunal has a broad power of appreciation in the choice of applicable law, a discretionary power, and is in no way obliged to give preference to one of the systems over another. Notwithstanding, it is the regular practice of tribunals, when required to deliberate on the rules of law applicable to a dispute, to choose the rules of law that, in their best view and reasoned opinion, best suit the dispute at hand. In that regard, arbitrators regularly employ a variety of methods for choosing the appropriate rules of law applicable to the merits of the dispute, such as: (i) the conflict of law system of the seat of arbitration19; (ii) the conflict systems of States that might be in some way connected to the dispute or the proceedings20; (iii) the use of general principles of private international law21; (iv) the conflict of laws rules contained in an International Convention22; or (v) the direct choice method.23 Although the arbitral tribunal is free to apply whichever rule of conflict it considers appropriate, it is exempt from justifying his choice of law, generally identifying connections between the chosen law and the contract.24 In any case, it is advisable that arbitrators provide a reasoned explanation for their choice in accordance with the legitimate expectations of the parties.25

2.4

Limits to Choice of Rules of Law

The freedom that the parties enjoy to choose the law governing the merits of their dispute is, nevertheless, not unlimited, for it is subject to the possible application of mandatory public laws or of public policy, irrespective of the choice of law made by the parties.26 A rather common approach adopted by national legislators when trying to restrict the parties’ freedom to choose substantive law is to designate certain fields of law where private parties have no right to choose law. These fields will set the outer limits for party autonomy, and a choice of a foreign law will not affect the application of the national law in these fields. 19 ICC Case No. 10303, ICC Bulletin, Vol. 19, No. 1, p. 117: as the seat of arbitration was France, the arbitral tribunal decided to apply the Rome Convention adopted by France. 20 Yves Derains, “L’application cumulative par l’arbitre des systèmes de conflits de loi intéressés au litige”, in Revue de l’arbitrage, 1972, p. 99. ICC Case No. 7319, ICC Bulletin, Vol. 3, No. 2, p. 56. 21 ICC Case No. 7319, ICC Bulletin, Vol. 3, No. 2, p. 56. 22 ICC Case No. 9636, ICC Bulletin, Vol. 19, No. 1, p. 112. 23 W. Lawrence Craig, William W. Park and Jan Paulsson, International Chamber of Commerce Arbitration, 3rd edition, Dobbs Ferry: ICC Publishing/Oceana Publications, 2000, §§8.04, 17.02. 24 ICC Case No. 4451 (unpublished), where the arbitral tribunal designated the law of the place of the characteristic performance of the contract as the law applicable to the substance of the dispute. 25 Jan Paulsson, Nigel Rawding and Lucy Reed, The Freshfields Guide to Arbitration Clauses in International Contracts, 3rd edition, Alphen aan den Rijn: Kluwer Law International, 2010, p. 23. 26 Serge Lazareff, “Mandatory Extraterritorial Application of National Law Rules”, in Albert Jan van den Berg (ed.), ICCA Congress Series No. 7, Alphen aan den Rijn: Kluwer, 1996, p. 538.

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One way to do this is to adopt conflicts rules that exclude the application of party autonomy in those specific areas of law, especially where equality of the parties, a condition precedent for the conclusion of any arbitration agreement, is not present. Most common examples can be found in labor and consumer legislation. Another method is to give the national substantive rule an overriding character over the choice of law of the parties. National interests that are often given an overriding character include rules protecting the weaker contractual party, rules protecting a third party, rules adopted to regulate national economics, and rules protecting community interests.27 The reason behind every limitation must therefore be balanced with the parties’ interest in the predictable and consistent application of the rules of law.28 However, even if the potential application of mandatory rules and conflict rules creates unpredictable factors, this does not mean that the unpredictability cannot be reduced. By knowing which system of law will govern party autonomy and determine its scope at least the parties can make a high class evaluation regarding whether or not a specific rule, or public policy, will limit their choice of law.

3

Section 9(4)(1)

Most arbitration rules provide that arbitrators may decide a dispute ex aequo et bono if the parties expressly agree on such a prerogative.29 Following the same trend, the 2012 version of the CCBC Arbitration Rules established, in its Section 9.4.1, that the arbitral tribunal may decide ex aequo et bono, provided it has been expressly authorized to do so, either in the arbitration agreement or in the Terms of Reference. In some cases, such as where parties have chosen a law to govern the contract that is not the national law of either of them, the decision of an arbitral tribunal based squarely on fairness or equity may be preferable to one based on law, particularly where the contract provides for a long-term relationship. In the same line, the authorization for an ex aequo et bono decision allows for the selection of arbitrators who are not lawyers but who are knowledgeable about the specific subject matter in dispute, a possibility specially welcome in cases where the subject matter of the dispute is one of great technical complexity.

27 Giuditta Cordero Moss, International Commercial Arbitration: Party Autonomy and Mandatory Rules, Oslo: Tano Aschehoug, 1999, pp. 86-99. 28 Alan Redfern and Martin Hunter argue that as long as the intention expressed by the parties when choosing the applicable law is bona fide and legal and there is no reason to reject the parties’ choice because of public policy, there should be no restriction of party autonomy. Law and Practice of International Commercial Arbitration, Thomson Professional Pub Cn; 3 edition (November 1999), pp. 97-98. 29 See, e.g., ICC Rules Art. 17.3, LCIA Rules Art. 22.4 and UNCITRAL Arbitration Rules Art. 35(2).

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In order for a tribunal to decide ex aequo et bono, two conditions must be fulfilled. First, the parties must have expressly authorized the tribunal to decide in such a fashion. Second, the law applicable to the arbitration, in a broad perspective, must permit this. In that regard, it is noteworthy that jurisdictions adopting the UNCITRAL Model Law or similar wording are more likely to enforce awards decided ex aequo et bono.30 The choice of the parties for an ex aequo et bono decision connotes that a tribunal has greater freedom to decide issues of evidence and/or (quantification of) damages than would otherwise be the case under the applicable arbitration law. However, given the inherent uncertainties in its application, contract negotiators should – again – be wary of agreeing at the time of entering into the contract to confer upon arbitrators such broad and elastic powers.

4

Conclusion

Almost any choice of governing law is better than no choice at all. It enhances predictability, both during the execution of the contract and in the event of any subsequent dispute, and thus saves time and costs. The only people who will benefit from a failure to specify the governing law are the lawyers who will subsequently spend many hours fighting over which law should be applied. Unlike national courts, arbitral tribunals do not have a set of conflict of laws principles that they must apply to determine the governing law. Accordingly, where the parties have not chosen a governing law, the lawyers will have to argue first over which conflict of laws principles to apply and then over how to apply those principles. Such disputes are better avoided by simply agreeing on a governing law. As mentioned, almost any choice of governing law is better than no choice at all. For instance, the choice for lex mercatoria or other a-national rules of law devised by academics (e.g., the UNIDROIT Principles) is rarely advisable, for the same reasons highlighted above. This is not to say that a-national laws are not useful, specifically where they provide helpful guidance in the interpretation of the applicable substantive rules, and where the applicable provisions require the use of gap-filling mechanisms. Finally, agreeing to allow the arbitral tribunal to decide ex aequo et bono is also problematic. Allowing the tribunal to decide the dispute without having to necessarily observe any particular set of substantive rules renders even less predictable the outcome of a dispute. 9.5. The arbitration will be conducted in the language agreed by the Parties.

30 Art. 28(3) of UNCITRAL Model Law.

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9.5.1. If there is no agreement, the Arbitral Tribunal will choose the language, taking into consideration all relevant circumstances, including the contract.

1

Introduction

The fundamental principle that underlines the application of such provision is undoubtedly the principle of party autonomy. The parties are absolutely free to designate one or several languages to be used in the arbitral proceedings. Frequently, it is recommended that the parties stipulate the language in which the arbitration will be conducted in the arbitration clause inserted in the contract. The negotiation of this element should be made, ideally, before the conclusion of the contract so that the parties avoid prolonged discussions regarding this aspect after a dispute has arisen, delaying the commencement of the arbitration and, consequently, the definitive decision solving the dispute.31 As a rule, the specific choice regarding the language of the arbitral proceedings will produce certain effects that can be essential for the smooth unraveling of the arbitration. The choice of the parties’ representatives will be directly influenced by the language elected for the proceedings, since all the written memoranda, notifications, and all other forms of communications between the parties and the tribunal will have to be drafted or revised by those representatives in the language chosen for the arbitration.32 The choice of language can also influence the choice of the professionals who will serve as arbitrators and eventually provide a binding decision for the conflict between the parties. Obviously, the object of the arbitration cannot be properly evaluated by an arbitrator who does not have necessary knowledge of the language chosen for the arbitration, which will be the language used for the drafting of documents, the evidence produced by the parties, and possibly the language used by witnesses in their testimony. Lastly, the language selected for the proceedings may also provoke effects on the costs of the arbitration, since all documents produced in another language will have to be translated.

2

Language Agreed upon by the Parties

Customarily, when the parties determine the language of the arbitration through a contractual clause, they establish that such language will be that of the contract itself. Nevertheless,

31 Gary B. Born, International Arbitration: Law and Practice, Alphen aan den Rijn: Wolters Kluwer, 2012, p. 38. 32 Jan Paulsson, Nigel Rawding and Lucy Reed, op. cit., pp. 53-55.

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other parameters may equally be adopted in order to make the choice such as the law applicable to the contract or to the arbitral proceedings.33 When an arbitration clause is inserted, establishing the language of the arbitration as being that of the contract drafting, some problems may arise, particularly when the aforementioned contract was drafted in more than one language. In such a case, three options might be adopted: (a) the parties may, after the dispute arises, choose one of the contractual languages to be adopted in the arbitral proceedings; (b) all the documents, notifications, communications, witness statements, hearings, and decisions must necessarily be drafted in both languages in which the contract was drafted; (c) the documents relating to the arbitration may be produced in any of the contractual languages, without the need for translation. The first situation might impose difficulties, since the choice of the parties regarding the language in which the arbitration will be conducted will occur after the dispute has emerged, a moment in which the relationship of the parties might not be amicable anymore. Both parties will most definitely try to argue in favor of the language more convenient to them, often not reaching any agreement. The negotiations may even considerably delay the outline of the Terms of Reference and the arbitration itself. The second possibility also presents certain disadvantages that should be considered. Primarily, the costs of the arbitration would rise substantially, as all the documents, communications, notifications, and decisions will have to be translated into the other language. Some issues might arise regarding possible inconsistencies between both versions of the document, causing the need for interpretation or even a new translation of the record. The third alternative is also somewhat onerous, considering that the other party would have the burden of searching for a translation of the documents presented by the first party that it may not understand. The choice for the individuals who will serve as members of the arbitral tribunal will also be more burdensome, as all of them must have sufficient knowledge of all the languages that might be used in the arbitration, which might even be impossible in certain cases.

3

Absence of an Agreement Regarding the Language of the Arbitration

In the least favorable scenario in which the parties have not stipulated any contractual provisions relating to the language of the arbitration, such choice will have to be made by the arbitral tribunal. When the parties are in complete disagreement on this matter, it will

33 Detlev von Breitenstein, “La langue de l’arbitrage: Une langue abstraite?”, ASA Bull., 1995, p. 18.

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be necessary for the tribunal to address and decide the issue on the first procedural order or in the Terms of Reference of the Arbitration. According to paragraph 1 of the provision, the arbitral tribunal shall take into consideration all the relevant circumstances of the case, which might encompass the contractual language, the language of the parties to the arbitration, their representatives and the members of the tribunal, and also the language of the applicable law to the contract and the law applicable to the arbitration itself.

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Article 10 – Arbitral Award Gilberto Giusti and Douglas Catarucci As the main role of the Arbitral Tribunal is to render a final and binding order that will finally end the dispute raised between the parties, the Rules of the Center of Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (CAM-CCBC) provide, in 8 subsections of its Article 10, essential provisions regarding arbitral awards. As soon as the parties have completely submitted their case and, consequently, the respective proceedings are closed, the Arbitral Tribunal shall render the arbitral award (1) within the time frame stipulated by the parties, (2) whether partial or final and (3) following the formalities required. Once a final award is issued, (4) the arbitrators’ jurisdiction is over, unless (5) there is a request for clarification. Furthermore, Article 10 also (6) provides that none of the arbitrators or the CAMCCBC people should be deemed liable for any acts, facts or omissions related to the arbitration; and (7) allows the parties to request at any time that a settlement be recorded by an arbitral award.

1

Time Frame for Rendering the Award

Since arbitration is fundamentally based on the parties’ autonomy, it is left to the discretion of the parties to tailor the details of the proceedings.1 Article 23 of the Brazilian Arbitration Act (Law No. 9.307/96 as amended by Law No. 13.129/2015) establishes that “the award shall be made during the time frame stipulated by the parties; if no agreement is made, the arbitral award shall be made within six months from the date of the commencement of the arbitration or from the date of the substitution of an arbitrator.” As a guidance to the parties in choosing a reasonable time frame for the arbitral award to be made, Article 10(1) of the CAM/CCBC Rules establishes a general term, as follows: 10.1. The Arbitral Tribunal will issue the arbitral award within sixty (60) days from receipt by the arbitrators of the final arguments presented by the parties (or of their notification that the referred time period has expired), unless another time period is established in the Terms of Reference or agreed to with the parties.

1

Blackaby, Nigel. Partasides, Constantine. Redfern, Alan. Hunter, J. Martin. International Arbitration. Oxford: Oxford University Press, 2009, p. 365.

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Any different time frame for the arbitral award should be expressly stipulated in the competent Terms of Reference or agreed to with the parties in writing during the arbitral proceedings. This sixty-day term may be extended by up to thirty days, at the discretion of the President of the Arbitral Tribunal, provided that the parties are notified thereof before the first sixty-day term elapses, as per Article 10(1)(1) of the CAM-CCBC Rules. This thirty-day extension should be used on an exceptional basis where the complexity of the case clearly justifies that the arbitrators take some more time to come up with a grounded decision. The indiscriminate use of this prerogative by the Arbitral Tribunal is detrimental to the credibility of arbitration as an efficient and expeditious means of solving disputes. The time frame for the arbitral award is of utmost importance. As a general rule, Article 32(VII) of the Brazilian Arbitration Act provides that “[a]n arbitral award is null and void if it is rendered after the time limit has expired.” Consequently, in the unfortunate event where the Arbitral Tribunal exceeds the time frame applicable to the case, including the thirty days of possible extension, the late arbitral award may be challenged in court, depending on the consequences provided in the applicable law on the proceedings.2 In view of the above, the parties and the Arbitral Tribunal should, from the outset of the respective proceedings, be comfortable with the time frame stipulated for the award to be made, under the penalty of nullification of a decision rendered beyond the agreed time frame.

2

Partial or Final Award

The term ‘award’ is still debatable in the doctrine, and it is not the objective of this study to find the most accurate delimitation of the term. Notwithstanding, the definition chosen to illustrate the provisions of the CAM/CCBC Rules is the one proposed by Philippe Fouchard, Emmanuel Gaillard and Berthold Goldman, which determines the arbitral award as: […] a final decision by the arbitrators on all or part of the dispute submitted to them, whether it concerns the merits of the dispute, jurisdiction, or a procedural issue leading them to end the proceedings.3 2

3

“Under French law, an award made after the expiration of the deadline fixed by the parties for the making of the award may be set aside on the grounds that it was made on the basis of an expired agreement, under Article 1502 1° of the New Code of Civil Procedure. An award made abroad under the same circumstances could be refused enforcement in France on the same grounds.” (Fouchard, Philippe. Gaillard, Emmanuel. Goldman, Berthold. International Commercial Arbitration, eds. Emmanuel Gaillard and John Savage. Kluwer Law International: 1999, p. 758.) Fouchard, Philippe. Gaillard, Emmanuel. Goldman, Berthold. op. cit., p. 737.

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The terms “partial” and “final” used by the CAM/CCBC Rules are not related to the decision power exercised by the Arbitral Tribunal, but rather to the portion of the matter resolved. Partial awards, as well as final awards, have the same impact of putting an end to the dispute. The final award will be issued by the Arbitral Tribunal exclusively when it concludes the purpose in the proceedings, having determined any and all matters arising from the case. On the other hand, if any substantial question is left unresolved, the Arbitral Tribunal shall issue a partial award, settling part of the dispute but not putting an entire end to it.4 The CAM/CCBC Rules,5 in order to avoid discussions on whether the arbitrators are able to issue partial awards without the prior consent of the parties,6 established that the award, at the discretion of the arbitrators, may be partial. To the same effect, Article 23, paragraph 1 of the Brazilian Arbitration Act has been recently amended by Law 13,129/2015 to make it clear that “arbitrators can render partial awards.” Arbitrators are expected to issue partial awards with a view to maintaining the balance of the dispute, focusing the attention of the parties on relevant matters,7 deciding either on jurisdictional questions or on preliminary substantive issues.8 Hence, the Arbitral Tribunal, when facing preliminary or prejudicial issues, may bifurcate the proceedings for resolving the matters in a manner that increases the efficiency of the proceedings, avoiding the risk of wasting efforts in discussing questions that may end in jeopardy.9 Arbitral Tribunals are usually called to rule over their own jurisdiction. And, by the principle of Kompetenz-Kompetenz, the Arbitral Tribunal is the one competent to decide on matters concerning its own jurisdiction, which is not only recognized in the doctrine,10

4

Alonso, José María. Deliberation and Drafting Awards in International Arbitration in Liber Amicorum Bernardo Cremades, eds. M.Á. Fernández-Ballesteros & David Arias, Madrid: La Ley, 2010, p. 146. 5 In the same sense that the Rules of several renowned chambers, such as: ICC (Art. 2.iii), AAA (Art. 27.7), LCIA (Art. 26.7). 6 “If there is neither agreement between the parties nor express or implied provisions in the lex arbitri or arbitral rules, it has been doubted whether a power exists”. (Waincymer, Jeff. Procedure and Evidence in International Arbitration. Kluwer Law International, 2012, p. 1273.) 7 Waincymer, Jeff. op. cit., pp. 1272-1273. 8 Lew, Julian D.M. Mistelis, Loukas A. Kröll, Stefan M. Comparative International Commercial Arbitration. Kluwer Law International: 2003, pp. 334-335. 9 Schwarz, Franz T. Schwarz. Konrad, Christian W. The Vienna Rules: A Commentary on International Arbitration in Austria, Alphen aan den Rijn: Kluwer Law International, 2009, p. 459. 10 “It is a legal fiction granting arbitration tribunals the power to rule on their own jurisdiction” (Lew, Julian D.M. Mistelis, Loukas A. Kröll, Stefan M. op. cit., p. 332).

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11 In Brazilian Arbitration Law it is provided in the sole paragraph of Art. 8 that “The arbitrator has jurisdiction to decide ex officio or at the parties’ request, the issues concerning the existence, validity and effectiveness of the arbitration agreement, as well as the contract containing the arbitration clause.” 12 Art. 4(5) – Before the Arbitral Tribunal is constituted, the President of the CAM/CCBC will examine objections regarding the existence, validity or effectiveness of the arbitration agreement that can be immediately resolved, without the production of evidence, and will examine requests regarding joinder of claims, under Art. 4.20. In both cases, the Arbitral Tribunal, once it is constituted, will decide on its jurisdiction, confirming or modifying the decision previously made. 13 Fichtner, José Antonio. Monteiro, André Luis. Temas de Arbitragem. Rio de Janeiro: Renovar, 2010, p. 160. 14 Fouchard, Philippe. Gaillard, Emmanuel. Goldman, Berthold. op. cit. 1999, p. 741; Fichtner, José Antonio. Monteiro, André Luis. op. cit., p. 160.

