Contributed By Justen, Pereira, Oliveira & Talamini - Advogados Associados
Arbitration is the prevalent method of dispute resolution chosen by parties in contracts related to Brazil. There is a general perception of its reliability and of the quality and ethical standards of Brazilian arbitrators, arbitral institutions and specialised law firms. National courts are supportive and deferential to arbitral awards and to the arbitral process in general. An illustration of this trend is the steep rise in the use of arbitration by all levels of government entities in their contracts, especially in the past ten years.
Parties to international contracts with a connection to Brazil generally resort to international arbitration. Several Brazilian arbitral institutions are fully equipped and provide administration services to international parties in English, Spanish and other languages in addition to Portuguese. Their reference lists of neutrals comprise internationally acclaimed arbitrators. Foreign arbitral institutions may also administer proceedings in Brazil.
In government contracts, the general rule is for the place of arbitration to be in Brazil. In private contracts, there are clear advantages to having the place of arbitration in Brazil. If the award is to be enforced in Brazil, a local seat will avoid the significant time required for recognition of a foreign award by the STJ.
Some recent developments in the Brazilian arbitration practice are worth mentioning:
Consent is generally acknowledged as a requirement for arbitration. However, in recent times several manifestations of a more flexible approach to consent have arisen.
There is a growing tendency for parties to try and bring possible third parties into arbitration proceedings. It has become commonplace for tribunals to resolve issues relating to the personal scope of an arbitration agreement or the financial liability of third parties.
Multi-party or class arbitrations in corporate disputes are also becoming more common, but at this stage it is still a novelty with no discernible trend.
The Impact of COVID-19
The constraints caused by the COVID-19 pandemic in 2020 accelerated the clear tendency of Brazilian arbitral institutions to embrace digital transformation and technology. The most active institutions in Brazil adopted guidelines or rules for remote proceedings, and virtual hearings and fully electronic proceedings rapidly became a reality. In addition, the contractual disruptions associated with the COVID-19 pandemic had caused by July 2020 a rise in the number and economic relevance of negotiations and dispute resolution proceedings in various areas. Further growth was expected for the immediate future.
Lastly, an area that has grown steadily in recent times is arbitration involving state parties. This continues to be an important trend in Brazilian arbitration practice. Arbitration has become part of the government practice, since agencies, especially in sophisticated sectors such as energy and airports, have come to embrace dispute resolution mechanisms as an appropriate means to resolve contractual disputes in an effective, specialised and expeditious manner.
According to the 2019 edition of the annual research published by renowned scholar and arbitrator Selma Lemes, the most frequent subject matters featured in arbitration cases centre around corporate disputes, followed by construction and energy. However, since construction and energy also encompasses disputes in concessions, public-private partnerships (PPPs) and government infrastructure contracts, cases in these areas involve greater amounts in dispute. The same research shows that 10% of the cases in 2019 in the most active Brazilian arbitral institutions involve state parties.
In December 2018, CESA, a think-tank of Brazilian law firms, published research based on 2017 figures showing that cases with foreign parties in Brazil were generally handled by International Chamber of Commerce (ICC), Market Arbitration Chamber (CAM-B3), Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (CAM-CCBC), Chamber of Conciliation, Mediation and Arbitration Ciesp/Fiesp (CIESP-FIESP), Câmara de Mediação e Arbitragem Empresarial – Brasil (CAMARB) and Centro de Arbitragem e Mediação da Câmara Americana de Comércio para o Brasil (CAM-AMCHAM), in order of market share.
CAM-B3 is often chosen for corporate disputes in publicly traded companies. Given the increasing number of foreign investors in the Brazilian capital market, it is understandable that CAM-B3 will be handling a growing number of corporate disputes involving foreign parties.
CAM-CCBC has made a remarkable effort over the past ten years to internationalise its activities, capabilities and list of neutrals, and is the Brazilian arbitral institution most visible to foreign parties.
Centro Brasileiro de Mediação e Arbitragem (CBMA), based in Rio de Janeiro, is also well-known to foreign parties, among other reasons for its focus on maritime disputes. In Brazil, this area received special attention in 2019 and 2020 due to the XXI International Congress of Maritime Arbitrators (ICMA), which brought the international maritime law community to Rio de Janeiro in March 2020.
