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Brazil

Last Verified on Tuesday 14th April 2020

    Legislation

    • Brazil

      The recognition of foreign awards and arbitral agreements is governed by the Brazilian Arbitration Act (Law 9.307 of 1996), the New York Convention (Decree 4.311 of 2002), the Panama Convention (Decree 1.902 of 1996) and the 1992 Las Leñas Protocol (Decree 6.891 of 2009). The subsequent enforcement of recognised awards is governed by the Civil Procedure Code. Brazil is monist and does not have different legal regimes for international and domestic arbitration.

      Last verified on Tuesday 14th April 2020

    • Brazil

      UNCITRAL does not list Brazil as a Model Law jurisdiction. The Brazilian Arbitration Act follows the UNCITRAL Model Law in several aspects. There are common features such as the binding nature of the arbitral agreement, separability, competence-competence, the importance placed on due process and the requirement of reasoned awards. The structural framework of arbitration proceedings is also consistent with the Model Law, such as in the restriction of recourse and the grounds for setting aside an award. In contrast, it adopts a territorial notion of domestic and foreign awards based on the place they are rendered, and it does not contain a definition of international arbitration.

      Last verified on Tuesday 14th April 2020

  • Conventions

    • Brazil

      The New York Convention and the Panama Convention are in force. Brazil is also a party to a series of relevant treaties within Mercosur: the 1998 Mercosur International Commercial Arbitration Agreement; the Olivos Protocol for the Settlement of Disputes in Mercosur; the Buenos Aires Protocol of 1994; and the Las Leñas Protocol of 1992.

      Last verified on Tuesday 14th April 2020

  • Commercial arbitral agreements and arbitrability

    • Brazil

      Brazilian law used to require a post-dispute ‘compromiso’ until the Brazilian Arbitration Act was enacted in 1996. A pre-dispute arbitration clause has since then been enforceable. The Brazilian Arbitration Act provides for a party’s right to commence arbitration directly based on an arbitration clause that contains all the elements required to form an arbitral tribunal. If any element is missing, and the parties cannot reach an agreement to fill the gap (article 6, Brazilian Arbitration Act), an interested party may submit the matter to a court, and the judgement will be equivalent to a ‘compromiso’ and set forth the missing elements (article 7, Brazilian Arbitration Act).

      Last verified on Tuesday 14th April 2020

    • Brazil

      Arbitration agreements must be in writing, as a general rule. Case law varies whether they also need to be signed, and the prevailing view requires only they can be proven by written documents (STJ, REsp 1569422/RJ, 26 April 2016). In adhesion contracts, article 4, § 2, Brazilian Arbitration Act requires the text of the arbitration agreement to be in a separate document or in boldface, to be especially signed or initialled, unless the party that adheres to the contract takes the initiative to commence arbitration. In several cases, the Superior Court of Justice (STJ) has upheld this requirement by concluding that, in adhesion contracts that do not comply, the fact the adhering parties filed a suit before a national court is evidence of their lack of consent to arbitrate (STJ, REsp 1785783/GO, 5 November 2019; STJ, REsp 1628819/MG, 27 February 2018; STJ, REsp 1189050/SP, 1 March 2016).

      In 2015, the Brazilian Arbitration Act was reformed, among other changes, to include specific requirements for arbitration agreements relating to government parties. Article 1, § 2, Brazilian Arbitration Act requires the arbitration agreement to be entered into by the government official who has the power to enter into settlements on behalf of the government. This requirement applies to the government only, not to government-owned or government-controlled entities.

      Last verified on Tuesday 14th April 2020

    • Brazil

      The general requirement for subject matter arbitrability in domestic or international business transactions alike is that the dispute deals with economic disposable rights (article 1, Brazilian Arbitration Act). This phrase is construed expansively, and it is rarely invoked in the context of international business transactions to challenge arbitrability of international matters.

      Consumer relations, labour disputes and arbitration with state parties have specific characteristics. See questions 9 and 15.

      Last verified on Tuesday 14th April 2020

    • Brazil

      There are no specific limits from an arbitration law standpoint. Article 1 of the Brazilian Arbitration Act has always been interpreted as granting both to private or state parties the ability to enter into agreements to arbitrate provided they have the capacity to enter into contracts and the dispute related to economic disposable rights. Such requirements are the same for private or state parties. As the Brazilian economy grew and became more sophisticated in the 1990s, various statutes in different industries, such as oil and gas or water and sewerage, provided specifically for arbitration with state parties. Specific statutes also provided generally for arbitration in government concessions and public – private partnerships (PPPs). This trend culminated with the 2015 reform of the Brazilian Arbitration Act, which included provisions confirming the ability of the state and its instrumentalities to enter into agreements to arbitrate. Law 12.815 (ports) and Law (airports, railways and highways) also provide for arbitration, and the latter sets forth illustrations of matters that fall under the definition of disputes concerning economic disposable rights, such as non-compliance with contractual obligations or damages for termination. After 2015, there has been a surge in the number and importance of arbitration cases involving all levels of government, and governments have taken to regulate by executive orders or local legislation their participation in arbitration. Therefore, there are two levels of requirements for a state’s participation in arbitration. At the statutory level, which is the minimum required for the validity of the arbitration, the arbitration agreement must comply with the Brazilian Arbitration Act, namely (i) if the state (not an instrumentality) is a party, be entered into by an official with powers to settle on behalf of the state, (ii) be subject to the principle of transparency (ie, not confidential as a general rule). Other laws, such as the Concessions Act (1995), the PPPs Act (2004) and Law 13.448 (2017) require also the place of arbitration to be in Brazil and the proceedings to be in the Portuguese language. These latter requirements do not prevent the proceedings to be administered by a foreign arbitral institution or to be bilingual.

