Alessandra Renata Rasquel Noronha
Lawyer at Marcos Martins Advogados
The purpose of this article is to explain the concept and benefits of arbitration as a means of resolving disputes relating to available property rights and also to explain the possibility of third parties financing the costs of the procedure.
Arbitration originated a long time ago with the enactment of Law 9.307 of 1996, which was responsible for laying down the particularities of the procedure. However, it was with the advent of the 2015 Code of Civil Procedure (Law No. 13.105 of 2015) that the arbitration procedure gained strength, since this law encourages composition between the parties.
Arbitration – an alternative means of resolving disputes through the intervention of one or more people who receive their powers from a private agreement, deciding on the basis of it, without state intervention, and the decision is intended to have the same effectiveness as a court judgment – is made available to anyone, to resolve conflicts relating to property rights over which the disputants can dispose. (CARMONA, 2006, p.51)
The subject of discussion in arbitration, according to Law 9307/96, must deal solely and exclusively with available property rights, i.e. rights that can be appropriated or disposed of, rights that the person (individual or legal entity) owns and can negotiate, assign, donate, etc., excluding issues relating to the family and personality rights, for example.
The main objective of arbitration is to stimulate an alternative solution to the conflict in a faster and more beneficial way for both parties, replacing the traditional state jurisdiction, which, by the way, has many complaints about its slowness and lack of effectiveness.
The big question is: What are the differences between arbitration proceedings and court proceedings? And why opt for arbitration?
The arbitration procedure differs from the judicial process in some aspects, such as its particular character, the way it is set up, its flexibility, secrecy, speed, the autonomy of the parties, the guarantee of neutrality, the specialization of the arbitrators, informality, the payment of costs, etc.
As for how it is set up, arbitration can be provided for in a contract, where there is an arbitration clause (the parties undertake to settle the conflict in the contract in question through arbitration). However, it can also originate when, at the parties’ discretion, after the contract has been concluded, they opt, with the express agreement of both parties, for arbitration.
It is also worth mentioning that an arbitration award is enforceable and produces the same effects as an award handed down by the courts between the parties. Therefore, if it is a judgment, it constitutes an enforceable instrument. However, it should also be mentioned that the award is unappealable, i.e. its effects become immediate, which guarantees the speed and objectivity of the procedure.
Another advantage of the arbitration procedure is that the choice of arbitrators is made by the parties themselves, who will be able to opt for arbitrators with technical and specific knowledge of the dispute being discussed, which will clearly result in speeding up the procedure and a qualified and wide-ranging judgment. The only caveat is that, in order to guarantee a fair and beneficial decision, the arbitrators chosen cannot have personal interests in the resolution of the dispute, i.e. neutrality must be respected.
The arbitration procedure is confidential, so only the parties involved in the conflict can have access to and knowledge of the documents submitted, evidence, reports, testimony and discussions, in other words, it is completely different from the judicial process in which the publicity of procedural acts predominates.
Confidentiality is a strong feature of arbitration proceedings, as many companies wish to preserve their commercial image and also guarantee the normal progress of their business activity.
On the other hand, a major difficulty encountered in arbitration proceedings is the high costs, sometimes much higher than those incurred by the Judiciary in deciding a similar case. However, this obstacle has been overcome by the possibility of third-party financing of the arbitration procedure.
Third-party financing occurs when one of the parties opts for the assistance of a financier (financial institution, insurance company or funds specializing in litigation financing), which assumes the credit debts of the financed party on part or all of the amount discussed in the arbitration and in return receives, at the end, the credits discussed in the claim, whether total or partial, depending on the agreement.
Third-party funding of arbitration has been gaining momentum in Brazil and is a major novelty in the field of out-of-court dispute resolution.
With the growing advance of this possibility, on July 20, 2016, the Advisory Board of the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (CAM-CCBC) approved Administrative Resolution No. 18, which is a recommendation regarding the existence of third-party funding in arbitrations:
Article 1 – Third-party financing is considered to exist when a natural or legal person, who is not a party to the arbitral proceedings, provides full or partial resources to one of the parties to enable or assist in the payment of the costs of the arbitral proceedings, receiving in return a portion or percentage of any benefits accruing from the arbitral award or agreement. (2016)
Financing is an advantageous means both for investors and for companies or individuals who do not want to expose their assets to the risk of a lawsuit or who cannot afford to pay for the procedure.
Therefore, in the face of the economic crisis facing the country, it is a strong option for settling disputes out of court.
The Marcos Martins Law Firm is able to advise companies or individuals who wish to promote conflict resolution through arbitration, with the aim of achieving greater speed and benefits for its clients.
References
BRAZIL. Law 9.307 of September 23, 1996. Provides for arbitration. Available at: <http://www.planalto.gov.br/ccivil_03/leis/L9307.htm>. Accessed: April 20, 2017.
CARMONA, Carlos Alberto. Arbitration and Process: a commentary on Law 9.307/96. 2. ed. rev., atual. e ampl., São Paulo: Atlas, 2006.
CENTRE FOR ARBITRATION AND MEDIATION, Administrative Resolution 18 of July 20, 2016. Available at: <http://www.ccbc.org.br/Materia/2890/resolucao-administrativa-182016>. Accessed on: April 20, 2017.
