Brazil and Arbitration

Brazil has been attracting lots of attention from the international arbitration community. This has probably less to do with Brazil’s arbitration-friendly legislation and the pro-arbitration attitude of Brazilian judges, and more to do with the following facts:

1. - Brazil has been experiencing a significant economic growth during the last few years. Along with such growth there has been a significant increase in the number of international arbitrations involving Brazilian parties.

2. - Brazil has become a capital exporter. In 2006 alone, Brazilian capital outflows overseas have surpassed the inflows of foreign direct investment to Brazil. The total amount of Brazilian foreign direct investment abroad is now superior to $106 billion U.S. dollars (Múltis brasileiras crescem mais no exterior at O Globo, January 21, 2007, at 31). The more contracts Brazilian investors sign, the more arbitrations there will be in the future involving Brazilian parties.

I believe that Brazil will play a major role in international arbitration in the coming years. There should be plenty of work for international arbitration practitioners in Brazilian-related arbitrations.

Update on Odebrecht vs. Ecuador

International news agencies mention that Brazilian multinational Odebrecht has accepted the terms of Ecuador to resolve a dispute over the San Francisco hydroelectric plant (you can click here for related news in English).

According to globo.com, Odebrecht deposited approx. US$ 44 million today under the trust of a neutral third party. The amount deposited will be pending satisfaction of a third party independent analysis of the contingencies related to the breakdown of the San Francisco hydroelectric plant.

It's likely that the dispute does not qualify for investor-State arbitration, as Brazil has not entered in any BIT with Ecuador or signed the ICSID Convention. At the moment, there is no news available, as to whether there was an arbitration clause in the agreement signed by Odebrecht for the construction of the power plant.

In any case, it is not acceptable that Brazilian corporations continue to be unprotected by bilateral or multilateral investment treaties in their investments abroad.

Brazilian Investment in Ecuador in trouble

In my posting dated May 04, 2007, I’ve mentioned that there was a strong reason for a review in Brazil’s long-standing aversion to investment-arbitration: the protection Brazilian nationals' investment abroad.

Well, there are clear examples of that taken from today’s international news.

Earlier today, President Rafael Correa of Ecuador ordered the Ecuador’s armed forces to seize assets of Brazilian multinational Odebrecht. The assets are estimated to be worth about $800 million US Dollars (link here).

Today’s news also mentions the troubles of Petrobras (Brazil’s state-controlled oil company) in Ecuador, relating to the surrendering of Petrobras’ oil field concessions in that country (link here).

I don’t know if either Odebrecht or Petrobras made their FDI in Ecuador through subsidiary companies (in a country allowing them to use an investment-arbitration scheme) or using Brazilian vehicles. Also, I don't know any further details of either case, and I'm not making any judgments here. My personal opinion is simply that both companies would be much better off arbitrating their disputes at ICSID or any other neutral arbitral tribunal than litigating against Ecuador in Ecuadorian courts.

Alternative Dispute Resolution

Brazilian newspaper Correio Braziliense, which has a specific law section available every Monday, published yesterday an article I wrote about ADR.

The articles makes a comparison between the U.S. approach to settle disputes out of court with the hesitant 2006 Brazilian court conciliation program.

You can click in the picture to have full access to the text, in Portuguese.

Arbitration and the choice of the arbitral seat

Brazilian newspaper Valor Economico published today an article I wrote about international arbitration and the choice of the arbitral seat.

You can click in the picture to have full access to the text, in Portuguese.