Brazil
There has been a rise in insolvency, especially chapter-11 proceedings, and fraud. Since 2016 there is a new proceeding exclusively for evidence, that partially resembles a discovery/disclosure exercise, which can be used in complex litigation cases.
Notwithstanding, the pandemic accelerated the adoption of electronic payment options, which was responsible for the rise of litigation involving credit cards, acquirers, and banks.
1. Is third party funding permissible for disputes?
Yes, third party funding is permissible for disputes in Brazil.
In the Brazilian market, many local players offer third party funding, such as banks, alternative investment management companies, hedge funds and special situation funds.
At present, there is no legislation regulating third party funding in Brazil. However, the Court of Appeals of the State of São Paulo ruled on a case, in which it recognized that the parties are not subject to disclose who is funding the lawsuit. For the time being, revelation is not a duty in third party funding in state courts.
Contrarily, the arbitration chambers in Brazil impose a duty to the parties that have their cases funded by a third party, to declare any such funding due to the doubt that can be raised as to the impartiality or independence of the arbitrators, arising out of possible past or current relationship between the arbitrator and the third-party funder.
Third party funding can be used in virtually any sort of lawsuit. Common use of third party funding encompasses corporate lawsuits against controlling shareholders and lawsuit for damages due to anticompetitive practices.
2. Are lawyers able to work on a contingent basis in the jurisdiction and are there any restrictions?
In Brazil, it is relatively common for lawyers to work on a contingency fee basis.
This means that they receive payment only if they win the case or achieve a favourable outcome for their client. However, the most common fee arrangements are the payment of an initial amount combined with success fees that correspond to a percentage of any amount paid to the client by the counterparty in the lawsuit or benefit received by the client.
3. Can the court or tribunal order one party to pay the other’s legal costs?
Yes, in Brazil, the court or tribunal can order the unsuccessful party to pay the successful party’s legal costs. That includes fees for the court and expert’s fees. That does not include lawyer’s fees. However, the unsuccessful party must pay fees awarded by court to opposing counsel, which are payable irrespective of whatever legal fee arrangements the opposing counsel may have agreed with the client, and correspond to 10%-20% of the award or amount in discussion.
4. Is insurance available to protect against adverse outcomes for funded litigation?
In Brazil, there is no wide spread insurance to protect against adverse outcomes for funded litigation. However, insurance companies issue surety bonds, that can be used to guarantee lawsuits, especially those in enforcement proceedings. Once a lawsuit is guaranteed by a surety bond, the parties can carry on litigating until they reach a final ruling, so that the party does no need to make a payment before final ruling.
Contact
Caio Brandão Coelho Martins de Araujo Senior Lawyer, Azevedo Sette Advogados
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