Arbitration and Brazilian Courts: Conflicts and Cooperation

Since the enactment of the Brazilian Arbitration Act (Law No. 9,307/1996), the Brazilian legal framework has undergone remarkable changes that helped improve and strengthen arbitration as an alternative method of dispute resolution.

In 2002, the 1958 New York Convention came into force in Brazil, notably contributing to the development of arbitration in the country, particularly in respect to the recognition and enforcement of foreign arbitral awards.

More recently, the new Brazilian Civil Procedure Code (Law No. 13,105/2015) accommodated the kompetenz-kompetenz principle, under which it is up to the arbitrator to determine his or her own competence by examining the validity of the arbitration clause and the agreement in which it is inserted.

A few months later, Law No. 13,129/2015 amended the Arbitration Act, providing for some topics already settled in courts. Moreover, it explained and improved certain aspects of the original text.

Notwithstanding all the achievements towards the autonomy of the arbitral jurisdiction in Brazil so far, the connection between arbitral and judicial litigation is still inevitable and can be very beneficial if properly developed.

Before the beginning of the arbitration proceeding, courts may be required to enforce precautionary and urgent measures, due to the risk of irreparable damages. The most usual among these measures concern the request for suspension or enforcement of constrictive measures (e.g., the attachment of properties to guarantee a future execution) and the request for early production of evidence.

Judicial cooperation will also be essential before the arbitration proceeding starts if one party refuses to take part in it or if the arbitration clause fails to meet the minimum requirements for its commencement. In this case, Art. 7 of the Arbitration Act provides for a judicial mechanism for the specific performance of arbitration clauses.

On such occasions, there is a risk of undue judicial intervention, since Brazilian courts have allowed the judges to evaluate the validity of the arbitration clause if it is clearly null and void. From our point of view, such control should only happen after the arbitral award is issued, in order to comply with the above-mentioned kompetenz-kompetenz principle, which prevents the courts from making early intervention in matters that the parties have freely subjected to arbitration.

During the arbitration proceedings, the new Brazilian Civil Procedure Code provides that the courts’ cooperation must be done by means of the so-called “arbitral letter”. The “arbitral letter” can be used, for example, to enforce a subpoena through a judicial officer or a preliminary or advance relief ordered by the arbitrator, as well as to compel a witness to attend a hearing.

Finally, after the conclusion of the arbitration proceeding, a court decision enforcing the arbitral award may be needed if the losing party fails to comply voluntarily. Besides, if a defect[1] is identified in the arbitral award, an action for the annulment of the award may also be filed with a national court. Lastly, in order to be enforced, foreign awards must be homologated (exequatur) by the Brazilian Superior Court of Justice (STJ).

Both the New York Convention and the Brazilian Arbitration Act provide for some presumption that foreign awards are capable of producing effects in Brazil.[2] As a rule, this presumption is only struck down if STJ finds (i) that the party’s right to be heard and to present its case was violated; (ii) that the limits of the arbitral authority’s jurisdiction were exceeded; or (iii) that the merits of the decision violated public policy.[3]

In fact, not very long ago (in February 2017), STJ denied to homologate a foreign arbitral award rendered by a U.S.-based arbitration court in a dispute between the Spanish company Abengoa Bioenergia and the Brazilian company Adriano Ometto Agrícola. The majority of the STJ justices found that the impartiality requirement had been violated, since the president of the arbitral tribunal was a partner at a law firm which received high fees from the Spanish company during the course of the arbitration proceeding. Despite the fact that such fees were due for work not related to the matter discussed in the arbitration, the STJ decided that the president had an obligation to make proper disclosure to the parties, and did not do so.[4]

Even though the STJ usually recognizes the enforceability of foreign arbitral awards, the definition of public policy remains a controversial issue even among the signatory states of the New York Convention, which, depending on the subject under discussion, increases the risk of undue judicial intervention on the merits of the foreign arbitral award. That is why utmost care is required when choosing arbitration to solve disputes involving, for example, labor law, consumer law, environmental and tax issues, whose effects would need to be enforced in Brazil.

Arbitral jurisdiction and state jurisdiction are constantly intersecting each other, sometimes for the purpose of cooperation, sometimes for the purpose of legality control. Fortunately, the Brazilian legal framework is increasingly adequate and conducive to the development of a balanced relationship between arbitral tribunals and the national courts.

[1] A defect provided on the list of Art. 32 of the Arbitration Act.

[2] In this sense, Gary Born on the Brazilian Arbitration Act (BORN, Gary B. International Commercial Arbitration. Commentary and Materials. 2nd Ed. New York: Transnational Publishers, 2001, p. 157).

[3] DE ARAÚJO, Nádia. Opinion. Questões sobre a Motivação de Laudo Arbitral Estrangeiro e sua Homologação no Brasil: SE 5692/US. In: Revista Brasileira de Arbitragem, ano XII, vol. 45, jan-fev-mar 2015, p. 23.

[4] Brazilian Superior Court of Justice (STJ), Case (SEC) No. 12.493, Special Court, Reporting Justice Maria Thereza de Assis Moura, judged on February 15, 2017.