Law 13.448 was published today in Brazil, to regulate the possibility of extending or submitting to new bid certain current concessions of railways, highways and airports. This is an important step for the new Brazilian privatization program, as the Federal Government wishes to terminate and submit to a new bid certain concessions in which the concessionaire are supposedly in default, as well as to extend the term of other concessions in exchange of further investments.
The new law allows arbitration in contracts with the public sector in those areas. The authorization comprises not only future agreements, but also current ones, which may be amended to include arbitral clause, and even contracts that are being terminated, as to which the discussion on indemnification may be subject to arbitration.
The arbitration must be in Portuguese and the seat must be in Brazil. The private party shall advance the costs of the arbitral procedure. The new law expressly clarifies that the review of the price, the indemnification due to termination of the agreement and discussion on contractual defaults may be subject to arbitration. The parties may choose institutional arbitration, as long as the institution is previously accredited (credenciamento). The Federal Government is still to issue a decree regulating the accreditation procedure.
The 2015 reform of the Brazilian Arbitration Act had already clarified that the Public Administration may submit disputes to arbitration, so this new law is far from being a novelty. It is a clear indication however of a public policy choice to resolve through arbitration sensitive issues in the railway, highway and airport areas. Moreover, arbitration in those sections will play a role model for arbitral proceedings with the public sector in other industries.