      There is a second level of requirements, which arise from regulatory provisions enacted by the federal and various local governments as guidance to their own officials. Non-compliance with such requirements does not give rise to invalidity or unenforceability of the agreement, but compliance will ensure a smoother proceeding and avoid unnecessary disruptions. At the federal level, the requirements are set forth in Decree 10.025 for contracts in the sectors of airports, railways, highways and ports. In other areas, only the general requirements apply. Many larger states, such as São Paulo and Rio de Janeiro, or municipalities have their own regulations for arbitration involving local disputes. For more see Pereira, Cesar. Arbitragem envolvendo a Administração Pública no direito brasileiro: função pública e controle externo. In: Cordeiro, Antonio Menezes. Arbitragem Comercial. Lisboa. Almedina, 209 p. 253–272.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Article 2, Brazilian Arbitration Act provides the parties may choose between arbitration in equity or under law. However, article 11, II, Brazilian Arbitration Act requires a post-dispute agreement (compromiso) to provide for arbitration in equity. Brazilian law therefore provides for arbitration under law except if the parties expressly provide for arbitration in equity. Arbitration involving the state will always be under law (article 2, § 3).

      Last verified on Tuesday 14th April 2020

    • Brazil

      The Brazilian Arbitration Act grants broad discretion to the parties in their autonomy to build an arbitral agreement suitable to their needs and interests. The parties may choose the number of arbitrators, provided it is an odd number (article 13, § 1). They are also free to select an arbitral institution. In case the chosen institution has rules limiting the choice of any arbitrators to its reference list, the parties may jointly agree to override such requirement (article 13, § 4). Most importantly, the parties are free to choose a seat or place of arbitration (articles 10, IV, and 11, I) and the applicable substantive law (article 2, § 1). The former is important to define whether the award will be domestic or foreign. The latter is an exception under Brazilian law, since the conflict of laws rules generally limit the choice of substantive law except under arbitration.

      Disputes involving the state or its instrumentalities are an important exception to party autonomy. In several scenarios, arbitration with state parties must take place in Brazil, which limits the choice of a foreign seat, and the proceedings must be conducted in Portuguese. When the state is involved, parties are also prevented from contracting around the requirement of transparency, and may agree on how to implement it only within the boundaries of Brazil’s Access to Information Act (Law 12.527 of 2011).

      Last verified on Tuesday 14th April 2020

    • Brazil

      Brazilian case law does not distinguish between situations in which a non-signatory intends to pursue a claim in arbitration or is brought to arbitration by one of the signatories. In addition to the most obvious case of formal or informal succession of a party, Brazilian case law applies international standards such as the involvement of the non-signatory in the negotiations (TJSP. Apelação 9193203-03.2002.8.26.0000, 31 May 2006) and implied consent due to abuse of the corporate veil by the non-signatory (STJ. REsp 1698730/SP, 8 May 2018). In an ICC case reported by Arnoldo Wald, a non-signatory subsidiary of the respondent requested to join and was admitted by the ICC Court based on the premise that the subsidiary had a separate contract with the parties with equal arbitration clause and related subject matter (Wald, Arnoldo. ‘A arbitragem, os grupos societários e os conjuntos de contratos conexos’, RArb, no. 2, p. 31, ano 1, São Paulo, May–Aug 2004).

      The STJ has also recognised that, in a scenario of related contracts, the one identified as the main contract governs the dispute resolution of the subordinate related contracts and extend to the parties of the latter (STJ, REsp 1639035/SP, 18 August 2018).

      Last verified on Tuesday 14th April 2020

    • Brazil

      See question 12. Brazilian case law does not distinguish between situations in which a non-signatory intends to pursue a claim in arbitration or is brought to arbitration by one of the signatories. 

      Last verified on Tuesday 14th April 2020

    • Brazil

      Brazil’s Civil Procedure Code entitles the defendant in litigation to raise a defence based on the existence of an arbitration agreement. The law does not require a prima facie recognition of the arbitration agreement. The defendant may raise such defence under the theories that allow the extension of the arbitration agreement to a third party and produce evidence of its allegations before the court of law. The court will enter judgment and may dismiss the litigation and refer the parties to arbitration. The court will be required to dismiss the case in favour of arbitration if the arbitral tribunal in a possible parallel arbitration declares its own jurisdiction over the case. This is a consequence of the breadth given in Brazil to competence-competence. The matter may later be raised in court again at the set-aside stage.

      Last verified on Tuesday 14th April 2020

    • Brazil

      See question 8. Pursuant to article 4, § 2, of the Brazilian Arbitration Act, an arbitration clause in adhesion contract, which is typically the case in consumer disputes, will only be valid if the adhering party takes the initiative to commence the proceedings or if the arbitration agreement is in a separate document or printed in boldface, in either case also signed or initialled. In addition, article 51 of the Consumer Protection Code provides that any contractual clause making arbitration mandatory is null and void. Such requirements prevent most consumer disputes from being arbitrated.

      Labour disputes based on labour adhesion contracts are also subject to the Brazilian Arbitration Act formal requirements of dispute resolution clauses in such types of contracts. Article 507-A of the Labour Relations Act (CLT) refers to the Brazilian Arbitration Act for the applicable general arbitration regime. Under article 507-A, arbitration is allowed only in labour contracts for salaries above a certain threshold in which an arbitration clause is inserted by initiative or with express consent of the employee. In labour agreements that are negotiated and do not amount to adhesion contracts, the existence of an arbitration clause suffices as proof of consent by the employee. Although CLT only mentions arbitration clauses in contracts (pre-dispute agreements), the parties are free to enter into post-dispute agreements, at least with regard to labour disputes that meet the financial threshold of article 507-A. For more, see Muniz, Joaquim de Paiva. ‘Arbitragem no direito do trabalho’, Revista de Arbitragem e Mediação, v. 56, 2018.      

      Last verified on Tuesday 14th April 2020

    • Brazil

      Class actions under Brazilian procedural law have limited scope and effects and do have the finality attributed to them in other legal systems. Legal standing to bring a class action is attributed to a limited number of entities, the most typical of which are organisations representing a certain class (such as non-government organisations) and a branch of the public prosecutor’s office (Ministerio Publico). The limitations applicable to class actions in litigation make it a less important feature in arbitration in Brazil as opposed to other jurisdictions.

      Notwithstanding, starting in 2017, several minority shareholders’ claims against Petrobras, the Brazilian oil giant involved in a corruption scandal that erupted in 2014, and other large organisations have shaken the foundations of the discussion regarding class arbitration in Brazil. A class entity representing several minority shareholders filed a lawsuit seeking damages. The suit was dismissed, and the court referred the case to arbitration based on Petrobras by-laws provision for arbitration of corporate disputes. Some arbitration claims are said to feature hundreds of claimants, in what may amount to group arbitration under international standards.

