Author: Gabriel Teixeira Alves*
Arbitrators and Arbitral Tribunals
Conflict of Interest
Annulment of Awards
The recent resignation of one of the arbitrators nominated to adjudicate the multibillion-dollar conflict between J&F Investimentos S.A. (“J&F”) and CA Investment (Brazil) S.A. (“CA Investment”), after J&F sought annulment of an arbitration award rendered in favor of CA Investment, was broadly publicized. This is likely not only given the relevance of the dispute itself, but also because of the atypical nature of the challenge, made only after a merits judgement, and its somewhat innovative grounds, that led the arbitral community to intense discussions over the matter.
In a nutshell, the parties disputed the performance of agreements entered into in 2017 by which J&F was to sell all of its Eldorado’s shares to CA Investment, a transaction worth R$ 15 billion, the current equivalent to $2.7 billion, among payments and the assumption of debts. Although the two initial acquisitions were completed successfully, with CA Investment acquiring the equivalent to 49,41% of Eldorado’s capital stock, the parties came to a dead-end in relation to the final tranche, by which CA Investment was to acquire all of Eldorado’s shares, which was to be concluded, according to the contractual schedule and subject to the satisfaction of conditions precedent, and specially related to the release of warranties given by J&F to Eldorado’s debts, in the value of R$ 8 billion, no later than September 03rd, 2018. J&F argued that the failure to timely release the warranties would prevent performance of the second tranche of acquisitions.
The parties’ contention over the alleged failure to comply with conditions precedent to the sale of the shares of Eldorado and its consequences led CA Investment to file, on September 5th, 2018, for arbitration against J&F and Eldorado before the International Court of Arbitration of the International Chamber of Commerce (ICC), case n. 23909/GSS (herein the “Arbitration”). The Arbitral Tribunal, originally composed of Juan Fernández-Armesto (chairman), José Emilio Nunes Pinto, and Anderson Schreiber, issued a partial award deciding the merits of the case, leaving the computation of damages to a subsequent phase. In short, the Panel ordered J&F to sell and transfer the remainder of its Eldorado shares to CA Investment (“Partial Award”).
However, J&F resorted to Brazilian courts seeking annulment of the Partial Award, on the basis of, among others, hacking of e-mails and privileged information, the Partial Award being rendered outside of the scope of the arbitration agreement, an alleged failure by Mr. Anderson Schreiber “to disclose his ties to CA’s former counsel in the arbitration.” Mr. Schreiber denied the accusations in a thorough letter of resignation sent to the ICC in August, 2021.
One of J&F’s allegations is that Mr. Schreiber failed to disclose all relevant information to assess its independence and impartiality because Mr. Schreiber’s omitted that his old firm used to share the same office space with one of the law firms representing CA Investment in the dispute. Mr. Schreiber conceded that his old firm had in the past a sublease agreement with the law firm representing CA Investment, but asserted that they were completely separate entities, the sublease agreement ended before the start of the arbitration, and there were no implications to his impartiality, nor a duty to disclose this information.
The IBA Guidelines on Conflicts of Interest in International Arbitration (“Conflicts of Interest Guidelines”) are generally accepted in assessing the impartiality and independence of arbitrators. In its introduction, the Conflicts of Interest Guidelines define the concern around the scope of disclosure duties:
“Arbitrators and party representatives are often unsure about the scope of their disclosure obligations. The growth of international business, including larger corporate groups and international law firms, has generated more disclosures and resulted in increased complexity in the analysis of disclosure and conflict of interest issues. Parties have more opportunities to use challenges of arbitrators to delay arbitrations, or to deny the opposing party the arbitrator of its choice. Disclosure of any relationship, no matter how minor or serious, may lead to unwarranted or frivolous challenges. At the same time, it is important that more information be made available to the parties, so as to protect awards against challenges based upon alleged failures to disclose, and to promote a level playing field among parties and among counsel engaged in international arbitration.”
As a general rule, “[e]very arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so until the final award has been rendered or the proceedings have otherwise finally terminated.” A similar wording is adopted by the International Chamber of Commerce Rules of Arbitration (“ICC Rules”), which are relevant to the present case: “[e]very arbitrator must be and remain impartial and independent of the parties involved in the arbitration.”
Regarding the possible relationships between arbitrators and law firms, the Conflicts of Interest Guidelines provide that the specific circumstances of each case must be considered in assessing the impartiality and independence of the arbitrator, and the existence of a duty to disclose:
“The arbitrator is in principle considered to bear the identity of his or her law firm, but when considering the relevance of facts or circumstances to determine whether a potential conflict of interest exists, or whether disclosure should be made, the activities of an arbitrator’s law firm, if any, and the relationship of the arbitrator with the law firm, should be considered in each individual case. The fact that the activities of the arbitrator’s firm involve one of the parties shall not necessarily constitute a source of such conflict, or a reason for disclosure. Similarly, if one of the parties is a member of a group with which the arbitrator’s firm has a relationship, such fact should be considered in each individual case, but shall not necessarily constitute by itself a source of a conflict of interest, or a reason for disclosure.”
The matter is still to be decided by Brazilian courts, and the outcome could place an important milestone on the interpretation and implementation of rules on conflicts of interest in the country and elsewhere.