Brazil is not listed by UNCITRAL as a Model Law jurisdiction. However, several features of the 1996 Brazilian Arbitration Act reflect the UNCITRAL Model Law. The binding nature of the arbitral agreement, separability, competence-competence, the importance of due process and the requirement of reasoned awards are some of them.
The restriction of recourse and the grounds for setting aside an award are also similar to the solutions adopted by the UNCITRAL Model Law. Some areas of divergence are:
The 1996 Brazilian Arbitration Act has not been amended since 2015. However, other statutes and regulations affected the legal framework of arbitration in 2019 and 2020.
In 2019, Law 13.867 provided for arbitration in the determination of compensation for government expropriations. Part of the law was vetoed, and the veto reduced its practical application. Notwithstanding, it is an important signal of the government’s willingness to submit a key instrument of government action to arbitration. Also in 2019, the State of São Paulo and the federal government issued executive orders (State Decree 64.356 and Federal Decree 10.025) to regulate arbitration with their respective entities, limited to certain industries in the case of the federal decree.
Several bills in Federal Congress deal with arbitration and dispute resolution in general. Arguably one of the most relevant is PL 8.883/2019, currently at the House of Representatives. It aims to introduce Dispute Boards in government contracts, and it is inspired by Law 13.873 in force since 2018 in the Municipality of São Paulo. A similar statute was enacted by the Municipality of Belo Horizonte in 2020 (Law 11.241).
Another important bill is PLS 4.257/2019, now in the Senate, which intends to allow arbitration in certain tax matters.
The 1996 Brazilian Arbitration Act requires agreements to be in writing. The prevailing case law requires pre-dispute agreements to be proven by documents but does not require them to be signed (Superior Court of Justice (STJ), REsp 1569422/RJ, 26 April 2016). Post-dispute agreements are subject to different rules under the Brazilian Arbitration Act, but Article 2 of the New York Convention may be interpreted as superseding such formal requirements.
The Brazilian Arbitration Act provides for specific requirements for arbitration agreements in adhesion contracts. The 2015 reform of the Brazilian Arbitration Act created specific requirements for arbitration agreements with government parties, which do not extend to government-owned or government-controlled entities. Only the government officials with powers to enter into settlements on behalf of the government may enter into arbitration agreements.
The general approach for subject matter arbitrability in domestic or international disputes is to establish that it deals with economic disposable rights (Article 1, Brazilian Arbitration Act). There are scholarly and case law discussions on the meaning of this phrase, but it is generally agreed that all issues that may be resolved by contract fall within this definition.
Consumer relations and labour disputes have specific characteristics and requirements.
Arbitration agreements are generally upheld and enforced by courts. In some states, like São Paulo, specialised state courts hear cases in support of arbitration, and their judges are deeply aware of the importance of court support for the effectiveness of arbitration. Courts uphold arbitration agreements either by compelling recalcitrant parties to arbitrate of by dismissing litigation brought in violation of arbitration agreements.
Both the 1996 Brazilian Arbitration Act and the 2015 Civil Procedure Code have provisions guiding courts to give full effect to arbitration agreements, and such provisions are generally applied in practice at all levels of the court system. Competence-competence is a key principle of the Brazilian Arbitration Act.
In November 2019, the STJ seemed to have broken this virtuous trend by granting the federal government a remedy to dismiss an arbitration brought against it by minority shareholders of Petrobras (CC 151.130/SP, 27 November 2019). However, for the purposes of the discussion at hand, the STJ may have resorted – correctly or not – to an exception of competence-competence that allows courts to interfere if an arbitration agreement is prima facie non-existent. The principle that courts should uphold arbitration agreements still applies and is not affected by this decision. In July 2020, the case was still pending a final resolution within the STJ.
Separability is expressly provided in Article 8 of the Brazilian Arbitration Act: 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 widely accepted, and courts and tribunals recognise arbitration agreements contained in invalid contracts.
