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BRAZIL- APPOINTMENT OF ARBITRATORS IN CLASS ARBITRATION

BRAZIL- APPOINTMENT OF ARBITRATORS IN CLASS ARBITRATION

 

INTRODUCTION

The appointment of the arbitrators and the constitution of the Arbitral Tribunal are crucial stage of any arbitration. As the saying goes, arbitration is only as good as the arbitrators.

As stated in article 13, paragraph 6 of the Brazilian Arbitration Act of 1996, the arbitrator must act with impartiality, independence, competence, diligence, and judgement in carrying out his or her duties (Law n. 9.307). Individuals with relevant connections to the parties or who may be interested in the dispute are prohibited from serving as arbitrators under Article 14 of the Brazilian Arbitration Act.

APPOINTMENT OF ARBITRATORS

In ordinary cases, the claimant appoints one co-arbitrator, the respondent appoints the other arbitrator, and either the two arbitrators or the institution choose the President of the Arbitral Tribunal. If the matter is handled by a single arbitrator, the parties must agree on a name, or the institution will appoint one. It's a straightforward and equitable procedure.

However, the constitution of the Arbitral Tribunal in a multiparty arbitration may be more complicated, as several claimants or respondents may not be able to agree on who to appoint jointly. Therefore, institutions usually provide special rules for the appointment of arbitrators in multiparty cases.

Art. 4.16 of the Arbitration and Mediation Center of the Chamber of Commerce Brazil-Canada's Arbitration Rules (CAM-CCBC Rules) establishes that "in arbitration cases with multiple parties as claimants and/or respondents, if there is no consensus regarding the appointment of an arbitrator by the parties, the President of the CAM-CCBC shall appoint all the members of the Arbitral Tribunal, designating one of them to act as President, with observance of the requirements of article 4.12 of these Rules".

These rules are intended to prevent unequal and unfair treatment between the parties, affecting the arbitration award's validity. If one party cannot choose an arbitrator, the institution should appoint the entire Arbitral Tribunal to maintain the balance between all parties.

Now that there is a growing trend in Brazil in filing class arbitrations, particularly in corporate disputes, it is important to analyse how and if those rules could be applied in class arbitration.

CLASS ARBITRATION

It is vital to note that the interests of various minority shareholders will be represented in a class-action lawsuit filed to defend their homogenous individual rights, even though none of these shareholders will participate in the arbitration individually. The claimant or claimants might act in the entire class, and the arbitral award will have erga omnes effects.

As a result, it is preferable that the procedure for appointing arbitrators and forming the Arbitral Tribunal be made public before its conclusion to ensure the class arbitration's validity and efficacy.

It is relevant to mention that Brazilian institutions still have not enacted specific rules for class arbitrations. In this context, on the one hand, it is important to honour the autonomy of the will of the Parties and give them the chance to agree on the appointment of the arbitrators. On the other hand, it is important to remember that class arbitration is a procedure in which individuals who did not participate in the formation of the arbitral tribunal may subsequently intervene in the case.

Therefore, if all the arbitrators (or the sole arbitrator) are initially chosen by the institution, it is arguable that the process of the constitution of the Arbitral Tribunal would be more legitimate. It would also be a disincentive for a later challenge of the arbitrators or even the filing of an annulment action based on an alleged unfair constitution of the Arbitral Tribunal.

De lege ferenda might be useful if Brazilian institutions adopt rules that provide for the appointment of the Arbitral Tribunal by the institutions themselves in the cases of class arbitrations. Any risks about the validity of the Arbitral Tribunal's constitution and the award it renders will be considerably reduced once clear guidelines are implemented.

 

 

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre shall not be responsible for any errors caused due to human error or otherwise. 

  • INTRODUCTION
  • APPOINTMENT OF ARBITRATORS
  • CLASS ARBITRATION

BY : Aakrashi Jain

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