The Brazilian Superior Court of Justice ("STJ") rendered an important decision in the area of arbitration involving a health plan operator company which is under administrative winding-up proceedings (a measure applicable to troubled companies in certain regulated industries).
The company argued that, by virtue of the winding-up proceedings, it was prevented from closing any business dealings or disposing of any assets and, therefore, could not be a party to an arbitration case instituted by another company.
In its decision, the STJ emphasized that the participation of the company in the arbitration did not represent a risk to any public interest related to the winding-up proceedings, especially because the rights of the liquidated estate (and consequently the interests of creditors and third parties in general) could be adequately protected during the arbitration.
In addition, the STJ confirmed that, by applying the Kompetenz-Kompetenz principle, the arbitrators have the authority to decide whether the dispute could be validly submitted to arbitration.
In general terms, the STJ ruling is an important precedent for the validity of arbitration involving a company under administrative winding-up proceedings whenever the public interest is not affected by the arbitration.
Preliminary Injunction n. 14295 – SP (2008/0122928-4-2), STJ
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