In general, parties have great discretion when choosing arbitrators. The Brazilian Arbitration Act provides the arbitrator may be anyone who has the confidence of the parties, and it submits arbitrators to the same grounds for recusal that apply to judges. The 2015 reform inserted a provision allowing parties to jointly override institutional rules that may limit the choice of arbitrators to an arbitral institution’s reference list (Article 13, Section 4).
Under the Brazilian Arbitration Act, national courts are available to support the arbitral proceeding and appoint an arbitrator if the chosen method fails. However, this situation is highly exceptional, since most arbitration proceedings are subject to institutional rules that provide for appointment systems in case the parties fail to make their own appointments.
In case of multi-party arbitrations, arbitral institutional rules generally provide for appointment by the institutional in case the multiple parties cannot agree on a common appointment. This approach is widely adopted and is in line with the practice arising from Siemens v Dutco.
Firstly, a national court may intervene in the selection of arbitrators if the parties fail to appoint an arbitrator or to agree on how an arbitrator should be appointed. A court may intervene in support of the arbitral proceeding (Article 13, Section 2 of the Brazilian Arbitration Act), for instance, if the party appointed arbitrators fail to agree on a third arbitrator.
Secondly, it may intervene as a part of its interference to compel arbitration. If the parties have agreed to arbitrate but have not agreed on how to appoint an arbitrator, the interested party may resort to a national court to enter a judgment that will be equivalent to a post-dispute arbitration agreement and will appoint the arbitrator.
In either case, the national court is not bound by any specific requirements except those that apply to arbitrators in general, such as the grounds for recusal and complying as much as possible to any partial agreement the parties may have reached.
The Brazilian Arbitration Act provides that defects in the composition of the arbitral tribunal are grounds for a set aside action (Articles 32, item II, and 33). In institutional arbitrations, the applicable rules usually provide for challenge and removal, under a variety of systems. In ad hoc arbitrations, Brazilian law does not provide for direct recourse to courts earlier that at the set aside stage.
Extremely severe situations of prima facie partiality not resolved by the institution or the tribunal might allow a court to admit an early challenge to the composition of the tribunal. However, there is no known applicable precedent for such an unlikely scenario.
Under Article 13, Section 6, Brazilian Arbitration Act, arbitrators are required to show impartiality, independence, competence, diligence, and discretion. It also provides as grounds for conflict the same ones for recusal of judges under the Civil Procedure Code. Articles 144 and 145, CPC, provide for several grounds, and the following stand out:
The IBA Guidelines on Conflicts of Interest are a usual reference for arbitrators when making disclosures or resolving challenges. In 2017, in the Abengoa case, the STJ denied recognition to a US award based on the objective premise of a creditor-debtor relationship between the law firm of the presiding arbitrator and one of the parties (STJ, SEC 9.412/EX, 19 April 2017).
As a general rule, all matters that may be resolved by contract between the parties may be also referred to arbitration. In contrast, matters that are subject to protective regimes, such as consumer or labour relations, may not be fully referred to arbitration. In business or corporate transactions, there are no other relevant exclusions.
The Brazilian Civil Code provides that non-economic rights, such as one’s civil status or personality rights, may not be referred to arbitration.
The principle of competence-competence is expressly provided for in Article 8, sole paragraph, of the Brazilian Arbitration Act. National courts apply it consistently at all levels of the judicial system. A June 2019 STJ ruling affirming competence-competence illustrates this point (STJ, REsp 1598220/RN, 25 June 2019).
In November 2019, the STJ decided to apply an exception to competence-competence by recognising prima facie the inexistence of an agreement to arbitrate in a corporate dispute (STJ, CC 151.130/SP, 27 November 2019). In July 2020, the case was still ongoing. In this ruling, correctly or not, the STJ applied such exception expansively, which does not amount to negating the underlying principle. The principle of competence-competence remains in force and fully applicable under Brazilian law.
Reviewing Issues of Jurisdiction
Under the 1996 Brazilian Arbitration Act, any judicial review of issues of jurisdiction of an arbitral tribunal are reserved for a possible set aside action as grounds for annulment of the award. However, over the past ten years, a theory evolved based on the STJ constitutional power to resolve conflicts of jurisdiction between courts. This power has been expanded to encompass also conflicts of jurisdiction involving arbitral tribunals.