      Brazilian law allows for such multiple claimants (or defendants) to be represented in their individual claims by a single entity, with several procedural advantages (see Pereira, Cesar. Quintao, Luisa. ‘Entidades representativas (article 5º, XXI, da CF) e arbitragem coletiva no Brasil’. Revista de Arbitragem e Mediação 2015 v. 47, p. 105–126. In this scenario, the direct outcome of the arbitration will not extend to the whole class of claimants, but only to the ones represented by the entity at issue. If one takes a corporate dispute as an example, there are situations in which other shareholders may be affected by the award, but simply as an indirect effect of the solution of the dispute. For more see Wald Arnoldo. A evolução no Brasil e a arbitragem de classes. In Cordeiro, Antonio Menezes. Arbitragem Comercial. Lisboa. Almedina, 209 p. 127–140.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Class arbitration is a relatively new concept in Brazil, and contractual waivers precluding it are virtually unknown.

      In consumer disputes, the Consumer Protection Code prohibits clauses that impose the prior waiver of any rights. Therefore, a waiver in consumer contracts will be null and unenforceable. However, consumer disputes already face many restrictions to be arbitrated.

      In contracts in general, based on party autonomy, there is no reason why a waiver of a private right to class representation might not be valid and enforceable. Under the Brazilian class action system, a member of the class may choose between pursuing its individual claim and not benefitting from the class claim or staying its individual claim until the class claim is resolved. A negative outcome of the class claim does not extend to the individual claims, which may be pursued regardless. A waiver of the class dispute will simply mean an advance option not to stay the individual claim and possibly benefit from the collective claim.

      A possible difficulty in Brazil is that several entities with standing to sue (such as the prosecutor’s office) have their capacity rooted in law and may not understand they are prevented from exerting their capacity to sue by contractual waivers. However, they are indeed prevented to do so. In pursuing collectively individual rights of shareholders, for instance, such entities may not seek more than the rights assigned to the shareholders by the by-laws, contract or the law. If the holders of the individual rights have waived collective protection, no entity may pursue such rights collectively on their behalf.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Subject to all the restrictions mentioned before, class arbitration is allowed. The class action system in Brazil is based strongly on the initiatives of third parties, not the class members themselves, and it is exceptional that such powers of third parties are restrained by choices made by class members.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Foreign arbitral institutions are authorised to administer arbitrations in Brazil with no restriction. The law does not require any licence under local law to administer arbitrations in Brazil. If the arbitral institution provides its services outside of Brazil, the fact that hearings take place or the juridical seat of the arbitration is in Brazil does not make it subject to local licences. There is no official registration or accreditation system for arbitral institutions, local or foreign. The existence of permanent activities in Brazil that characterise Brazil as a place of business may make the institution subject to local regulations concerning business licences and local taxation.

      Last verified on Tuesday 14th April 2020

  • Arbitral institutions and arbitrators

    • Brazil

      In legal terms, it will be a domestic award subject to set aside actions under the same conditions as any other domestic award rendered under the auspices of a Brazilian institution or in ad hoc proceedings. In practice, major international arbitral institutions are respected and recognised, and the awards issued in proceedings they administer are equally respected. As an example, both the National Oil and Gas Regulator (ANP) and the Civil Aviation Regulator (ANAC) have included in their standard arbitration clauses in concession agreements their right to choose between ICC, LCIA and PCA to administer the related arbitration proceedings, which must take place in Brazil and be conducted in Portuguese.

      Last verified on Tuesday 14th April 2020

    • Brazil

      There is no general restriction for foreigners to be arbitrators in Brazil. However, some specific local laws may create obstacles in certain types of arbitrations. Article 5, I, of the State Law of Minas Gerais 19.477, of 2011, provides that only Brazilian citizens may be arbitrators in cases involving the state of Minas Gerais. In contrast, federal decree 10.025 implicitly allows foreigners by setting forth visa recommendations (article 12, sole paragraph).

      Last verified on Tuesday 14th April 2020

    • Brazil

      Article 13 of the Brazilian Arbitration Act provides that any individual with legal capacity and who is trusted by the parties may serve as arbitrator. There is no requirement for the representation to be made by lawyers, and there are no restrictions for foreign lawyers to represent parties in arbitration in Brazil. The Brazilian Bar position on the matter is that Brazilian lawyers are subject to Bar ethical standards and other professional obligations when they act as arbitrators or party representatives, but other professionals that are not Brazilian lawyers may act as arbitrators or party representatives in Brazil without invading activities reserved for Brazilian lawyers.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Article 14 of the Brazilian Arbitration Act provides that arbitrators have the same obligations and liabilities as judges under the Civil Procedure Code. Article 143 of the Civil Procedure Code provides a judge (and therefore an arbitrator) will be liable when she acts with malice or fraud or when she refuses, omits or delays, without just cause, a measure she should take sua sponte or upon request of the party. The latter instance requires the party to request the measure specifically and the judge does not entertain the request after 10 days.

      Last verified on Tuesday 14th April 2020

    • Brazil

      If the arbitrator’s fees are payable from a source located in Brazil to a beneficiary located abroad, the fees of foreign arbitrators will be subject to five types of taxes.

      The first is the withholding income tax, in accordance with article 765 of Decree 9.580 (Income Tax Rules) and article 8 of Law 9.779. The rate is 15 per cent unless the reduced rate of 15 per cent under article 765 (technical services) applies. If the country of origin has a double taxation treaty with Brazil, the withholding income tax may not apply. For example, Brazil signed a Convention with Portugal to avoid double taxation (Decrees 188 and 4.012).

      The second is a municipal city tax, regulated by Supplementary Law 116, with a maximum rate of 5 per cent.

      The third are additional federal taxes for specific purposes. In accordance with article 1, section 1, of Law 10.865, these taxes apply on the importing of services. The rates are 1.65 per cent and 7.60 per cent, in accordance with article 254, subsection I, points (a) and (b) of Normative Instruction 1.911 of The Brazilian Federal Revenue.

      The fourth is another federal tax on economic activities, governed by Law 10.168. Pursuant to article 2, section 4, the rate is 10 per cent.

