STJ: Late disclosure by arbitrator does not prevent annulment

The duty of disclosure in commercial arbitration

Arbitration has consolidated itself as the preferred method for resolving complex business disputes, including corporate conflicts and issues involving foreign direct investment in Brazil. The attractiveness of this model is based on the technical expertise of the adjudicators, confidentiality, and the speed of the procedure.

However, the legitimacy of arbitration depends directly on the trust the parties place in the chosen arbitrators. This is where the duty of disclosure comes into play. This legal concept requires that anyone appointed to act as an arbitrator must proactively and immediately disclose any fact or circumstance that could raise justifiable doubts about their impartiality or independence.

The understanding of the Superior Court of Justice

The Superior Court of Justice (STJ – Brazil’s highest court for non-constitutional matters) has established an important understanding regarding the limits and consequences of breaching this duty. The court ruled that late disclosure by the arbitrator does not prevent the annulment of the arbitration.

In practice, this indicates that the obligation of transparency does not allow for later corrections that harm the parties’ right to choose. If an arbitrator had a potential conflict of interest and did not declare it at the appropriate time, the fact that they revealed this information late does not validate the procedure. The initial omission is sufficient to support a request to annul the arbitral award before the Judiciary, as it compromises the foundation of trust in the system.

Practical implications for companies and investors

For executives, board members, and investors, the STJ decision delivers a clear message about the strictness of the Brazilian arbitration system. National case law acts to preserve the fundamental guarantees of the process and does not tolerate flexibility when it comes to guaranteeing an impartial judgment.

When structuring commercial contracts or shareholder agreements, companies must be aware that conducting arbitration proceedings requires continuous diligence. Immediate and complete transparency protects the integrity of the procedure and prevents disputes resolved in arbitration from being subsequently annulled, which would generate additional costs, delays, and instability for businesses.

This content is for informational purposes only and does not constitute legal advice. For guidance on specific matters, consult a qualified lawyer.