A Threat to The Kompetenz-Kompetenz Principle? The Intervention of The São Paulo Appellate Court in The Formation of The Arbitral Tribunal in Vale v. Shareholders

In the appeal no. 1129029-43.2024.8.26.0100, judged on November 18, 2025, the São Paulo Appellate Court (TJSP), the largest in Latin America, rendered a decision that disrespects the independence of the arbitral jurisdictional system by annulling a decision of the President of CAM B3 (CAM B3 Decision) before the arbitral tribunal had the opportunity to assess the issue.

I.               Facts of the Case

The arbitration in which the CAM B3 Decision was issued was filed by 123 shareholders (Shareholders) of Vale, the world’s largest producer of iron ore, to request compensation for the devaluation of their shares, which allegedly occurred due to supposed informational failures associated, among other factors, with environmental disasters involving the company in recent years.

In the CAM B3 Decision, Article 3.6 of the CAM B3 Arbitration Rules was applied to allow the President of CAM B3 to appoint all members of the arbitral tribunal due to the impossibility of a joint appointment of a professional by the Shareholders after seven failed attempts. This provision states that:

“3.6. If there is more than one Respondent or Claimant, these, in accordance with their common interests, shall jointly appoint an arbitrator, under the terms of these Rules. In the absence of consensus, the President of the Arbitration Chamber shall appoint all arbitrators.”

This is a provision present in the arbitration rules of several renowned institutions, since it is the solution that resulted from the accumulation of practical arbitral experience both in Brazil (following the Paranapanema case – see here) and internationally (following the Dutco case) to reconcile the principles of party equality and the impartiality of the adjudicator.

Vale, dissatisfied with this decision and arguing it had a fundamental right to the appointment of an arbitrator, filed an action against the Shareholders and CAM B3 for the annulment of the CAM B3 Decision. Vale did so before requesting the arbitral tribunal to rule on its own competence regarding Vale’s allegations of its irregular constitution.

The trial court did not admit Vale’s request, correctly understanding that it was an attempt to bypass the Kompetenz-Kompetenz principle set forth in art. 8 of the Brazilian Arbitration Law.

However, the TJSP overturned the trial court’s ruling and annulled the CAM B3 Decision, based on four grounds: (1) Vale’s action to request judicial intervention was admissible given the absence of a threat to the Kompetenz-Kompetenz principle; (2) there would be a denial of justice if the Judiciary refused to hear the case, since the CAM B3 Decision would be final and binding; (3) the dissent necessary for the application of article 3.6 of the CAM B3 Rules had not been proven; and (4) there would be no sufficient basis to deprive Vale of its fundamental right to appoint an arbitrator.

All four grounds are flawed.

II.            Analysis of TJSP’s Ruling

1.     Inadmissibility of the Annulment Action.

The TJSP held that there was no violation of Kompetenz-Kompetenz, since a decision rendered before the investiture of the arbitrators lacked a jurisdictional nature. According to the TJSP, the Kompetenz-Kompetenz principle would only apply in cases where the decision is rendered by the arbitral tribunal in the exercise of jurisdictional power. Nonetheless, premature judicial intervention to decide an annulment claim regarding the constitution of the tribunal entails the violation of the primacy of the arbitral tribunal to decide on its own competence (art. 8 of the Brazilian Arbitration Law). The administrative nature of the institution’s decision does not authorize the parties to bypass the arbitral tribunal’s authority to be the first to decide on its own competence.

The TJSP seems to start from a mistaken premise regarding the limits of the arbitral tribunal's jurisdictional power to decide on its own competence when it considers that there would be no threat to the Kompetenz-Kompetenz because “the existence, validity or effectiveness of the arbitration agreement is not discussed, much less the arbitral jurisdiction [...] but rather the correct application of the rules of procedure”. The application of the rule of procedure at hand deals with the formation of the tribunal, an essential element of arbitral jurisdiction and grounds for the annulment of an arbitral award (article 32, II and VIII, of the Brazilian Arbitration Law) which can be the subject of a decision by the tribunal itself.