      Lastly, in accordance with article 6 of Law 8.894, a financial transaction tax incurs upon capital transfers abroad. The rate is 0.38 per cent.

      All these taxes must be deducted from the arbirators fees and are paid to the government revenue services by the parties to the arbitrators or the arbitral institution.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Pursuant to article 13, § 6, Brazilian Arbitration Act, an arbitrator must act with impartiality, independence, competence, diligence, and discretion. Article 14 provides that an arbitrator is conflicted if she is in a position regarding the parties or the subject matter equal to the ones provided for recusal of judges under the Civil Procedure Code. Articles 144 and 145 of the Civil Procedure Code provide for several grounds for recusal, many of them applicable to arbitrators. Most grounds are obvious and intuitive, but a few should be highlighted: (i) the party is a client of the law firm of her spouse, partner or relative up to a third degree (niece or cousin), although represented by another lawyer in the firm, (ii) the arbitrator is a party to a lawsuit against the party or its counsel, (iii) the arbitrator is a close friend or an enemy of the party or its counsel, (iv) the arbitrator receives gifts before or after the commencement of the proceedings from a person who is interested in the matter, gives advice to the party about the subject matter of the case, or she supplies means to support the dispute, (v) the party is a creditor or debtor of the arbitrator, her spouse or partner, or relative up to third degree in a direct line (great-grandmother or great-granddaughter), (vi) the arbitrator has an interest in the outcome of the matter in favour of the party.

      In practice, the IBA Guidelines on Conflicts of Interest are frequently used as reference even without express agreement of the parties. Arbitrators take them into consideration when making disclosures at the outset or during the proceedings, and arbitral institutions use them as guidance for the resolution of challenges.

      Brazilian case law became the subject matter of worldwide commentary in 2017 when the STJ applied a strict disclosure and impartiality standard to deny recognition in the Abengoa case. The STJ considered as a decisive fact that there was a creditor-debtor relationship between the law firm of the presiding arbitrator and one of the parties, regardless of whether the arbitrator was aware of it or not (STJ, SEC 9.412/EX, 19 April 2017).

      Last verified on Tuesday 14th April 2020

    • Brazil

      In accordance with the Brazilian Arbitration Act, any defects in the composition of the arbitral tribunal are reserved as grounds for a set aside action (articles 32, item II, and 33), after the tribunal issues the award. There is no provision for direct recourse to courts at an earlier stage. It is possible that in extremely egregious situations of prima facie partiality not resolved by the arbitral institution or by the tribunal, as the case may be, a court will entertain an early challenge to the composition of the tribunal. This is an unlikely situation, and there is no known applicable precedent regarding such a scenario.

      Last verified on Tuesday 14th April 2020

  • Arbitral proceedings

    • Brazil

      Arbitration is generally perceived as reliable, and the fact that courts set aside only a minimal percentage of challenged awards supports this perception. In the past 10 years, the Brazilian government at all levels has embraced arbitration in its more complex contracts, such as concessions and PPPs. Private contractors and concessionaires are supportive of this trend, as they trust arbitration with state parties to be an efficient and reliable mechanism to resolve disputes. The Brazilian arbitration community, comprised of internationally recognised arbitrators, arbitral institutions and law firms, is also well regarded for its quality and ethical standards by businesspeople, government officials and courts. Costs of the proceedings, including those of experts, and lack of availability of arbitrators affecting the expedience of the arbitration are much more common concerns than those related to ethical issues.

      Last verified on Tuesday 14th April 2020

    • Brazil

      In general, arbitral proceedings seated in Brazil may be held in any language, and they are often conducted in English or Spanish. However, in cases involving state parties, specific statutes or regulations generally require the proceedings to be held in Portuguese. This applies to all concessions and PPP agreements, as well as other arbitrations with the federal government in the areas or ports, airports, highways and railways (Decree 10.025). Several state governments have issued similar regulations requiring Portuguese as the language of arbitration. Two examples are article 4, § 1, item 3 of the São Paulo state Decree 64.356, of 2019, article 4, III, of Rio de Janeiro state Decree 46.252, of 2018.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Since qualification as a lawyer is not required to be a party representative in arbitration, foreign lawyers may represent parties in arbitration in Brazil alone.

      The Brazilian Bar Association regulates the provision of legal services in Brazil by foreign lawyers. Resolution 1/2000 provides for an authorisation by the Bar Association, after proof of certain requirements, to provide services as foreign law consultant. It forbids foreign lawyers from representing parties in judicial proceedings and from providing consulting services or legal advice on Brazilian law. The Resolution is silent with regard to arbitration.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Refer to question 24 for a more detailed discussion. Fees earned by foreign lawyers may be subject to the taxes mentioned in question 24 if the source of payment is located in Brazil. The services tax may not apply if the case qualifies as services substantially provided abroad.

      Brazilian lawyers benefit from a differentiated regime. If such professionals are not enrolled as taxpayers in the relevant municipal revenue department, the tax must be withheld by the source of payment and become payable to the municipal tax authority. However, imported services are generally recognised as not subject to such municipal tax (TJSP, Apelação 9221533-34.2007.8.26.0000, j. 11 March 2019). Case law is clear that services tax does not apply when the services are rendered abroad (TJSP, Apelação 0155480-98.2005, j. 14 July 2011). Scholarly writings confirm that services prepared abroad and implemented in Brazil are also not taxable by the municipal services tax (MELO, José Eduardo Soares de. ISS – teoria e prática. 6ª ed. São Paulo: Malheiros, 2017). However, if the foreign lawyer receiving payment from Brazil for work partially done in Brazil wants to avoid such taxes, she will need to challenge the taxes administratively or in court. This will be necessary for the source of payment to be exempt from withholding and paying them.

      Last verified on Tuesday 14th April 2020

    • Brazil

      The Brazilian Arbitration Act does not deal with consolidation, but practice has led the main arbitral institutions to provide for consolidation in their rules, which reflect the general approach to the issue. As a general reference, item 4.20 of the CAM-CCBC 2012 arbitration rules provide that:

      If a request for the commencement of an Arbitration is submitted and has the same purpose of same cause of action as an arbitration currently proceeding at the CAM-CCBC or if the same parties and causes of action are present in two arbitrations, but the subject matter of one, because it is broader, includes that of the others, the President of the CAM-CCBC can, upon request of the parties, up to the time the Terms of Reference are signed, order joinder of the proceedings.

