Tuesday, January 02, 2007

The "Dark Side" of Brazilian Arbitration

Brazilian arbitration has a "dark side", which is unknown to foreign practitioners. That's the so-called "arbitragem pirata", as it has been named by Brazilian arbitration practitioners (meaning literally "pirate arbitration", in the sense of fake, fraudulent arbitration companies existing in Brazil).

These fake arbitration companies —they cannot be called "arbitral institutions"— have the sole purpose of generating profit to their owners, performing illegal activities to that end. Most of such companies pretend that they are courts of law and —to appear legitimate to the general public— they use symbols proprietary to the Brazilian court system. It is not uncommon that these fraudulent companies serve fictitious service-of-process notices on people who have never agreed to use arbitration in the first place, and the fake symbols give them "legitimacy".

Another scam used by those fraudulent organizations involves the offering of "mandatory" arbitrator courses, under the false allegation that arbitrators must receive certification in order to act as such (Brazilian law does not require that potential arbitrators have any particular qualifications in order to act as arbitrators, and anybody can act as arbitrators as long as they (i) have legal capacity, (ii) are trusted by the parties, and (iii) act with impartiality, independence, competence, diligence and discreetness). Said "mandatory" courses are advertised in national newspapers such as O Globo, published in Rio de Janeiro.

The good news is that some of these fake arbitration companies have already been shut down by the real courts of law, in several different Brazilian States. It is also worth mentioning a recent initiative of the Brazilian Ministry of Justice, which has created a booklet explaining what arbitration is all about, and warning the general public about the fraudulent arbitration companies that are —unfortunately— still selling their services to the general uninformed population.

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