Gisela Mation, Leandro Felix and Mateus Zottarelli

Just open the days' newspaper to come across news about impasses, delays, and suspension in the realization of works and infrastructure projects arising from bidding contracts, discussions about the termination of bidding contracts and reports on disputes that drag on for years in the judiciary without a definitive resolution. For this reason, when it comes to bidding contracts, one of the points that most arouses the attention – of experts and laypeople – is the general desire to prevent disputes or give them a quick and efficient solution, especially in contracts involving works and infrastructure projects, to ensure continuous execution, within the established deadlines and according to the budget for in order to preserve the contractual relationship between the private sector and the public agent.

The new Bidding Law (Federal Law No. 14,133/21), sanctioned on April 1, has everything to promote improvement in public management. The new legal framework, which had long been requested by experts, replaces the old Bidding Law (Federal Law No. 8,666/93), the Auction Law (Federal Law No. 10,520/02) and the Differentiated Contracting Regime (Federal Law No. 12,462/11), in addition to attaching various topics related to public procurement.

In the midst of so many amendments promoted by the new law, it is worth mentioning the chapter "Alternative Means of Dispute Resolution", which– in line with recent legislative practice in similar situations – establishes the possibility of using appropriate means for the prevention and resolution of conflicts related to available property rights arising from bidding contracts.

The new Bidding Law states that, in the contracts governed by its dictates, "alternative means of prevention and resolution of disputes may be used, notified by conciliation, mediation, the dispute resolution committee and arbitration" (art. 151).

The possibility of resolving disputes in the field of arbitration, although it is not in itself an innovation (since the arbitrability of disputes involving public authorities is a peaceful matter and of wide practical application in Brazilian law), is quite commendable, especially because it brings greater legal certainty to those involved.

Although there was no express provision to this effect in the previous legislation, several public contracts already had an arbitration clause, which were included based on of Article 54 of the former Bidding Law, which provided for the possible application of the "provisions of private law" in the context of bidding contracts. Subsequently, the arbitrability of disputes involving the government was overcome with the reform of the Arbitration Law, which occurred in 2015. She eventually confirmed the understanding that "[direct and indirect] public administration may use arbitration to resolve disputes relating to available property rights" (art. 1, §1).

Regarding to the objective arbitrability of disputes involving the public authorities, the new Bidding Law – in a very positive way – also aligns with the consolidated arbitration practice. The law brings a list of hypotheses in which disputes related to bids will deal with available property rights, such as issues related to:

  • restoring the economic and financial balance of the contract;
  • non-termination of contractual obligations by any of the parties; and
  • calculation of indemnifications.[1]

However, if this list is merely an example, other disputes arising from the bidding agreements, provided that they also see on available property rights, may also be resolved by arbitration.

The legislator made a point of providing that any arbitration proceeding involving public procurement under the aegis of the new Bidding Law should always be lawfully and will comply with the guidelines of the principle of advertising. This provision also goes against what the Arbitration Act provides since 2015: "[a] arbitration involving public administration shall always be lawfully binding and shall respect the principle of publicity" (Art. 2§3).

The new Bidding Law establishes that bidding contracts may be added to allow the adoption of alternative means of conflict resolution. At this point, the legislator's intention converges with statements 10 and 18 of the 1st Administrative Law Day, which have, respectively, on the possibility of:

  • the Public Administration proposes an additive to administrative contracts arising from bidding in order to include alternative methods to the Judiciary for conflict resolution; and
  • inclusion of arbitration clause in administrative contracts, although there is no provision in the notice for this.

Again, therefore, the current Bidding Law has well-walked towards favoring the adoption of arbitration in disputes arising from bidding agreements.

If the new law does not present any further news in arbitration scope, what certainly draws attention is the possibility of using a committee for dispute resolution, the disputes boards, which may deal with any issues relating to available property rights that are departing from the bidding agreements. The use of dispute boards its main objective is to prevent the emergence of disputes during the execution of the contract from impacting the performance of the parties or resulting in the waste of resources destined for contractual execution.

The dispute boards are a board, usually appointed at the beginning of the performance of the contract and composed of impartial professionals whose objective is:

  • monitor the progress and development of the project;
  • encourage the prevention of disputes; and
  • to assist in the resolution of any disputes by issuing recommendations or decisions, which in turn shall be binding on the Contracting Parties.

