Dispute Prevention Methods in the Brazilian Agreements on Cooperation and Facilitation of Investments (CFIAs)

Brazil is viscerally opposed to investor-State international arbitration. Its first generation of bilateral investment agreements signed in the 90s were never ratified by the local Congress, namely because of the specific transnational arbitration provision. It therefore comes as no surprise that the Brazilian Agreements on Cooperation and Facilitation of Investments (CFIA), a new bilateral investment agreement model signed with 13 States since 2015, contain no provision on investor-State arbitration. Still in 2015, an aperture took shape with the adoption of Statute no.13.129 which amended the local Brazilian arbitration law, enabling arbitration procedures against the public administration. This was however restricted to domestic private-public arbitration and did not foreshadow any trend at the international level as evidenced by the CFIAs signed between 2015 and 2020. This Brazilian traditional resistance echoes the more recent outcry against investor-State arbitration, namely in cases like Philip Morris, Vattenfall or Achmea and more generally regarding the recurrent questioning of the States’ right to regulate before arbitral tribunals. The insertion of an Investment Tribunal System in the recent investment agreements signed by the European Union—which includes an Appeals mechanism—acknowledges this backlash. A similar resistance has already been flagged by Australia. The United Nations Commission on International Trade Law (UNCITRAL) has joined the movement in entrusting its Working Group III to address the issue of dispute settlement reform in international investment law. The concerns discussed by the Working Group III were divided in three groups (“consistency, coherence, predictability and correctness of arbitral decisions by ISDS tribunals; arbitrators/decision makers; and costs and duration”) which commentators have categorised as “(1) excessive legal costs; (2) duration of proceedings; (3) legal consistency; (4) decisional correctness; (5) arbitral diversity; and (6) arbitral independence and impartiality”. These concerns are real and must conspicuously be addressed although it seems that they have been raised because many capital exporting countries are facing arbitration procedures wherein their right to regulate is being questioned by foreign investors.