Corporate arbitration: what changed after the Petrobras trial?

In a change that occurred in 2015, the Arbitration Law now expressly allows the participation of the Union – as well as other federative entities and their respective agencies, foundations, public companies and mixed-economy companies.[3] – in arbitration proceedings. For this to occur, the rights in conflict must necessarily be patrimonial and available, that is, those that can be valued financially and freely negotiated by their holders. The STJ, in an emblematic judgment on the conflict of state and arbitration jurisdictions (Conflict of Jurisdiction nº 139.519/RJ, which allowed the resolution of a dispute between Petrobras and the National Petroleum Agency via arbitration), understood that, if a certain matter can be the subject of a contract administrative, if there is a conflict, it can also be decided in an arbitration procedure.

Obviously, as arbitration jurisdiction emanates from the will of the parties, it is necessary for the Union to agree with the counterparty to institute arbitration as the means of resolving the conflict, whether before or after the conflict arises. In the Petrobras case, the Union's adherence to the arbitration clause seems clear to us in the wording of article 58 of the company's bylaws.

Returning to the case, the dispute began in mid-2016, when a group of foreign shareholders of Petrobras requested the beginning of an arbitration procedure before the Market Arbitration Chamber (CAM) against the company and the Union, in the position of controlling shareholder. , seeking compensation.

Notified to comment on the request for the institution of arbitration, the Union defended itself against its inclusion as a defendant, with the main grounds being: the lack of legal authorization for arbitration with the public administration when the arbitration clause was approved (in 2002) and the matter discussed in the procedure had content of public interest that could not be subject to arbitration.

On trial first faction, the president of CAM understood that there was no reason to terminate the procedure before the constitution of the arbitration court. The Union then filed a lawsuit in Federal Court seeking a declaration that the arbitration clause provided for in Petrobras' Bylaws would not apply to it, with a request for provisional relief to prevent the arbitration from continuing.[4]

The Federal Court granted provisional protection and, at the beginning of 2017, the minority shareholders raised a conflict of competences, requesting the STJ to define who is responsible for deciding on the Union's submission to the arbitration clause: whether to the arbitration court or to the Federal Court.

At the STJ, the conflict of competences was distributed to the rapporteur of Minister Nancy Andrighi, famously recognized as a defender of arbitration in the Judiciary. The provisional protection was temporarily revoked by her, authorizing the continuation of the arbitration initiated by the minority shareholders.

In a plenary session of the Second Section, the minister maintained her understanding of granting the arbitration court the competence to decide on the Union's submission to the statutory arbitration clause, as she understands that it is up to them to give the first word on the existence, validity and effectiveness of the aforementioned clause. On the other hand, Minister Luis Felipe Salomão understood that the Federal Court had jurisdiction to process and judge the case, on the grounds that:

Following the vote of Minister Felipe Salomão by the majority of ministers, the decision of the Second Section came as a shock to scholars of arbitration and corporate law. The foundations of the ruling drew attention especially in view of the STJ's own jurisprudence, which for decades had been recognizing that it is up to the arbitrators to decide on their own jurisdiction, so that the Judiciary should not carry out premature examinations on the existence, validity and effectiveness of the arbitration agreement[5]; the arbitration clause provided for in the company's bylaws obliges all its shareholders, whether or not they have agreed to such provision[6]; and the absence of an express reference to arbitration with the Public Power, in the original wording of the Arbitration Law, does not prevent the State from using and submitting to arbitration jurisdiction[7].

In view of the profound discrepancy between the ruling and the jurisprudence already consolidated in the STJ, it is difficult to assess at this moment whether the decision is isolated and specific to the Petrobras case or whether it is a true shift in the position of the Second Section. The judgment on Petrobras' conflict of competences does not automatically bind other similar cases. Its foundations, however, can guide other judgments to the same result.
This results in an immediate concern that revolves around the extreme legal uncertainty for those under jurisdiction and the market as a whole regarding the effectiveness of other arbitration arbitration clauses. The so-called “competence-competence principle”, provided for in article 8, paragraph, appears to have been mitigated. first, the Arbitration Law, which gives arbitrators the primacy to decide on their own jurisdiction. Originally, the STJ understood that – except in some very exceptional situations – the Judiciary could not comment on the existence, validity and effectiveness of the arbitration agreement before the arbitration court. Such is the strength of the principle of competence-competence that the STJ has already applied it even though the issue discussed involved the forgery of the signature entered in the arbitration clause[8].

