Arbitration is an alternative dispute resolution method in which the parties choose one or more professionals specializing in a determined subject to resolve their controversy. Different from what occurs in legal proceedings, which are often tied up for years in the most diverse of court decisions, arbitration proceedings are, as a rule, more agile and flexible, measured to fit to best attend the interests of the parties in dispute.
Although the origin of the arbitration proceeding can be found in the summit meetings of the citizens of Athens of Ancient Greece, it is today that the institution has gained notoriety and is applied around the globe in proving efficient, expeditious and flexible solution for business litigation.
This is because, due to the prestige of its speedy resolution in contrast to the traditional civil proceeding, or its maintenance of information inherently or necessarily confidential, the arbitral proceeding brings enormous benefit to the business community, such that nowadays it is the alternative dispute resolution method most widely employed in Brazil and in the World1.
In addition to common commercial arbitration, the application of arbitration in tax matters has been constant in international forums2 and global organizations, such as the Organization for Economic Cooperation and Development (OECD), which has been incentivizing and recommending its use to avoid international double taxation and to simplify tax litigation that otherwise would normally take years to resolve.
The present moment the Country is now living, in which important simplified tax collection tax reform is being discussed, cannot not contemplate alternative techniques for litigation solution. It is with exactly this in mind that on September 03, 2020 the Senator Daniella Ribeiro (PP-RB) proposed to the National Congress the creation of a special tax arbitration regime, to initiate arbitration during the course of tax audit and thus “prevent conflict through solutions of controversies on matters of fact.” 3
Note further that the proposed scope of said Bill seeks conflict resolution before the tax credit is constituted, applying in two situations: (a) tax consultation; and (b) the quantification of credit already judicially recognized and to be compensated, its applicability not being possible in cases where the tax credit has already been constituted (Article 1, sole paragraph), these cases being known to be the immense majority.
Even though the initiative is laudable for attempting to provide the taxpayer and the tax authority with a more simplified, rapid and less onerous tax conflict resolution method, the proposal presented does not consider important situations and characteristics of arbitration proceedings, such as the flexibility and free choice of the parties, unless those already known and repeatedly used by the Brazilian business community are considered.
In effect, the Bill highlights that this proceeding is denominated “special” in that although being called arbitration it should have its own treatment, distinguishing it from the traditional formula commercial arbitration.
To this end, it creates figures that do not exist in the arbitration that we know, such as (i) the presence of a tie-breaker arbiter (Article 9 of the Bill) for “situations that due to the controversy and following non-unanimous vote call for the same”; and (ii) special requirements for the exercise of the function of the arbiter (Article 4, § 9), which efficiency is unknown and appears, at first glance, to create more barriers than provide solutions.
Practice shows that arbitrations are flexible and customizable proceedings best serving the interest of those bringing the same, the adaptations to the base formula commonly being made via adopting the regulation of arbitral institutions. Note that there is no necessity for the creation of specific law for commercial arbitration, or for arbitration of public-administration-related matters or for employment-related matters, which would effectively diminish the prestige and force of the already consolidated Brazilian Law of Arbitration, as well as diminish the importance of arbitration court regulation.
In light of these considerations, one recognizes the attempt to create a more simple, expeditious and flexible solution of problems between taxpayers and the tax authorities, it being certain that the alternative conflict resolution methods have a lot to contribute with respect to public organs and the national business community, being able to, at the end of the day, avoid unnecessary tax sanction.
It should be considered, however, that the proposal certainly demands greater analysis and care on the part of the well-intentioned legislator or otherwise creates its own rules as well as obstructs the good and correct advance of the arbitration in its classic form within the National Territory.
Almeida Advogados counts amongst its ranks professionals with vast experience in defending tax contributor prerogatives and collaborating in the creation of norms and regulations for uniformizing alternative conflict resolution implementation procedure.
Written By:
Rodrigo Petry Terra
Eduardo Machado Tortorella