On December 23, 2016 the Brazilian Senate approved a bill for a new law to regulate public bidding procedure (the “Bill”). In Brazil contracts with state entities in principle shall be subject to such public bidding procedures, which include invitation for qualified interested parties to participate in the bid, as well as publication of draft agreements for the bidders’ comments before the bid.

The Public Bids Bill expressly authorizes arbitration on contracts involving state-owned entities, which is in line with the Brazilian Arbitration Act. Nonetheless, according to the Bill, the arbitration clause will have to be provided for in the draft of the agreement circulated to the bidders prior to the bid. This is a step back from the current case law of the Superior Court of Justice, which in the “Compagás” case” acknowledged that the public administration could insert arbitration clauses in contracts even if it was not contemplated in the draft published in the invitation to bid.

This restriction is quite controversial and might change in the House of Representatives. In certain instances, it might be of the public administration’s best interest to submit certain disputes to arbitration, even if the invitation to bid or the original contract provided for judicial courts as the venue to resolver controversies. A good example is the renewal and termination of certain public concession agreements, most of which have judicial venue clauses, but in relation to which the Federal Government has recently issued a provisional measure (MP 752), authorizing the resolution of some pendencies through arbitration.

The Bid will now be sent to the House of Representatives for review and voting, being expected to be approved during 2017.