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On this occasion, arbitrators shall be especially proactive and organized in order to issue, as quickly as possible, a final award. Considering this, it is strongly recommended that the Arbitral Tribunal arrange for a preparatory conference15 with the parties, immediately after the issuance of the partial award, in order to define the events of this new phase. Prior to the meeting, the arbitrators shall establish a procedural timetable16 that outlines the key stages and the main dates of this part of the proceedings. In the timetable, the Arbitral Tribunal shall define the way that the arbitral proceedings will be conducted and determine what stages are necessary, considering the content of the partial award and the particular necessities of the case.17 Finally, the parties, in the preparatory meeting, shall be invited to review the procedural timetable in order to eventually modify the stages previously provided by the Arbitral Tribunal.18 Proceeding in this manner, the Arbitral Tribunal will design a more efficient and organized proceedings after the issuance of the partial award, respecting the due process, creating a desired scenario of certainty between the parties and the Arbitral Tribunal.

3

Formalities of the Award

The formalities provided in the CAM/CCBC Rules for the arbitral awards are meant to ensure that the Arbitral Tribunal will follow the essential requisites in order to render a valid and enforceable award, considering not just the Brazilian legal system,19 but also international provisions.20 The first requirement of the CAM/CCBC Rules is that the arbitral award shall be expressed in a written document, which is a general rule for arbitral awards worldwide,21 as oral awards would create a range of difficulties at the enforcement stage.22 15 The expression refers to either a face-to-face or a teleconference meeting, which in question of efficiency and time and cost saving, the teleconference is shown to be more likeable. 16 “the tribunal will seek to establish a schedule, ideally with the parties agreeing to many of the procedural steps, that is both efficient and fair, and that suits the particular requirements of the case” (Schwarz, Franz T. Konrad, Christian W. op. cit., p. 458). 17 Waincymer, Jeff. op. cit., p. 455. 18 “Key advantages are that an experienced tribunal will be better able to establish a sensible timeline. Parties might more readily accept a suggestion from the tribunal than one from the opposing party” (Waincymer, Jeff. op. cit., p. 459). 19 The Brazilian Arbitration Law provides in Arts. 24 to 26 the formal requisites to a valid and enforceable arbitral award. 20 Arts. IV and V of the New York Convention on the recognition and enforcement of foreign arbitral awards; Art. 31 of UNCITRAL Model Law. 21 Art. 24 of Brazilian Arbitration Law; Art. 1057(2) of the Netherlands Code of Civil Procedure; Art. 1701(4) of the Belgian Judicial Code; Art. 1054(1) of the German ZPO; Art. 31(1) of the UNCITRAL Model Law; Sec. 31 of the 1999 Swedish Arbitration Act. See also Art. 48(2) of the 1965 Washington Convention. 22 Fouchard, Philippe. Gaillard, Emmanuel. Goldman, Berthold. op. cit., p. 759.

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In case the arbitrators record their decision in audio or video, for example, it shall not be considered an arbitral award under the scope of the laws that contain such a provision,23 such as the CAM/CCBC Rules. Moreover, under the Rules, the term “written document” means the hard version of the arbitral award rather than any digital means. According to Article 10(5)(1) of the Rules,24 the time frame for making the award should be considered fulfilled only when the presiding arbitrator presents the signed original version of the award to the Secretariat of the CAM/CCBC. The deliberations conducted to render the arbitral award, when the arbitration is held by three or more arbitrators, shall take into account the views of all the members of the Arbitral Tribunal; otherwise, it would constitute a fundamental procedural error.25 Although it is always desirable that all the arbitrators agree on the decision, they normally have different backgrounds, which could, consequently, lead to a divergence in the opinions concerning the result of the arbitration. The CAM/CCBC Rules, in this sense, provide the following solution while facing this problem: 10.3.1. Where there is an Arbitral Tribunal, the arbitral award shall be issued by consensus whenever possible and, if this is not viable, by a majority vote, with each arbitrator, including the President of the Arbitral Tribunal, having one vote. Failing a majority opinion, the vote of the President of the Arbitral Tribunal will prevail. Thus, if a consensus is not reached, the decision will prevail if issued by both the majority opinion – the presiding arbitrator plus one coarbitrator – or, as the case may be, the sole vote of the presiding arbitrator. In the event that a consensus cannot be reached, the presiding arbitrator will play a fundamental role in the outcome of the dispute. It must prevent the deadlock of the discussions and guarantee that a position will be finally taken by the Arbitral Tribunal, respecting the deadline established by the parties.26 Despite the fact that it sometimes means that the presiding arbitrator will render the award on the basis of his sole vote, there will be, on the other hand, no need for the chair-

23 Carmona, Carlos Alberto. Arbitragem e processo: um comentário à Lei n° 9.307/96. 3ª ed. São Paulo: Atlas, 2009, p. 358. 24 Article 10(5)(1) – The President of the Arbitral Tribunal will send the original copies of the decision to the Secretariat of the CAM/CCBC, who will send them to the parties. 25 Waincymer, Jeff. op. cit., p. 1297. 26 Alonso, José María. op. cit., p. 139.

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person to force a compromise with at least one of the coarbitrators, leading to decisions that cannot be considered legitimate or reasonable.27 This approach of the CAM/CCBC Rules prevents the presiding arbitrator from incurring in a negotiation as to the final decision and disincentives unnecessary barriers that could be created by unsatisfied coarbitrators, maintaining the technical quality of the arbitral award.28 As a consequence, the presiding arbitrator usually has the burden of the drafting process of the award, while the coarbitrators would assist him.29 Additionally, in order to protect the arbitral proceedings from any possibility of the unsatisfied arbitrator obstructing the issuance of the award, the CAM/CCBC Rules provide that: 10.3.2. The arbitration award will be reduced to writing by the President of the Arbitral Tribunal and signed by all the arbitrators. If one or more of the arbitrators do not sign the award, it will fall upon the President of the Arbitral Tribunal to state that fact. Hence, if the decision is not unanimous and any of the arbitrators refuses to sign the award, the presiding arbitrator has the duty to provide the reasons for the arbitrator’s failure to sign the award,30 this measure being enough to assure the validity of the award. Nevertheless, if it is the case, the arbitrators are able to sign different copies of the same award,31 avoiding the unfortunate scenario that the divergent arbitrator is willing to frustrate the process by holding on to the original copies.32 The dissenting arbitrator may, in some cases, desire to express his/her dissenting opinion. In order to avoid theoretical discussions regarding the possibility of manifesting his/her dissenting vote,33 the CAM/CCBC Rules expressly provide for the opportunity to include the dissenting opinion in the award: 10.3.3. An arbitrator who dissents from the majority can explain his or her dissenting vote, which will be included in the arbitration award. 27 Derains, Yves. Schwartz, Eric A. A Guide to the ICC Rules of Arbitration. Kluwer Law International: 2005, p. 306. 28 Derains, Yves. op. cit., p. 307. 29 Waincymer, Jeff. op. cit., p. 1312. 30 “In the event that an arbitrator refuses to sign the award, it is, moreover, generally considered that the Award should indicate that the arbitrator in question was given the opportunity to sign, but refused to do so, and the reason for such refusal.” (Derains, Yves. Schwartz. Eric A. op. cit., p. 308.) 31 Alonso, José María. op. cit., p. 154. 32 Waincymer, Jeff. op. cit., p. 1324. 33 “Where arbitral rules are silent as to the possibility of dissenting opinions, there has been debate about whether there is a general entitlement or not.” (Waincymer, Jeff. op. cit., pp. 1301-1306); Fouchard, Philippe. Gaillard, Emmanuel. Goldman, Berthold. op. cit., p. 764.

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As to the time frame for rendering the dissenting opinion, it shall not exceed the term established by the parties for the final award and, if the dissenting arbitrator fails to include his/her vote in the award, this shall not obstruct the filing of the arbitral award. Otherwise, it could allow the opportunity for the unsatisfied arbitrator to unduly prolong the delivery of the arbitral award.34 The dissenting opinion cannot be used in an action to set aside or to resist the enforcement of the award, as the divergent vote is only a matter of fact and has no authority to overrule the vote of the majority at any recourse stage.35 Nevertheless, the dissenting opinion shall not be described as an award,36 but shall be included in the arbitral award in a manner that makes it clear to the reader that it is not an essential part of the majority’s deliberation.37 As a result, in order not to create any doubt about the nature of the divergent vote, it shall be added after the signatures with a clear indication about that part being the dissenting opinion.38 The CAM/CCBC Rules provide four minimum standards that the arbitral award must observe in order to be enforceable in most jurisdictional systems.39 10.4. The arbitration award must contain: (a) The facts, with the parties’ names and a summary of the dispute; It is the so-called award’s report, in which the arbitrators shall briefly expose the framework of the dispute, not being necessary to describe it in exhaustive detail, but only demonstrating the relevant information of the case. Considering this, it is enough to briefly expose the facts and circumstances of the proceedings, any procedural incidents, the elected arbitration rules, the language of the arbitration and the evidence produced. Additionally, the report shall contain the qualification of the parties and the substance of their submissions, as well as their requests, including preliminary issues.

34 Blackaby, Nigel. Partasides, Constantine. Redfern, Alan. Hunter, J. op. cit., p. 567. 35 “In this respect, the minority opinion will not affect the outcome of an action against the award made by the majority, especially where, as is usually the case, no review of the merits can take place in the context of that action” (Fouchard, Philippe. Gaillard, Emmanuel. Goldman, Berthold. op. cit., p. 768). 36 “In either case, the dissenting opinion does not form part of the award itself: it is not an ‘award’; it is an opinion” (Blackaby, Nigel. Partasides, Constantine. Redfern, Alan. Hunter, J. Martin. op. cit., p. 574); Waincymer, Jeff. op. cit., p. 1301. 37 Waincymer, Jeff. op. cit., p. 1310. 38 Arroyo, Manuel. Dealing with Dissenting Opinions in the Award: Some Options for the Tribunal. ASA Bulletin 26, no. 3 (2008), p. 460. 39 Brazilian Arbitration Law provides in Art. 32(III) that the award, which does not observe the same requisites, shall be null.

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In other words, the report of the award shall only be enough to clearly demonstrate the core of the arbitrator’s deliberation in order to render the arbitral award. (b) The reasons for the decision, which will address both questions of fact and of law, with an express statement that it was issued ex aequo et bono, when that is the case; This provision contains a fair disincentive to arbitrariness in the decisions of the Arbitral Tribunal, guaranteeing the parties a justification for why it has not won the case, or vice versa, making clear the justice of the determination.40 The reasons shall be enough to clearly demonstrate to the parties that all the matters have been considered by the Arbitral Tribunal.41 In what practical questions are concerned, by the reasoning of the award it is possible to have a critical control over its content regarding the professional competence of the arbitrator. Even though the arbitral award, in principle, cannot be annulled if it is not accurately reasoned, the arbitrators who constantly fail in reasoning their awards may easily lose credibility among their peers.42 On the other hand, the lack (as opposed to inaccuracy) of reasoning of the award may jeopardize the validity and enforceability of the award, under public policy grounds.43 The lack of reasoning may have a constitutional approach depending on the legal system, such as provided in Article 93, subsections IX and X, of the Brazilian Federal Constitution, creating even more solid grounds for putting the award aside. At this point, after presenting the reasons for the decision taken, the award shall fix the determinations for the losing party. In different terms, it is the practical result of the decision issued by the Arbitral Tribunal; it is where the tribunal will effectively express its power of decisum. The Arbitral Tribunal must observe the principle of congruence, having necessarily the order issued by the tribunal correspondence with the submissions of the parties. Otherwise, the Arbitral Tribunal may incur in a decision citra petita, extra petita or ultra petita. The award that fails to appreciate any of the issues (citra petita) or decides on objects that the parties did not submit (extra petita) or concedes something beyond the request of the parties (ultra petita) may be subject to nullification, which is expressly provided in Article 32 of Brazilian Arbitration Law. There shall be no confusion with cases in which the Arbitral Tribunal decides on a different legal basis from the one presented by the parties in the proceedings, since the arbitrators are not bound by the legal and juridical arguments submitted by the parties, but rather to their requests. 40 41 42 43

Bingham, Lord. Reasons and Reasons for Reasons. Arbitration International 4, no. 2 (1988), pp. 142-143. Derains, Yves. Schwartz. Eric A. op. cit., p. 309. Carmona, Carlos Alberto. op. cit., p. 370. Waincymer, Jeff. op. cit., p. 1373.

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(d) The day, month and year on which it was issued and the seat of the arbitration. The provisions regarding the date and the place of the award are particularly important. The date is necessary, in a first moment, to analyze whether the Arbitral Tribunal complied with the time limit established by the parties for the issuance of the award; otherwise, the award may be rendered null, as already stated above. Second, the date of the award will be the parameter to establish the term, now for the parties, to request for clarifications44 and, if the parties fail to present a motion for clarification in this period, they will no longer have the opportunity to do so. The date is also important to determine the effects of res judicata of the award. As to the place where the arbitral award was made, it is important for definition of the nationality of the award, which will affect the necessity of recognizing the award prior to its enforcement. According to Article 34, sole paragraph of the Brazilian Arbitration Act, “[a] foreign award is an award rendered outside the national territory.” As such, a foreign award must be ratified by the Brazilian Superior Court of Justice in order to be enforceable in Brazil, as per Article 35 of the Brazilian Arbitration Act. Hence, if the Arbitral Tribunal complies with the formalities regarding the substance of the award, it will be in accordance with all the formal requirements for a valid award, avoiding the creation of scenarios for the losing party to challenge it. In a first moment, the liability of the parties regarding administrative costs, arbitrators’ fees, expenses and attorneys’ fees will depend on the determinations provided in the arbitration agreement or in the Terms of Reference. 10.4.1. The award will also contain, where appropriate, the parties’ liability for the administrative costs, arbitrators’ fees, expenses, and attorneys’ fees, as well as the respective apportionment, also observing that which was agreed by the parties in the Terms of Reference. If it is agreed by the parties in the arbitration agreement or in the Terms of Reference, the Arbitral Tribunal shall strictly follow the allocation of costs accorded by the parties in one of those instruments in order to respect the party’s autonomy that serves as a basis for the tribunal’s power to rule over the proceedings. However, if the parties fail to provide any agreement in this sense, it will be on the Arbitral Tribunal to determine the liability of the parties on costs.45

44 Unless the parties have established in the Terms of Reference that the terms are counted from the receipt of the hard versions of the award. 45 Derains, Yves. Schwartz. Eric A. op. cit., p. 371.

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Article 10 – Arbitral Award As there is no consensus regarding the allocation of costs,46 it is hardly predictable to define a general principle concerning the party who shall bear the arbitration costs and in what proportion.47 It must be analyzed on a case-by-case basis, considering the particular circumstances in order to have a proper and fair allocation. The Arbitral Tribunal shall consider the parties’ submissions on the reimbursement of arbitration costs, which are normally submitted in the request for relief. Nevertheless, if there is no submission of the parties in this sense, the tribunal may concede the opportunity for the parties to manifest in this regard, given its duty to decide on costs.48 After having analyzed the parties’ requests, the Arbitral Tribunal may adopt several approaches influenced by their own legal background, since the CAM/CCBC Rules have no provision concerning any specific conduct of the tribunal regarding the allocation of costs, and neither are the arbitrators limited by national legal requirements in this aspect.49 There are three approaches that are most commonly followed: the unsuccessful party bears all the costs; the allocation is in proportion to the outcome of the dispute and each party bears its own costs.50 The arbitrators, on the other hand, may not treat all the costs equally, meaning that they can establish different criteria for the administrative costs, arbitrators’ fees, expenses and attorneys’ fees. In this sense, in the same award, the arbitrators may determine that the losing party bear all the costs related to the administration of the proceedings, but the attorneys’ fees are equally divided between the parties. In another case, the Arbitral Tribunal may understand that the costs shall be held by both parties regarding administrative fees, but the attorneys’ fees must be borne by the losing party. Along with these, there are other possible scenarios. For establishing these criteria, the arbitrators may take into consideration elements regarding the raising of the dispute and its development, such as problems of proof, the difficulty of the case, party responsibility for the dispute, inflated claims, the relevance of settlement offers, bad faith, hardship and other factors.51 In light of the aforementioned, if it is not previously stated by the parties in the Terms of Reference regarding the questions of allocation of arbitration costs, there will be plenty of scenarios for its outcome, depending on the Arbitral Tribunal’s discretion based on its own experience.

46 47 48 49 50 51

Id., p. 370. Waincymer, Jeff. op. cit., p. 1191. Derains, Yves. Schwartz. Eric A. op. cit., p. 370. Id., p. 371. Id., p. 371. For a more detailed discussion on these issues see: Waincymer, Jeff. op. cit., pp. 1221-1228.

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4

Cease of Jurisdiction

The mandate of the Arbitral Tribunal is conceded by the parties with one single objective: to finally resolve the dispute raised between them. Considering this, the CAM/CCBC Rules provide for the consequences regarding the issuance of the final award. 10.5. Once the final arbitral award is issued and the parties notified, the arbitration will be considered closed, unless there is a request for clarification as provided in the following article, in which case jurisdiction will be extended until the respective decision. This means, in other words, that the delivery of the final award will render the Arbitral Tribunal functus officio. It will no longer have jurisdiction over the matter, and the mission of the tribunal in the proceedings is considered accomplished.52 As a result of that concept, apart from the possibility of extension of the Arbitral Tribunal’s jurisdiction to decide on any motion for clarification, the matter discussed in the proceedings cannot be reopened. It gives rise to res judicata effects between the parties, and the award becomes binding.53 And the last activity of the Arbitral Tribunal, specifically of the presiding arbitrator, before its functus officio is to address the original copies of the decision to the Secretariat of the CAM/CCBC, which will provide each party involved with a copy thereof. 10.5.1. The President of the Arbitral Tribunal will send the original copies of the decision to the Secretariat of the CAM/CCBC, who will send them to the parties. The presiding arbitrator, therefore, shall ensure that there will be sufficient original signed copies for all the parties involved in the arbitration, such as Claimant(s), Respondent(s), members of the Arbitral Tribunal and Secretariat. As soon as the arbitral award is filed before the Secretariat of the CAM/CCBC, the Arbitral Tribunal no longer has jurisdiction over the case and, consequently, the proceedings are finally closed.

5

Clarifications

As an exception to the functus officio of the Arbitral Tribunal and its consequent effects, after the issuance of the final award the parties can concede a last additional portion of jurisdiction to the tribunal. 52 Blackaby, Nigel. Partasides, Constantine. Redfern, Alan. Hunter, J. Martin. op. cit., p. 519. 53 Waincymer, Jeff. op. cit., p. 1346.

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When the parties find necessary a clearer expression of the award’s content, they shall file a motion requesting for clarifications to the Arbitral Tribunal. 10.6. The parties can, within fifteen (15) days from the date they receive the arbitral award, request clarifications regarding any contradiction, omission or obscurity by request directed to the Arbitral Tribunal. The parties must appoint in their motion for clarification specifically the points where the award incurred in contradiction, omission or obscurity, being any other discussion by the parties irrelevant at this stage,54 which shall not be taken into consideration by the Arbitral Tribunal. In other words, by means of a motion for clarification the parties are not allowed to seek modification of the decision provided in the arbitral award. If the clarifications are accepted, the winner of the arbitration will still be the winner, and the loser will still be the loser. The clarifications shall not be seen by the parties as recourse against the arbitral award, but solely as a means to enlighten specific provisions that were not properly expressed or deeply analyzed; otherwise, it would work as an appeal against the arbitral award, which is not acceptable in most jurisdictions.55 Nevertheless, even when attached precisely to the clarification of a contradiction, omission or obscurity of the award, the determination issued by the Arbitral Tribunal regarding the clarifications may contain a limited modifying effect. This will be the case, for example, when the parties allege that the Arbitral Tribunal omitted the judgment regarding the allocation of costs, which can modify, if observed by the tribunal, what had been established in the award in this specific regard. Despite the fact that there is no legal provision regarding the necessity of granting the opposing party the right to respond to the motion of clarification, it is advisable that such right is granted, especially in cases in which the possible acceptance of the motion may alter some aspects of the award, considering the principles of due process, equal treatment of the parties and proper presentation of the case. In this sense, the party that may have its right affected by the modification shall be informed about the submissions of request for clarifications and have the opportunity to present its response to it within a reasonable term.

