Dispute Boards Worldwide

Transcription

1 9th Annual DRBF International Conference London, May 2009 Dispute Boards Worldwide 1

2 The DB Format in Brazil: Challenges and Perspectives Presentation by: GILBERTO JOSÉ VAZ DRBF Country Representative for Brazil 2

3 STRUCTURE OF THE PRESENTATION 1) BRAZIL: AN OVERVIEW 2) BRAZILIAN LEGAL SYSTEM AND THE DRB CLAUSES 3) PERSPECTIVES FOR THE ADOPTION OF DRBS IN THE COUNTRY 4) CONCLUSIONS 3

4 BRAZIL: AN OVERVIEW Brazil is a country of continental proportions. The country has about 190 million inhabitants. The capital city is Brasília. The language spoken is Portuguese. 4

5 BRAZIL: AN OVERVIEW The territory comprises over 8.5 million km 2, occupying approximately 47% of South America. 5

6 BRAZIL: AN OVERVIEW The country is the 5 th in size of the world. The population is the 5 th largest of the world. The country is the 1 st economy of Latin America and is about to become the 8 th economy of the world in 2009 (Centre for Economic and Business Research, London). Brazil can be geographically divided in five regions, with over cities. 6

7 BRAZIL: AN OVERVIEW There are big metropolitan regions, all over the country, like: 1. São Paulo (19.2 million inhabitants); 2. Rio de Janeiro (11.5 mi); 3. Belo Horizonte (4.9 mi); 4. Porto Alegre (3.9 mi); 5. Recife (3.7 mi); 6. Salvador (3.6 mi); 7. Fortaleza (3.4 mi); 8. Curitiba (3.1 mi); 9. Belém (2.0 mi); 10. Manaus (1.9 mi). 7

8 The City of São Paulo SP Brasília DF, the Capital City 8

9 Variety in Economical Activities: Soy Harvest in Mato Grosso Plane Manufacturing in São Paulo Mines in Minas Gerais Metallurgy in Minas Gerais Petroleum Platform in RJ 9 Sugar Cane Fields in the Northeast

10 BRAZIL: AN OVERVIEW Brazil is a federation with a consolidated democracy. The Federation is divided in Federal, State and Municipal Governments. The Executive, Legislative and Judiciary Powers are independent, and the legal system is the Civil Law. Brazilian construction market is currently stimulated by a Federal Government program, called Program for Growth Acceleration (PAC), foreseeing U$ 210 billion in investments until

11 Oil Refinery Plant Abreu e Lima, in the Northeast. EXAMPLES OF PAC WORKS Platforms for oil extraction in high seas. 11

12 EXAMPLES OF PAC WORKS Power Plant of Estreito, in the state of Tocantins, (1.087 MW). Jirau Power Plant (3.300 MW). Santo Antônio Power Plant (3.150 MW). 12

13 DRBS AND BRAZILIAN LEGAL SYSTEM DRBs are a true novelty in Brazilian construction market. The technical and legal communities are not quite familiar yet with the format. Few construction contracts foresee DRB clause in the country. The DRBs entered in scene in Brazil in 2003 in three administrative contracts related to the expansion of São Paulo Metro System. 13

14 Works of the ongoing expansion of the Line 4 of São Paulo s Metro System (DRB Clause). 14

15 DRB AND THE PUBLIC CONTRACTS IN BRAZIL The Metro EPC contracts were signed with the Public Administration, through an administrative contract. For the analysis of the challenges to be faced by the method in the country, it is important to outline the discipline applicable to the Public Administration. The State has extraordinary powers, occupying a position of clear superiority in the contracts. 15

16 DRB AND THE PUBLIC CONTRACTS IN BRAZIL These typical powers of the Administration can be perceived in a series of situations in the legal system. For example, the Administration has extended time limits in the Civil Procedure Code to respond law suits. There is one Federal and other local Administrative Procedure Laws, which guarantee to the Administration the power-obligation of analyzing and making decisions about requests and claims, within specific procedural steps. 16

17 DRB AND THE PUBLIC CONTRACTS IN BRAZIL This superiority of the Administration is based on the principle of supremacy of public interest over private interest. Other legal principles orient the administrative function: legality, publicity, efficiency, due process of law, morality, control of administrative acts, etc. All to be considered in the use of DRBs in administrative contracts. The legality principle: the Public Administration can do only what the law directly determines. Contrarily to the private persons, who can do whatever the law does not prohibit. There are substantial differences between private contracts and administrative contracts. 17