In many cases, the STJ has entertained motions to resolve conflicts of jurisdiction. The STJ has almost invariably applied the principle of competence-competence to allow the arbitration to proceed (STJ, CC 147.427, 28 November 2016). An important exception was STJ, CC 151.130/SP, 27 November 2019, when the STJ decided the arbitration should be dismissed with regard to one of the parties.
Reviewing Negative Determinations
Courts have understood that they may not review a negative determination of an arbitral tribunal regarding its own jurisdiction (TJRS, AI 70055754949, 8 October 2013). However, this point is not completely settled in case law, and courts may at least in exceptional cases entertain motions to compel arbitration by reviewing negative determinations by arbitral tribunals.
A situation that is similar to this one, expressly provided in the Brazilian Arbitration Act, is a motion to complement an arbitral award (Article 33, Section 4). If a party shows the award failed to address part of its requests, it is entitled to obtain a court order commanding the arbitral tribunal to complement its award.
In general, parties are allowed to raise challenges in court to the jurisdiction of the arbitral tribunal only after the award has been rendered, since jurisdiction defects as grounds for a set aside action. However, if there is a conflict of jurisdiction between a national court and an arbitral tribunal, the interested party may resort to the STJ to resolve the conflict prior to the rendering of an award. In the wide majority of cases heard by the STJ, the Court has tended to apply the principle of competence-competence strictly and order the arbitration to proceed, reserving the power of the courts to review the jurisdictional issues at the set aside stage.
For questions of admissibility and jurisdiction, the courts exercise a de novo review. They are allowed to delve fully into the matters without having to defer to the determinations made by the arbitral tribunal. It is true the STJ acknowledges that courts are limited to reviewing only the formal aspects of the awards, without any review of the merits (STJ, AgInt AREsp 1566306/SP, 30 March 2020, and TJSP, AC 0220847-50.2011.8.26.0100, 20 March 2014).
However, this premise does not restrain the court’s power to examine fully such formal requirements, such as the ones related to admissibility and jurisdiction. In a 2012 decision, the Court of Appeals of Rio de Janeiro reviewed fully the validity of a post-dispute agreement and annulled the ensuing award (TJRJ, AC 00037647520108190054, 14 March 2012).
If a party commences court proceedings in breach of an arbitration agreement, it is the burden of the defendant to raise the issue in its response. The court may not raise it sua sponte. However, once the issue is raised, courts have a strong tendency to enforce the arbitration agreements and refer the parties to arbitration. There is case law at all levels of the court system upholding arbitration agreements in this situation.
In the wake of a 2018 STJ opinion in which the court considered that disregard of the corporate veil should be argued before the arbitral tribunal rather than at the enforcement stage (STJ, REsp 1698730/SP, 8 May 2018), there is a growing tendency for parties to try and bring possible third parties into arbitration proceedings. It has become commonplace for tribunals to resolve issues relating to the personal scope of an arbitration agreement or the financial liability of third parties.
The international standards to assume jurisdiction over individuals or entities that are neither party to an arbitration agreement nor signatories to the contract containing the arbitration agreement, such as the involvement of the non-signatory in the negotiations and implied consent due to abuse of the corporate veil by the non-signatory, are applied by Brazilian case law (See TJSP. Apelação 9193203-03.2002.8.26.0000, 31 May 2006 and STJ. REsp 1698730/SP, 8 May 2018).
In 2018, the STJ admitted that, in the context of related contracts, the one identified as the head contract governs the dispute resolution of the subordinate related contracts. Based on this premise, the STJ extended the dispute resolution provision of the head contract to the parties of the subordinate contracts (STJ, REsp 1639035/SP, 18 August 2018).
The STJ resolved another important case in May 2019, dealing with the subrogation of an insurance company in an arbitration agreement existing in the underlying contract (STJ, SEC 14.930/EX, 15 May 2019). In the Alstom v Mitsui case, the STJ rejected allegations of breach of public policy relating to consent and recognised a New York ICC award that considered the insurer to be bound by an arbitration agreement signed between the insured and the beneficiary of the insurance.