      The most important Brazilian precedent is in CEC III case, resolved by the Rio de Janeiro Court of Appeals in 2013 in favour of the reunion of three separate proceedings relating to the same EPC contract, with partly coinciding parties. For more, see Terashima, Eduardo. Gagliardi, Rafael. Commentary on item 4.20 2012 CAM-CCBC Arbitration Rules. In: Straube, Frederico; Finklestein, Claudio; Casado Filho, Napoleão (Eds.) The CAM-CCBC Arbitration Rules: A Commentary. Eleven International Publishing. 2016. pp. 106-111).

      Last verified on Tuesday 14th April 2020

    • Brazil

      Brazilian practice tends to be relatively restrictive with regard to the amplitude of request for documents in arbitration, but the breadth of admissible requests may vary in accordance with the sophistication and respective expectations of the parties. It is common that a broader exchange of documents is admissible in international arbitration. The format of requests for documents generally follows a Redfern Schedule pattern. Parties are normally expected to describe in as much detail and as narrowly as possible the documents or groups of documents they request from the other party. Tribunals are normally not willing to grant broad requests, and they will either require a party to narrow down its requests or deny what they perceive to be unreasonably broad requests.

      International standards such as the IBA Rules on the Taking of Evidence in International Arbitration and the Chartered Institute of Arbitrators (CIArb) protocols and guidelines are also often used as guidance by tribunals. Even in domestic cases, tribunals often rely on international references or practices, albeit adjusted to local expectations and preparedness of the parties to requests for documents. Brazilian arbitral institutional rules also allow for document exchanges in accordance with the practice of the parties. In a previous commentary to the CAM-CCBC rules, I pointed out they ‘are sufficiently flexible to allow the parties to make their own arrangement concerning document production. It is possible, for instance, to adopt the UNCITRAL rules as a reference and adopt requests to produce, or to agree on exchange of documents based on a Redfern schedule’ (Pereira, Cesar; Levin, Erika. ‘Commentary on Article 7 2012 CAM-CCBC Rules’. In: Straube, Frederico. Finklestein, Claudio. Casado Filho, Napoleão (Eds.), The CAM-CCBC Arbitration Rules: A Commentary. Eleven International Publishing. 2016. pp. 139-140).

      Last verified on Tuesday 14th April 2020

    • Brazil

      The Brazilian Arbitration Act does not impose any duty of confidentiality and only requires arbitrators to act with discretion. However, arbitral institutional rules generally impose a duty of confidentiality. In accordance with article 14.2 of the CAM-CCBC arbitration rules, for example, ‘members of the CAM-CCBC, the arbitrators, the experts, the parties and others who participate are prohibited from disclosing any information to which they have had access as a result of their role or participation in the arbitration proceedings’.

      The trend in favour of arbitration involving state parties also led to the recognition that confidentiality cannot apply in the same extent when the state is involved, given the necessary transparency requirements.

      Last verified on Tuesday 14th April 2020

    • Brazil

      There is no restriction on the use of third-party funding in international arbitration. Arbitral institutional rules only provide for disclosure of certain information for the purpose of ensuring there are no conflicts of interest. However, disclosure is not a hard rule, and the opportunity and level of disclosure remain debatable. Brazil has become an active market for international and domestic funders, and in practice parties seek funding for all the widely known reasons, including to better manage their finances and reduce exposure. Third-party funding came naturally into Brazilian practice, which has always been favourable to contingency fees arrangements.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Although one is not required to be a lawyer to represent parties in domestic or international arbitration in Brazil, the Brazilian Bar Association understands that lawyers registered with the Brazilian Bar are subject to its profession ethics standards when acting as counsel (or even as arbitrators). Article 77 of the Code of Ethics and Discipline of the Brazilian Bar Association (Resolution 2/2015) extends its application to arbitration, when conducted by lawyers.

      The Code of Ethics does not apply to foreign lawyers acting as party representatives in arbitration. However, its article 76 extends it to foreign law consultants, either individuals or law firms. Therefore, the Code of Ethics may become applicable if the foreign lawyer, in addition to representing the party in arbitration, provides services in Brazil that may qualify as legal advice or consulting work on foreign law.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Pursuant to article 458 of the Civil Procedure Code, the witness shall take an oath to say the truth about what she knows regarding what is asked of her. Furthermore, the witness will be informed the punitive sanctions imposed on those who make false statements, remain silent or omit the truth. Article 342 of the Brazilian Penal Code criminalises the conduct of providing false testimony under oath. Witnesses in arbitration take the oath to say the truth, unless they are under a condition that will allow them to be heard as informants – which do not potentially incur in the civil or criminal penalties applicable only to witnesses under oath.

      Last verified on Tuesday 14th April 2020

  • Court support for arbitration

    • Brazil

      There are no restrictions on interviewing of witnesses, except the same widely applicable prohibition of inducing or incentivising the witness to provide false testimony. Witness statements are widely used in international arbitration in Brazil, and that illustrates that counsel is allowed and expected to be in close contact with the witness will bring to support the client’s case. Practices such as those reflected in article 24 of the IBA Rules on the Taking of Evidence are consistent with Brazilian law and practice. For commentary on the application of the IBA Rules in Brazil, see Carmona, Carlos Alberto, ‘Breves considerações críticas acerca das diretrizes da International Bar Association sobre a representação de parte na arbitragem internacional’, Revista de Arbitragem e Mediação, vol. 40, 2014.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Article 8, sole paragraph, of the Brazilian Arbitration Act expressly grants the arbitrator the power ‘to decide sua sponte or by request of the parties the matters pertaining to the existence, validity and effectiveness of the arbitration agreement and of the contract that contains the arbitral clause’. This provision enunciates the principle of competence-competence in Brazil. The principle is consistently followed by courts, as illustrated by a June 2019 ruling (STJ, REsp 1598220/RN, 25 June 2019).

