What happens when an arbitration ends with a monetary award against the Public Administration? The question may seem simple, but it is precisely what determines the fate of millions in public contracts submitted to arbitration.
In Brazil, Law No. 9,307/1996 (the Arbitration Act), as amended by Law No. 13,129/2015, expressly allows the direct and indirect Public Administration to use arbitration to resolve disputes involving disposable pecuniary rights. The law consolidated arbitration as a legitimate and technical tool for resolving complex disputes in contracts such as those related to infrastructure, concessions, and public works. However, when the outcome is a monetary condemnation against the Public Administration, the following question arises:
Must an arbitral award that imposes a monetary obligation on the Public Administration be subject to the precatório regime, just like a court judgment?
This was precisely the issue addressed in Opinion No. 12/2024 of the Office of the Attorney General of the State of São Paulo. According to the opinion, an arbitral award has a jurisdictional nature, producing the same effects as a judicial decision. Accordingly, its enforcement must follow the procedure set forth in Articles 534 et seq. of the Brazilian Code of Civil Procedure and, above all, when the award is rendered against the Public Administration, it must be subject to the precatório regime established in Article 100 of the Federal Constitution (“Article 100. Payments owed by the Federal, State, District and Municipal Treasuries, by virtue of a judicial decision, shall be made exclusively in the chronological order of presentation of precatórios and charged to the respective credits, with the designation of specific cases or persons in budgetary appropriations and supplementary credits opened for this purpose being prohibited”). In other words:
The arbitral award must comply with the constitutional payment regime.
The opinion also highlights a relevant point: the liquidation of public expenditure, the phase in which the Administration verifies the fulfillment of the contractual obligation assumed toward the potential creditor, is an act exclusive to the public authority. No arbitral tribunal may replace this stage, under penalty of exceeding the limits of arbitration, pursuant to Article 32, IV of the Arbitration Act.
This same understanding was adopted by an arbitral tribunal in resolving a dispute involving, on one side, a consortium formed by a Portuguese and an American company and, on the other, the State of São Paulo and the São Paulo Metropolitan Trains Company (CPTM) (see the news here). In that decision, it was established that the tribunal cannot set deadlines for compliance with the obligation and that enforcement must comply with Article 100 of the Federal Constitution.
This is a topic that is likely to generate new developments in the dialogue between arbitration and the Public Administration, especially considering that the application of the precatório regime remains highly controversial.
Now, we wait for the next chapters to unfold.