Articles 8; 20, §§1 and 2; 32 and 33 of the Brazilian Arbitration Law establish a system that grants chronological priority to the arbitrator to decide on nullities that occur in the course of arbitration proceedings and limits the judicial control to the annulment action that can be initiated only after the arbitral award is rendered. Admitting judicial intervention before the definitive judgment on the merits (whether in part or in its entirety) without the consent of all parties involved violates the autonomy of the Brazilian arbitration system.

In addition, the state intervention violated the consent of the parties to be subject to the CAM B3 Rules for the constitution of the arbitral tribunal. This is an inadmissible judicial intervention in a private contract.

Therefore, instead of requesting premature judicial intervention Vale should have argued its disagreement regarding the formation of the arbitral tribunal to the tribunal itself after its constitution so that a decision could be rendered in this regard. If that had been the case, any nullity could be argued in the appropriate annulment action of arts. 32 and 33 of the Brazilian Arbitration Law after the award on the merits.

2.     The CAM B3 Decision Was Neither Final nor Binding.

TJSP’s premise is mistaken, as all decisions of the President of CAM B3 that influence the premises for the exercise of jurisdictional powers are subject to review by the arbitral tribunal.

It is necessary to distinguish two types of activities of arbitral institutions. On the one hand, there are the merely administrative activities, related to document filing, fee collection, logistical organization of hearings, sending official letters to state and private institutions, among others. This is a range of purely administrative attributions that do not influence the exercise of jurisdiction by the arbitral tribunal. In such cases, any mistakes by the chamber (as occurs in duplicate charges or loss of documents, for instance) do not interfere with the legal premises for the exertion of jurisdiction and do not concern the subsequent activity of the tribunal.

On the other hand, there are the quasi-jurisdictional activities, i.e., activities that support the tribunal in the management of the case even before its constitution, such as decisions on challenges to arbitrators, consolidation of proceedings, inclusion of additional parties, and, finally, the decision rendered in the case at hand: the appointment of all three arbitrators by the president of the chamber in cases in which multiple parties cannot agree on a joint appointment.

This second type of activity influences the exertion of jurisdictional power, as these decisions concern procedural aspects capable of generating violations of due process. For this reason, the arbitral tribunal may always review any act of the chamber that belongs to this type of quasi-jurisdictional category, as it is the guardian of due process in arbitration. As decided by the Superior Court of Justice, “all procedural incidents of arbitration must be resolved by the Arbitral Tribunal itself – and only by it – and the intervention of the Judiciary is undesirable and inappropriate until the arbitral award is definitively rendered” (REsp no. 1.614.070/SP, adjudicated on June 26, 2018).

Therefore, there would be no denial of justice if the TJSP did not admit Vale’s premature annulment action, since it would be possible to access state jurisdiction through the appropriate means of the annulment action of an arbitral award after the tribunal’s decision on its own competence in light of Vale’s allegations regarding its irregular constitution.

3.     Applicability of Article 3.6 CAM B3 Rules.

The TJSP understood that (a) the alignment of the Shareholders on the merits of the dispute was evidence of agreement on the arbitrator to be appointed; and (b) the previous appointment of seven potential arbitrators before the impossibility of consensus on an eighth name would be evidence that Vale did not obstruct in any way the Shareholders’ choice on the co-arbitrator.

First, the trigger of article 3.6 CAM B3 Rules is solely the dissent over the name of the arbitrator to be jointly appointed, a matter of specific consent that is not to be confused with the merits of the claim. There is no imposition of a cumulative requirement of dissent on the merits.

Consensus on legal theories or counsel does not necessarily mean agreement on the arbitrator. Even when parties have identical interests in the outcome, they may have incompatible views on the attributes of the arbitrator to be appointed. It is, therefore, an issue subject to specific consent, which cannot be extracted from the alignment on the merits.