      In November 2019, the topic of competence-competence in Brazil gained international attention due to an STJ decision defining whether a dispute between the federal government and some minority shareholders of Petrobras should be resolved in arbitration (based on an arbitration agreement in the company’s by-laws) or before a federal court. Even though the arbitrators seem to have asserted their jurisdiction, the STJ decided to apply an exception to competence-competence consisting of recognising prima facie the inexistence of an agreement to arbitrate. Although it may be debatable whether the exception applies in this case, the relevant aspect in terms of competence-competence is that the STJ did not negate the principle, but it rather applied it in an expansive matter a generally accepted exception. The principle of competence-competence remains, albeit not applicable in this specific instance (STJ, CC 151.130/SP 27 November 2019).

      Last verified on Tuesday 14th April 2020

    • Brazil

      Article 8 of the Brazilian Arbitration Act provides that the ‘arbitration clause is separate from the contract in which it is inserted, so that the invalidity of the contract does not imply necessarily the invalidity of the arbitration clause’. This notion of separability is generally accepted, and courts recognise that a party may submit to arbitration issues relating to the invalidity of the contract which contains the agreement to arbitrate.

      Last verified on Tuesday 14th April 2020

    • Brazil

      In accordance with article 22-B, sole paragraph of the Brazilian Arbitration Act, the arbitral tribunal is empowered to grant interim relief or preliminary orders. If the relief or order requires enforcement, the interested party may request the tribunal to issue an ‘arbitral letter’ (provided for in article 22-C). This is the means for the tribunal to communicate to a national court that an order has been granted and should be enforced. The national court will not review the order but only confirm the formal requirements of the arbitral letter. It may also refuse enforcement of an order that is manifestly contrary to public policy. Although the decision itself falls under the exclusive jurisdiction of the arbitrators, the court will add the necessary enforcement measures, such as fines or other penalties.

      Last verified on Tuesday 14th April 2020

    • Brazil

      The arbitrators can invite third-party witnesses to give testimony or third parties to produce evidence. Upon request of any party or, less commonly, sua sponte, the arbitrators can also order that a third party should appear or cooperate with the arbitration proceedings in the production of evidence. However, the arbitrators do not hold enforcement power, and enforcement must be sought before a national court. Article 22, Brazilian Arbitration Act deals specifically with the evidentiary powers of the arbitrators and allows the arbitrators to order the production of any type of evidence upon request or sua sponte. What is more, article 22, § 2, provides that the sole arbitrator or presiding arbitrator may request the support of a national court to bring a recalcitrant witness to be heard. Courts are ready to do so using police force if needed. It befalls on the arbitrators, not the national court, to decide whether the witness has good cause to refuse to appear to be heard. The same rationale applies to other types of evidence.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Article 381 of the Brazilian Civil Procedure Code provides for a specific proceeding for the early production of evidence. This proceeding allows the taking of testimony or production of expert reports before the proper evidence-gathering stage of a lawsuit or an arbitration is reached. Scholars and courts understand that, in principle, in matters subject to arbitration agreements, the early production of evidence should also be made in arbitration, not in court. However, scholars acknowledge several instances in which it is appropriate to produce such early evidence in court (Talamini, Eduardo, ‘Produção antecipada de prova no Código de Processo Civil de 2015’, Revista de Processo, vol. 260, 2016). Urgency is also a clear ground for a court-directed early production of evidence.

      Under article 381, there is no requirement that the purpose of the evidence is to be used in an arbitration seated in Brazil. The proceeding can be used in support of an international arbitration in Brazil or conducted abroad. Each tribunal will decide the weight it intends to give, if any, to the evidence thus produced.

      Last verified on Tuesday 14th April 2020

    • Brazil

      In very exceptional circumstances in which the tribunal is not available to assist the party with the necessary expedience, the party may seek relief directly from a national court without first requesting an order from the tribunal. This possibility was acknowledged by the STJ in 2012 (STJ, REsp 1.297.974, j. 12 June 2012).

      See also Talamini, Eduardo. Arbitragem e a tutela provisória no Código de Processo Civil de 2015. Revista de Arbitragem e Mediação, vol. 46, 2015.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Courts rarely interfere early in arbitral proceedings given the widespread application of the principle of competence-competence. A notorious instance to the contrary took place in November 2019 when the STJ granted a remedy for the federal government to dismiss an arbitration brought against it by minority shareholders of Petrobras. They sought damages from the federal government as controlling shareholders of Petrobras, and they sought it in arbitration proceedings based on the company’s by-laws, which contains an arbitration clause. At an earlier stage in the litigation, the STJ had decided it could not prevent the arbitration from continuing precisely because of competence-competence. However, the STJ finally resolved to resort to an exception of competence-competence that allows courts to interfere when an arbitration agreement is prima facie non-existent. It is debatable whether the arbitration agreement manifestly does not exist in this case, given the great controversy – even the STJ decision was split and one position prevailed by a relatively small margin. The principle that courts should not interfere at an early stage is not affected (CC 151.130/SP, 27 November 2019).

      Last verified on Tuesday 14th April 2020

    • Brazil

      The law provides for interest in the enforcement stage if the award is not paid voluntarily, regardless of an express provision for interest in the award. However, if the award does provide for post-award interest, this determination may not be changed during enforcement (TJSP, Apelação 1005619-07.2015.8.26.0053, j. 19 April 2017; TJSP, Apelação 1005618-22.2015.8.26.0053, j. 22 September 2017).

      In an interesting case involving a railway, the award provided for post-award interest but did not set a final date for voluntary compliance with the award. In view of the omission, the debtor was given the opportunity to comply with the award at any time and thus avoided the post-award interest and penalties (TJSP, Agravo de Instrumento 2080401-25.2018.8.26.0000, j. 12 February 2020).

      Last verified on Tuesday 14th April 2020

    • Brazil

      An arbitral tribunal is empowered to award attorneys’ fees generally as part of the reimbursement of expenses incurred by the parties (or the prevailing party) to pursue their defence. Article 27 of the Brazilian Arbitration Act provides the award will allocate the liability for costs and may sanction a party for contempt if necessary.

