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The possibility of settling labor disputes by arbitration in Brazil before going to court is guaranteed by the country's Basic Law. However, surprisingly enough, labor disputes are still rarely referred to arbitration. This is due to the country's especially valuable labor regime, which we will talk about in this blog post. We will also consider the issue of legal regulation of labor disputes in Brazil and will not ignore the current situation with the pandemic and how arbitration institutions are now adapting to it.

Updated labor contract rules

An extensive reform of the Brazilian labor law took several years. The updates relate mainly to contracts between employer and employee, which, in the event of a conflict, prevail over general labor legislation. The new code also gave workers with higher education and significant seniority unprecedented leeway in resolving labor disputes in Brazil out of court. They can set conditions on most of the clauses of their employment agreement and agree or refuse to include an arbitration clause in the contract to resolve possible conflicts.

Until now, there have been no judicial precedents on this issue. Therefore, there was no way to test in practice how effective arbitration is for resolving labor disputes in Brazil.

Arbitration in Brazil amid COVID-19

When the pandemic broke out, the local arbitration practice subjected many procedures to significant modifications to the customary arbitration in Brazil. Urgent action was needed to adapt the current proceedings (and initiate new ones) in this new reality.

For example, the participants in the proceedings can participate in the court session in the mode of videoconference outside the courthouse using their own technical means. It is important to note that at the moment electronic systems have not yet been tested enough and work with numerous errors and shortcomings. Preparations are in full swing for the implementation of special software that will allow effective online arbitration in Brazil with data security and proper confidentiality.

Pro-arbitration approach

The choice of the place of arbitration in an international dispute is largely related to the attitude of local courts to this out-of-court dispute resolution mechanism. Contracting parties usually seek arbitration-friendly jurisdictions to ensure that possible future dispute resolution can be considered using this ADR method. Over the past decades, Brazil has gradually strengthened its position as a pro-arbitration country.

Court decisions are increasingly recognizing the binding nature of the arbitration clause. This forces the parties to use arbitration even when one of them is unwilling to do so. Local courts guarantee the enforcement of judgments in Brazil and abroad.

NOTE: Brazilian courts maintain confidentiality in matters related to arbitration, which is an exception to the rule of publicity in civil proceedings in Brazil.

New Arbitration Dispute Resolution in Brazil

  • If there is an arbitration clause, the case will be referred first to the arbitration court, even if the parties want to bypass it and go directly to the court.
  • There are no legal obstacles to the conclusion of an arbitration agreement by state-owned companies, in particular those with mixed capital, to resolve disputes in Brazil concerning economic rights.

Finally

The credibility of arbitration as an effective means of resolving conflicts is increasingly reflected in the Brazilian judicial system. The impact of the coronavirus pandemic on arbitration has a serious impact on procedures, and effective technical solutions are being sought for online arbitration in Brazil. An innovation was the consideration of cases remotely in real time. Further improvement of this process will speed up the cases processing time, and will reduce the time and legal costs of the participants in the process.

The country actively promotes the settlement of labor disputes and is considered favorable to the implementation of this ADR mechanism. 

A consultation on the resolution of labor disputes by arbitration in Brazil will help you to understand this process in detail. Reach out to our experts by filling out a quick contact form below.