By Fabio Marques

The text of the Decree regulating the establishment of arbitration clauses for resolving conflicts in which the Direct Administration and its autonomous bodies are parties was recently subject to public consultation.

The possibility of establishing an arbitration clause in contracts involving direct and indirect administration came with the legislative change introduced by Law 13,129/15, which amended Law 9,307/96 – the arbitration law – through the introduction of the first and second paragraphs of article 1, in addition to the provision introduced by §3 of article 2 of the Arbitration Law, the latter restricting arbitration to questions of law and respect for the principle of publicity.

It is worth remembering, however, that despite the express provision contained in Law 13,129/15, the use of arbitration by the Public Administration was already provided for in specific legal instruments, such as in the laws 8.987/953, 9.478/97, 10.233/01 and 11.079/04, which regulate the concession and permit regime, as well as the bidding and contracting of public-private partnerships by the Administration.

The Decree of the State of São Paulo regulating the use of arbitration by the direct public administration and its autarchies in the State of São Paulo, stipulates, firstly, that the arbitration process will preferably be “institutional”, that is, the existing Arbitration Chambers will be appointed institutionally, thus avoiding the appointment ad hoc, which, however, may occur in specific cases as long as the appointee meets the criterion of notable specialization.

The subject matter of arbitration must refer to available rights, that is, rights that the State can dispose of, usually identified with rights established in contractual relationships in which the State acts as if it were a private entity, but, due to the public law regime, this relationship is regulated by public law rules.

The Law requires that in common concession contracts, public-private partnerships and obligatory instruments with a value greater than R$100,000,000.00, the arbitration clause demonstrates the advantage of choosing the arbitration method in relation to the usual methods of conflict resolution, that is, the use of the judiciary.

The use of arbitration through one of the institutional Arbitration Chambers that has a reputation in the election of its arbitrators is an advantage for the parties to the contract, as they will be able to resolve the conflict through arbitration more quickly and effectively, ensuring the full application of the principle of efficiency, as provided for in article 37 of the Federal Constitution.

Arbitration clauses that stipulate arbitration agreements must contain the following requirements:

I – the capital of the State of São Paulo as the seat of arbitration;

II – the choice of laws of the Federative Republic of Brazil, with judgment based on equity prohibited;

III – the adoption of the Portuguese language as the language applicable to arbitration;

IV – the election of the court of the district where the arbitration is held as competent for the processing and judgment of related or precautionary demands, when applicable;

V – the advance payment of expenses by the arbitration claimant;

VI – the composition of the Arbitration Court by three members, appointed in accordance with the regulations of the chosen arbitration chamber, with a sole arbitrator being able to be chosen in cases of lesser value, based on criteria established by the State Attorney General's Office, or by agreement between the parties.

The prohibition of judgment by equity is related to the legal regime of public law to which the public administration is subject, which is obligatorily limited to the principle of legality.

The doctrine refers to equity according to the preposition that precedes the name: (a) Decision with equity: is any decision that intends to be in accordance with the law, law as the supreme ideal of justice; (b) Decision by equity: is based on the conscience and perception of justice of the judge, who does not need to be bound by rules of positive law and pre-established methods of interpretation; (c) Decision using equity as a supplementary means of integration and interpretation of norms: in this case the decision is made in order to find the balance between norm, fact and value (application of the law to the specific case), in situations where there is a contradiction between the legal norm and reality, creating a gap.

In this case, the prohibition refers to the decision based on equity, since public administration is closely linked to the principle of legality, as they say, while for individuals the limit is the law, the public administration entity can only do what is provided for in the law, and, therefore, a judgment on a contractual issue is not permitted, a contractual interpretation that does not have a judgment based on the interpretation of the legal texts.

Furthermore, in relation to public contracts, there is a link to the bidding process that precedes it and that binds the winner and the public administration, and the admission of an arbitration clause that used the judgment by equity could serve as a circumvention of the principle of equality, protected by the bidding process for public contracts. 1st) Decision with equity: is any decision that intends to be in accordance with the law, law as the supreme ideal of justice;

Another important aspect refers to the mandatory publicity in arbitration procedures involving the public administration, as expressly required by the Federal Constitution, which enshrined the principle of publicity for acts of the public administration, since arbitration procedures are usually conducted in secret.

In general, the so-called alternative dispute resolution procedures, including arbitration, are procedures that offer the parties in conflict a faster and more efficient way of resolving the issue, and for this reason better serve the interests of the parties involved, especially if the direct Public Administration is at one of the poles.

The adoption of arbitration in these cases avoids the search for a solution before the congested Judiciary and, in addition, allows the judgment of certain issues by technicians with specific knowledge of the contract and the affected area, as well as public law, allowing the administrative and economic efficiency of the contract to be achieved.