Under Article 22-B, sole paragraph of the Brazilian Arbitration Act, an arbitral tribunal may award preliminary or interim relief. The relief is binding, not merely recommended, and it may be enforced in court if needed. An interested party may request an "arbitral letter" (Article 22-C) for the tribunal to inform a national court about the order and request its enforcement.
There are no restrictions as to the types of relief available, but any enforcement requires court intervention. Even though the arbitrators have exclusive jurisdiction over the relief, only the court may apply enforcement measures.
In accordance with the Brazilian Arbitration Act, courts have the power to grant preliminary or interim relief prior to the formation of the arbitral tribunal. As a general rule, after the tribunal is formed national courts only have a role in the enforcement of relief granted by the tribunal. However, in a 2012 case, the STJ ruled that courts are available to grant interim relief even after the tribunal is constituted if the urgency of the matter so requires (STJ, REsp 1.297.974, j. 12 June 2012). See Arbitragem e a tutela provisória no Código de Processo Civil de 2015.
Under article 381 of the Civil Procedure Code, courts or tribunals may proceed with an early production of evidence. Until Brazil’s current CPC was enacted in 2015, this type of proceeding was usually reserved for urgent preservation of evidence. It has now become accepted more broadly, and it aims at the taking of testimony or production of expert reports before the proper evidence-gathering stage of a lawsuit or an arbitration. Although it should be done normally in arbitration, in several situations it is appropriate to produce such early evidence in court (See Produção antecipada de prova no Código de Processo Civil de 2015).
The evidence may be intended for support of a domestic or an international arbitration in Brazil or abroad. It is up to the arbitral tribunal of the substantive case to assign any weight to the evidence at hand.
The Brazilian arbitration legal framework allows for security for costs. In a 2016 case, the STJ admitted the requirement of security for costs imposed on a foreign litigant. However, in the specific case, the STJ overturned the decision that had imposed security for costs at the enforcement stage. The STJ concluded that the existence of an award in favour of the foreign litigant made it unlikely for the opposing party to prevail in the dispute (STJ, REsp 1286878/SP, 21 June 2016).
The basic law governing arbitration in Brazil is the 1996 Brazilian Arbitration Act (Law 9.307). Several other laws govern specific areas, such as government contracts in a variety of sectors or compensation for expropriation. Arbitration with state parties is also governed by executive orders (decrees) or local laws issued or enacted by the various government levels (federal, state or municipal). However, the basic procedural framework is governed by the 1996 Brazilian Arbitration Act.
In arbitration proceedings conducted in Brazil, there are no particular procedural steps required by law.
Under Article 13, Section 6, Brazilian Arbitration Act, an arbitrator must act with impartiality, independence, competence, diligence, and discretion. Article 17 provides that arbitrators shall be considered equivalent to government officials for the purpose of criminal law. Arbitrators that are lawyers registered with the Brazilian Bar are subject to the Brazilian Bar professional ethics standards, in accordance with Article 77 of the Code of Ethics and Discipline of the Brazilian Bar Association (Resolution 2/2015).
An arbitrator is defined by law as a judge in fact and in law, and their award is not subject to appeal or recognition by national courts (Article 18).
Legal representatives do not need to fulfil any particular qualifications or requirements to appear in arbitration in Brazil, either in domestic or international arbitrations.
However, even if there is no requirement to be a lawyer to represent parties in domestic or international arbitration, the Brazilian Bar Association requires lawyers registered with the Brazilian Bar to comply with its profession ethics standards, and Article 77 of its Code of Ethics extends its application to arbitration.
The Code of Ethics does not apply to foreign lawyers, but it does apply to foreign law consultants that provide such consulting services in Brazil.
