BRAZIL: An Introduction to Dispute Resolution: Arbitration
In Brazil’s legal landscape, 2024 is a year that marks pivotal shifts and emerging trends. This evolving landscape encompasses arbitration dynamics in infrastructure disputes, a surge in agribusiness litigation, and the intricate realm of conflicts relating to data protection.
This article explores the key forces influencing these legal aspects, considering both global economic influences and Brazilian legislative changes. As we navigate through these legal waters, the analysis aims to provide insights into the factors that will define Brazil’s legal framework this year.
Infrastructure and public administration
While investment arbitrations are not yet part of the Brazilian legal scene, there has been a significant increase in arbitrations involving infrastructure matters between private entities and the government in recent years, especially as a result of legislative amendments authorising the insertion of arbitration clauses in public contracts.
Looking ahead, a surge in civil construction works is anticipated by the federal government, alongside similar initiatives by municipal governments, coinciding with the end-of-year municipal elections. All of these factors are expected to foster the continuation and expansion of this trend.
This trajectory gains momentum as parties engaged in contracts with the government perceive arbitration as a mechanism enabling quicker and more efficient resolution of disputes, particularly ones that are socially relevant, such as infrastructure disputes.
Agribusiness litigation
Despite the economic challenges of 2023, marked by high interest rates and inflation, Brazil witnessed substantial growth in agribusiness, with record harvests of cereals and oilseeds. This growth, in turn, has caused a rise in disputes within the sector, leading to the development of a specific niche within the litigation domain: agribusiness arbitration. This topic has become a focal point in numerous lectures, articles, reports and academic competitions, garnering significant attention throughout the year.
Given the sector’s pivotal role in the Brazilian economy, holding a significant share of the Brazilian GDP in 2023, agribusiness arbitration is expected to carve out an even more substantial space in the Brazilian legal landscape in 2024.
Arbitration within the Brazilian legal environment
A few years ago, the prevailing consensus was that arbitration was a somewhat exclusive and expensive means of dispute resolution. However, this perception has changed in recent years, becoming more attuned to the Brazilian reality.
The increase in commercial arbitrations in Brazil is not a new phenomenon, but what stands out is the rise in medium-sized arbitration proceedings. This shift has been made possible by the ongoing democratisation of arbitration proceedings and the establishment of several arbitration chambers within the Brazilian arbitration scene.
Consequently, what was once considered an “imported” procedure has progressively adjusted to the domestic legal sector and taken root in Brazil. Such trend is expected to remain in force throughout 2024.
Arbitrations involving Asian investors
In 2024, an expected rise in arbitrations involving Asian investors in Brazil can be attributed to the strengthening of economic ties between Brazil and Asian countries.
The growing interest of Asian investors in Brazil’s wide diversity of sectors, such as agriculture, infrastructure, and energy, has led to a surge in cross-border investments in recent years. For example, 2023 was marked by a significant increase in Chinese investment in the Brazilian energy sector. As a result, the legal sector has seen an increase in the number of disputes involving Asian parties, due to the increased presence of Asian investors doing business in Brazil.
We cannot expect anything different for 2024: experts and authorities who attended the Brazil-China Meeting in January 2024 have already stated that the Brazilian agribusiness logistics offer a great investment opportunity for China.
As these economic partnerships flourish, disputes over contractual obligations, regulatory changes and investment protection are likely to arise, prompting an increase in arbitration cases in 2024.
Disputes involving technology and data protection
Among the countless effects of the constant advance of technology is the emergence of new types of conflicts and, consequently, the constant need to update appropriate legal solutions. This trend was observed in 2023, notably in conflicts involving matters addressed by the General Data Protection Law (LGPD): Brazil saw an 81% increase in court decisions based on the LGPD. The projection for 2024 is that the courts increasingly apply the LGPD in disputes involving data protection, seeking to standardise case law and, consequently, provide greater legal certainty on the subject.
Additionally, as the development and use of artificial intelligence tools continue to rise, 2024 should witness new disputes on this front. These could resemble the legal action initiated by The New York Times against Microsoft and ChatGPT, alleging the “copying and usage” of its articles.
Corporate disputes
For 2024, the legal landscape heralds an increase in disputes pertaining to corporate matters, particularly involving shareholders and private equity matters.
The evolving dynamics of business environments, coupled with the global economic rebound, are expected to set the stage for an increase in corporate disputes. Matters that are relevant to shareholding, including corporate social responsibility and ethics, are expected to take centre stage as stakeholders and investors demand greater transparency and accountability from corporations. It is also important to note that Bill 2925/23 – which proposes amendments to the Brazilian Capital Markets Law – is expected to be voted on in 2024, which may result in disputes involving its provisions.
In addition, the private equity sector is expected to play a pivotal role in shaping the corporate dispute landscape in 2024. The ongoing trend of increased investment by private equity players in the real economy, driven by favourable market conditions and a quest for higher returns, will likely result in greater transactional complexities. As private equity firms engage in such deals, navigating issues such as fund structures, valuation and regulatory compliance, disputes over deal terms become much more likely.
Consequently, a notable increase in legal disputes within the corporate sphere is expected for 2024, reflecting the complexities that are inherent in these transactions.
Insolvency and judicial reorganisation
Global insolvency and court-supervised reorganisation proceedings have increased considerably in the last two years, largely as a result of the COVID-19 pandemic, including a consistent trend of high global inflation and increase in interest rates.
In Brazil, specifically, 2023 saw a notable 62% increase in the number of filings for court-supervised reorganisation proceedings compared to 2022. Some of Brazil’s most prominent companies make up this percentage, such as Americanas.
Although the Brazilian economic landscape has improved in recent months, requests for court-supervised reorganisation and insolvency are the result of a process that began years ago, which indicates that the number of indebted companies resorting to the courts to organise their debts will continue to increase throughout 2024.
Climate litigation
In 2024, a significant increase in legal disputes and arbitrations relating to climate litigation is expected within the Brazilian legal sector. Fuelled by a growing awareness of environmental issues and the expanding impacts of climate change in Brazil, citizens, communities and organisations are increasingly inclined to seek legal remedies to address environmental harm and hold companies accountable for their role in climate change. This heightened environmental consciousness is likely to trigger an increase in lawsuits, including legal actions against major corporations accused of environmental negligence in international arbitration cases involving cross-border climate conflicts. Furthermore, the implementation of more stringent environmental regulations and policies by the Brazilian government may lead to legal disagreements over compliance, resulting in legal disputes between entities and regulatory bodies.
The complexity of climate litigation, combined with the urgency to address environmental challenges, contributes to the projection of a substantial increase in disputes relating to climate matters.
These projections point towards a dynamic dispute resolution landscape marked by new trends and challenges in 2024.