54 If not otherwise agreed by the parties or established by the applicable procedural law., i.e. Art. 30(I) of Brazilian Arbitration Law provides also for the possibility of rectification of material errors of the arbitral award. 55 Lew, Julian D.M. Mistelis, Loukas A. Kröll, Stefan M. op. cit., p. 657.

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the parties having addressed their motions for clarifications to the arbitral award, the tribunal shall decide whether there is a real need to clarify the award or only to disregard a party’s request that is out of the scope of this provision. 10.6.1. The Arbitral Tribunal will decide during the following ten (10) days, counted from their notification regarding the request for clarification. After the issuance of the decision on clarifications, the Arbitral Tribunal will definitely end its mandate, having no more jurisdiction over the case.

6

Immunity of Arbitrators and People Related to CAM/CCBC

The CAM/CCBC Rules, in order to prevent any possible kind of restrictions to the operation regarding the people involved in the arbitral proceedings, provide the exclusion of their liability concerning the arbitral proceedings. 10.7. None of the arbitrators, or the CAM/CCBC or the people connected to the Chamber, are liable to any persons for any acts, facts or omissions related to the arbitration. The purpose of this article is to expressly provide the implicit principle of nonliability of arbitrators56 that developed from the judicial immunity conceded by the State to the judges.57 It protects the arbitrators, the CAM/CCBC and the people connected to the Chamber from unsatisfied parties seeking compensation for the unsuccessful outcome of the arbitration, which could affect the independence and impartiality of these people while conducting the arbitral proceedings.58 However, on the other hand, this immunity shall not be seen as a full protection from any kind of behavior, since arbitrators and members of the arbitration chambers may be liable to consequences provided in the national law. For example, Article 17 of Brazilian Arbitration Law provides that arbitrators are equivalent to public servants regarding the consequences provided in the Brazilian Penalty Law. In this sense, in order to maintain the good conduct of the arbitral proceedings, and apart from the cases expressly provided in the national law, the CAM/CCBC Rules prevent 56 It is provided in Art. 18 of Brazilian Arbitration law that the arbitrator is considered a judge in fact and in law, which gives rise to the presumption that arbitrators are under the same immunity conferred on judges. 57 Appaji, Prathima R. Arbitral Immunity: Justification and Scope in Arbitration Institutions, Indian Journal of Arbitration Law. Volume I. Issue 1. Centre for Advanced Research and Training in Arbitration Law, National Law University: 2012, pp. 63-65. 58 Appaji, Prathima R. op. cit., pp. 72-73.

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the people involved in the management of the proceedings from any liability to any acts, facts or omissions related to the arbitration.

7

Settlement of the Dispute

The Arbitral Tribunal, at the discretion of the parties, shall issue an Award by Consent,59 whenever by their own initiative the parties decide to compromise, making the arbitral proceedings to lose its purpose. 10.8. If the parties reach a settlement during the arbitration proceedings, putting an end to the dispute, the Arbitral Tribunal, upon request of the parties, will record that agreement in an arbitral award. The parties, nevertheless, are not obliged to record their composition in the form of an Award by Consent and, if it is not their intention in doing so, they may, otherwise, only withdraw their submissions and request the closing of the proceedings.60 Notwithstanding, the settlement without an award would characterize a simple agreement and, consequently, the failure to comply with it would require another set of proceedings to discuss the possible breach of contract.61 Therefore, it is advantageous to the parties that the Arbitral Tribunal renders an Award by Consent, since it shall confer the character of a judicial enforcement title to the agreement of the parties in settling the dispute. In other words, if an Award by Consent is issued, the terms of the settlement may be subject to enforcement, if they are not complied with.62 Considering this, the Arbitral Tribunal must follow the aforementioned requirements for the rendering of awards provided in Article 10(4) of the CAM/CCBC Rules. It shall create the res judicata effect to the settlement and, as a result, it will have the support of enforcement mechanisms, if necessary.63 However, the powers of the arbitrators in rendering an Award by Consent are limited, differently from the State courts judge.64 The Arbitral Tribunal can only homologate an

59 “Settlement agreements rendered as awards can also be described as consent awards” (Waincymer, Jeff. op. cit., p. 1282). 60 Derains, Yves. Schwartz. Eric A. op. cit., p. 311. 61 Waincymer, Jeff. op. cit., pp. 1282-1284. 62 Derains, Yves. Schwartz. Eric A. op. cit., p. 311. 63 Waincymer, Jeff. op. cit., pp. 1282-1284. 64 Carmona, Carlos Alberto. op. cit., pp. 300-301.

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Gilberto Giusti and Douglas Catarucci agreement of the parties if it is within the scope of the arbitration agreement.65 Any other issues that extrapolate the arbitrators’ jurisdiction are not subject to an Award by Consent.66 As the Award by Consent normally puts an end to the arbitral proceedings, the Arbitral Tribunal shall define the allocation of the costs of the arbitration as per the terms of Article 10(4)(1) of the CAM/CCBC Rules. Otherwise, if it only regards a settlement of part of the dispute, the Arbitral Tribunal shall follow the later procedural steps stated in Article 10(2)(1) of the Rules.67

65 Martins, Pedro A. Batista. Apontamentos sobre a Lei de Arbitragem. Rio de Janeiro: Forense, 2008, p. 295. 66 Art. V(1)(c) of the New York Convention; Art. 32(IV) of Brazilian Arbitration Law; Art. 34(2)(a)(iii) of UNCITRAL Model Law. 67 Derains, Yves. Schwartz. Eric A. op. cit., p. 312.

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Article 11 – Compliance with the Arbitral Award José Carlos de Magalhães 11.1. The parties are obliged to comply with the arbitral award as issued, in the manner and by the time provided for in it, and if they do not do so the losing party will be liable for the harm caused to the prevailing party. When the parties enter into an arbitration agreement, it is expected that they accept the Arbitral Tribunal’s decision voluntarily, that is, without being forced to abide by it by a judicial decision taken in a procedure aimed at adjudicating the decision. That expectation is based on the pacta sunt servanda principle, which ensures the parties’ compliance with what will be decided in an arbitral procedure. The parties in an arbitration procedure have – or should have – full knowledge that, being a private way of solving disputes, they are bound to comply with the arbitral sentence, without being forced to do so. Even if the losing party has a feeling that it was subject to an injustice, for not having its claim accepted, it must honor its word. After all, when one goes to arbitration or to judicial court, one has the expectation that one’s case would be upheld by the decision maker. Any litigation involving contrary views regarding facts and application of law or regulation is to be interpreted in a final and definitive decision on behalf of one party. That is the core of any dispute resolution system. Even in the judicial system, which provides means of recourse to higher degrees of the Judicial Power, a final decision will be taken on behalf of one party in prejudice to the other. The provision of the Rules under analysis states the obligation of the parties to abide by the arbitral decision, not subject to an appeal or other system of revision, which does not modify the final character of the decision on the matter submitted to the arbitrators. The rule also foresees a consequence for noncompliance with the decision, which has a material character in saying that the party that does not obey it will be liable for the harm caused to the prevailing party. This norm does not have procedural content, as would be expected in a regulation on procedure, as the one of arbitration. It goes further in providing an effect that goes beyond the strict procedure as it gives to the winner a right to apply for damages suffered by noncompliance with the decision by the defeated party. In such a case, the claim for damages could be filed together with the claim for adjudication of the arbitral award before a judicial court. In other words, the claimant may add to its claim,

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which has focus on the execution of the arbitral decision, the payment of the amount of damage suffered by the noncompliance of the defeated party. Depending on the nature of the award, the claim for damages may also be submitted to arbitration, as it is linked to the arbitral convention and to the arbitral award, which is the source of the claim. 11.2. If the arbitral award is not complied with, the injured party can communicate this fact to the CAM/CCBC so that it can disclose this fact to other arbitration institutions and chambers of commerce or analogous entities in Brazil or abroad. This kind of provision is more appropriate in cases where the parties are affiliated to a professional association with common members to be advised of the behavior of one of them. It is not a procedural rule and relates to a matter beyond the arbitration. It may raise questions such as whether it is reasonable for an arbitration center to disclose to others the behavior of the parties after the arbitral award is enacted. In addition to the theoretical character of the provision, aimed at encouraging the enforcement of the arbitral awards, it may have little, if any, practical effect as an arbitral convention signed by a defaulting party with third parties may precede the award and, even being posterior, the contractor may not know the result of the arbitration and the outcome of the adjudication of the award. The warning contained in the communication may serve only to show in closed professional circles that a member is not reliable and that some caution should be taken by the contractors. But this effect does not depend on the communication of the center, as, being active in certain commercial or entrepreneurial sectors, the other members will know that a particular party did not comply voluntarily with the award and, therefore, is not reliable. The affected contractor will disclose the noncompliance of its counterpart to other members of the economic sector. 11.3. Upon written request from any of the parties or of the arbitrators, the CAM/CCBC can provide copies of documents regarding the arbitration proceedings that are necessary to start court proceedings directly related to the arbitration. The procedure under CAM/CCBC rules provides that each party receives a set of motions and documents relating to the case produced by contenders during the procedure. Unlike the Brazilian judicial procedure, which has a centralized organization of the records with the secretary of the court, the arbitral procedure follows a a system in which all procedural pieces, being a motion or a document, are distributed to all participants in the litigation, comprising the parties, the Arbitral Tribunal and the secretariat. As a result, all parties have, or should have, a complete set of procedural pieces of a given arbitration. This set is official and not a mere copy of the records.

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However, it may be the case that it would be necessary for a party to support a claim for adjudication of an award in a judicial court that may require an official certification of the set of pieces of the procedure provided by a neutral entity, as is the Center of Arbitration. The provision states that possibility, even though the parties may file a claim with the judicial court relying on its own records of the procedure, as occurs in the ad hoc arbitration, that does not have any centralized secretary to uphold a set of pieces of the procedure. 11.4. The case file of the arbitration proceedings will remain in the CAM/CCBC’s archives for five (5) years from the closing of the arbitration. Within this period, an interested Party can request, at its expense, a copy of the arguments and documents it wishes. This provision touches one of the hardest administrative problems of any arbitral institution: the huge amount of arbitration files accumulated over the years requires enormous safe places to store them. As time goes on and procedures come to an end, it is necessary to keep the files for some time. Since, according to Brazilian law, the time of limitation for a party to file a legal suit for annulment of an award is ninety days, it would not be necessary to keep the files beyond that period. It may be advisable that the parties authorize the center to destroy them after that short period, keeping only some pieces such as the Terms of Reference and the award, which could be stored in electronic devices and not in physical form.

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Chapter III – Costs and Expenses

Article 12 – Arbitration Expenses Luciano Benetti Timm

1

Introduction

The purpose of this article is to draw some considerations regarding Article 12 of Chapter III in the Rules of CAM-CCBC, concerning costs and expenses of arbitration. To make these comments, we have divided this article into two parts. In the first part, we make specific observations with regard to each of the items that are a part of Article 12. Thus, our proposal is to analyze the three arbitration cost categories, namely, the Administration Fee, the Expense Fund, and the Arbitrators’ Fees. Furthermore, we will address the consequences of incompliance with the payment of such costs, such as the possibility of one of the parties paying the costs in place of the defaulting party, in order to continue the arbitration, or the extinction of the procedure, owing to recurrent lack of payment. In the second part, we propose the use of some concepts of Economic Analysis of Law in order to answer a potential doubt that may arise after the observations made in the first part: is arbitration really more ‘expensive’ than lawsuits? This is due to the fact that, as we have already presented in previous articles, the transaction costs involved in a lawsuit, especially due to the slowness of the Brazilian judiciary, may make arbitration more efficient to the parties when compared with public justice. We consider such analysis to be essential when faced with corporate disputes, in which executives, profit maximizers, seek the reduction of losses and costs, which, as a general rule, will be provisioned and incorporated in the product’s end-price passed to consumers.

2

Costs and Expenses of Arbitration: Article 12 of the Rules of CAM-CCBC

The Arbitration and Mediation Center of the Brazil-Canada Chamber of Commerce (CAMCCBC), as a private entity, which is aimed at administering arbitrations, charges the dispute parties for the administration of such arbitrations. The costs we refer to can be divided into three groups: (i) the administration of the arbitration, which is composed of two fees, the Registration Fee and the Administration Fees; (ii) the Expense Fund; and (iii) the Arbitrators’ Fees. The classification proposed

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follow the destination of the fees, being in the first case (A) the Center itself, in the second case (B) several service suppliers and the third (C) the Arbitrators. Therefore, fees charged by CAM-CCBC are either for the entity itself or for third parties. In addition, it will be addressed in the following subchapters (D, E, F) some consequences of non compliance of such set of rules.

A

Arbitration Center Fees

Firstly, in Article 12.1 of the Rules, it is provided that the cost of such expenses is established through a Table of Expenses, available at the Chamber’s own Web site.1 The first group of costs due to the arbitration center comprises the administration of the arbitration, provided in Article 12.2 of the Rules, which can be divided into two costs. The first is the Registration Fee, which is the first cost to be borne by the Claimant when filing the request for arbitration before the Chamber. The Claimant shall present the payment receipt of the Registration Fee, which cannot be reimbursed or compensated, accompanied by the request for arbitration, pursuant to the provisions in Article 12.5 of the Rules. That payment is the price (compensation) for the service rendered by the Center while processing the case.2 The Registration Fee is always fixed, and does not relate to the value of the dispute attributed by the Claimant. The Registration Fee is updated from time to time by the Chamber, being attached to the CAM-CCBC Table of Expenses, provided that the current cost, which has been made effective as of 1 January 2015, is worth R$ 4,000.00 The amount is not significant because the significant part of the work is not yet rendered by the Center. The second is the Administration Fees, which, in turn, are calculated according to the value of the dispute estimated by the parties (under the scrutiny and review of the arbitration tribunal). Claimant and Respondent must each perform full payment of the Administration Fees calculated according to the amount in dispute. The cost of the Administration Fees is also included in CAM-CCBC’s Table of Expenses, reproduced bellow: Amount in Dispute (RS) up to RS 4 million

RS + % of the difference 50,000

from 4 million to 19 million 50,000

+

0.10%

of the amount exceeding 4 millions

from 10 million to 18 million 56,000

+

0.05%

of the amount exceeding 10 millions

from 18 million to 50 million 60,000

+

0.09%

of the amount exceeding 18 millions

1 2

Available at: . 12.5. At the time of presentation of the notice for commencement of arbitration, the Claimant must pay to the CAM-CCBC the Registration Fee, in the amount stated in the Table of Expenses, which cannot be set off or reimbursed.

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Article 12 – Arbitration Expenses

Amount in Dispute (RS)

RS + % of the difference

from 50 million to 100 mil- 88,000 lion

+

0.06%

of the amount exceeding 50 millions

from 100 million to 150 mil- 118,000 + lion

0.04%

of the amount exceeding 100 millions

from 150 million to 300 mil- 138,000 + lion

0.004%

of the amount exceeding 150 millions

from 300 million to 500 mil- 144,000 + lion

0.001%

of the amount exceeding 300 millions

from 500 million to 1 billion 146,000 +

0.002%

of the amount exceeding 500 millions

above 1 billion

0.005%

of the amount exceeding 1 billion

156,000 +

It is relevant to point out that, differently from what occurs with the dispute adjudicated by the judiciary, in which, as a general rule, the party who files the lawsuit shall bear the court costs, in arbitrations administered by CAM-CCBC, both parties shall collect the Administration Fee (Art. 12.3 of the Rules).3 Let’s examine the following example, in order to illustrate this subject. Suppose in an arbitration, the Claimant “X” attributes the value of R$ 1 million to the dispute. The Respondent “Y”, when presenting its response to the notice of commencement of arbitration, files a counterclaim worth R$ 2 million. With regard to the Registration Fee, when presenting the request for arbitration, the Claimant shall present the fee’s payment receipt, currently fixed at R$ 4,000.00. On the other hand, the Administration Fees are variable with respect to the cost of the dispute attributed by the parties. In our example, the cost given to the dispute is R$ 3 million (corresponding the sum of the values attributed by the parties). According to the Table of Expenses, each party shall collect, the Administration Fees in the total amount of R$ 50,000.00.4

B

The Expense Fund

The Expense Fund, the second group of costs regarding the arbitration, is provided in Article 12.8 of the Rules.5

3

4 5

12.3. In an arbitration in which there are multiple parties, as Claimants or as Respondents, each of them, separately, must pay in full the Administration Fee owed as a result of the services performed by the CAMCCBC. Pursuant to the current Table of Expenses, in the disputes that involve a cost up to R$ 4 million, each party shall pay a total Administration Fee worth R$ 50,000.00. 12.8. After the Terms of Reference are signed, the Secretariat of the CAM-CCBC will be able to request that the parties make advance payment of the estimated expenses for the proceedings to establish an expense fund, with the amount paid by the Claimant being set off under Art. 12.6.1 of these Rules.

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The Expense Fund is a kind of accrual to which the parties contribute in order to pay the expenses that are necessary during the course of the arbitration. It is a function of the Chamber, for example, to send to the parties the documents, petitions, notices from the Chamber itself and from the other party, to hire professionals to record the discovery hearings and to perform transcriptions, to make copies and print documents, etc. With regard to the Expense Fund, the Chamber may request the Claimant to advance payment of the expenses it considers are necessary until the execution of the Terms of Reference, pursuant to Article 12.6.1 of the Rules. Following the execution of the Terms of Reference, CAM-CCBC’s Secretariat may require the parties to prepay expenses estimated to occur with the proceeding, to constitute an Expense Fund, while offsetting the amounts paid by Claimant. Finally, pursuant to Article 12.9 of the Rules6, all expenses that arise out of the arbitration will be paid in advance by the party that has required the measure, or by the parties, equally, if the measure is required by the Arbitral Tribunal. Expense Fund is not thus a payment (remuneration) of services rendered by CAMCCBC, but reimbursement of costs incurred to hire and pay third party service (and products) suppliers.

C

Arbitrators’ Fees

As a third group of costs of arbitrations, we have the Arbitrators’ Fees, regarded in Article 12.7 of the Rules.7 Arbitrators’ Fees is the remuneration due to the Arbitrators. The Arbitrators’ Fees, as well as the Administration Fee, vary in accordance with the value assigned by the parties to the arbitration. Yet again, the cost of the fees is presented in CCBC/CAM’s Table of Expenses: Amount in Dispute (RS)

RS + % of the difference

up to 2 million

75,000

from 2 million to 4 million

75,000

+

1.25%

of the amount exceeding 2 millions

from 4 million to 10 million 100,000 +

0.90%

of the amount exceeding 4 millions

from 10 million to 18 million 154,000 +

0.10%

of the amount exceeding 10 millions

from 18 million to 50 million 162,000 +

0.10%

of the amount exceeding 18 millions

6

7

12.9. All the expenses that are incidental to, or incurred during, the arbitration will be paid in advance by the party who requested the act, or by the parties, equally, if resulting from acts requested by the Arbitral Tribunal. 12.7. Each party will deposit with the CAM-CCBC its portion of the amount of the Arbitrators’ fees, corresponding to a minimum number of hours established in the Table of Expenses or a percentage of the amount in dispute. This deposit must be made by the time established in the Table of Expenses.