The idea is that the committee intervenes quickly and effectively, to prevent or resolve an impasse, allocated responsibilities based on an independent interpretation of the contractual clauses, according to the technical and technical peculiarities of each case.

The dispute resolution committee is composed of three members, who, pursuant to Article 154 of the new Bidding Law, shall be appointed per "isonomic, technical and transparent criteria." It is advisable that the choice of professionals should be based, above all, on their technical knowledge, without leaving aside that the panel merges professionals whose know-how has a direct relationship with the characteristics of the project and those whose knowledge may be useful in the legal interpretation of the contractual clauses.

the dispute boards may be characterized as permanent, remaining in operation throughout the contractual relationship, even if no disputes arise between the parties, or ad hoc, when they will be formed only if contractual disagreements arise, remaining active until the decision is made.

The parties may establish what will be the rules applicable to the committee, and may choose, to give greater security to those involved, by a specialized institution whose specific regulation will have the attribute of guiding the out-of-court procedure.

Depending on the nature of the decision to be given, the dispute boards can be classified in the following modalities:

  • the Dispute Review Boards, recommendations of a non-binding nature;
  • the Dispute Adjudication Board, whose decisions are mandatory adoption by the parties, however, subject to the right of one party, after communication to the other, to question the decision before the judiciary or in the context of arbitration, as the case may be; and
  • the Combined Dispute Boards, which merge the previous modalities, issuing recommendations and decisions, depending on the circumstance.

In cases of disputes potentially arising from contracts to be signed under the new Bidding Law, especially those whose object is the construction of public works and infrastructure projects, in which the level of complexity is known to be higher, one of the main advantages of dispute boards is to prevent the work from being paralyzed or even unfeasible due to technical disputes. This concern had already been expressed by the Federal Council of Justice in 2016, through statement no. 80 of the 1st Day on Prevention and Out-of-Court Settlement of Disputes, which recommended "[the] use of dispute resolution committees (Dispute Boards), with the insertion of the respective contractual clause, (...) for construction contracts or infrastructure works", in order to allow "the immediate resolution of conflicts arising in the course of the execution of contracts".

On that same occasion, the legality of the dispute boards, in the manner provided for in Paragraph 3 of Article 3 of the Code of Civil Procedure,[2] and the appropriate binding of the parties to the decisions given by the committee until the judiciary or the competent arbitral tribunal is issued a new decision or confirms it, if provoked by one of the parties.[3]

The forecast of disputes boards in the new Bidding Law, in addition to being innovative at the federal level, it is commendable and follows the trend that had already been observed in the municipal and/or state spheres. This is the case of the municipality of São Paulo, which, in attention to the importance that has been attributed to this resource, enacted Law No. 16,873/18, recently regulated by Decree No. 60,067/21. Such regulation allows parties involved in continued contracts signed with the municipality to provide for the dispute boards as a way to prevent and resolve, in a practical and efficient manner, any disputes that may arise during the relationship between the parties, so that it is not necessary to interrupt the progress of the project and, thus, can maintain due continuity in the execution of contracts.

Generally speaking, therefore, it is verified that the legislator took into account, in the drafting of the new Bidding Law, all the development of alternative means of dispute resolution in the public sphere – which, year after year, does not stop growing – and rightly included a specific chapter to deal with the subject. This provision expressly, in addition to offering greater security to all involved, will certainly bring greater efficiency to companies interested in contracting with the Public Administration, given all the speed and specificity that extrajudicial means can provide to stakeholders. The insertion of dispute boards points out, above all, the continuous effort to consolidate the use of extrajudicial means of conflict resolution.

 

[1]    These provisions follow what has already been discussed in the 1st Administrative Law Day, through the statement no. 19, which highlights that "the controversies about the economic and financial balance of administrative contracts are part of the category of those relating to available property rights" and, therefore, the "appropriate extrajudicial means of prevention and resolution of disputes will be admitted , notified by conciliation, mediation, dispute resolution committee and arbitration."

[2]    Set out No. 49: "Dispute Resolution Committees (Dispute Boards) are a method of consensual settlement of conflict, as provided for in § 3 of Art. 3 of the Brazilian Code of Civil Procedure."

[3]    Paragraph 76: "Decisions made by a Dispute Resolution Committee (Dispute Board), when the contractors have agreed to their mandatory adoption, bind the parties to their compliance until the judiciary or the competent arbitral tribunal issue a new decision or confirm it, if they are provoked by the dissatisfied party."