In accordance with article 22, Brazilian Arbitration Act, the sole arbitrator or the arbitral tribunal, either sua sponte or at the parties’ request, may hear testimony and rule on the production of expert evidence, and any other evidence deemed necessary. With the notable exception of discovery, most or all other internationally accepted evidentiary tools such as the use of witness statements, cross-examination, requests for documents through Redfern Schedules and restrictions on documents due to privilege are widely accepted and used in practice. There are no specific rules that bind arbitral tribunals in this regard, except the general principles of due process and equal treatment of the parties. Courts are supportive of evidence-gathering in arbitration, and they are available to order third-parties or witnesses to give testimony or produce evidence.
Tribunals often use 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 as guidance even in domestic cases. However, they may require adjustment to local expectations. Brazilian arbitral institutional rules also often provide for document exchanges. The CAM-CCBC rules, as an example, "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" (see Commentary on Article 7 2012 CAM-CCBC Rules and The CAM-CCBC Arbitration Rules).
The rules of evidence for arbitral proceedings with place of arbitration in Brazil are broadly provided for in the Brazilian Arbitration Act, and the same rules apply both to domestic and international arbitration.
Article 22, Brazilian Arbitration Act provides the evidentiary powers of the arbitrators and allows them to order any type of evidence upon request or sua sponte. Article 22, Section 2, provides that the arbitrators may request the support of a national court to bring a witness to be heard. Courts are ready to use police force if required. The arbitrators are the ones to decide whether the witness has good cause to refuse to appear and be heard.
Article 22, Section 2, of the Brazilian Arbitration Act, provides that failure of a party to give personal testimony leads to negative inferences, but a witness may be compelled by a national court to appear.
Brazilian law does have a legal requirement of confidentiality and only commands arbitrators to be discrete. Arbitral institutional rules generally provide for confidentiality. An example is Article 14.2 of the CAM-CCBC arbitration rules.
The 2015 reform of the Brazilian Arbitration Act provided expressly that arbitration with state parties is not subject and, conversely, is subject to transparency.
An arbitral award under Article 26 of the Brazilian Arbitration Act is subject to formal requirements. One of the most important is that it must state the reasons for the decision. Another is that is must resolve the dispute fully, except for the possibility of a partial award, which does not complete the task of the arbitral tribunal.
The arbitral award must be rendered within the time frame set forth by the parties. The default time period is six months from the date of the commencement of the arbitration or from the date of the replacement of an arbitrator (Article 23, Brazilian Arbitration Act).
There are no restrictions provided by law on the types of remedies a tribunal may award. Article 27, Brazilian Arbitration Act, allows the tribunal to apply sanctions related within the proceedings. Brazilian law assimilates punitive damages with moral damages designed to compensate losses that do not have a direct economic expression. Provided there is a broad enough arbitration agreement, a tribunal may award punitive or moral damages under the applicable substantive law.
Article 27, Brazilian Arbitration Act, provides the arbitral award will decide on the parties’ duties regarding costs and expenses for the arbitration. The general practice is that costs follow the event.
Legal costs are generally part of the reimbursement of expenses granted to prevailing party.
The treatment of legal costs under Brazilian law has some peculiarities. The Civil Procedure Code and the Brazilian Bar Association Act (Federal Law 8.906 of 1994) provide that in most litigation cases courts will set attorneys’ fees that are payable directly to its counsel as a bonus or separate entitlement, not as reimbursement to the party. This practice is present in litigation. Most Brazilian scholars and tribunals require agreement between the parties for counsel to be granted fees under this regime.
At the present stage, Brazilian law does not provide for appeals of an arbitral award, only challenges to set aside the award. Given the narrow avenues for setting aside, scholars discuss the possibility of creating internal appeals to allow broader review without leaving the environment of the arbitral proceeding. Such an internal appeal would be more than the request for clarifications provided for in Article 30 of the Brazilian Arbitration Act and widely used in practice in arbitrations seated in Brazil.
Brazilian Arbitration Act does not provide for appeal, only for challenge to set aside the award. Although the topic of expansion or reduction of the grounds to set aside is not subject to wide discussion among scholars or in case law in Brazil, there is scholarship in favour of internal appeals based on the agreement of the parties.
Such possible internal appeals are part of the arbitration and are not to be confused with a set aside action. The set aside action is designed to protect the legitimacy of the arbitral process. Therefore, the tendency is to acknowledge the grounds for challenge are not subject to party autonomy and may not be reduced or expanded.