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Article 12 – Arbitration Expenses

Amount in Dispute (RS)

RS + % of the difference

from 50 million to 100 mil- 194,000 + lion

0.10%

of the amount exceeding 50 millions

from 100 million to 150 mil- 244,000 + lion

0.06%

of the amount exceeding 100 millions

from 150 million to 300 mil- 274,000 + lion

0.03%

of the amount exceeding 150 millions

from 300 million to 500 mil- 319,000 + lion

0.03%

of the amount exceeding 300 millions

from 500 million to 1 billion 379,000 +

0.025%

of the amount exceeding 500 millions

above 1 billion

0.020%

of the amount exceeding 1 billion

504,000 +

However, unlike the Administration Fee, the Arbitrators’ Fees are divided between the parties. In our previous example, with a dispute value of R$ 3 million, each Arbitrator will be entitled to receive R$ 87,500.00. This cost shall be divided equally between Claimant and Respondent. Claimant and Respondent must each pay CAM-CCBC 50% of the Arbitrators’ Fees, and the payment of Arbitrators’ Fees must occur within thirty days following the submittal of the request for arbitration by Claimant, or within forty-five days following the Notification concerning the Notice of Commencement by Respondent.

D

Consequences of Lack of Costs’ Payment

Once the arbitration has been initiated, pursuant to the clauses of Article 12 indicated above, the parties shall collect the Administration Fee, the Arbitrators’ Fees, and the contribution to the Expense Fund. However, there are cases in which one of the parties refuses to pay for the continuity of the arbitration. To prevent the interruption or even the extinction of the arbitration, CAM-CCBC enables the parties to make the payment of such fees in place of the defaulting party, in order to continue the procedure (Art. 12.10 of the Rules).8 However, if none of the parties makes the payment in place of the defaulting party, the arbitration is suspended (Art. 12.10.2 of the Rules). Finally, as a consequence of non compliance by the parties regarding to collecting the total of the arbitration expenses for more than thirty days of suspension, the arbitration

8

12.10. In the event that the Administration Fees, Arbitrators’ fees and experts’ fees or any arbitration expenses are not paid, one of the parties will have the option of making the payment for the other’s account, by a time to be established by the Secretariat of the CAM-CCBC.

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Luciano Benetti Timm may be extinguished, in accordance with Article 12.11 of the Rules.9 In addition, it is important to point out that the parties can present a new request for the commencement of a new arbitration aiming at solving the dispute, once the pending amounts are collected. Article 12.12 of the Rules asserts that CAM-CCBC may demand the payment of Administration Fees, Arbitrators’ Fees or Expenses by judicial or extrajudicial means, and such amounts will be deemed net and certain, they may be charged through execution procedure as well, plus interest and monetary update, pursuant to the provisions of the expense sheet. It is worth mentioning that, recently, the CAM-CCBC Table of Expenses have been changed in order to deal with the questions arising from counterclaims. In our previous example, Claimant started an arbitration and attributed the value of R$ 1,000,000 to the dispute. Respondent, considering the formulation of counterclaims, requested worth R$ 2,000,000. However, sometimes, one party could assign a high value to its claims, to force to opposing party’s fault in paying the costs involved in the proceeding. Trying to offer an option in these cases, CAM/CCBC created the rule of segregation.10 By this rule, in cases of counterclaims, any of the parties may request the separate specification of the amount (segregation) for the purpose of payment of the Administration Fees and Arbitrators’ Fees. In such cases, Claimant and Respondent will be liable for the payment of amounts related to the respective claims. If payment is not effected, the notices thereto will be ignored by the Arbitral Tribunal, regardless of whether they will be submitted to another arbitration proceeding. Another matter that is constantly faced by the parties during the arbitration is the production of expert evidence. Usually, when one or more parties request the production of expert evidence through the traditional Brazilian model, the Arbitrators will seek reliable experts to perform this technical evidence work. The procedure that is normally adopted is the communication to the parties through a Procedural Order regarding the experts’ quotes, and determining that, in case of acceptance by the parties, they shall deposit the experts’ fees before the initiation of the expert analysis, pursuant to Article 12.12.1 of the Rules, as well as to Article 12.9. Moreover, Article 12.13 regards the costs of the Special Committee, provided in Article 5.4 of the Rules, which regards the entity formed by three Arbitrators for judgment of potential appeals to the election of Arbitrators, due to independence and impartiality.

9

12.11. Once the proceedings have been stayed for thirty days for lack of payment, without either of the parties effectuating the provision of funds, the proceedings can be terminated, without prejudice to the right of the parties to present a request for the commencement of new arbitration proceedings seeking resolution of the dispute, so long as the amounts in arrears are paid. 10 Available at: .

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E

Consequences of Defeat

The party who is defeated in arbitration proceedings, unless otherwise agreed, may, in proportion of its lost, be ordered by the Arbitral Tribunal to make the early repayment of costs, expenses, Arbitrators’ fees, as well as attorney fees. The Terms of Reference shall regulate attorney fees. In absence of that, the default rule of CAM-CCBC gives a discretionary power to the Arbitrators to fix the attorney fees. Brazilian Code of Procedure is not applicable in that matter, so that parties shall not have the expectation of winning a percentage of the amount in dispute as it happens before a court case if they do not regulate that on the Terms of Reference.

F

Lack of Funds

Other situations that may cause difficulties are those in which a party has no fund to pay the costs related to the arbitration – whether the Claimant’s claims to start the proceeding, whether the Respondent’s counterclaim – due to a cause external to is will (financial difficulty, economic crisis, etc). That is problem that could arise in arbitration but not in court litigation since Federal Law gives free access to the civil justice system to the parties who lack financial conditions (“assistência judiciária gratuita”). Naturally, that Federal Law is not applicable to private arbitration institutions. These discussions fostered the study of so-called third party funding.11 Nevertheless, in many cases, given the high costs involved in the arbitration proceeding, the aggrieved party in the transaction relationship is being prevented from starting or continuing an arbitration for lack of funds to do so. The issue concerning the right of access to justice, in cases where the parties do not have the financial resources to bear the costs of arbitration, is not treated unanimously within the judicial courts. Should the right of access to justice triumph over party autonomy to submit their disputes to arbitration governed by a procedure agreed by the parties and thus arbitration clause could be disregarded by a court of justice? First, we will analyze two conflicting decisions on this issue.

11 About third party funding, see, for example, the Association of Litigation Funders (“ALF”) from United Kingdom. The Association of Litigation Funders is an independent body that has been charged by the Ministry of Justice, through the Civil Justice Council, with delivering self-regulation of litigation funding in England and Wales. The ALF has its own Code of Conduct. The Code sets out the standards by which all full funder members of the ALF must abide, and meets each of the key concerns set out by Lord Justice Jackson in his Civil Litigation Costs Review. The Code of Conduct for Litigation Funders was published by the Civil Justice Council – an agency of the UK’s Ministry of Justice – in November 2011. Available at: .

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Luciano Benetti Timm In the first case (Pirelli v. Licensing Projects),12 the Paris Cour de Cassation annulled an ICC award because the Arbitral Tribunal refused to consider the counterclaims submitted by Respondent, on the grounds that due process had been violated and that the recognition or enforcement of the award would be contrary to international public policy. On that case, in November 2007 Pirelli initiated arbitration proceedings before the ICC, requesting the arbitral tribunal to: (i) acknowledge the termination of the agreement; and (ii) hold Licensing Projects liable to pay the outstanding royalties, as well as damages resulting from alleged breaches of the agreement. Respondent introduced several counterclaims before the arbitral tribunal, with the aim of that Arbitral Tribunal declare that Pirelli had unlawfully terminated the agreement and requested damages for the resulting loss of profits. Once Licensing Projects could not pay the advance on costs, the ICC court decided that the counterclaims were deemed to have been withdrawn pursuant to Article 30.4 of the 1998 ICC Rules (Art. 36.6 of the 2012 ICC Rules13). In the final award rendered in Paris in October 2009, the Arbitral Tribunal admitted all of Pirelli’s claims and did not consider Licensing Projects’ counterclaims. Licensing Projects initiated the proceedings to set aside the award. It argued that the arbitral proceeding, in which the Arbitral Tribunal did not hear its counterclaim because of its failure to pay the advance of costs, even if Licensing Projects was materially unable to make such a payment, violated its right of access to justice. The Cour de Cassation understood that this fact would be offensive to the principle of access to justice and equality. In Brazil the matter is new and the recent economic crisis of the country might bring the issue at stake to the courts. However, the lack of funds to pay the arbitration should be treated under the general rule of the theory of impossibility under the Civil Code. Personal (private) circumstances of any of the parties shall not be considered as basis for breaching contractual duties of the parties. Unless it is a general impossibility of all people under the same objective situation, agreements shall be enforced and respected. Therefore, courts should enforce arbitration clause even if the party lacks funds. Otherwise, our legal system will lack certainty for economic agents.

12 Cour de Cassation de Paris. Cass. Civ. 1er, 28 March 2013, n. 392 (11-27.770). Available at: . 13 Similar to the CAM-CCBC rule of segregation. As explained, by this rule, in cases of counterclaims, any of the parties may request the separate specification of the amount (segregation) for the purpose of payment of the Administration Fees and Arbitrators’ Fees. In such cases, Claimant and Respondent will be liable for the payment of amounts related to the respective claims.

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3

Economic Analysis of Costs of Arbitration: Is Arbitration More ‘Expensive’ Than a Lawsuit?

Legal science, also called legal doctrine, does not offer analytical tools to properly size the issue of costs and more broadly the price of the options that parties have to resolve their disputes. Accordingly, without the lens of economics, starting from the superficial assumption that cost is synonymous with financial payment, one would believe that arbitration is expensive when compared to the state method of dispute settlement. However, by applying some concepts of economics, we arrive at the opposite conclusion. This is because the legal process, which may even have less costly Administration Fees,14 includes many “hidden” costs that are present in the solution of disputes by the judiciary, namely transaction costs and opportunity cost. The opportunity cost of a claim, in the words of Robert Cooter and Thomas Ullen, designates the economic cost of an alternative that has been overlooked.15 In other words, in economic terms, it is the cost of alternative allocative use of financial resources, which is stopped during a dispute, because the creditors are not receiving the money corresponding to their right. We understand that the arbitration procedure can reduce opportunity cost. Thus, starting from the content of recent research showing that a court decision takes around seven years, and that arbitration does not take more than two years, the opportunity cost due to the unavailability of funds and assets sub judice for a very long period, makes arbitration cheaper compared judicial proceedings. Transaction costs, introduced in economics by Ronald Coase,16 can be defined as all the costs involved in an exchange or trade. In summary, transaction costs cover the three steps of a commercial transaction: (i) search costs for conducting business; (ii) cost of trading; (iii) costs of complying with what was negotiated. What is of interest to us, specifically, are the costs related to compliance of the business, since a typical example of transaction costs are the costs of resolving disputes that may arise from a contract.

14 The Judicial fee has a ceiling that varies from state to state in the Federation, but that is usually not higher than R$ 60,000.00, in case, for example, of the Court of Justice of Sao Paulo. Available at: . 15 These authors demonstrate the opportunity cost with the following example: “When you decided to attend university, a post-graduate course or law school, you gave up other valuable alternatives, for example, getting a job, or training for the Olympics.” (COOTER; ULLEN, 2010, p. 53) Bringing the example to the scope of the law, the unavailability of economic assets for a long period of time during a lawsuit, increases the cost of a waiver of these assets, as well as decreasing the benefits that could be obtained from these foregone assets. 16 Through his two main articles: The nature of the firm (1937) and The problem of social costs (1960).

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Accordingly, again we conclude that the arbitration procedure reduces the transaction costs involved in a dispute resolution. First, the agility of the procedure is the quality that attracts new players to arbitration. The extension in time of court proceedings itself can be extremely damaging to business activity. Thereunto, we propose the analysis of two graphs: Graph 3

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Through the analysis of the graphics, we can reach the following conclusions: i.) As a contention lasts in time, the intensity of conflict tends to increase exponentially; (graphic 01) ii.) The cost of resolving a dispute is variable according to the degree of hostility of the dispute (intensity of the conflict), i. e., the higher the degree of litigiousness of the dispute, the higher the cost. Given that the judicial dispute is the one that lasts longer, it is the means for resolution of disputes that shows more hostility (see lower graph on page 200); iii.) Therefore, what is observed is that litigation is more expensive than arbitration, which reduces the transaction costs involved, making it a more efficient means than the judiciary. We can list other characteristics of arbitration proceedings, other than agility, which, in our view, also reduce the transaction costs of dispute resolution. It should be emphasized that in arbitration are the parties who choose the Arbitrators. Therefore, there is a range of alternatives for them to choose experts in the subject matter of the dispute. The specialization of the Arbitrator enables a considerable decrease in the risk of errors in decisions. The parties are free to choose Arbitrators who are experts in the subject matter of the dispute, being able to choose Arbitrators that have experience in civil works to interpret contracts of this kind and who have a more accurate knowledge of this matter, for example. The Arbitrators are usually better prepared for the task of judging claims involving complex contracts, by virtue of their refined knowledge and expertise in the area in question. Furthermore, we can assert that the expectation generated by the parties because of the great level of independence and impartiality of the Arbitrators is crucial to reduce the transaction costs. Partiality is clearly bad, intentionally and decidedly distorting a sense of justice. Likewise, we can cite confidentiality. The arbitration proceedings are confidential, a desirable quality within the corporate scope. This is because, in many situations, corporate internal and confidential information are discussed, information which, if released, could get in the way of its good functioning. Confidentiality reduces the risk of the leakage of privileged information regarding product development, research performed, potential markets, and other information that could possibly be used by competitors if the procedure becomes public, as in the case of a lawsuit. Finally, it is relevant to point out the importance of the impossibility to appeal on an arbitration award. Arbitration is free of the countless possibilities of appeal to which a lawsuit is subject. This feature generates more legal certainty for the parties, who are not subject to the different positions of the Courts of the judicial procedure.

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4

Conclusion

Due to all we have presented, we conclude that arbitration is a highly efficient method of dispute resolution. The economic pendulum seems to favor arbitration as opposed to judiciary in Brazil when we use tools of law and economics, in situations in which all costs and risks are calculated. However, there is always a trade off when choosing the adequate method to solve disputes between parties. Parties shall be aware of the implications of the applicable rules with respect to bearing the costs. Differently from litigating in Brazilian courts, in which there is a high level of public subsidization, in arbitration they might borne significant costs in exchange of time saving, and by implication, avoiding transaction and opportunity costs.

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Article 13 – Interpretation Marcelo Ricardo Escobar and Yuri Pedroza Leite In effect the interpreter’s prejudices provide both freedom (within the permitted boundaries) and constraint (through the establishment of those boundaries).1 13.1. The arbitrators will interpret and apply these Rules in all matters concerning their authority and duties. 13.2. Majority rule will also be followed for interim decisions that fall upon the Arbitral Tribunal, including regarding the interpretation and application of these Rules. 13.3. The arbitrators can submit a question regarding the interpretation of the provisions of these Rules to the President of the CAM/CCBC, without prejudice to the provisions in article 2.6.(f). 13.4. The CAM/CCBC Code of Ethics is an integral part of these Rules for all purposes of law and should be used, as a secondary source, for the interpretation of the provisions of these Rules.

1

Introduction to Legal Hermeneutics

This chapter makes considerations regarding Article 13 of the CAM/CCBC Rules of Arbitration, which deals with the interpretation of the Rules themselves. Interpretation can be defined as “The art or process of determining the intended meaning of a written document, such as a constitution, statute, contract, deed, or will.”2 This determination of the intended meaning of words and expressions can, then, be different from person to person. Different concepts may arise from the same word or phrase due to our own subjectivisms and prejudices, and the science behind all this is called hermeneutics, that is, the theory of interpretation of texts3 – and not the interpretation itself. When it comes to the Law, we would like to bring Goodrich’s consideration, who stated: “The task of the historical legal community … has been that of restricting and constraining the scope of possible interpretations, that of defining the dictionary of legal language and

1 2 3

Sherman, B. (1988), Hermeneutics in Law, 51 M.L.W., pp. 386-402. doi:10.1111/j.1468-2230.1988.tb01762.x. West’s Encyclopedia of American Law (2nd ed.). (2008). The Gale Group, Inc. Audi, R. (1999). The Cambridge Dictionary of Philosophy (2nd ed.). Cambridge: Cambridge University Press, p. 377.

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2

Legal Interpretation: Theory and Practice

For this purpose, we shall investigate the concept of a legal method and its application in common law and civil law systems – taking into consideration that depending on the seat of arbitration the applicable legislation will follow such geographical criteria – in order to differentiate signs from symbols, distinguish text from context, creating the necessary background to contextualize the so-called “irreducible minimum of the deontic message,” which will address the inexhaustibility and interdisciplinarity at a strictly legal level, highlighting the importance of semiotic as a general theory of the signs of any language. We shall initiate this journey on the basis of the lessons of Danish jurist Alf Ross, to whom the interpretative efforts intend to determine the significance of the directives, indicating under what circumstances they will be applied and how the judge must behave, providing examples of such rationale through an interpretation of Article 67 of the Danish Constitution, which guarantees the freedom of religion to its citizens5: It is argued that the word citizens must be interpreted here in an inclusive manner towards the nationals of Denmark and those who aren’t, which means that when applying article 67 the judge must not attribute importance to the nationality of the person who appeals to their right to practice their religion.6 He proceeds, differentiating what can be considered as a current interpretation and current law, especially when interpretative rules act as the basis for decisions rendered by those who, just like the actors in arbitration, apply the law to the case, solving a controversy. We shall now examine if these wordings, concerning the interpretation, can be considered assertions about what is a current interpretation analogous to the assertions concerning what is current law. If this is the case, then these wordings, according to their real content, will be understood as predictions in the sense that such interpretation will have the adhesion of tribunals when the rule in question is adopted as basis for a decision of a specific legal case. A prediction of this kind may be supported by precedent. In this case, the state4 5 6

Goodrich, P. (1986). Law and Modernity, 49 M.L.R., p. 555. Ross, A. (2000). Direito e Justiça. Bauru: Edipro, 2000, p. 135. Idem.

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ment regarding the interpretation can be equated to the statements regarding current law.7 What can be drawn from this rationale is that under determined conditions, tribunals will take current law as the foundation for its precedents8; however, when these decisions do not provide authoritative criteria, it is necessary to question whether, through the study of the practice in the tribunals, we can discover certain principles that guide them in the application of general rules to specific cases. And it is this practice within tribunals, and the discovery of principles and rules that guide them, that the author calls legal method “(…) or, in case of application of the written law (written law in a broad sense), interpretation.”9 The problems of the legal method, according to the Danish author, must assume diverse forms when facing a common law system – where precedent constitutes a predominant source of law – or a civil law system – where legislation is the principal source.10 Regarding the problems of the interpretative legal method when applied to common law systems, based on the English system, the author asserts: In the first system, the judge does not face a formulation clothed in the authority of a general rule of law. The problem of the method, thus, consists in how to extract a general rule of the existing precedent and apply it to the case to be decided. The situation becomes complicated due to the fact that the general rule is frequently altered in the course of this development from one case to another. The continuity or alteration of the rule will depend on the judge, when examining the similarities and differences between the present case and the precedent, understanding that the relevant facts can be classified according same concepts presupposed in the precedent, in other words, deciding that it’s important to introduce a distinction with the help of other concepts. (…) The legal rationale (legal method) in a system like this is a rationale by means of examples, and the argument technique demanded by this method aims to show the similarities and differences displayed by the cases and ascertain that the differences are relevant or not.11 Regarding the problems of the method when facing civil law systems, it is stated that the method “possesses the character of interpretation of a text clothed in authority,” where 7 8 9 10 11

Idem, p. 136. Idem, p. 135. Idem, p. 135. Idem, p. 138. Idem.