18 PRIVATE CONTRACTS X ADMINISTRATIVE CONTRACTS PRIVATE CONTRACTS Freedom of Will Pacta Sunt Servanda Principle Free Consensuality Formal Freedom ADMINISTRATIVE CONTRACTS Public Interest Possibility of Unilateral Modifications by the Administration Legality Principle Administrative Procedure 18

19 DRB AND THE PUBLIC CONTRACTS IN BRAZIL There is a debate in the legal community about the employment of ADR methods in contracts involving the Public Administration (mainly about arbitration). According to the legality principle, there must be a specific legal provision for that. Federal Law 8.666/93 admits that procedures of financial multilateral agencies or International Treaties can integrate the contracts (such as arbitration clauses). 19

20 DRB AND THE PUBLIC CONTRACTS IN BRAZIL In 2005, article 23-A was included in Federal Law that rules public services concessions, allowing the inclusion of private mechanisms for solution of disputes. The same rule is valid for PPPs (Public Private Partnerships). So DRBs are legally valid for these types of administrative contracts. Regarding administrative construction contracts, there are still some doubts. DRBs (or DBs) mandatory decisions in administrative contracts could be challenged, considering: Administrative Procedure Codes, the proper administrative duty of analyzing claims and deciding upon them following certain steps and time limits, etc. 20

21 PERSPECTIVES FOR DRBS IN BRAZIL Apart from the legal challenges, there is an undeniable potential for the utilization of Dispute Boards in Brazilian legal and social reality. However, the traditional practices in construction contracts still impose obstacles to the success of the model in the country. Traditionally, the powers of solving disputes have been concentrated in the hands of the owner, whenever out of judicial courts (and arbitral courts more recently). 21

22 PERSPECTIVES FOR DRBS IN BRAZIL Project owners are still very reluctant about the DRB clauses, seeing the method as a potential loss of their power. Moreover, the owners still see a DRB not as an investment, but as a cost item. This reluctance is also reflected in a fear of the owners to lose control over the costs or cash flow of a venture, due to decisions of a DRB. There is also a cultural aspect in Brazilian engineering market keeping owners concerned about DRBs: designers and consultants (potentially preferable DRB members) are traditionally closer to contractors than to owners. 22

23 PERSPECTIVES FOR DRBS IN BRAZIL The best tool to revert this concern is the spreading of information about the functioning and advantages of DRBs, inclusively for the final costs of the enterprise. In the last years, the DRBF representation in Brazil induced and supported a series of events and discussions over the theme, in which the benefits of DRBs were explored. 23

24 RIO DE JANEIRO RJ DECEMBER, 2005 WORKSHOP ICC RULES ON DISPUTE BOARDS Workshop held on the 5 th of December, 2005, about Dispute Boards models and rules, promoted by the International Chamber of Commerce Brazilian Committee. 24

25 SÃO PAULO SP AUGUST, 2008 INTERNATIONAL CONGRESS OF ARBITRATION ON ENGINEERING Congress held from the 7th to the 8th of August, 2008, with a panel called Another path on the resolution of conflicts in the construction and infrastructure fields: Dispute Resolution Boards. Promoted by the Brazilian Institute of Engineering (Instituto de Engenharia). 25

26 BELO HORIZONTE MG OCTOBER, 2008 INTERNATIONAL CONFERENCE OF ARBITRATION, INFRA-STRUCTURE AND CONSTRUCTION Conference about Arbitration in the Construction Field, with a panel discussing the use of Dispute Resolution Boards. Promoted in the 28th of October, 2008, by the Chamber of Arbitration CAMARB. 26

27 CONCLUSIONS Brazilian construction market shows relevant potential for the DRBs. The method is legally feasible in Brazil. Legal challenges could be faced when DRB mandatory model is adopted in public contracts. The acceptance of a DRB is still a problem for owners, always afraid to spend money to lose power and cost control. Information is the most important tool. 27

28 CONCLUSIONS The costs of Dispute Boards signalize that they should be focused, in this moment, in medium or large size contracts. The model could be also used for other purposes, such as judicial and extrajudicial recuperation of companies. In line with the DRBF recommendations, DRBs with powers to issue non binding recommendations are considered as the best format for Brazil. Legally adequate both for private and public contracts. 28

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