      Brazilian law has a unique feature with regard to attorneys’ fees. Under the Civil Procedure Code and the Brazilian Bar Association Act (Federal Law 8.906 of 1994), in most litigation cases, courts will set attorneys’ fees that are payable not to the prevailing party, but directly to its counsel as a separate entitlement. Such fees – styled sucumbencia fees – belong to the attorneys, who are allowed to appeal to have them raised or may enforce this portion of the judgment separately. This long-established practice in litigation brings about the discussion whether this system applies in arbitration.

      Neither the Civil Procedure Code not the Brazilian Bar Association Act make any reference to arbitration. The wide majority of Brazilian scholars and tribunals acknowledge that only with express agreement of the parties will the attorneys be directly entitled to sucumbencia fees (Tepedino, Gustavo; Pinto, José Emílio Nunes. ‘Notas sobre o ressarcimento de despesas com honorários de advogado em procedimentos arbitrais’, Revista trimestral de direito civil, vol. 9, no. 34, Rio de Janeiro, Apr./Jun. 2008, p. 43-50; Castro Neves; José Roberto de. ‘Custas, despesas e sucumbência na arbitragem’, Revista de Arbitragem e Mediação, vol. 43, 2014; Nunes, Thiago Marinho; Pereira, Mariana Gofferjé. ‘Breves Notas sobre Custos e Despesas na Arbitragem Interna’. In https://www.migalhas.com.br/coluna/arbitragem-legal/317140/breves-notas-sobre-custos-e-despesas-na-arbitragem-interna. 17 December 2019). One of the few contrary opinions, regarding sucumbencia fees in favour of the counsel as within the powers of the tribunal regardless of whether the parties have agreed to grant such powers, is found in Aprigliano, Ricardo de Carvalho, ‘Alocação de custas e despesas e a condenação em honorários sucumbenciais em arbitragem’. In: Carmona, Carlos Alberto, 20 anos da lei de arbitragem, São Paulo: Atlas, 2016.

      Last verified on Tuesday 14th April 2020

  • Awards - content

    • Brazil

      In accordance with article 27, Brazilian Arbitration Act, the tribunal is empowered to apply sanctions for contempt or other reproachable conduct by either party within the proceedings. The arbitrators are also allowed to set financial incentives or penalties to compel compliance (astreintes), which will be enforced in court if not complied with voluntarily. Punitive damages are often assimilated in Brazil with moral damages to compensate for pain and suffering or other losses that do not have a direct expression. If the arbitration is under law and its scope is broad enough to encompass disputes that may be closer to tort than contract in nature, the arbitrators will be empowered to award punitive or moral damages under the applicable substantive law.

      Article 395 of the Civil Code provides that the debtor is liable for all damages caused by its delay, in addition to interest, adjustment to inflation and attorneys’ fees.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Article 32 of the Brazilian Arbitration Act, consistently with the UNCITRAL Model Law, provides the award is null and void if: I – the arbitration agreement is void; II – it is rendered by someone who is not able to act as an arbitrator; III – it does not contain the requirements provided in article 26 (form requirements); IV – it is issued outside the scope of the arbitration agreement; V – (repealed by the 2015 reform; used to provide that awards that did not address all of the dispute were void); VI – it is proven that it was rendered through malfeasance, graft, or passive corruption; VII – it is rendered out of time, provided the provisions of article 12, item III, of this Law, are complied with; and VIII – it is in breach the principles referred to in article 21, paragraph 2, of this Law (due process). These are the possible grounds for the set-aside action of article 33.

      In practice, there is great deference to arbitral awards. Between 2015 and 2019, the Court of Appeals of the State of São Paulo heard 127 appeals in set-aside actions. Only 17.32 per cent of the actions were successful. Out of all 127 set-aside actions, the grounds invoked for setting aside were as follows (more than one were used): item IV (scope): 48.03 per cent; item I (invalidity of the agreement): 41.73 per cent; item VIII (due process): 40,15 per cent; item II (inadequate arbitrator): 22.83 per cent; item VII (untimely award): 19.68 per cent; item III (form requirements): 17.32 per cent; item V (lack of full resolution of the dispute): 7.87 per cent; item II (corruption): no cases (Ferreira, Daniel Abrantes; Silva Filho, Euclides de Almeida, 'Ação anulatória de sentença arbitral: análise doutrinária e empírica da jurisprudência do TJSP e do TJSC entre 2015 e 2019'. At: https://www.jota.info/opiniao-e-analise/artigos/acao-anulatoria-de-sentenca-arbitral-14032020).

      It is significant that the overwhelming majority of awards are confirmed and that in the five years covered in the São Paulo research not a single award was challenged due to corruption or fraud.

      In addition to the specific grounds of article 32, some scholars understand there is a general public policy ground that is reflected in the items of article 32 but goes beyond them as well (Lucon, Paulo Henrique dos Santos; Baroni, Rodrigo; Medeiras Neto, Elias Marques. ‘A causa de pedir nas ações anulatórias de sentença arbitral’, Revista de Arbitragem e Mediação, vol. 46, 2015).

      Last verified on Tuesday 14th April 2020

    • Brazil

      Brazilian law does not recognise as valid grounds lack of reasonableness, manifest disregard or any approach under which the courts may carry out an indirect review of the merits of the award. Any review on the merits is strongly avoided, and no theory has been developed to the contrary. The courts have consistently avoided entering into discussions on the merits, such as in this 2019 case from the São Paulo Court of Appeals (TJSP. Apelação 1122507-78.2016.8.26.0100. 6 November 2019).

      Last verified on Tuesday 14th April 2020

    • Brazil

      Public policy is often invoked as grounds for denial of recognition of foreign awards. Since it is not an express ground for setting aside, unlike the regulation for recognition, it was not mentioned in the 2015-2019 research of challenges to awards (see question 48).

      In regard to recognition of foreign awards, it is a ground often invoked or examined sua sponte by the STJ, but it is rarely accepted. One such case was the Abengoa case of 2017 (see question 25), in which the STJ concluded that under Brazilian law the damages could not have been set under the criteria adopted by the tribunal. This inconsistency was enough for the STJ to consider that the award had decided outside the scope of the arbitration, which required the application of Brazilian law (STJ, SEC 9.412/EX, 19 April 2017). In a more recent decision, the STJ avoided any possible interference and rejected all allegations that might resemble a review on the merits (STJ, REsp 1660963/SP, 26 March 2019).