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the attention is focused on the existing relationship between a “certain linguistic relationship and a specific complex of facts,” aiming to discover the significance of the law and sustain that the facts in question are covered by it or not.12 Accepting the premise that in civil law countries – such as Brazil, in case the seat of arbitration is established in its territory – all interpretation of written legislation stems from a text, a written linguistic formula, and the extraction of meaning of its printed symbols, it specifies that: If the lines and black dots that constitute the physical aspect of the law are capable of influencing the judge, it is so because they possess a meaning that has nothing to do with the real physical substance. This meaning is conferred to the written law by the person, who, through its visual faculties, experiments these characters. The function of these is the one of certain symbols, they designate (they mean to say) or indicate something distinct from themselves.13 It differentiates symbols and signs establishing that these are natural and those are artificial, “a product elaborated by human beings. More specifically, the significance of a sign is contained simply in my knowledge of the course of nature and the interaction of things,”14 and concludes that of all systems of symbols “language is the most fully developed, the most effective and the most complicated,”15 considering that the majority of words do not have a unique field of reference, but two or more, constituting an ambiguity.16 In view of such a scenario, it can be deduced that the role played by the connections in determining the meaning “consists in them providing grounds for making a decision, based on certain hypothesis, which of the many interpretations (…) is the more possible one. [being] mandatory to decide what can be accepted, according to the circumstances, as context and situation”,17 and such activity, which confirms to expose the meaning of an expression, is called interpretation.18 In this context, we shall refer to the lessons of Tupiniquim professor Lourival Villanova, to whom “the physical world is changed through work and technology, which potentiates it in results. And the social world is changed through language of the rules of Law,”19 and it is exactly the interpretative efforts of these rules that will be the object of the next lines,

12 13 14 15 16 17 18 19

Idem. Idem, p. 139. Idem. Idem, p. 140. Idem, p. 143. Idem, p. 144. Idem, p. 145. Villanova, L. (2006). As estruturas Lógicas e o Sistema do Direito Positivo. São Paulo: Noeses, p. 42.

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and only then shall we turn to the interpretation of the rules of Law contained in Article 13 of the CAM/CCBC rules. As raised in the proem, the epistemological analysis disregards scientific elaboration,20 and the exegete in its cognitive task reflects on the legal knowledge, getting back the space of the fundamental notions of its science, and this being the legal science, it is undisputed that the language element is one of its constitutive aspects, both as the object’s speech (legal science) and as how it participates in its constitution (positive law).21 Based on this premise, Professor Paulo de Barros Carvalho explains that “to interpret is to attribute values to the symbols, i.e., award them with meanings and, through such meanings, references to objects,”22 and searching for appropriate tools for the exploration of texts in positive law, breaking them down into four legal subsystems. The trajectory of interpretation starts with the need for interpreting the means to grant them content, evolving into the meaning-generator route and the signical structures of the legal system: “if there is a fact F, there will be a relation R settled between two or more subjects of right (S’ and S”),”23 where he registers that the legal rule is a categorical structure built epistemologically by the interpreter, based on the meanings that the reading of positive law documents awakens in his spirit, in order to reach the conclusion that the reading of a sole article will be insufficient to comprehend the legal rule, so that the exegete may consult other provisions of the same law, and maybe even from outside its provisions.24 Having settled these premises, before we proceed in this brief exercise of contextualization of legal interpretation, we shall, in short, distinguish the concepts of text and context, which we will also do on the basis of Professor Paulo de Barros Carvalho’s lessons, who calls them “strict text and text in a broad sense.”25 Text can be conceptualized as the physical support, the material base for producing the representation inside a man’s conscience and the semantic relation with signified objects, being that starting point for the formation of significations where subjective manifestations gain objectivity, becoming intersubjective.26 For stricto sensu purposes, the text is limited to the scope of the utterances as signification support, of an eminently physical character, expressed in the material sequence of the syntagmatic axis.27 The context, in turn, refers to associations of the paradigmatic axis (linguistic) and of possible extralinguistics. It is the perception held through our sensory organs that, from

20 21 22 23 24 25 26 27

Carvalho, P.B. (2011). Direito Tributário : linguagem e método (4th ed.). São Paulo: Noeses, p. 180. Idem, p. 181. Idem. Idem, p. 185. Idem, p. 189. Idem, p. 192. Idem, pp. 189-190. Idem, p. 190.

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such perceptions, gives rise to corresponding significations, intersubjectively. They are stimuli that trigger sense production in us.28 The proper comprehension of a legal command is achieved when a formally structured quantum is given to that command. This structure is outlined by Professor Paulo de Barros Carvalho through the following formula: D [F → (S’ R S”)]

This formula must be interpreted in the following manner: “a legal command (D) which, given a fact (F), will establish the juridical relationship (R) between subjects (S’ and S”).”29 The validation process of the subject (gnoseological activity), made through the study of the language of the norm, therefore, shows uniformity to its object, once the legislator’s speech is reducible to juridical rules to a conditional judgment, “in which a consequence is related to the realization of a factual event earlier foreseen. Now, the outcome is the connective factors of the normative formation, through lecture of the corresponding enunciations.”30 In Professor Carvalho’s words, such corresponding enunciations take part in the syntactic structure of the norms, as hypothesis (antecedent) and thesis (consequent), “once the norm is the minimal and irreducible unity of deontic meaning.”31 Translating, these units cannot be understood separately, the connection being necessary between such minimal unities to form a “complete and singular deontic unity.”32 Semiotics are also part of the general theory of any and all languages, as signs are the starting point of any approach to the language, be that a current or a legal one, thus implicating in the intertextuality as an internal and external instrument to law interpretation.33 Intertextuality and inexhaustibility are, then, the cornerstones of the interpretation process. The first one is the most elementary process for the construction of texts, through the definition of the meaning of a particular interdiscursivity by two or more material textuality.34 The second one is based on the idea that the interpretation process is endless, a lifetime work toward comprehension, even if seemingly simple at first. The reason for this is the mutability of the signs in the field of law, transformed by time and circumstances.35 Through 28 29 30 31 32 33 34 35

Idem, pp. 190-191. Idem, p. 193. Idem. Idem. Idem. Idem, pp. 194-195. Idem, pp. 198-199. Idem, pp. 196-197.

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this process, Professor Carvalho reaches the conclusion that the interpretation process is not an extraction of meaning, but rather a construction of (different and possible) meanings, mainly with the use of the interpreter subjectivity, restrained to its own “language universe.”36 When dealing with the different interpretative techniques,37 one should take as a starting issue the premise that the law, as it is written, is only a language layer, in which four different points must be taken into account. The first, by the disposition of the words in the phrase, and the allocation of phrases in the speech (syntax); the second being the study of the meaning of such words and phrases (semantics) and, finally, the meaning of the ideas as influenced by their practical effects (pragmatics).38 Professor Carvalho understands, then, that the prevailing method is the one by systematic interpretation: As the literal and logical methods of interpretation are used in a syntaxical level, the historical and teleological have influences in the semantical and pragmatical level. The systematic criteria for interpretation must resort to all levels, and is, on those grounds, the most exhaustive method to grasp the meaning of legal language. Singly understood, only the systematic has conditions to prevail, precisely because it considers analysis of previous elements. It is, thus, considered the method by excellency.39 Therefore, by the end of what was shown above, as a preliminary conclusion, one can understand that the interpretative rules of the Rules cannot (and must not) be understood singularly. One must use the systematic interpretation to reach the correct (or at least, most suitable), having in sight the whole body of the Rules, which shall be used by the interpreter and by the arbitrators in the arbitral proceedings with the CAM/CCBC.

3

The Establishment of Interpretation Boundaries

The CAM/CCBC Rules, as any other text, can sometimes have multiple imprecisions or meanings. Sometimes, gaps may be found from its use in the specific case. Altogether, the new Rules came into force in 2012, bringing new regulations, and, therefore, new landscapes for further interpretations. Having that in mind, the Rules of the CAM/CCBC adopted four criteria as guidelines for the arbitrators’ interpretation of the said Rules.

36 37 38 39

Idem. Literal ou gramatical, histórico ou histórico-evolutivo, lógico, teleológico e sistemático. Carvalho, op. cit. p. 202. Idem, p. 204.

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Article 13.1: The Powers and Obligations of the Arbitrators Whenever the arbitrators are faced with questions regarding their powers or their duties in the arbitration process, they must find the solution for that matter by reading, interpreting and applying the CAM/CCBC Rules. They are given the power to proceed with the authentic interpretation of the spirit of the Rules in the matters that relate to their own powers and obligations.

Article 13.2: Majority as a General Principle Whenever there is an arbitral tribunal with multiple arbitrators, the Rules prescribe the adoption of the majority criterion for the tribunal to determine the correct interpretation of a meaning within the Rules. In case no consensus can be achieved (for instance, when a tribunal of three arbitrators reaches three different meanings), the issue may be resolved by the Chairman Arbitrator, with respect to the spirit of Article 10.3.1 of the Rules (in which failing to have a majority vote, the vote of the President of the Arbitral Tribunal will prevail), or by requesting the President of the CAM/CCBC, as provided by Article 13.3 of the Rules, to resolve their doubts.

Article 13.3: Solving Problems of Certainty Article 13.3 determines that the Arbitral Tribunal, whenever faced with a problem of interpretation of the Rules on which no consensus has been achieved or no solution found, may contact the President of the CAM/CCBC to solve this issue. It also makes reference to Article 2.6(f) of the Rules. This article establishes the duties of the President of the CAM/CCBC and reads as follows: Article 2.6: The duties of the President of the CAM/CCBC are to: (f) Issue complementary rules to resolve doubts and provide guidance for the application of these Rules, including in cases of gaps. Therefore, the President of the CAM/CCBC may issue complementary rules that will serve as the proper reference and might be used as binding definitions for the correct application of the Rules.

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Article 13.4: Supplementary Criteria of Interpretation Lastly, the Code of Ethics of the CAM/CCBC is to be used as reference whenever the arbitrators must agree on a specific interpretation of a term contained in the Rules. The Code of Ethics contains an Introduction, five Enunciations regarding the Independence & Impartiality; Diligence & Competence; Confidentiality Obligations; Obligations to make Revelations; and Acceptance of the Appointment. Also, General Provisions are provided regarding members of the CAM/CCBC Management that also act as arbitrators, and also a restraint concerning attorney–arbitrator communications about ongoing arbitral proceedings during social and academic events.

4

Interpretation of Institutional Rules: A Brief Comparative Study

One interesting study that might help us understand the relevance of Institutional Rules’ interpretation provisions is a comparison with the rules of other major institutional rules worldwide. Some arbitral institutions, however, have no express provision at all regarding the issue, such as the German Institution of Arbitration (“Deutsche Institution für Schiedsgerichtsbarkeit – DIS”) Rules of 199840; the Stockholm Chamber of Commerce (“Stockholms Handelskammares Skiljedomsinstitut – SCC”) Arbitration Rules of 201041 and the ICSID (“International Centre for Settlement of Investment Disputes”) Rules of 2006.42

4.1

International Chamber of Commerce (ICC) – 2012 43

The ICC Rules of 2012 do not have an express article on Interpretation of the Rules. However, one will find such ruling under Article 41, which states: Article 41: General Rule In all matters not expressly provided for in the Rules, the Court and the arbitral tribunal shall act in the spirit of the Rules and shall make every effort to make sure that the award is enforceable at law.

40 41 42 43

. . . .

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According to the ICC Secretariat’s Guide to ICC Arbitration under the 2012 Rules of Arbitration,44 Article 41 “enables the Court and the arbitral tribunal to fill any lacunas in the Rules. In doing so, they must act in the spirit of the Rules and make every effort to ensure that any award rendered in the arbitration is enforceable” and justify its inclusion in the rules as to “developing practices to deal with novel problems or new trends in arbitration.”45 Article 41 is also a way of promoting flexibility to the arbitration process through the actions of the Arbitral Tribunal.46

4.2

London Court of International Arbitration (LCIA) – 2014 47

Following ICC’s example, the LCIA Rules provides interpretation guidelines under its Article 32.2. Much to the disdain of British traditions, it uses the concept of good faith as the underlying principle to interpret the rules, altogether with a broad “spirit of the Arbitration Agreement” principle. It also demands that reasonable efforts be made to ensure that the award will be legally recognized and enforceable at the arbitral seat. Commentary on this article criticizes the first two elements, as they are too broad and cannot provide certainty for the arbitrators’ decision.48 The same commentators argue 44 Fry, J., Greenberg, S. & Mazza, F. (2012, July). The Secretariat’s Guide to ICC Arbitration. Chapter 3, p. 13. 45 For example, the Secretariat brings a case from 2011 that dealt with Art. 41 provision: “In a case from 2011 (therefore subject to the 1998 Rules), the arbitration clause required the Court to appoint all arbitrators in a three-member arbitral tribunal but to allow the arbitrators themselves to determine which of them would serve as president. The Rules do not address such situations. Accordingly, the Court was required to devise a novel method for constituting the arbitral tribunal. Maintaining the spirit of Articles 8 and 9 of the 1998 Rules (now Articles 12 and 13), which allow appointments only to specific positions (co-arbitrator or president, rather than simply arbitrator), the Court decided to appoint the arbitrators only once they had determined their respective positions within the arbitral tribunal. To do so, it first confirmed a list of three candidates and directed them to select the president. They were informed that if they failed to do so, the Court could replace them with other candidates.” 46 “For example, arbitral tribunals wishing to help facilitate the settlement of the dispute, which is a possibility now expressly recognized in Appendix IV on case management techniques, have sometimes relied upon this provision for that purpose.” 47 . 48 Gerbay, R., Richman, L. & Scherer, M. (2015). Arbitrating under the 2014 LCIA Rules: A User’s Guide. London: Kluwer Law International, pp. 382-383: “A similar provision (but without the reference to good faith) may be found at Article 41 of the ICC Rules (2012). One may wonder whether this will be of any practical usefulness for the purposes of filling gaps left open by the parties’ Arbitration Agreement. Each of the above three elements, and in particular the spirit of the Arbitration Agreement and the notion of good faith appear, on their own, to be too vague to offer genuinely effective guidance to an Arbitral Tribunal, the LCIA or the parties. In fact, the authors are not aware of any instances where the LCIA Court or Secretariat has expressly made reference to the equivalent provision under the 1998 Rules. However, Derains & Schwartz point out that a Federal Court in the United States has made application of the provision of the ICC Rules equivalent to Article 32.2 of the LCIA Rules. In that case, the US Court decided to ‘remand’ an ICC Award to an Arbitral Tribunal in order to clarify ambiguities preventing its enforcement, even though the ICC Rules did not expressly contemplate the possibility of remand. In this respect, the court found that Article 35 of the 1998 ICC Rules (the equivalent of Article 32.2 of the LCIA Rules) offered ‘a guiding principle behind the rules

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that Article 32.2 may also impose a duty to act in good faith during the arbitration process on the arbitrators, on the parties and even on the LCIA.49 Article 32 General Rules 32.1 A party who knows that any provision of the Arbitration Agreement has not been complied with and yet proceeds with the arbitration without promptly stating its objection as to such non-compliance to the Registrar (before the formation of the Arbitral Tribunal) or the Arbitral Tribunal (after its formation), shall be treated as having irrevocably waived its right to object for all purposes. 32.2 For all matters not expressly provided in the Arbitration Agreement, the LCIA Court, the LCIA, the Registrar, the Arbitral Tribunal and each of the parties shall act at all times in good faith, respecting the spirit of the Arbitration Agreement, and shall make every reasonable effort to ensure that any award is legally recognised and enforceable at the arbitral seat. 32.3 If and to the extent that any part of the Arbitration Agreement is decided by the Arbitral Tribunal, the Emergency Arbitrator, or any court or other legal authority of competent jurisdiction to be invalid, ineffective or unenforceable, such decision shall not, of itself, adversely affect any order or award by the Arbitral Tribunal or the Emergency Arbitrator or any other part of the Arbitration Agreement which shall remain in full force and effect, unless prohibited by any applicable law.

4.3

Singapore International Arbitration Centre (SIAC) – 2013

Deviating from what was previously seen, the SIAC Rules of 2013 have a specific and express article about scope and interpretation of the rules. It states, briefly, that any indication of the parties to the SIAC in their arbitration agreement will be deemed as an acceptance of the SIAC Rules.50 It also states that mandatory provisions of applicable law […] to ensure that the award is ultimately susceptible of enforcement […]’. The Court therefore ‘read this provision to permit remand in this case, given that clarification by the original arbitrator [was] critical in order to make the […] Award enforceable at law.’” 49 See id: “The manner in which Article 32.2 is drafted may arguably raise questions as to whether this provision aims to place an obligation of good faith on the LCIA, the parties or the Tribunal. A literal interpretation of the terms of Article 32.2 could suggest that this provision only operates as an ‘interpretative aid’, merely requiring the LCIA, the parties and the Tribunal to have regard to good faith when construing the Arbitration Agreement. However, a better view is that this provision imposes a free standing obligation of good faith on the parties, the Tribunal and the LCIA. This view is consistent with the use of the words ‘shall act at all times in good faith’ and ‘shall make every reasonable effort’ in the provision. Also, a contrary interpretation would lead to the (arguably surprising) conclusion that the parties need not respect good faith otherwise than when construing their Arbitration Agreement.” 50 One interesting case was the Insigma Technology Co Ltd v Alstom Technology Ltd [2009] SGCA 24, judged in 2009. The Singapore Court of Appeal denied Insigma motion to set aside the award, upholding as valid

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prevail over the Rules, and finally establishes on Article 1.3 some words’ definitions. It does not provide, however, for a general guideline of interpreting the SIAC Rules themselves, such as the previously seen rules do. Rule 1: Scope of Application and Interpretation 1.1. Where parties have agreed to refer their disputes to SIAC for arbitration, the parties shall be deemed to have agreed that the arbitration shall be conducted and administered in accordance with these Rules. If any of these Rules is in conflict with a mandatory provision of the applicable law of the arbitration from which the parties cannot derogate, that provision shall prevail. 1.2. These Rules shall come into force on 1 April 2013 and, unless the parties have agreed otherwise, shall apply to any arbitration which is commenced on or after that date. 1.3. From 1 April 2013, the SIAC Rules (4th edition, 1 July 2010) are amended as follows. a. In Rule 1.3: The definitions of “Board”, “Chairman” and “Committee of the Board” are deleted and the following are substituted: “Board” means the Court; “Chairman” means the President; “Committee of the Board” means the Court; b. The following definitions are inserted after the definition of “Committee of the Board”: “Committee of the Court” means a committee consisting of not less than two members of the Court appointed by the President (which may include the President); “Court” means the Court of Arbitration of SIAC and includes a Committee of the Court; “President” means the President of the Court and includes a Vice President and the Registrar;

an hybrid arbitration process. The Arbitration Clause contracted between the parties established that the arbitration was to be administered by the SIAC, pursuant to the ICC Rules, thus basing Insigma’s attempt to set aside the award under arguments of lack of certainty for arbitration. The Court held that “(a) where the parties have evinced a clear intention to settle any dispute by arbitration, the court should give effect to that intention even if certain aspects of the agreement are ambiguous, inconsistent or incomplete; (b) where a clause can be interpreted in two different ways, the interpretation enabling the clause to be effective should be adopted in preference to that which prevents the clause from being effective; (c) as far as possible, a commercially logical and sensible construction is to be preferred over another that is commercially illogical; (d) there was no reason why a clause providing for the rules of one arbitral institution to be applied by a similar institution should be too uncertain to be given effect to; (e) a defect in an arbitration clause does not necessarily render it unworkable, since it may often be cured by the assistance of state courts, arbitral institutions and arbitrators, and in this case the clause was rendered workable by the SIAC agreeing to administer the arbitration in accordance with the ICC Rules; and (f) no policy considerations would bar the SIAC from agreeing to administer an arbitration under the ICC Rules.” The former SIAC Rules of 2007, which applied to the case, contained the same Art. 1.1. referring to interpretation of the SIAC Rules.