Second, it is irrelevant to the application of article 3.6 whether the counterparty created an obstacle to the choice of co-arbitrator. There is no provision in this regard in CAM B3 Rules.

In the case at hand, the fact that the Shareholders made seven attempts at appointing a co-arbitrator makes it credible that, on the eighth attempt, they really could not reach consensus. Although it is not possible to analyze the circumstances of the seven previous attempts due to the confidentiality of the arbitration proceedings, the mere existence of such attempts constitutes a strong indication that the Shareholders were not using art. 3.6 CAM B3 Rules to intentionally “deprive Vale of the essential right to choose the arbitrator”. The Shareholders do not derive any benefit from the waiver of the right to appoint an arbitrator and the consequent transfer of this power to a third party.

4.     Inexistence of a Fundamental Right to Appoint an Arbitrator.

While common in three-member tribunals, there is no provision in the Arbitration Law (or any other Brazilian law) for a fundamental right to appoint an arbitrator. It is a prerogative subject to restrictions when it conflicts with principles of equal or greater importance.

Thus, party autonomy must be weighed (in a proportionality assessment) with the fundamental principles of Brazilian civil procedure and arbitration: due process of law, party equality and the right to be heard. Such principles of public nature (as they discipline the exertion of jurisdictional power that derives from the State’s monopoly of legitimate coercion) prevail over the parties’ autonomy regarding the appointment of arbitrators. The solution provided by Paranapanema and Dutco harmonizes these legal values and is still the best practice.

In any case, the parties can always agree on a procedure in which the arbitrator is appointed by an appointing authority, which is common in sole arbitrator proceedings but can just as easily be used in three-member tribunal proceedings. This is the case at hand, in which the parties had already consented to the application of a regulation containing the rule that provides flexibility to the alleged fundamental right in the situation foreseen in Article 3.6. In summary: the very consent of the parties to the adoption of the CAM B3 Rules demonstrates that the right to participate in the formation of the arbitral tribunal is not absolute, fundamental, or non-waivable, and may give way to another form of constitution of the arbitral tribunal should the parties so agree.

III.          Conclusion

In light of the foregoing, four conclusions can be drawn regarding the subject analyzed: (1) the Judiciary is not competent to review decisions on procedural incidents rendered during the course of an arbitration, even if administrative in nature and prior to the constitution of the Arbitral Tribunal (quasi-jurisdictional activity of the arbitral institution); (2) there is no denial of justice in recognizing the inadmissibility of an action to annul a quasi-jurisdictional decision of the arbitral institution, as it can be subject to review by the Arbitral Tribunal if the party so requests; (3) the existence of consensus among multiple parties on the merits does not equate to consensus on the arbitrator to be appointed. The world’s leading arbitral institutions do not impose disagreement on the merits as a cumulative requirement to the specific dissent regarding the name of the arbitrator to be jointly appointed; and (4) the right to participate in the formation of the arbitral tribunal is not fundamental or absolute, as it does not prevail over party equality and due process. The solution provided by Paranapanema and Dutco, mirrored in Article 3.6 CAM B3 Rules, remains the best practice for harmonizing such legal values.

Finally, answering the question posed in the title, we understand that although the TJSP’s ruling represents a worrying departure from international standards, the Kompetenz-Kompetenz principle is not under a systemic threat in Brazil. Despite the TJSP being the country’s most relevant State Court, its rulings are not binding on future decisions. The Superior Court of Justice, as the final authority on the interpretation of Brazilian federal law (which is the case of the Arbitration Law), has a consistent history of upholding the chronological priority of the arbitral tribunal to decide on its own competence. Therefore, as long as the Superior Court maintains its pro-arbitration stance, the TJSP’s decision in Vale v. Shareholders should be considered an isolated judicial error rather than a definitive shift in Brazilian case law.