      Last verified on Tuesday 14th April 2020

    • Brazil

      According to article 33, § 1, of the Brazilian Arbitration Act, the request to set aside the award, whether partial or final, must be filed within ninety (90) days after receipt of notification of the respective award, or of the decision on a motion for clarification.

      Last verified on Tuesday 14th April 2020

    • Brazil

      In practice, there is great deference to the awards. A research conducted in the State of São Paulo, which is responsible for roughly one-third of Brazil’s GDP and the overwhelming majority of arbitration cases, shows that between 2015 and 2019, the Court of Appeals of the State of São Paulo heard 127 appeals in set aside actions. Only 17.32 per cent of the actions were successful. See question 48.

      Last verified on Tuesday 14th April 2020

  • Awards enforcement

    • Brazil

      The courts will not entertain a request to set aside an award rendered in another jurisdiction. It is clearly understood that such an award is subject to the exclusive power of STJ to grant or deny recognition.

      Last verified on Tuesday 14th April 2020

    • Brazil

      The parties may not expand or reduce the scope of review or waive court review, since the grounds for setting aside and the procedure for challenge are mandatory law and directly related to the legal force given to an arbitral award in Brazil as equivalent to a court judgment. In any case, the only form of challenging the award is by commencing a set aside action within the limit of 90 days.

      Last verified on Tuesday 14th April 2020

    • Brazil

      Recognition is a constitutional requirement. Article 105, I, i, of the Constitution grants the STJ jurisdiction for the ‘recognition of foreign judgments and granting exequatur to letters rogatory’. An international arbitral award is considered apt for recognition as an equivalent to a foreign judgment. Most Brazilian specialists mention that the Arbitration Act follows closely the New York Convention and must therefore be construed as accepting the historical premise that such convention aimed at ending the previous requirement of double exequatur. (Pereira, Cesar. ‘Recognition and enforcement of international arbitral awards in Brazil’, Revista de Arbitragem e Mediação, vol. 20, 2009).

      Pursuant to article 960 of the Brazilian Civil Procedure Code, the recognition of the foreign decision shall be requested by an action for the recognition of a foreign decision, unless otherwise provided by a treaty. Article 963 provides the formal requirements. After the award is recognised, it is enforced by a federal court of the place of execution, which is typically the domicile of the debtor of the award.

      Last verified on Tuesday 14th April 2020

    • Brazil

      In Brazil the procedure for recognition and enforcement of a foreign award or a foreign judgment is the same. Both are recognised by the STJ and subsequently enforced by a federal court.

      Last verified on Tuesday 14th April 2020

    • Brazil

      In 2015, Nadia de Araujo conducted an interesting research regarding the position of the STJ after 10 years of recognition of foreign awards – until 2004, the recognition was made at the STF – the Brazilian Supreme Court. The STJ refused recognition in only 11 per cent of the cases, all of them based on public policy (Araujo, Nadia de. ‘O STJ e a homologação de sentenças arbitrais estrangeiras: dez anos de atuação’. In: Tiburcio, Carmen; Menezes, Wagner; Vasconcelos, Raphael (org). Panorama do direito internacional privado atual e outros temas contemporâneos, Belo Horizonte: Arraes Editores, 2015, pp. 155-180).

      In 2017, the Abengoa case raised some concerns about a possibly more expansive view of public policy, but in later decisions, the STJ went back to its traditional restrictive approach to public policy. See questions 25 and 50.  

      Last verified on Tuesday 14th April 2020

  • The outlook

    • Brazil

      See questions 25, 50 and 58.

      Some illustrations of public policy issues recognised by the STJ are the existence of parallel proceedings of a pre-bankruptcy nature in Brazil (SEC 826/KR, 15 September 2010), an order for the party to withdraw a court lawsuit in Brazil (SEC 854/EX, 16 October 2013), and cumulative calculation of damages based on the exchange rate and, at the same time, on the accrued inflation (SEC 2.410/EX, 18 December 2013).

      Last verified on Tuesday 14th April 2020

    • Brazil

      So far there has been only one case of an award that had been set aside at the seat (Argentina) and brought for recognition in Brazil. The STJ denied recognition. The decision has been criticised for not having examined in more depth the possible grounds for granting the recognition but applying automatically the literal language of the 1958 New York Convention (STJ, SEC 5.782/EX, j. 02 December 2015). For more, see PEREIRA, Cesar; QUINTÃO, Luísa. Reconocimiento de laudos arbitrales extranjeros anulados: una perspectiva latinoamericana, Spain Arbitration Review no. 27, Wolters Kluwer España, 2016, p. 51-70. See also NASSER, Rabih A.; TAKITANI, Marina Yoshimi. Homologação de sentença arbitral estrangeira anulada na sede. Revista de Arbitragem e Mediação, vol. 53, 2017.

      Last verified on Tuesday 14th April 2020

    • Brazil

      In the 1990s, the federal government had several arbitral awards rendered against it abroad in connection with inferences in the prices of sugar and alcohol. One of the awards was denied recognition due to a procedural issue (STF, SEC 4.724-2 j. 27 April 1994). The federal government immediately enacted a law (Law 8.874, of 1994) authorising it to negotiate and pay all awards, regardless or recognition.  

      Last verified on Tuesday 14th April 2020

    • Brazil

      A significant area of future growth in international arbitration in Brazil is contract-based arbitration with state parties. The states of São Paulo and Rio de Janeiro, which correspond together to around 45 per cent of the country’s GDP, and the federal government have all enacted regulations to provide clear rules for their participation in domestic and international arbitration.

      The success of arbitration in Brazil reflects a combination of sophisticated arbitral institutions, well-prepared professionals and practitioners and supportive, arbitration-friendly courts.

      In private contracts, a foreign lawyer advising clients in a business deal with a Brazilian company should consider selecting Brazil as the place of arbitration. If the award must be enforced in Brazil, having the award issued in Brazil will save around 30 months in average, since the award will not require recognition by the STJ. Prestigious Brazilian arbitral institutions provide services comparable to those of the most renowned international institutions. Their reference lists of neutrals comprise internationally acclaimed arbitrators. Foreign arbitral institutions are also free to administer proceedings in Brazil.

      Last verified on Tuesday 14th April 2020

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