The city of São Paulo enacted on February 23, 2018 Law 16.873, which regulates the use of dispute boards in its contracts, to foster the adoption of this dispute mechanism in the contracts with the municipality and their controlled entities. The parties will have freedom to choose among a dispute review board (to issue non-binding recommendations), a dispute adjudication board (to issue contractually binding decisions, that may be later discussed in court) or a combined dispute boards, which can issue recommendations or decisions.
The city and the parties can select institutional dispute board rules to apply, such as ICC Dispute Board Rules, as long as this is contemplated in the relevant administrative law contract. The parties can also agree on specific rules of procedure for the dispute board.
The procedure should be public. The annual budget of the city shall contemplate the expense with the fees of the dispute board members. The private party shall advance the full amount of the fees, but as the works are approved the city of São Paulo shall reimburse the private private of half of such fees.
The dispute board shall be composed by three members, preferably two engineers and one lawyer, jointly appointed by the city of São Paulo and the private parties. The members shall be vested in the office within 30 days from the execution of the contract, through the signature of a term of commitment between them and the parties.
The members of the dispute board shall be independent, impartial, diligent and competent for the assignment. The members shall be deemed not to be impartial if they meet any of the causes of suspeciousness or impediment of judges under the Brazilian Code of Civil Procedure. The members shall disclose to the parties any fact that can trigger justifiable doubts on their independence or impartiality. In the exercise of their duties, the members will be subject to the same crimes of a public servant, such as corruption.
Although this new law does not bring any novelty, but it is very important to promote dispute board for contracts with state entities, since the São Paulo is the largest city of Brazil and its budget for investment is greater than any other Brazilian public entity, except for the Federal Union and the State of São Paulo. The other larger cities and even federal states tend to follow the example and will probably start considering the use of dispute boards.