Part 2 Specific Issues of Arbitration in Brazil, 19 Insolvency and Arbitration

Subject(s):

International monetary law — Arbitral agreements

This chapter addresses the main issues regarding the possibilities of using arbitration in dispute resolution under the Brazilian Bankruptcy Law (BBL). Such possibilities include an insolvent company agreeing to an arbitration clause and the viability of submitting insolvency-related disputes to an arbitral tribunal. The Brazilian insolvency system is regulated by the BBL. In essence, this provides for two kinds of proceedings: judicial restructuring and liquidation. Judicial restructuring proceedings give debtors the opportunity to present a reorganizational plan to their creditors. Debtors will attempt to convince creditors not only of their ability to overcome the temporary economic and financial crisis, but also of their business' feasibility. In some circumstances, the economic and financial distress is so extreme that no means exist to reverse the situation, in which case it is preferable to definitively interrupt the debtor's activities, forcibly eliminating the enterprise from the market and liquidating its assets, in order to pay creditors and prevent the damages inflicted on the community from aggravation by breaching credit reliability. Brazilian liquidation proceeding may be initiated by debtors (voluntary petition) or creditors (involuntary petition).