However, by excluding the Union from the arbitration procedure before the issue was decided by the arbitration court, the STJ ended up going against this rule and its own jurisprudence. According to the new decision, a new orientation is suggested in the sense that only discussions regarding the validity and effectiveness of the arbitration clause would be subject to the first arbitration court. Therefore, challenges related to the existence of the arbitration clause would become the responsibility of the Judiciary. This point is especially relevant because it covers discussions related to the extension of the arbitration clause.

From a legislative point of view, the central foundation invoked by Minister Felipe Salomão, in the sense of requiring legal and specific provision for the Union to require arbitration jurisdiction, suggests the creation of a competing jurisdictional system for disputes involving mixed-economy companies .
According to the STJ ruling, the Arbitration Law is not sufficient legislative authorization for the Union, as controlling shareholder, to submit to arbitration jurisdiction, requiring specific regulation to do so. As this “specific authorization” does not yet exist, a serious problem of jurisdiction is created in the necessary passive joint litigation actions. For example, in cases of annulment of meeting resolutions, minority shareholders will be obliged to submit the dispute to the CAM, but will not be able to sue the Union.

All of this can endorse a practice – most of the time mistaken – of requesting the Judiciary to prevent the continuation of an arbitration procedure or to exclude a certain party from it before the arbitration court can assess the pertinence of the request and even if adherence to the convention of arbitration is unambiguous. It is the risk of changing the rules of the game after the participants themselves have defined them. And as arbitration clauses in corporate statutes tend to adopt wording similar to that suggested by the arbitration chamber (in this case, the CAM), this risk is further increased for other publicly traded companies that have the Union or states as shareholders (Vale, Banco do Brazil, Eletrobras, etc.).

[1] STJ; Conflict of Jurisdiction nº 151.130/SP. Second Section; Rapporteur for the ruling: Minister Luis Felipe Salomão. Judgment date: 27/11/2019. Publication date: 11/02/2020.

[2] In Re Petrobras Securities Litigation (14-cv-9662). Judge Jed. S. Rakoff’s Opinion on the Motion to Dismiss. Available at: , accessed on 1/2014/09662 .

[3] In fact, the issue of the use of arbitration by mixed-capital companies has already been very well addressed by the STJ when deciding Special Appeal No. 612.439/RS, of 2006, in which it was decided that contracts signed by mixed-capital companies are subject to the ordinary rules applicable to any other business company, there is no reason to depart from the arbitration agreement agreed by the CEEE in an electricity purchase and sale contract.

[4] This type of precautionary request, aimed at preventing the establishment or continuation of arbitration procedures, is not uncommon in Brazil, especially in the context of Public Administration or mixed-capital companies. According to Daniel Levy (The Interactions Between the Judiciary and Arbitration. In: LEVY, Daniel (Coord.). Arbitration Course. São Paulo: Revista dos Tribunais, 2018. p. 327), represents a form of harmful intervention by the Judiciary of the arbitration system, being the most patent proof of the immaturity of the principle of competence-competence in a country.

[5] STJ; Aglnt no AREsp 976.218/SP. Third Panel; Rapporteur: Minister Moura Ribeiro. Judgment date: 17/06/2019.

[6] STJ; REsp nº 1.727.979/MG. Third Panel; Rapporteur: Minister Marco Aurélio Bellizze. Judgment date: 12/06/2018.

[7] STJ; REsp nº 904.813/PR. Third Panel; Rapporteur: Minister Nancy Andrighi. Judgment date: 20/10/2011.

[8] STJ: REsp nº 1.550.260/RS. Third Class. Rapporteur: Minister Ricardo Villas Bôas Cueva. Judgment date: 12/12/2017.

*Bruno Viana, associate lawyer at Freitas Ferraz Capuruço Braichi Riccio Advogados, collaborated.