Brazil's Provisional Measure 752/16: New Arbitration Rules on Public Partnership Programs
Brazil's Provisional Measure 752/16 (“MP 752/16”) established new rules for the extension and rebid of airport, highway and rail concessions under the Investment Partnership Program (“PPI”). A major feature of this provisional measure is the possibility of extension of highway and rail concessions without a new tender, pursuant to the existing concessionaire’s commitment of making further investments and improvements.
Another significant aspect of MP 752/16 lies on the arbitration provisions provided in its Article 25, which reflects the Federal Government’s continuing efforts to increase investors’ confidence and modernize processes for investing in infrastructure projects in Brazil.
MP 752/16 provides that concession contracts under the PPI may originally contain an arbitration clause or be subject to other alternative dispute resolution procedure. It also provides that existing concession contracts may be amended to provide for arbitration or other alternative dispute resolution procedure, which is a good prospect for investors who want to dodge the Brazilian judicial courts.
The fourth paragraph of Article 25 addresses the arbitrability of issues, defining what matters may be subject to arbitration, which includes: (i) contractual issues involving the economic-financial balance of the concession; (ii) the calculation of the indemnification by termination or assignment of the concession; and (iii) default of the parties’ obligations.
Finally, the fifth paragraph of Article 25 establishes that the Federal Government will provide for a list of arbitral tribunals eligible for deciding arbitration over contractual disputes under the MP 752/16.
MP 752/16 has been in effect since November 25, 2016 and is subject to approval by Brazil’s Congress to become an act.