Brazilian Federal Attorneys’ Office (AGU) established criteria for appointment of arbitrators by the Federal Union in arbitrations 

In brief

After the Reform of the Brazilian Arbitration Law, Federal Union and other Federal institutions have been increasingly participating in arbitrations, a great number of which involve high values and/or sensitive issues. There were doubts as to which criteria the Federal Union could adopt to choose arbitrators, which is regulated by this new ruling, granting more legal security for arbitration with the Brazilian public administration.

Key takeaways

The Ruling grants some discretion for the Federal Union to appoint arbitrators, as long as the individuals chosen are independent, impartial and do not have conflict of interests. The Federal Union should also consider strategic issues such as the background and experience of the arbitrator, as well as the choice of the arbitrator from the counterparty.

In depth

On March 07, the AGU established in its Ruling (Portaria Normativa) 42, the following criteria for appointment of arbitrators by the Federal Union in arbitrations in which it is a party, including:

• full legal capacity under Brazilian Law;
• knowledge compatible with the nature of both the contract and the conflict;
• absence of any relationship with the parties or the case which would render a judge prevented from judging the case (impedimento and suspeição) under the Brazilian Code of Civil Procedure;
• absence of conflict of interest, as definted in international standards and/or the rules of the arbitral institution; and
• not to occupy any position at the Federal Attorneys’ Office, the Federal Revenue Office or the Central Bank of Brazil.

 As to the requirement of compatible knowledge, the following elements shall be considered:

• professional formation;
• area of expertise;
• nationality; and
• proficiency in the applicable languages.

 The choice of arbitrators shall be made by the AGU’s Arbitration Division (Núcleo Especializado em Arbitragem), which can also take into account:

• the arbitrators’ availability;
• the arbitrators’ experience in arbitrators;
• the number of appointments by the federal Union; and
• the profile of the arbitrator appointed by the other side.

 Although this Ruling does not bring anything complelely new compared to the criteria the Federal Union already adopts for appointing arbitrators, it gives more estability and helps in the justification of the choice, which is necessary in view of the principle of transparence of public administration, reflected in art. 154 of the new Brazilian Public Contracts’ Law. In addition, it is interesting to note that this Ruling acknowledges that the AGU can take into account, when selecting the arbitrators even in domestic cases, international standards such as the IBA Rules on Conflict of Interest.