Weeks after the International Council for Commercial Arbitration (ICCA) showcased the sophistication of the Brazilian arbitration market, an unexpected decision by a São Paulo court last Monday has left local practitioners aggrieved.

São Paulo's state-owned underground rail operator, Metrô, won a preliminary injunction against an ICC tribunal hearing its dispute with the Via Amarela consortium over costs associated with the construction of a new line. In a decision roundly condemned by observers, the court said there was a public interest in the case and ordered the tribunal to widen the scope of the expert evidence it is considering.

"This decision represents a huge act of interference by the courts in the arbitration proceedings, and if it prevails it's going to send Brazil back to the Stone Age of arbitration," warns Marcelo Ferro of Ferro, Castro Neves, Daltro e Gomide Advogados, counsel to Via Amarela. "There are a number of strong precedents in Brazilian law stressing that courts cannot interfere in arbitrations. This is an isolated decision by a single judge in a state court, who has not heard our arguments. We are confident that it will be overruled."

But Metrô's counsel, Samuel Mac Dowell de Figueiredo, of Rodrigues Barbosa, Mac Dowell de Figueiredo, Gasparian - Advogados, says critics of the decision do not have all the facts. "The act of the arbitral tribunal clearly violates the essential principles of due process and amounts to a violation of the mandate conferred on the arbitrators by the disputing parties. The tribunal is bound by the arbitration agreement and should decide the case accordingly. It is undisputed that the arbitral proceeding is governed by the will of the disputing parties and there is no inherent power that allows the arbitral tribunal to disregard it."

He continues, "The view of some practitioners that arbitration is something detached from any legal system impairs the consolidation of an arbitration culture in Brazil. In my opinion the court order obtained by Metrô is, in fact, favourable for the legitimacy of arbitration in Brazil as a means of dispute settlements; it shows that the disputing parties have remedies available against violations of due process committed by arbitrators."

Metrô initiated the arbitration in 2007 after Via Amarela adopted a tunnelling method that had not been agreed in the original contract. A disputes board of engineers put the additional cost at around US$100 million but its conclusions were non-binding.

The arbitral tribunal, seated in Brazil, considered geological expert evidence but refused Metrô's request to also consider testimony from engineering experts. The panel issued a partial award in July 2009, calling for the parties to agree on the appointment of an accountant to evaluate the exact amount the consortium should collect.

Eduardo Damião Gonçalves, a partner at Barretto Ferreira, Kujawski, Brancher e Gonçalves and former head of the Brazilian Arbitration Committee, CBAr, says, "This is indeed a bad decision that shows how important it is to work continuously with judges, particularly lower-level judges who are still not very acquainted with the specifics of arbitration."

"Brazilian courts have been systematically refusing to interfere in arbitration proceedings and this court should have done the same. As Emmanuel Gaillard has said, anti-arbitration injunctions are a plague that we have to fight," Gonçalves adds.

Fernando Mantilla-Serrano, a Colombian lawyer in Shearman & Sterling LLP's international arbitration practice in Paris, agrees that "this is an interim decision that may well be overturned on appeal, and does not reflect the actually rather positive stance of Brazilian courts towards arbitration."

According to commentators the tribunal is not bound by this decision as far as arbitration law is concerned, but would risk being in contempt of court if it failed to observe it. After consultation with the arbitrators, Ferro confirms that they intend to abide by the decision while Via Amarela seeks its reversal.

Metrô is understood to have filed another lawsuit with a different São Paulo court last week calling for a suspension of the whole arbitration, which was refused.

Via Amarela is a consortium made up of leading Brazilian industrial conglomerates Odebrecht, OAS, Queiroz Galvão, Camargo Corrêa and Andrade Gutierrez, together with France's Alstom.

·                 Carlos Alberto Carmona (President)

·                 Maria Sylvia Zanella di Pietro (appointed by Metrô)

·                 Gustavo Binenbojm (appointed by CVA)

·                 Ferro, Castro Neves, Daltro e Gomide Advogados

Partner Marcelo Ferro, Alice Moreira Franco and Eduardo Pecoraro

·                 Manesco, Ramirez, Perez, Azevedo Marques

Partner Floriano de Azevedo Marques

Counsel to Companhia do Metropolitano de São Paulo (Metrô)

·                 Rodrigues Barbosa, Mac Dowell de Figueiredo, Gasparian - Advogados

Partner Samuel Mac Dowell de Figueiredo