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4.4

Hong Kong International Arbitration Centre (HKIAC) – 2013 51

Very detailed, the HKIAC Rules, on matters of interpretation, bring new elements not previously seen. First of all, they determine that the HKIAC (which is a term used in the HKIAC Rules that encompass the “Council of HKIAC or any committee, sub-committee or other body or person specifically designated by it to perform the functions referred to herein, or, where applicable, to the Secretary General of HKIAC for the time being and other staff members of the Secretariat of HKIAC,” as provided in Art. 3.3) is the main interpreter of the HKIAC Rules, and the arbitral tribunal might interpret where necessary insofar as regarding its powers and duties. Also, it addresses that any inconsistency between them is solved by the prevalence of the arbitral tribunal’s interpretation. Articles 3.3 to 3.10 bring word definitions under the HKIAC Rules, such as to the term “seat,” which is to be interpreted according to the UNCITRAL Model Law’s Article 20.1 meaning. Finally, the HKIAC Rules specify a language for the correct interpretation in case discrepancies arise from translation. Article 3.13 establishes that English is the proper language to specify meanings wherever there are uncertainties regarding the meaning of some of its provisions. Article 3 – Interpretation of Rules 3.1 HKIAC shall have the power to interpret all provisions of these Rules. The arbitral tribunal shall interpret the Rules insofar as they relate to its powers and duties hereunder. In the event of any inconsistency between such interpretation and any interpretation by HKIAC, the arbitral tribunal’s interpretation shall prevail. 3.2 HKIAC has no obligation to give reasons for any decision it makes in respect of any arbitration commenced under these Rules. All decisions made by HKIAC under these Rules are final and, to the extent permitted by any applicable law, not subject to appeal. 3.3 References in the Rules to “HKIAC” are to the Council of HKIAC or any committee, subcommittee or other body or person specifically designated by it to perform the functions referred to herein, or, where applicable, to the Secretary General of HKIAC for the time being and other staff members of the Secretariat of HKIAC. 3.4 References in the Rules to “Claimant” include one or more claimants, and references to “Respondent” include one or more respondents. 3.5 References to “additional party” include one or more additional parties, and references to “party“ or “parties” include claimants, respondents or additional parties. 3.6 References in the Rules to the “arbitral tribunal” include one or more arbitrators. Such references do not include an Emergency Arbitrator as defined at paragraph 1 of Schedule 4.

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3.7 References in the Rules to “witness” include one or more witnesses and references to “expert” include one or more experts. 3.8 References in the Rules to “claim” or “counterclaim” include any claim or claims by any party against any other party. References to “defence” include any defence or defences by any party to any claim or counterclaim submitted by any other party, including any defence for the purpose of a set-off. 3.9 References in the Rules to “award” include, inter alia, an interim, interlocutory, partial or final award, save for any award made by an Emergency Arbitrator as referred to in Schedule 4. 3.10 References in the Rules to the “seat” of arbitration shall mean the place of arbitration as referred to in Article 20.1 of the UNCITRAL Model Law on International Commercial Arbitration as adopted on 21 June 1985 and as amended on 7 July 2006. 3.11 These Rules include all Schedules attached thereto as amended from time to time by HKIAC, in force on the date the Notice of Arbitration is submitted. 3.12 HKIAC may from time to time issue practice notes to supplement, regulate and implement these Rules for the purpose of facilitating the administration of arbitrations governed by these Rules. 3.13 English is the original language of these Rules. In the event of any discrepancy or inconsistency between the English version and the version in any other language, the English version shall prevail.

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China International Economic and Trade Arbitration Commission (CIETAC) – 2015 52

The most recent of the institutional rules brought to this study is very brief on the interpretation issues. Article 83 states that headings of articles do not indicate interpretation parameters for the provisions contained therein, and that the CIETAC Rules must be interpreted by the CIETAC (meaning its Secretariat and others of its administrative bodies). There are no provisions regarding the arbitrators’ own powers to do so or regarding general principles for such interpretation to be based on. Article 83 Interpretation 1. The headings of the articles in these Rules shall not be construed as interpretations of the contents of the provisions contained therein. 2. These Rules shall be interpreted by CIETAC.

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4.6

International Centre for Dispute Resolution (ICDR) – 2014 53

Finally, the ICDR Rules repeat the formula where the arbitrators have powers to interpret the Rules, where it relates to their powers and duties, and that the Administrator is the sole person responsible to provide the correct interpretation of other provisions of the ICDR Rules. Article 39: Interpretation of Rules The arbitral tribunal, any emergency arbitrator appointed under Article 6, and any consolidation arbitrator appointed under Article 8, shall interpret and apply these Rules insofar as they relate to their powers and duties. The Administrator shall interpret and apply all other Rules.

5

Conclusion

After all that we have examined in this short study, it is possible to see that the CAM/CCBC’s Rules of Arbitration bring new elements to improve the correct use and interpretation of the Rules by the Arbitral Tribunals, not present (expressly) in other institutional rules, such as a majority standard, the Code of Ethics and also a conjoined effort between the Tribunal and the CAM/CCBC President to ascertain the precise meaning of the Rules, in whatever the interpretation might be needed for.

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Article 14 – Confidentiality Armando Luiz Rovai and André Luis Caetano Silva

1

Introduction

This article aims to solve the upcoming questions about the duty of confidentiality within an arbitration procedure, by its various participants. This duty of confidentiality can be defined as the central point in many arbitration processes, given its pertinence as a way of litigation solution. Nowadays, the most complex legal transactions choose, in the vast majority of cases, to be under the auspices of arbitration, to the detriment of the State’s jurisdiction. That way, one may verify the importance of the duty of secrecy, as well as its tenuous limiting lines, on its various presentations. A distinction between the absolute secrecy duty and the sobriety expected from the arbitrator must be drawn, as well as the necessity of the inclusion of such duty on an express clause in the arbitration agreement. Accordingly, the conflicts between the duty of confidentiality and the rights to information, particularly in relation to the questions involving the public power and its entities, or, also, corporate interests, must be discussed. Finally, regards to the arbitrators’ exemption when conflicted by those questions, as a collateral effect of its secrecy duty. This article, essentially, is about the secrecy duty embodied in Article 14 of the CAM/CCBC Rules. 14.1. The arbitration proceedings are confidential, except for the situations provided for in statute or by express agreement of the parties or in light of the need to protect the right of a party involved in the arbitration. 14.1.1. For the purposes of research and statistical surveys, the CAM/CCBC reserves the right to publish excerpts from the award, without mentioning the parties or allowing their identification. 14.2. Members of the CAM/CCBC, the arbitrators, the experts, the parties and others who participate are prohibited from disclosing any information to which they have had access as a result of their role or participation in the arbitration proceedings.

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2

Doctrine

Carlos Alberto Carmona,1 in his book “Arbitragem e Processo” (Arbitration and Process), states: Finally, the arbitrator is required discretion since the secrecy lies in between the parties, which allows them to search for a proper venue to solve their disputes. It’s natural that the arbitrator shall behave in conformity to the discrete ambience, saving himself from comments about the acts committed during the arbitral process. This mannered behavior is so important that it allows the parties to actually demand strict secrecy, in such ways that it may be expressed on the arbitration clause an obligation to refrain from an act (i.e., not revealing the acts and facts connected to the arbitration). The arbitrator who violates such obligation may respond for losses and damages. But even if the parties do not expressly state the confidentially duty, the arbitrator is expected to have a sober behavior, in such ways that he must not express himself about the causes that are (or have been) under its responsibility Such expectation also has legal coactivity, so the arbitrator may suffer from legal responsibility due to information misuse and its effects, such as loss and damages, even if there is no express clause in the arbitration agreement – however, in view of legal security issues, the insertion of that clause is always recommended. The professor continues, Anyway, it is important to keep in mind that arbitration in Brazil is not necessarily confidential. The institutional rules are the ones inclined to determine the secrecy of the proceedings. As there is a huge increase on arbitral demands concerning public entities, the major point is that those may be under external control that cannot be neglected at all. One thing is the arbitrator temperance, from whom is expected such behavior; another, way different, is the absolute secrecy. It is recommended that in the arbitral litigations involving public entities, the secrecy may be moderated, as a manner to permit the natural control of the public interest; in the same way, the secrecy determined by the procedural rule is required to be mitigated in cases that involve corporate issues, especially those whose decision will produce 1

Carmona, C.A. Arbitragem e Processo. 3rd edition, São Paulo, Atlas, 2013, p. 246.

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subsequent effects to the partners, shareholders and enterprise’s business in general. About that, Fernando Eduardo Serec and Eduardo Rabelo Kent Coes, in an article published in “Consultor Jurídico”2 online magazine, state the following: (…) there are some determined characteristics that naturally induce some questionings about the arbitral use on these kind of conflicts, peculiarly elements like confidentiality usually assigned to the arbitral procedure – as a counterpart to the shareholders’ disclosure rights –, and the agreement needed in order to establish the arbitral litigation, by those whom eventually may become a part into the arbitral procedure. A lot has been discussed about this second point on the last years. Actually, otherwise, it is possible to say that the subject is relatively soothed, because the vast majority of doctrine understands that the arbitral clause embedded at the social statute binds all the enterprises shareholders. The latter defended point prevails, through which the enterprise is obliged to inform its partners and shareholders about any pertinent information of the arbitration proceeding, just like the duty to provide other information due by Law or regulatory organs determination. One must understand, then, that the enterprises are not allowed to trespass these boundaries, being responsible for anything that exceeds those rights and obligations. The scholars state further: Although the confidentiality is not automatically deducted from the arbitral procedure establishment, as frequently presumed, it’s mostly a demand from the parties and/or a statement of the Arbitration Chamber’s regulations.3 (…) The CVM’s instruction n.º 358, as example, describes the facts unveiling hypothesis and its correlatives rules and limitations. It is on this exact scenario where we come across with the confidential issue in arbitration, such as demanded by Institutions and Arbitral Chambers,

2 3

. For example, the secrecy is found on the CAM/CCBC Rules, one of the country’s most reputable institutions.

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CAM/CCBC included. Despite the apparent contradiction, a more accurate analysis shows us that it is possible to reconcile the arbitral procedure rules with the rules stipulating the duty to report relevant facts. (…) After all, confidentiality isn’t an indissoluble characteristic of the arbitral procedures, but may be diminished if necessary (…). As lucidly explained, the secrecy duty, although apparently conflicting with the duty to report, does not reveal itself as absolutely inflexible, and it is possible to verify that, under a systematic interpretation, such inflexibility would run counter to the constitutional and legal dispositions that protect the public and economic order. In this regard, Julio Cesar Lazzarini Lemos4 states: As a general rule, national legal systems do not use to bring any norm regarding the secrecy duty; the New Zealand arbitration law may be pointed as an exception. (…) When breaching the confidentiality, one party, besides causing damages to the other, also breaches the very own contract foundation, that is, the arbitration clause itself, even if it does not expressly mention the secrecy duty. That is why the most powerful argument that favors the secrecy duty between the parties lies on the good faith general clause. What once was an ethical expectation becomes, through the good will general clause, a prohibition in stricto sensu. (…) Naturally, not only good faith justifies the secrecy duty between the parties. It is also due to a legal sub-system, at the arbitration scope: if the arbitrator must keep secret, it is also a logic deduction that the parties should proceed accordingly. Even third parties that work in the arbitration proceedings are bound to the confidentiality. 4

Available at: < https://geamack.wordpress.com/2011/05/13/boletim-valor-notas-sobre-sigilo-na-arbitragem/>.

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Article 14 – Confidentiality Last but not least, Gustavo Pamplona5 implies that on the arbitral procedure: (…) In contrast to what takes place on the Judiciary, the arbitration’s substance is circumscribed to the arbitrators and parties, constrained by the professional secrecy. The proofs used, the controversies’ nature, its value and the arbitration award shall not be disclosed, as it occurs with the Judiciary decision and procedure. There are some authors that advocate that the institutional “legal secrecy” would be able to reproduce the same effectivity of the secrecy found in arbitration. However, the arbitral tribunal guarantees total secrecy, that is to say, only just the involved parties will have access to case files (and even be aware of the litigation). Second point, the secrecy is inherent to the arbitral procedure, while on the Judiciary it is a plea that may or may not be granted. Third, the dispute itself is sheltered by secrecy, nobody except the parties and arbitrators will know there is a conflict between them, which does not occur in the judicial system. About these points, the legal secrecy is not sufficiently effective to safeguard the business interests of the enterprises involved in greater disputes.

3

Conclusion

In regard to the elaborated opinions listed above, the following remarks can be offered. The absolute secrecy duty is distinct from the discretion duty (expected soberness). While the latter would be a minimal imposition, a basic etiquette, given its own nature reserved to the arbitral solution, which demands soberness and discretion of its parties and elements, the former would be an express commitment that constitutes the obligation to refrain from an act for the arbitrator, from whom is required absolute secrecy about the case. However, even if there is no express clause on the arbitration clause, following the intrinsic characteristics of the arbitral solution, the arbitrator is not allowed to express himself about the cases that are, or have been, under his patronage, mainly in media and

5

Available at: .

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social networks, assuming that it would break the elementary ethics that permeate the arbitrator’s positions. Nevertheless, experience reveals that only in cases where such an express secrecy duty clause exists, i.e., where the arbitration agreement or arbitral rules so impose, the arbitrator may be demanded in loss and damages liability for breach of this duty. However, the vast majority of the arbitral institutions pay attention to this point, imposing, carefully, rules about the parties’ privacy – arbitrators, included – and data obtained throughout the arbitral procedure. Such secrecy duty sometimes collides with the public interest, on the litigations involving public entities above all. On such cases, the discretion and secrecy duties shall remain untouched, since the public interest does not conflict with the arbitrators’ activities, but with the whole arbitral procedure itself. Consequently, there is no dispute about the arbitrators’ duty to inform data or facts that may be of public interest, since it is not for him to make such a distinction, but for the public power itself, according to the principles that rule its management. The same applies to the companies that may have the right to inform their shareholders about corporate issues being discussed on the arbitration forum. Also, a violation to the confidentiality duty cannot be implied in cases where such information gets passed to the shareholders, whether limited by the rights to information about their own society or by the Law or by statutory provisions, just as well, it will be necessarily to be verified, in casu, third parties legitimacy that requires confidential data to the arbitral procedure. Above all, such distinctions do not fit the arbitrator, who must maintain secrecy under any hypothesis, according to the motivations listed above. Precisely, as shown above, the secrecy duty is indisputable, transcending the strictly ethical sphere, because the secrecy duty becomes, mostly, a legal obligation. Finally, in regard to the parties’ duty of confidentiality, in spite of the general legal imposition, various particularities found on a case-by-case analysis must be assessed; as, for instance, whenever the society has the obligation to provide information to its shareholders, by doing it under the legal and contractual limits, it may not be charged with having breached its confidentiality duties. For all that has been said, arbitral institutions that value confidentiality are commendable and should be sought by parties wishing to safeguard their interests.

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Article 15 – Enter into Force Daniel F. Jacob Nogueira 15.1. These Rules, approved by an Extraordinary General Meeting of the Brazil-Canada Chamber of Commerce held on September 1, 2011, will enter into force on January 1, 2012, except for articles 2 and 3 of these Rules, which will enter into force from September 1, 2011. 15.2. These Rules revoke the former ones, which were approved on July 15, 1998. 15.3. Unless otherwise agreed by the parties, the CAM/CCBC Rules in force on the date the notification described in article 4.1 is filed will apply. 15.4. At the parties’ option, any arbitration filed before January 1, 2012, but whose Terms of Reference are signed after the beginning of the enter into force of these Rules, can also be governed by them.

1

Introduction

If institutional rules provide a significant portion of the arbitral procedural framework, and if the said rules are subject to periodical updates and revisions, it is relevant to be able to correctly ascertain which version shall govern each individual arbitration. In this chapter, we address the various options when dealing with issues of intertemporal1 conflicts between revisions of institutional rules, as well as identify CAM/CCBC’s approach thereto.

2

Party Autonomy as the Primary Means of Determining the Applicable Version of Arbitral Rules

As is the case with the choice to resort to arbitration and with the selection of the arbitral institution itself, parties are perfectly able to determine, at the moment of the arbitration agreement, which edition of the selected rules is to be applied to any future proceedings deriving therefrom. In fact, Waincymer points outs that an arbitration agreement that fails

1

For clarity, the terms ‘intertemporal conflicts’ and ‘intertemporality’ are used herein to address the question of which different version of institutional arbitral rules, prevailing during successive periods of time, is to be applied in a particular case. For our purposes, the use of such terms is to be construed within the confines of identifying the applicability of successive revisions of arbitral institutional rules and is not to be confused with the international legal doctrine of intertemporal law as applied in the ISLAND OF PALMAS Arbitration (PCA United States of America v. The Netherlands).

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Daniel F. Jacob Nogueira to do so is “suboptimal.”2 The author suggests that the agreement either specify the applicability of rules “in force at the time of the arbitration agreement” (thus rendering any subsequent amendments by the institution ineffective) or, contrariwise, that it readily incorporate future changes by referencing the rules “as amended from time to time.”3 However, more often than not, the arbitration agreement itself does not offer guidance as to the applicability of subsequent revisions of the selected rules. None of CAM/CCBC’s model clauses,4 for instance, are quite explicit on this issue. 2 3 4

Waincymer, J. Procedure and Evidence in International Arbitration. The Hague: Kluwer Law International, 2012, p. 193. Ibid. Available at and which, as of February 2015, were as follows: Recommended arbitration clauses I – Standard Arbitration Clause Any dispute arising out of the present contract, including its interpretation or performance, shall be finally settled by arbitration,administered by the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (“CAM/CCBC”), under its Rules and the Arbitral Tribunal shall consist of [one(1)/three(3)] arbitrators appointed in accordance with the said Rules. II – Detailed Arbitration Clause 1. Any dispute arising out of the present contract shall be finally settled by arbitration. 1.1 The arbitration shall be administered by the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (“CAM/CCBC”) under its Rules, and the Rules’ provisions shall be an integral part of the present contract. 1.2 The Arbitral Tribunal shall consist of [one(1)/three(3)] arbitrators, appointed in accordance with the Rules of the CAM/CCBC. 1.3 The seat of arbitration shall be [city, state, country]. 1.4 The arbitration proceedings shall be conducted in [language]. 1.5 [applicable law] III – Standard Multi-Tier Mediation-Arbitration Clause Any dispute arising out of the present contract, including its interpretation or performance, shall be mandatorily submitted to mediation, administered by the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (“CAM/CCBC”), under the Mediation Guide, and it shall be coordinated by a Mediator from the CAM/CCBC’s Mediator List, appointed in accordance with the mentioned Guide. If the dispute is not settled by the mediation, it shall be finally settled by arbitration, administered by the same CAM/CCBC, under its Rules, and the Arbitral Tribunal shall consist of three (3) arbitrators appointed in accordance with the said Rules. IV – Detailed Multi-Tier Mediation-Arbitration Clause 1. Any dispute arising out of the present contract, including its interpretation or performance, shall be mandatorily submitted to mediation, administered by the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (“CAM/CCBC”), under the Mediation Guide, and it shall be coordinated by a Mediator from the CAM/CCBC’s Mediator List, appointed in accordance with the mentioned Guide. 1.1 If the conflict is not settled by the mediation, it shall be finally settled by arbitration, administered by the same CAM/CCBC, under its Rules. 2.1 The arbitration shall be administered by the CAM/CCBC under its Rules, and the Rules’ provisions shall be an integral part of the present contract. 2.2 The Arbitral Tribunal shall consist of [one(1)/three(3)] arbitrators, appointed in accordance with the Rules of the CAM/CCBC. 2.3 The seat of arbitration shall be [city, state, country]. 2.4 The arbitration proceedings shall be conducted in [language].

