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.