State of São Paulo Approves Arbitration for Government Contracts

Well-regarded arbitration institutions may be chosen to resolve disputes with the State.

On 1 August 2019, Decree 64,356/2019 was published in the São Paulo Gazette and came into force. The Decree adopts the use of arbitration for certain government contracts.

The Decree provides that the authorities may choose to have arbitration as the dispute resolution mechanism if:

  1. the City of São Paulo is the seat of the arbitration;
  2. Brazilian law applies to the arbitration;
  3. Portuguese is the language of the arbitration (although “technical documents” may be submitted without translations, unless a party challenges it);
  4. the courts in the City of São Paulo have exclusive jurisdiction to resolve disputes (including interim relief) relating to the arbitration (if any);
  5. the claimant advances the arbitration costs;
  6. the arbitration panel has three arbitrators (one arbitrator in case of smaller or less complex disputes);
  7. no legal costs (attorneys’ fees) can be awarded by the arbitrators (except for sucumbência, which is legal costs payable directly to the winning lawyers).

Most of the requirements above are standard. However, exclusivity of São Paulo courts even for interim relief (such as for injunctions) is at least odd, as orders from São Paulo’s courts are unlikely to be promptly enforceable outside of Brazil.

Importantly, the arbitration proceedings must be public (i.e. not confidential) except if otherwise provided by law.

The arbitrations may be conducted under the rules of arbitration institutions or ad hoc. In ad hoc arbitrations, the UNCITRAL Rules must be adopted.

The arbitration institutions must be previously approved by the São Paulo Attorney General’s Department. Foreign institutions may be registered. The institutions must:

  • have space available in the City of São Paulo to host hearings and provide secretarial services “without additional cost to the parties”;
  • be at least five years old;
  • fulfil the requirements for receiving payment by the State of São Paulo (this requires registration in the CAUFESP); and
  • have “recognised good reputation, competence and experience in the provision of arbitral proceedings” involving government parties.

This move by Governor João Doria will no doubt be welcomed by foreign investors, especially those interested in government procurement processes and public-private partnerships (PPPs).

For more information contact me.

Last modified: August 29, 2019