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Article 15 – Enter into Force It is important to note that owing to a peculiarity of the current CAM/CCBC Rules,5 even if parties were to expressly select an outdated version as applicable, some structural aspects pertaining to the institution’s administrative organization (as opposed to those that establish the arbitration’s procedural framework) might be rightfully unaffected by such a choice. This is because some provisions of CAM/CCBC’s 2012 Rules regulate organizational arrangements that would typically be better provided for in an institutional charter. Article 2, for instance, provides CAM/CCBC’s place of business, its governing bodies and the duties of its officers. To the applicability of these provisions – which have no direct consequence for arbitral proceedings, and which cannot even be narrowly construed as proper arbitral rules – the parties’ selection of the previous version of the CAM/CCBC rules6 to govern their arbitration shall prove indifferent. That is not to mean that the institution has the right to pick and choose which provisions it should apply if parties decide to arbitrate under older revisions. If parties exercise their autonomy and select the 1998 CAM/CCBC Rules to govern their proceedings, every single procedural aspect of that arbitration should be according to 1998 Rules. The only aspects that should be unaffected by the parties’ choice are those that should not have been a part of the procedural rules in the first place.

3

Institutional Solutions to Determining the Applicable Version of the Rules

When the arbitration agreement is not clear and parties are unable to reach an understanding as to the governing version of the rules, the rules themselves typically proffer a default method to ascertain their intertemporal applicability. Usually, such default modes are one of the following:

3.1

Rules Effective at the Time of the Arbitration Proceedings

The only logical reason for updating arbitral rules is to better serve the arbitral process. For an institution to undergo a revision of its rules is, after all, a somewhat burdensome process, in which established and well-known practices are forgone, and energy must be spent on educating the arbitral community and communicating the revisions to the market. That, allied with the perceived need to have long-lasting and stable rules is why it typically takes so long for revisions to get published. Nonetheless, this is a process that institutions

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2.5 [applicable law] Which came into force on 1 January 2012 and shall hereafter be referred to as the CCBC 2012 Rules. Which came into effect on 15 July 1998 (hereafter CAM/CCBC 1998 Rules).

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Daniel F. Jacob Nogueira must undertake every so often in order to accommodate new legal developments,7 get rid of unforeseen inefficiencies in existing rules and incorporate new case-management techniques, all in order to keep parties content with the process and, ultimately, remain competitive within the case-administration marketplace. Therefore, it comes as no surprise that institutions would rather have their new (and presumably better) rules implemented sooner rather than later. Consequently, most rules of major arbitral institutions stipulate that, unless parties agree to the contrary, any arbitration shall be governed by the edition of the rules that is in effect at the time of the arbitration. For example, the ICDR,8 LCIA9 and, except for specific provisions discussed below,10 the ICC11 all prefer that new revisions of their rules immediately govern any arbitration that has not yet commenced on the day in which the revisions enter into force. This approach also has the added benefit of not subjecting the institution to dealing with a dual-rule system for very long. By directing parties by default to the current rules, in just a few years the old rules could be all but completely archived. The CAM/CCBC 2012 Rules dedicate an entire article12 to issues of intertemporality. The overall gist of CAM/CCBC’s take on the effective date of revisions to its rules is quite similar to that of the other major institutions, specifying that, unless otherwise agreed on 7

As, for instance, happened after Dutco, when many institutional rules incorporated a provision that allows for institutional appointment of the entire Tribunal if multiple parties on the same side of the dispute cannot agree on a common arbitrator. For clarity, Dutco refers to B.M.K.I et Siemens v. Dutco case, an influential case in which the French Cour de Cassation set aside an arbitral award in a multiparty arbitration where the claimant nominated an arbitrator and the multiple respondents, with differing interests, could not agree upon whom to nominate. Respondents only jointly appointed an arbitrator under protest when ordered to do so by the ICC. The main reasoning behind Dutco was that the principle of equality in the right to designate arbitrators is an expression of public policy and, as such, unwaivable prior to the dispute. 8 ICDR 2014 Rules: Art. 1: Scope of These Rules. 1. Where parties have agreed to arbitrate disputes under these International Arbitration Rules (“Rules”), or have provided for arbitration of an international dispute by the International Centre for Dispute Resolution (ICDR) or the American Arbitration Association (AAA) without designating particular rules, the arbitration shall take place in accordance with these Rules as in effect at the date of commencement of the arbitration, subject to modifications that the parties may adopt in writing. The ICDR is the Administrator of these Rules. 9 LCIA 2014 Rules: Preamble. Where any agreement, submission or reference howsoever made or evidenced in writing (whether signed or not) provides in whatsoever manner for arbitration under the rules of or by the LCIA, the London Court of International Arbitration, the London Court of Arbitration or the London Court, the parties thereto shall be taken to have agreed in writing that any arbitration between them shall be conducted in accordance with the LCIA Rules or such amended rules as the LCIA may have adopted hereafter to take effect before the commencement of the arbitration and that such LCIA Rules form part of their agreement (collectively, the “Arbitration Agreement”). These LCIA Rules comprise this Preamble, the Articles and the Index, together with the Annex to the LCIA Rules and the Schedule of Costs as both from time to time may be separately amended by the LCIA (the “LCIA Rules”). 10 Namely, the new Emergency Arbitrator’s Provision in ICC 2014 Rules, Art. 29. 11 ICC 2012 Rules: Art. 6:Effect of the Arbitration Agreement 1)Where the parties have agreed to submit to arbitration under the Rules, they shall be deemed to have submitted ipso facto to the Rules in effect on the date of commencement of the arbitration, unless they have agreed to submit to the Rules in effect on the date of their arbitration agreement. 12 CCBC 2012 Rules, Art.15 – Enter Into Force. See Arts. 15.1 to 15.4 given in the beginning of this article.

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by the parties, whichever revision is in effect on the date in which the notice of arbitration is filed is the one that shall govern the proceedings. A limited carve-out allows parties to jointly adopt the 2012 rules even if the notice of arbitration was filed before the revision came into force, insofar as the Terms of Reference have not yet been signed by the day the new rules became effective. Notwithstanding conceivable benefits to the efficiency of the arbitral process and to the administering institution, from a conceptual point of view, the adoption of this mechanism by default could, in certain circumstances, be problematic. Furthermore, the express language in the rules defaulting this mechanism of dealing with questions of intertemporality does not necessarily bind the arbitrator. Both of these issues shall be further discussed below.

3.2

Rules Effective at the Time of the Arbitration Agreement

Another mechanism for dealing with rule revision applicability is to simply submit the arbitration to the procedural framework established by the rules at the time the arbitration agreement was finalized. From a legal standpoint, this option is decidedly less complicated: at the time they agree to submit disputes to arbitration, parties are previously and fully informed of which procedure is to be adopted in future disputes. However, as noted above, this approach would make full implementation of new rules an unnecessarily extended process, and would keep stale rules active for much longer. Furthermore, keeping a prolonged dualrule system alive within institutions could lead to certain unnecessary logistical difficulties. In short, this option prefers broad legal conformity over expedient comprehensive implementation of the new rules. From the ICC comes a recent example of an institution choosing this more cautious intertemporal mechanism for a limited, albeit significant, modification introduced in the institution’s rules in 2012. As a general tenet, the 2012 revisions of the ICC follow the rebuttable presumption that “parties shall be deemed to have submitted ipso facto to the Rules in effect on the date of commencement of the arbitration.”13 However, in a noteworthy and substantial departure from its previous rule sets, the 2012 ICC Rules instituted a procedure that, unless expressly opted out of, allows parties to request from an Emergency Arbitrator urgent interim or conservatory measures that cannot await the constitution of an arbitral tribunal.14 13 ICC 2012 Rules: Art. 6(1). 14 ICC 2012 Rules: Art. 29: Emergency Arbitrator 1) A party that needs urgent interim or conservatory measures that cannot await the constitution of an arbitral tribunal (“Emergency Measures”) may make an application for such measures pursuant to the Emergency Arbitrator Rules in Appendix V. Any such application shall be accepted only if it is received by the Secretariat prior to the transmission of the file to the arbitral tribunal

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In light of the significance of this procedural innovation and of the foreseeable objections to emergency jurisdiction by parties (who would inevitably argue that their agreement to the 1998 ICC Rules could not be accepted as consent to subject urgent prearbitral measures to this new decision-maker),15 the 2012 ICC Rules expressly stipulated that “the Emergency Arbitrator Provisions shall not apply if the arbitration agreement under the Rules was concluded before the date on which the Rules came into force.”16 In doing so, the ICC significantly slowed down the wide applicability of the Emergency Arbitrator provisions, but did so in exchange for a much stronger legal foundation in those cases that did get referred to prearbitral jurisdiction.

4

The True Solution to Intertemporal Rule Applicability: Determining the Intent of the Parties

Even though major arbitral institutions attempt to regulate the applicability of revisions to their rules by stipulations inserted within the amended rules themselves, such a device does not necessarily translate the parties’ intent and, as such, may not be binding on a Tribunal attempting to determine which edition of the rules shall govern the arbitration. Jeffrey Waincymer notes that while “modern rules will themselves seek to indicate that a reference to the rules is presumed to be a reference to the rules in force at the time of dispute [,] that by itself cannot be determinative, as a statement by an institution in a particular point in time cannot be determinative of the true intent of the parties at an earlier time.”17 In order to ascertain the parties’ intent, if the arbitration agreement itself fails to give any guidance, one should first establish whether the parties had notice of the consequences of any future revisions to the rules. The LCIA Rules, for example, notify the parties quite precisely that, unless stated otherwise, they are agreeing to the rules and to any future modifications thereto. Therefore, if a hypothetical arbitration agreement selecting LCIA Rules is signed in 2010, and a dispute arises in 2015, one need not look at the LCIA 2014 Rules18 to determine whether they are applicable to the dispute, since the preamble of the

15

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pursuant to Article 16 and irrespective of whether the party making the application has already submitted its Request for Arbitration. Especially since previous editions of the ICC rules already contemplated a PreArbitral Referee whose mandate depended on parties expressly opting-in to the Referee procedure. Therefore, if parties to contracts concluded prior to 2012 had really intended to appoint a private decision-maker prior to the constitution of the Tribunal, they could easily have done so by agreeing to the PreArbitral Referee. Therefore, it seems highly unlikely to derive consent to emergency arbitration from the silence of ICC agreements concluded before the new rules. ICC 2012 Rules: Art. 29(6)(a). Waincymer, J. Procedure and Evidence in International Arbitration. The Hague: Kluwer Law International, 2012, p. 193 See footnote 9.

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1998 LCIA Rules in effect on the date of the conclusion of the arbitration agreement clearly states that “the parties shall be taken to have agreed in writing that the arbitration shall be conducted in accordance with the following rules (‘the Rules’) or such amended rules as the LCIA may have adopted hereafter to take effect before the commencement of the arbitration.”19 In other words, the LCIA Rules in force at the time of the arbitration agreement inform parties prospectively that, unless otherwise stated, future modifications of the Rules are to be considered incorporated to their consent. In such a scenario, there is no question of intent. Under the LCIA model, because of the prospective notice contained in the older rules, if parties wished the 1998 rules to apply in perpetuity, they should have said as much in their agreement. ICC and ICDR intertemporality provisions20 are slightly but meaningfully different from LCIA’s, as they are not prospectively informing parties of the presumption of incorporation of future modifications, but rather retroactively declaring that the new rules shall now apply to arbitrations previously governed by the old rules. In other words, the effects of the revisions to the rules are contained within the new rules themselves. Therefore, in these scenarios, parties were, technically, not clearly and expressly notified of the effects of future amendments to the rules. Even so, the matter of the applicable edition of the rules within these frameworks can be easily resolved by relying on the reasonable expectations of the parties. While neither the ICC nor the ICDR intertemporality provisions are as forward-facing as the LCIA’s, the intertemporality provisions themselves maintain a steady pattern as time passes. For instance, Article 6(2) of the ICC 2012 Rules is a verbatim copy of Article 6(2) of ICC 1998 Rules. In the same light, Article 1(a) of ICDR 2014 Rules is almost identical to Article 1(a) of ICDR 2009 Rules.21 Therefore, in either case, if parties concluded an arbitration agreement in 2010, one can safely infer that the said parties should reasonably expect the intertemporality provisions of any future revisions to the rules to be substantially similar to the existing provisions that indicate that, unless otherwise noted, rules in effect on the commencement of the arbitration shall govern the proceedings. Therefore, under 19 LCIA 1998 Rules: (Preamble) Where any agreement, submission or reference provides in writing and in whatsoever manner for arbitration under the rules of the LCIA or by the Court of the LCIA ("the LCIA Court"), the parties shall be taken to have agreed in writing that the arbitration shall be conducted in accordance with the following rules ("the Rules") or such amended rules as the LCIA may have adopted hereafter to take effect before the commencement of the arbitration. The Rules include the Schedule of Costs in effect at the commencement of the arbitration, as separately amended from time to time by the LCIA Court. 20 See footnotes 8 and 11. 21 The changes are very minor. ICDR 2009 Rules Art. 1(a) Where parties have agreed in writing to arbitrate disputes under these International Arbitration Rules or have provided for arbitration of an international dispute by the International Centre for Dispute Resolution or the American Arbitration Association without designating particular Rules, the arbitration shall take place in accordance with these Rules, as in effect at the date of commencement of the arbitration, subject to whatevermodifications the parties may adopt in writing.

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these procedural frameworks, parties should reasonably expect that the lack of specific guidance from the arbitration agreement equates to acceptance of the rules that are in force at the time of the dispute. As if that were not enough, the ubiquitousness of institutional rules presuming application of rules as revised at the time of the dispute further aids the inference that parties should reasonably expect such a solution to be default. CAM/CCBC’s intertemporality, much like LCIA’s, prospectively puts the parties on notice that, unless parties agree otherwise, any future revisions of the rules in effect on the date of the notice of arbitration shall govern the dispute. Thus, if an arbitration agreement indicating CAM/CCBC Rules as applicable was signed before the CAM/CCBC 2012 Rules came into effect, and the language of the agreement lacked any guidance as to the version of the rules that should govern future disputes, one need only look at the version of the rules in effect at the time of the agreement to establish that the 2012 Rules are applicable. Just like the 2012 revision, the 1998 CAM/CCBC Rules clearly state that “unless otherwise agreed by the parties, the CAM/CCBC Rules in force on the date the [Notice of Arbitration] is filed will apply.”22 Consequently, the 1998 CAM/CCBC Rules put parties on notice that, unless exempted by a differing agreement, parties would be bound by future revisions of the Rules. Therefore, unless the exercise of party autonomy mandates otherwise, there is no question that the 2012 CAM/CCBC Rules govern arbitration proceedings pursuant to agreements signed before the said Rules came into effect.

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Conclusion: A Simple Model to Ascertain Intertemporal Rule Applicability

In conclusion, by retracing the path laid out in the prior sections, the analysis of the problem of intertemporality should take the following steps: 1. Does the arbitration agreement itself offer guidance as to which revision of the rules should be applicable? It is best for parties to resolve any issues of intertemporality in the arbitration agreement itself, by either mandating the applicability of rules “‘in force at the time of the arbitration agreement” and thus rendering any subsequent amendments by the institution ineffective, or by indicating the applicable rules “as amended from time to time” and therefore incorporating future changes by the institution. 2. If not, do any provisions of the rules in force at the time of the agreement provide notice to the parties as to the projected effects of future modifications of the Rules? Such is the case of CAM/CCBC and LCIA Rules. In such scenarios, the language of the Rules is such that the silence of the parties as to the applicable version of the Rules must

22 CAM/CCBC 1998 Rules, Art. 13.4.

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be construed as consent to being bound to any future procedural changes implemented by the institution. 3. If not, do any provisions of the rules in force at the time of the agreement afford parties’ reasonable expectations as to future modifications of the Rules? A provision within new rule revisions declaring the revised rules applicable retroactively to past agreements is not, per se, binding on the parties. However, if such a provision is historically incorporated into the institution’s rules, parties may be deemed to reasonably expect the same intertemporal solution to be incorporated into future revisions and, therefore, reasonably expect to be bound by the said amendments. This seems to be the case with ICDR and ICC rules. 4. If not, do the provisions of the rules in force at the time of the arbitration adequately reflect parties’ intent based on other ascertainable factors? Factors to be considered include, but are not limited to, parties’ knowledge of the widespread practice of applying rules, as amended, that are effective on the date of the arbitration, as well as parties’ domestic legal traditions and their approach to intertemporality for procedural rules. As a practical matter, the foregoing questions should be answered in the order presented, since obtaining a positive answer in any tier solves the problem and renders the subsequent steps moot. However, if all of the proposed inquiries above are responded to in the negative, parties are to be bound to the procedural framework that existed at the time of the arbitration agreement.

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About the Authors Foreword Jan Paulsson: President of ICCA

Preface Frederico José Straube: Former President of CAM/CCBC

Brazil’s Role in the World of International Arbitration Louise B. Barrington: FCIArb, Founder and Director of the Vis East Moot

Article 1 Ana Olivia A. Haddad: has a law degree from the University of São Paulo Law School (USP) and a post-graduate degree in Business Law from Fundação Getúlio Vargas (FGV). She acts as counsel in arbitrations and on litigations in the Brazilian courts. Member of the Brazilian Bar Association (OAB); member of the Brazilian Arbitration Committee (CBAr); member of the Brazilian Association of Students of Arbitration (ABEArb); Assistant Teacher in the Course of Specialization in Arbitration organized by CEU-IICS Law School (2014). Eleonora Coelho: has a law degree from the University of São Paulo Law School (USP) and a Master’s in Litigation, Arbitration and Alternative Methods of Dispute Resolution (ADR) from Université Paris II – Phantéon Assas. Acts in national and international arbitrations as a lawyer and an arbitrator. Member of Brazilian Bar Association (OAB); member of the Center of Arbitration and Mediation of the Brazil-Canada Chamber of Commerce – CAM/CCBC; member of the Commission of Jurists designated by the Federal Senate to update Brazilian Arbitration Act; member and former vice president of the Brazilian Arbitration Committee (CBAR); member of the International Bar Association (IBA); member of the Latin-American Committee for the International Chamber of Commerce (ICC); member of the Consultant Counsel of Latin America for the International Centre for Dispute Resolution (ICDR); member of the Board of the Brazilian Institute of Construction Law (IBDIC); member of the Superior Council of the Conciliation, Mediation and

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Arbitration Chamber of Sao Paulo (CIESP/FIESP); member of the Consultant Counsel of the American Chamber of Commerce for Brazil (AMCHAM).

Article 2 Marcos Paulo de Almeida Salles: Architect, Lawyer and Economist. He holds Specialization Degrees from the Law School of São Paulo State University in Tax Law (1969) and Finance Sciences (1970). He also holds a Post-Graduation Degree from the Law School of São Paulo State University with a major in Commercial Law and supplementary majors in Economic Law, Civil Procedural Law, General Theory of Law and International Law, qualified in 1978, 1984. He holds a Master’s Degree in Commercial Law from São Paulo State University (1986). He was accredited as an Extrajudicial Mediation and Arbitration Expert as an Economist – CORECON-SP Annotation in 1997. He holds a Doctorate Degree in Commercial Law from São Paulo State University (1999). Senior Professor in Commercial Law of São Paulo State University. He also holds an MBA – Brand Equity from Faculdades Integradas Rio Branco. Within the arbitration scope, in addition to being a former president of AMC/BCCC and vice president of Arbitration of BCCC, among other entities, he is a Member of the Arbitration Commission of the Brazilian Committee of the International Chamber of Commerce – ICC. Member of the Body of Arbitrators of the Arbitration Center of the Brazil-Canada Chamber of Commerce. Member of the Body of Arbitrators of BM&F and BBM – Member of the Body of Arbitrators of CMA-FIESP/CIESP, as well as of CAMARB in São Paulo. He has been a partner of Telles Pereira, Azzi, Ferrari e Almeida Salles – Sociedade de Advogados for over 35 years.

Article 3 Thiago Marinho Nunes: PhD in International and Comparative Law from the University of São Paulo Law School. Master in Litigation, Arbitration and Alternative Dispute Resolution Methods, and Post-graduate in Civil Law, both at the University of Paris II – Pantheón-Assas. Senior associate at Mattos, Muriel & Kestener law firm.

