On 2 May 2011, the Brazilian Federal Supreme Court, in association with the Brazilian Arbitration Committee, hosted the seminar "Judiciary and Arbitration: a Necessary Dialogue". The event was well attended, delegates including ministers, judges, practitioners and academics (see Legal update, Brazilian Supreme Federal Court hosts event highlighting the importance of mutual support between arbitration and the judiciary).

Supreme Federal Court Justice Ellen Gracie opened the seminar presenting the advantages of arbitration compared to court proceedings, highlighting that parties to arbitral proceedings may avail themselves of highly experienced arbitrators who can bring their expertise to the dispute and offer more suitable resolutions. She was followed by former Justice, and current Brazilian Permanent Court of Arbitration judge, Francisco Rezek, who remarked on the consistency and operability of the Brazilian Arbitration Act, stating that unfavourable judicial decisions towards arbitration are increasingly uncommon.

Special focus was also given to the 2014 FIFA World Cup and the 2016 Summer Olympic Games. Justice Nancy Andrighi, from the Superior Court of Justice, suggested the adoption of arbitration clauses in the agreements to be signed for the construction of stadiums, sports complexes, airports, hotels and so on. Investment in infrastructure, tourism and accommodation for these events is substantial and often involves complex agreements which would most likely give rise to prolonged disputes if submitted to the courts.

In a further effort to promote and deepen the debate, the Brazilian Arbitration Committee held its 10th annual congress in Brasília in September 2011. The event was supported by the Supreme Federal Court, Superior Court of Justice and the National Council for Justice (see Legal update, Brazilian Arbitration Committee hosts 10th annual Arbitration Congress).

Since the enactment of the Brazilian Arbitration Act in 1996 and the Supreme Federal Court confirmation of its constitutionality in 2001, arbitration in Brazil has achieved great stability and credibility. Therefore, in recent years legislators have been striving to modernise federal legislation to allow for the participation of state and state-owned entities in arbitration.

One of the key features of the congress was the presence of justices of the Superior and Supreme courts as debaters, along with representatives from regulatory agencies, ministries and secretariats, congressmen, academics and practitioners from several countries. The debaters tackled difficult and interesting questions such as:

The results of the Congress were immediate: the federal government, its ministry of justice and the secretariat for legislative affairs executed a co-operation agreement with the Brazilian Arbitration Committee for the latter to provide specific legal assistance on legislative matters involving arbitration.

In October 2011, the Superior Court of Justice (STJ) affirmed the validity of a submission agreement executed following a dispute arising under a public tender contract. The STJ disregarded the respondent's main argument that the submission agreement was invalid because arbitration was not provided for in the public request for proposals (PRFP) (see Legal update, Brazil Superior Court of Justice rules in favour of arbitration in public contracts). The case involved a state-owned company and a company incorporated to tender for an infrastructure project. Although there was no arbitration provision under the public request for proposals, or the public tender contract, the parties consented to execute a submission agreement.

The decision is extremely important, considering the Brazilian courts' reluctance to accept any solution on public interest issues being taken outside state courts. In that sense, the STJ mitigated administrative law principles and broadened the scope of both the Brazilian Arbitration Act and the Public Tender Contracts Act. The court not only allowed for arbitration in public-private joint ventures and public utility concessions but also confirmed the possibility of arbitration in contracts stemming from public requests for proposals, adding that post-dispute submission agreements are as valid as pre-dispute arbitration clauses.

The Brazilian arbitration community anxiously awaits developments regarding the possibility of a New Code of Civil Procedure in 2012. Amongst a thorough review on numerous areas of civil procedure, the restructuring of the process for recognition and enforcement of foreign arbitral awards stands out.

Since 2004, the Superior Court of Justice has been the court with jurisdiction to process the recognition of arbitral awards which are then subject to enforcement at a federal lower court. However, a proposal from a group of practitioners and academics has reached Congress (where a commission is discussing a New Code of Civil Procedure) to simplify the procedure further. The proposal intends to treat domestic and foreign awards equally, granting the latter enforceability irrespective of previous recognition. In this new system, if one of the parties objects to enforcement, the case would be heard by the Superior Court of Justice.

Brazilian congressmen and the academic community are still to reach a consensus on whether or not such change would impair the forward momentum arbitration has been experiencing in Brazil.

In late 2007, Gol Airlines Group (VRG) initiated arbitral proceedings before the ICC Court of Arbitration against MatlinPatterson and three other parties. VRG claimed, in brief, that the price of USD 275 millions was inflated due to fraud in the acquired company's accounting records and sought indemnification. The arbitral tribunal rendered an award holding MatlinPatterson liable for the payment of the requested indemnification.

In December 2010, MatlinPatterson filed a request to set aside the arbitral award before the São Paulo state lower court. Among other arguments, two issues are of particular interest:

In July 2011, the lower court judge, dismissing MatlinPatterson's request, held that:

This conclusion was based on different grounds, namely:

In August 2011, MatlinPatterson filed an appeal against the lower court ruling. The appeal was remanded to the São Paulo Court of Appeals in November 2011. Further developments on this highly controversial subject are expected in 2012.

In Article, Brazil: round up 2010/2011, we had anticipated a decision on a media case involving a former Justice of the Brazilian Federal Supreme Court and Permanent Court of Arbitration Judge. The judge had resigned from an arbitral tribunal in which he acted as chairman after having his impartiality challenged in March 2010.

To date, no judicial decision has explicitly ruled on an arbitrator's conflict of interest as grounds for setting aside arbitral awards.

The arbitral proceedings concerned a corporate dispute commenced by Elétron, a company controlled by a Brazilian banker (Banker), related to the shareholding of the second largest mining company in the world (Brazilian company, VALE).

After rendering a partial award in favour of Elétron, the arbitral tribunal discovered that the chairman of the tribunal had previously served as a counsel for the Banker. That relationship was not disclosed to the parties in his statement of independence (which was later published in the press in violation of the confidentiality of the arbitral proceedings). When questioned on the existence of any previous legal service on behalf of the parties, the chairman had answered "no".

The former Justice argued that his previous firm had merely provided the Banker with a legal opinion concerning judicial proceedings in Italy and that this information was disclosed to the parties in a conference call.

The final decision on the setting aside of the partial award is expected in 2012. We will continue to report on developments.