Is third-party litigation funding permitted? Is it commonly used?
Third-party funding is not a regulated activity in Brazil. Aside from the Centre for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (CAM-CCBC) Administrative Resolution No. 18, issued in July 2016, there are no other rules expressly dealing with the subject, and no statutory regulation exists. Despite the lack of regulation, third-party funding activities in Brazil are increasing, especially in arbitrations. The same is not true as far as litigation is concerned.
Since last year’s survey, the number of third-party financed arbitrations has increased from four to fifteen. However, it would be an exaggeration to say third-party funding is commonly used. There is no record of court cases involving third-party funding issues and, consequently, there is no common understanding or approach concerning funding by third parties in Brazil.Restrictions on funding fees
Are there limits on the fees and interest funders can charge?
There are no specific statutory limitations for the fees or the interest owed to the funder.
However, should a limit apply, the chances are that the court or arbitral tribunal would consider a limit of around 30 per cent, given a relevant precedent by the Superior Court of Justice (REsp No. 1155200) from March 2011. In this case, an ad exitum collection of 50 per cent of the amount in dispute was deemed excessive by the court because this rate was not a reasonable proportion between the quota litis agreement and the amount in dispute. Further to that, the court ruled that the lawyer had taken advantage of their client’s need to solve the conflict, thus deeming such percentage unacceptable. This case could provide a good starting point for creating limits on payments to third-party funders, but given this issue has not yet been raised, such understanding is still subject to much debate and interpretation.Specific rules for litigation funding
Are there any specific legislative or regulatory provisions applicable to third-party litigation funding?
If one were to imagine any type of control or rule to be applicable - even indirectly - a valuable source would be the Statute of the Brazilian Bar Association (EOAB), which sets forth the conditions and the boundaries of lawyers with regard to their clients. In addition, the Brazilian Code of Civil Procedure (BCCP) and the Brazilian Arbitration Act (BAA) impose upon arbitrators’ duties of independence and impartiality. Therefore, some may say that the duty to disclose the existence of a funder derives from these instruments.Legal advice
Do specific professional or ethical rules apply to lawyers advising clients in relation to third-party litigation funding?
At the time of writing, there were no specific ethical rules applicable to third-party litigation funding. As mentioned in question 1, when it comes to arbitration, the only rule regulating client-attorney relationships and third-party funding is CAM-CCBC’s Administrative Resolution No. 18. Section 1 of the Resolution establishes a set of guidelines applicable to the parties involved in arbitration funding and describes funding as the situation:
[W]hen a natural or legal person who is not party to the arbitration proceedings provides full or partial resources to one party so as to enable or assist the payment of the arbitration costs, receiving in return a portion or percentage of any profits earned from the award or from the agreement.
To avoid conflicts of interest, the CAM-CCBC recommends full disclosure (ie, full qualification) of the funder at the ‘earliest opportunity’ (section 4 of the Resolution). In addition, according to our research, other arbitral institutions, such as the Arbitration and Mediation Center of the American Chamber of Commerce (AMCHAM) and the Business Arbitration Chamber (CAMARB), also seem to be concerned with establishing recommendations regarding third-party funding.Regulators
Do any public bodies have any particular interest in or oversight over third-party litigation funding?
No public entities in Brazil have laid down any principles or established any oversight mechanisms to control third-party funding in Brazil yet.