Tuesday, October 02, 2007

Publicly traded companies participating in arbitrations... Do they have to disclose such participation to their investors?

Early this week Brazilian newspaper Valor Econômico published an article about disclosure of arbitration to investors by publicly traded companies.

According to the article, just a few companies traded at Bovespa have been disclosing information about arbitrations they are parties to. The article mentions three of such companies: Grupo Pão de Açúcar; Embratel; and Brasil Telecom.

Two things to keep in mind:

  1. The Brazilian Arbitration Act does not have any provision regarding the confidentiality of arbitration (arbitration in Brazil is private, but not necessarily confidential);
  2. The Brazilian Securities and Exchange Commission - CVM does not have any specific rule regarding disclosure of arbitrations, therefore, parties should look for general disclosure rules when in doubt whether or not to disclose any arbitrations t their investors.

To date, neither a Brazilian court has ruled on this subject nor any fines have been imposed by CVM for lack of disclosure of participation in arbitration proceedings.

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