Abstract
Brazil is South America’s leading domicile for listed public companies and has enjoyed substantial economic growth in the last generation. But it remains a nation constrained by limited resources to address all of its challenges and opportunities. Because of this reality, Brazil has chosen to use arbitration as the method to resolve disputes between the stockholders of public companies about critical issues such as the fairness of interested transactions and other claims for breach of fiduciary duty or compliance with statutory law and securities laws.
Likewise, important commercial disputes involving public companies are also resolved in arbitration. This is problematic in one hugely important way: Brazil has not yet recognized that arbitration of this kind that affects public companies, their stockholders, and other stakeholders is distinct from purely private arbitration. As a result, the arbitration process for public companies lacks the accountability and integrity that accompanies public adjudication and also fails to create a body of decisional law that provides a basis for the evolution of sound corporate governance best practices and that encourages arbitrators to base their decision on principled and coherent interpretations of commercial, corporate, and securities law. Recognizing that one of the primary reasons Delaware has emerged as an international leader in corporate and commercial law is that its system of adjudication resolves cases promptly, expertly, and publicly, and provides practitioners, academics, regulators, stockholders, corporate leaders, and the public with reasoned decisions about important determinations affecting public companies, we argue that features of Delaware’s approach could be usefully employed within Brazil’s system of public company arbitration. We thus support and encourage recent reforms in Brazil to open up the system of public company arbitration and provide specific suggestions for making the new movement toward public arbitration in public company cases effective. By capitalizing on the speed and expertise that can be brought to bear by arbitration, but combining it with credibility- and consistency-enhancing features, Brazil can further its ambitions to be an international leader in the market for incorporation and better encourage investment in its economy.