On March 19, 2020, the City of São Paulo enacted Law 17.324/2020, to foster out of court resolution of disputes. The purpose is to reduce litigation in the city, stimulate ADR’s and better manage the high volume of judicial lawsuits currently handled by the city attorneys. São Paulo shall implement a public policy to broaden the adoption of out of court solutions, to be coordinated by the chief-city attorney. Moreover, the new law has lowered the criteria and thresholds for the City of São Paulo to settle cases, allowing settlement agreements even for municipal tax debts, which had been a controversial issue under Brazilian Law. The city shall consider mediation in its cases and can implement specific taskforces aiming at settling as many disputes as possible involving specific matters that trigger a significant amount of lawsuits.
Art. 7 of the new law provides that the city of São Paulo can adopt arbitration to resolve its disputes. In fact, this authorization was not strictly necessary, since art. 1, paragraph 1 of Brazilian Arbitration Act already allows public law entities to go to arbitration. It should be however read in the context of the whole law, in the sense that the public servants of the city of São Paulo from now on have the obligation to adopt out of court methods such as arbitration, whenever they are the most adequate option . This is an indication that the city of the São Paulo, which is the largest in Latin America and whose budget is lower only to the Federal government and the State of São Paulo, will substantially increase the number of administrative law agreements with arbitral clause and, consequently, in the medium-term, the amount of arbitrations.