Article 4 Arnoldo Wald: Founding Partner of Wald Advogados, in São Paulo, Brazil. Lawyer, Arbitrator and Expert. Professor of Private Law in Universidade do Estado do Rio de Janeiro (UERJ). Doctor Honoris Causa – Université Panthéon-Assas – Paris II. Member of the Court of International Arbitration of the ICC ( 2003-2012).

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About the Authors

Ana Gerdau de Borja: Lawyer. Phd and LLM from the University of Cambridge. Cocoordinator of the Investment Arbitration Group of the Brazilian Arbitration Committee (CBAr). President of MUTUSP (Associação Franciscana dos Amigos do Moot – USP). Bryan Longo: J.D. by the University of São Paulo`s Faculty of Law (USP). Oralist of the USP Team for the 21st Willem C. Vis International Commercial Arbitration Moot. Coach of the USP Team for the 23º Vis Moot. Eduardo Ono Terashima: LLB, Postgraduate Degree in Public Law and LLM Candidate in International Law from the Pontifical Catholic University of São Paulo (PUC/SP). LLM in International Commercial Law from the University College London – UCL. Coach of PUC/SP’s Willem C. Vis-Moot Team (Vienna and Hong-Kong). Author of articles published in Brazil in the fields of International Sales, Arbitration and Commercial Law. Maíra de Melo Vieira: Lawyer. Phd Candidate in International Law at the University of São Paulo (USP). Master in Law from Université d’Aix Marseille III. Napoleão Casado Filho: Master’s and PhD in International Economic Relations from the Pontifical Catholic University of São Paulo (PUC/SP). Coach for the PUC/SP in international arbitration competition in Vienna and Hong Kong since 2008. Assistant Professor of International Arbitration at PUC/SP. Fellow of the Chartered Intitute of Arbitrators – CIArb. Listed arbitrator at the Hong Kong International Arbitration Center (HKIAC), Eurocâmaras, FIEP and the Brazilian Agribusiness Society (SRB) Arbitration Chambers. Lawyer in São Paulo, partner of Clasen, Caribé & Casado Filho Sociedade de Advogados. Rafael Villar Gagliardi: Partner at Demarest Advogados. LLB, LLM and PhD Candidate at the Pontifical Catholic University of São Paulo (PUC/SP). Visiting researcher at London School of Economics and Political Science – LSE. Fellow of the Chartered Institute of Arbitrators (CIArb). Listed arbitrator at the FIESP/CIESP, FIEP and the Brazilian Agribusiness Society (SRB) Arbitration Chambers. Member of the Publications Advisory Board of the International Council For Commercial Arbitration (ICCA), of the LatinAmerican Arbitration Association (ALARB) and of the Institute of Private Law (IDP). Author of articles and books published in Brazil and abroad in the fields of International Sales, Arbitration, Contract Law, Commercial Law and Energy Law.

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Article 5 Carlos Suplicy Forbes: President of CAM/CCBC. Post-Graduate in Civil Procedure Law in Pontifícia Universidade Católica de São Paulo (PUC-SP). Senior Partner of the Litigation and Arbitration Department of Mundie e Advogados. Responsible for all litigation sponsored by the Firm. Patrícia S. Kobayashi: Secretary-General of CAM/CCBC.

Article 6 Haroldo M.D. Verçosa: Master and PhD in Commercial Law from the University of São Paulo. Legal Consultant in Mattos Muriel Kestener Advogados Associados. Member of the Editor’s Board of Revista de Direito Mercantil, Industrial, Econômico e Financeiro (RDM). Professor at the University of São Paulo (USP).

Article 7 Cesar A. Guimarães Pereira: Brazilian attorney, partner at Justen, Pereira, Oliveira & Talamini (São Paulo). He holds an LLM (1998) and a JSD (2005) in Public Law from Pontifícia Universidade Católica (PUC-SP) and was a visiting scholar at Columbia University Law School (2013-2014), European University Institute (2016) and University of Nottingham (2016). He has published and edited numerous books, articles and book chapters on subjects related to infrastructure, public law, international sales and arbitration. He is a Fellow of the Chartered Institute of Arbitrators (FCIArb) and a listed arbitrator in domestic and international institutions, and he acts as arbitrator in matters involving PPPs and corporate or commercial law. He is the president of the Arbitration Center of the Federation of Industries of the State of Paraná (CAMFIEP), and the vice president of Brazil Infrastructure Institute, an industry think tank. Erika Levin: lawyer with Stone & Magnanini LLP and an Adjunct Professor at Rutgers School of Law in the United States.

Article 8 Clávio Valença Filho: was awarded the degree of Doctor of Laws (JSD) in international private law by the University of São Paulo, in 2015, and the degree of Masters of Law in Commercial Law by the Catholic University of São Paulo (PUC-SP), in 2002. He has also

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About the Authors

been awarded the degree DEA en droit international privé et du commerce international by Université Panthéon-Assas (Paris II) and DESS en droit international et communautaire by Université Catholique de Louvain (UCL). Clávio Valença Filho is currently the vice president of the Brazilian arbitration comity, senior partner of Valença Contencioso Arbitral, and also acts as arbitrator. Isabela Lacreta: awarded a degree of Master of Law in Litigation, Arbitration and ADR by Université Panthéon-Assas (Paris II), and is currently candidate for the degree of Doctor of Laws (JSD) in civil procedure law by the University of São Paulo. She has a specialization degree in international private law by Université Panthéon-Assas (Paris II), and in arbitration by Fundação Getúlio Vargas (FGV). Isabela Lacreta is an associate attorney at Valença Contencioso Arbitral.

Article 9 Adriana Braghetta: Master and Phd in International Law from the University of São Paulo. Partner in L.O. Baptista – SVMFA Advogados Associados. Vice President of ICCA –International Council for Commercial Arbitration. Former President of the Brazilian Arbitration Committee (CBAr). Claudio Finkelstein: Masters in International Law from the University of Miami. PhD in International Economic Relations by PUC/SP. Coach for the PUC/SP in international arbitration competition in Vienna and Hong Kong since 2008. Professor of International Arbitration at PUC/SP. Fellow of the Chartered Institute of Arbitrators – CIArb. Lawyer in São Paulo, founding partner of Finkelstein Advogados. Fabio Alonso Vieira: Masters and PhD candidate in International Economic Relations by PUC/SP. Lawyer in São Paulo, partner of Mattos, Muriel & Kestener Advogados.

Article 10 Gilberto Giusti: holds an LLB in Law from the University of São Paulo (USP) and an LL.M. (Master of Laws) degree from the University of California – Berkeley. Partner at Pinheiro Neto Advogados and head of the Litigation and Arbitration practice in the firm, Gilberto advises on litigation and alternative dispute resolution proceedings such as mediation and arbitration, and also acts as arbitrator in complex civil, commercial, corporate and construction disputes, as well as other regulated sectors (energy, telecommunication, oil and gas). He was a Board member of the American Arbitration Association (AAA) and is

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currently a member of its Advisory Council, as well as of the Institute for Transnational Arbitration – ITA. He was also a member of the Permanent Court of the London Court of Arbitration (LCIA). He is a member of the Latin-American Arbitration Group of the International Chamber of Commerce (ICC); President of the Brazilian Chapter of Club Español del Arbitraje and Board member of the CPR (International Institute for Conflict Prevention and Resolution). Since 2011, Giusti has been Vice-Chair of the Arbitration and Mediation Center of the Brazil-Canada Chamber of Commerce. He also chairs the British Chamber of Commerce and Industry (BRITCHAM) in São Paulo. Douglas Catarucci: holds an LLB in Law from the Mackenzie University of São Paulo. Associate at Pinheiro Neto Advogados in the Litigation and Arbitration Team and also secretary of arbitral tribunals in commercial arbitrations.

Article 11 José Carlos de Magalhães: Master in Law from Yale University. PhD in Law from University of São Paulo. ‘Visiting Scholar,’ Yale Law School. Professor in University of São Paulo. Senior Partner of José Carlos de Magalhães – Advogados Associados.

Article 12 Luciano Benetti Timm: Post-Doctorate Studies in the Law, Economics, and Business Department, University of California, Berkeley. Doctorate in Business Law and Regional Integration, Federal University of Rio Grande do Sul. LLM in International Economic Law, University of Warwick – scholar of the British Council. Master’s in Private Law, Federal University of Rio Grande do Sul.

Article 13 Marcelo Ricardo Escobar: PhD candidate in Tax Law in Pontifícia Universidade de São Paulo. Master in Law in Universidade Presbiteriana Mackenzie. Fellow of the Chartered Institute of Arbitrators (FCIArb). Listed arbitrator at the Hong Kong International Arbitration Center (HKIAC) and Federação das Indústrias do Estado do Paraná (FIEP) Arbitration Chambers. Lawyer in São Paulo, partner of Escobar Advogados.

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About the Authors

Yuri Pedroza Leite: J.D. by the Pontifícia Universidade Católica de São Paulo PUC/SP). Oralist of the PUC/SP Team for the 21st Willem C. Vis International Commercial Arbitration Moot. Coach of the PUC/SP Team for the 23º Vis Moot.

Article 14 Armando Luiz Rovai: Phd in Law in Pontifícia Universidade Católica de São Paulo. Professor at the Presbyterian Mackenzie University. Former President of the São Paulo Board of Trade. André Luis Caetano Silva: Academic in law at the Presbyterian Mackenzie University.

Article 15 Daniel F. Jacob Nogueira: Master of Laws (LLM), Intellectual Property Law and Alternative Dispute Resolution from the University of Texas School of Law. Vice President of Brazilian Bar’s National Arbitration Commission. Partner in Jacob & Nogueira Advogados.

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Annex 1 – CAM-CCBC Conflict of Interest and Availability Questionnaire CAM-CCBC [n]/ [year] SEC [n] Conflict of Interest and Availability Questionnaire Arbitration and Mediation Center Brazil-Canada Chamber of Commerce (CAM-CCBC) Objective To guide the appointed arbitrator in fulfilling his/her obligation to reveal facts that may affect his/her independence and impartiality to judge, pursuant to art. 13, § 6, and Art. 14 of Law nr. 9.307/96, in CAM-CCBC’s Rules and Code of Ethics. Parties Claimant(s): [filled out by the Secretarial Office]

Respondent(s): [filled out by the Secretarial Office]

Attorneys: [filled out by the Secretarial Office] Attorneys: [filled out by the Secretarial Office]

1. Appointed Arbitrator Name: ______________________________________________________________________ Qualification: ______________________________________________________________________ Address: ______________________________________________________________________

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2. Did you under any circumstance or capacity act as defense council to any of the parties in the proceeding for which you are being appointed to perform as arbitrator? No [ ] Yes [ ] Observations: ________________________________________________________________________ 3. Have you ever been employed by, or did you act as outside consultant or judicial or extrajudicial expert for any of the parties in this proceeding? No [ ] Yes [ ] 4. In what company do you work or have you performed professional activities in the last five (5) years? [response] ________________________________________________________________________ 5. Do you know any of the parties to the proceeding? No [ ] Yes [ ] In what capacity do you know the party? Please specify: ________________________________________________________________________ 6. Have you previously acted as arbitrator in an arbitration proceeding in which one of the parties was claimant or respondent in the last five (5) years? No [ ] Yes [ ] Please specify: [response] ________________________________________________________________________

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Annex 1 – CAM-CCBC Conflict of Interest and Availability Questionnaire

7. Considering that pursuant to Provision 2 of this Center’s Code of Ethics the arbitrator is obliged to only accept the appointment if he/she is able to dedicate time and effort required to satisfy the expectations of the parties, thereby warranting celerity in processing the proceeding and preventing the unduly increase of expenditures, you are hereby asked whether you have enough time to perform in processing the arbitration proceeding, while also taking into account that arbitrators are obliged to abide by the schedules agreed upon for the actions with which they are entrusted under the Rules? No [ ] Yes [ ] 8. Did you voice an advance opinion on the issue to be resolved in the arbitration as the result of contact by one of the parties? No [ ] Yes [ ] Observations: ________________________________________________________________________ 9. Do you or did you entertain any business relation with any of the parties to this arbitration? No [ ] Yes [ ] Observations: ________________________________________________________________________ 10. Does or did any member of your family, a relative up to the second degree, or a member of your company entertain business relations with any of the parties to the arbitration proceeding? No [ ]

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Yes [ ] Observations: ________________________________________________________________________ 11. Have you ever performed in the capacity of arbitrator or judicial expert? No [ ] Yes [ ] If possible, please specify the subject matters covered: ________________________________________________________________________ 12. Considering that pursuant to Provision 4 of this Center’s Code of Ethics the arbitrator is obliged to reveal any fact that may signal any rightful doubt concerning his/her independence or impartiality, is there any additional comment or revelation you wish to make? No [ ] Yes [ ] Observations: ________________________________________________________________________ [City], [date]________________________, __________________. __________________________ Signature

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Annex 2 – CAM-CCBC Code of Ethics (Arbitrator) Introduction This Code is intended to guide the proceedings of arbitrators who act in the Arbitration and Mediation Center of the Brazil-Canada Chamber of Commerce/CCBC (‘Arbitration and Mediation Center’), beginning with the appointment preceding phase, continuing through the duration of the arbitral proceeding, until after the arbitral sentence is pronounced. Furthermore, it is intended as guidance for the parties and attorneys dealing with an arbitrator or arbitrators composing any given Arbitral Court. Being a deontological code, the following are recommended norms to be followed by arbitrators. They are not legal rules, but, rather, norms of conduct and proceedings to be adopted by the arbitrators, intended as guidance for the Arbitration and Mediation Center and its users. Such norms should also not be deemed as complete or all-encompassing, and should not exclude other postures based on common sense and ethics. The enunciations below comply with the provisions set forth in Article 13, §6 of Law No. 9.307/96: “in fulfilling his/her functions, the arbitrator shall act impartially, independently, competently, diligently and discretely.” Every arbitrator integrating the Body of Arbitrators, or who acts in arbitrations conducted by the Arbitration and Mediation Center, shall receive a copy of this Code.

Enunciation 1 – Independence and Impartiality The first obligation of an arbitrator is to remain independent and impartial before and during arbitration. Independence is a prerequisite of impartiality. It means to be and to remain impartial, without privileging one of the parties to the detriment of the other or showing a predisposition vis-à-vis any aspects of the subject matter of the dispute. To conduct oneself and to decide according to one’s free rational and informed conviction. To act with justice. To always act with independence and transparency, without any links or proximity to the parties involved in the controversy. To reveal all facts and circumstances that may constitute reason for doubt concerning an arbitrator’s impartiality or independence, not only in his/her own perception, but also as perceived by the parties, i.e., he/she

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must put himself/ herself in the place of the parties and ask himself/herself whether if he/she were a party, he/she would like to or should know or not know about a given fact. Preferably, the arbitrator shall not have direct contact with the parties and their attorneys prior to the final conclusion of the proceeding. If, however, a need for such contact should arise, not to do so individually, but rather in the presence of other members of the Arbitral Court.

Enunciation 2 – Diligence and Competence To be diligent, assuring regularity and quality in the proceeding, not restraining efforts to act in the best manner possible relative to the investigation of facts pertinent to the controversy. To conduct the proceeding in an impeccable and diligent manner, with extreme rectitude in all his/her decisions and attitudes, which must be conducted with prudence. To act with competence and efficiency, adhering to parameters set forth by the parties in the Arbitration Agreement in order to reach his/her decision. To prevent expenses from increasing excessively, rendering arbitration too costly. To only accept the appointment if duly qualified to resolve the matter of litigation and if proficient in the language used in the arbitration. To only accept the appointment if able to commit the time and attention required for the arbitration to reasonably meet the parties’ expectations, including the time required to study the matter and the most recent contributions thereto offered by doctrine and jurisprudence. To be prepared for hearings, having previously and adequately become familiar with the case. To avoid not only improper behavior, but also the appearance of improper or questionable behavior. To be loyal to and trustworthy with respect to the relationship of trustfulness and confidentiality inherent to his/her position. To maintain a virtuous and urbane attitude vis-à-vis the parties, attorneys, witnesses, and also in relation to all other arbitrators and members of the Arbitration and Mediation Center’s administrative staff, whether in relation to the proceeding or otherwise. To behave zealously and commitedly so the parties feel they are supported and may expect the nor mal development of the arbitral proceeding. To care for documents he/she may receive to be properly filed and to ensure that such attribution shall properly be undertaken by the Arbitration and Mediation Center. To cooperate to bring about good quality of services rendered by the Arbitration and Mediation Center.

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Annex 2 – CAM-CCBC Code of Ethics (Arbitrator)

Enunciation 3 – Confidentiality Obligation Before, during, and after the arbitration, to maintain confidentiality regarding the proceedings, debates, deliberations of the Arbitral Court and the content of the arbitral sentence, unless the parties expressly authorize him/her to disclose such arbitral sentence. To refrain from using information obtained during the arbitral proceeding to attain personal advantages or for third parties, or which may affect any third party interests. To abstain from using elements collected in arbitrations in which he/she is participating or may have participated for the purpose of publishing journalistic or technical/legal articles that may allow identification of the parties and/or of any matter “sub judice” by the public targeted by such publications. To return to the Arbitration and Mediation Center any and all documents and working papers in his/her possession, or to ensure their destruction, at the parties ´ discretion, without making copies or electronic registries thereof.

Enunciation 4 – Obligation to Make Revelations The arbitrator must reveal to the parties, upon his/her appointment, any interest or relationship (of business, professional or social nature) he/she may have or have had with any of the parties, their attorneys or any other person that may be considered a potential witness in the arbitration and that may in any manner affect his/her impartiality or compromise his/her image of impartiality. To reveal any interest or relationship that may potentially affect his/her independence or create any apparent partiality or trend. Partiality and trend are understood as the arbitrator’s personal situation in relation to the parties and their attorneys and with respect to the subject matter of litigation, and the extent to which it may affect a fair judgment in the concrete case. The revelation obligation is continuous throughout the arbitral proceeding and any occurrences or facts that may arise or be discovered in such period, must be reported.

Enunciation 5 – Acceptance of the Appointment Upon acceptance of the appointment, the arbitrator shall commit to the parties, and shall comply with the terms agreed on upon such appointment. The arbitrator composes the Arbitral Court and, in being the sole arbitrator, the Arbitral Tribunal, and has no link or commitment to the party that appointed him/her.

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The arbitrator, during the arbitral proceeding, may not make contact with the party that appointed him/her or the party’s attorney, to comment on anything relative to the arbitral proceeding in progress. The arbitrator may not resign his/her appointment except for any severe reason preventing him/her from performing the assignment. A severe or relevant reason, among others, shall be any severe illness of the arbitrator or members of his/her family or of individuals closely associated with him/her, which shall impair or render difficult compliance with his/her assignment; any in-depth misunderstanding relative to one or the other or both other arbitrators, the parties or their attorneys, which may prevent adequate and impartial development of the assignment; the need to undertake an unpostponable long-lasting journey, incompatible with the assignment in the Arbitral Court or which may substantially be detrimental to the assignment; furthermore, any fact or situation that may characterize an impediment. To be respectful in acts and words. To abstain from making discrediting references or such as may cause any kind of constraint with respect to arbitrations being conducted or having been conducted by other arbitrators.

General Provisions It is permitted to members of the Arbitration and Mediation Center’s Management to act as arbitrator or attorney of a party in arbitrations conducted by the Arbitration and Mediation Center. However, they must abstain from acting in administrative deliberations relative to the respective arbitral proceedings. The members of the Arbitration and Mediation Center’s Management may not be appointed by the President or Vice President to act as arbitrator or as president of the Arbitral Court in the case of article 5.5 of the Arbitration and Mediation Center’s Statute. Due to the obligation to maintain confidentiality and trust, as well as to prevent embarrassing situations for arbitrators in social and academic events, attorneys for the parties must refrain from making comments or conversing with the arbitrators about ongoing arbitral proceedings.

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