* Gabriel Teixeira Alves is a Student Editor at ARIA and an LL.M. candidate at Columbia Law School. He earned his LL.B. at the Faculty of Law of the University of São Paulo, Brazil, and is an attorney at Sergio Bermudes Advogados. He has participated in numerous arbitration proceedings before the ICC, the CAM-CCBC (Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada), the LCIA, along with several national litigation and other arbitration proceedings.
 A Brazil-based investment company that owns and controls companies involved in multiple industries, including the meat and agriculture industry. See generally, The United States Department of Justice, https://www.justice.gov/opa/pr/jf-investimentos-sa-pleads-guilty-and-agrees-pay-over-256-million-resolve-criminal-foreign (last visited Oct. 6, 2021).
 A subsidiary of Paper Excellence B.V. See, Paper Excellence’s website, https://paperexcellence.com/locations/brazil/ (last visited Oct. 3, 2021). See also 2nd Court of Corporate Disputes and Arbitration of the State of São Paulo, Preliminary Injunction No. 1083967-87.2018.8.26.0100, 7692 (Braz.).
 See Global Arbitration Review, https://globalarbitrationreview.com/arbitrator-resigns-brazilian-pulp-case (last visited Oct. 4, 2021); https://www.conjur.com.br/2021-ago-18/renuncia-arbitro-processos-colocam-negocio-questao; Consultor Jurídico – CONJUR, https://www.conjur.com.br/2021-ago-02/tj-sp-suspende-transferencia-eldorado-paper-excellence (last visited Oct. 6, 2021).
 2nd Court of Corporate Disputes and Arbitration of the State of São Paulo, Preliminary Injunction No. 1083967-87.2018.8.26.0100, 7691-7701 (Braz.),
 CA Investment acquired 13% of the Eldorado’s shares on September 25th, 2017 and the another 36.41% on December 2017. See 2nd Court of Corporate Disputes and Arbitration of the State of São Paulo, Preliminary Injunction No. 1083967-87.2018.8.26.0100, 2476-2495 (Braz.).
 2nd Court of Corporate Disputes and Arbitration of the State of São Paulo, Preliminary Injunction No. 1083967-87.2018.8.26.0100, 7694 and 1887 (Braz.).
 2nd Court of Corporate Disputes and Arbitration of the State of São Paulo, Preliminary Injunction No. 1083967-87.2018.8.26.0100, 7694 (Braz.). See original text: “Está mais do que evidente, portanto, que a liberação das garantias prestadas pela J&F é condição necessária para a realização da Segunda Aquisição. Caso tais garantias não sejam liberadas até a Data-Limite (prazo de 12 meses), conforme o Contrato, a Segunda Aquisição deixará de ser realizada, devendo a Compradora permanecer como acionista da Eldorado, com os direitos que lhe são conferidos no Acordo de Acionistas.”
 2nd Court of Corporate Disputes and Arbitration of the State of São Paulo, Preliminary Injunction No. 1083967-87.2018.8.26.0100, 2651-2654 (Braz.).
 2nd Court of Corporate Disputes and Arbitration of the State of São Paulo, Preliminary Injunction No. 1083967-87.2018.8.26.0100, 7687-7690 (Braz.).
 The case was allocated to the 2nd Court of Corporate Disputes and Arbitration of the State of São Paulo given the previous judgement of the Preliminary Injunction No. 1083967-87.2018.8.26.0100. The annulment claim is under court secrecy, and therefore is not publicly available.
 See TJ-SP suspends transfer of control from Eldorado to Paper Excellence, Consultor Jurídico – CONJUR, https://www.conjur.com.br/2021-ago-02/tj-sp-suspende-transferencia-eldorado-paper-excellence.
 See Cosmo Sanderson, Arbitrator resigns from Brazilian pulp case, Global Arbitration Review (Aug. 23, 2021), https://globalarbitrationreview.com/arbitrator-resigns-brazilian-pulp-case (subscription required).
 Id. See the original text: “It [J&F] alleges that Schreiber’s old firm (now known as Domingues Cintra) and Stocche Forbes used to share the same office space in Rio de Janeiro and São Paulo and worked together on matters for clients, including one case that ended after the ICC arbitration over Eldorado began. In his resignation letter, Schreiber says that while Domingues Cintra did have a sublease agreement with Stocche Forbes, they were entirely separate firms. He has attached a letter from partners at Domingues Cintra testifying to this. Regardless, Schreiber said the sublease ended in 2016, two years before his appointment in the ICC case. Schreiber also disputes allegations that his firm worked on five cases with Stocche Forbes. He says Domingues Cintra either did not act as counsel in those cases or, in one, represented a separate party to Stocche Forbes. Schreiber says he was not involved in any of the cases.”
 International Bar Association, IBA Guidelines on Conflicts of Interest in International Arbitration, 2015, https://www.ibanet.org/MediaHandler?id=e2fe5e72-eb14-4bba-b10d-d33dafee8918.
 Id., Introduction.
 Id. ¶1.
 ICC, Rules of Arbitration, Article 11(1).
 International Bar Association, IBA Guidelines on Conflicts of Interest in International Arbitration, 2015, ¶6(a).