The merits of an arbitral award are not subject to any judicial review. Only formal aspects of the award may fall under the grounds for annulment provided for in Article 32 of the Brazilian Arbitration Act, which are inspired by the UNCITRAL Model Law.
Brazilian practice shows strong deference to arbitral awards. A 2019 research shows that the Court of Appeals of the State of São Paulo heard 127 appeals in set-aside actions between 2015 and 2019, and 7.32% of the requests for setting aside were granted (see Ação anulatória de sentença arbitral: análise doutrinária e empírica da jurisprudência do TJSP e do TJSC entre 2015 e 2019.
The New York Convention and the Panama Convention are in force in Brazil.
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.
The Brazilian Constitution provides for recognition by the STJ (Article 105, I, i). Recognition is conducted under the New York Convention, the Panama Convention or other international treaties, or under the Brazilian Arbitration Agreement. The recognised award is enforced by a federal court (see Recognition and enforcement of international arbitral awards in Brazil).
Only one case of a previously set aside award has been brought to Brazil for recognition. The STJ denied recognition, but the decision may not have in full the variety of angles generally raised in similar cases internationally (STJ, SEC 5.782/EX, j. 2 December 2015). For more, see Reconocimiento de laudos arbitrales extranjeros anulados: una perspectiva latinoamericana.
Public policy is not an express ground for setting aside under the Brazilian Arbitration Act, as opposed to what is provided for the recognition of foreign awards in the New York Convention. However, scholars and courts often consider public policy as an implicit ground for setting aside awards underlying the express grounds of Article 32, Brazilian Arbitration Act (see A causa de pedir nas ações anulatórias de sentença arbitral).
In regard to recognition of foreign awards, it is rarely accepted by the STJ. One exception was the Abengoa case in 2017, due to an alleged inconsistency of the award with criteria for damages under Brazilian law (STJ, SEC 9.412/EX, 19 April 2017). More recently, in another case not related to recognition, the STJ rejected all allegations that could lead to a possible review of the merits (STJ, REsp 1660963/SP, 26 March 2019).
In a 2015 research paper, Nadia de Araujo studied the positions of the STJ over ten years. Recognition was denied in 11% of the cases, all due to public policy (see O STJ e a homologação de sentenças arbitrais estrangeiras: dez anos de atuação and Panorama do direito internacional privado atual e outros temas contemporâneos.
Class arbitrations in corporate disputes are also becoming more frequent. As a consequence of multiple accusations of wrongdoings arising from criminal investigations, large Brazilian corporations are facing complaints from minority shareholders. Most corporations have included arbitration agreements in their bylaws, a move that started as a market practice and later found its way into the Brazilian Corporations Act through a legislative change in 2015. Therefore, many complaints are now being arbitrated either in cases with multiple claimants or in which the claimants are associations formed by injured individual shareholders (see Entidades representativas (article 5º, XXI, da CF) e arbitragem coletiva no Brasil).
The 2015 change allows a corporation to include an arbitration agreement in its bylaws through a majority vote, in which case the dissenting minority will only be entitled to redeem their shares and leave the corporation: if the minority choose to remain as shareholders, they will be bound by the arbitration agreement.
Class actions in Brazilian litigation have limited scope and effects and do not have the finality of other legal systems. The limitations applicable to class actions in litigation make it relatively less important than in other jurisdictions. Class arbitration is a new concept in Brazil, and its requirements and effects are still largely unknown.
There are no general ethical codes provided for in law, except for counsel and arbitrators that are also lawyers registered with the Brazilian Bar or foreign consultants practising in Brazil and also subject to the Brazilian Bar regulations. Arbitral institutions have their own set of ethical rules which apply to their lists of neutrals as well as to professionals sitting as arbitrators in existing panels.
In 2019, the Chartered Institute of Arbitrators (CIArb) opened a Brazil Branch, with a growing number of members based in Brazil. One of the main features of CIArb internationally is the provision and enforcement of its ethical rules, which apply both to arbitrators and counsel. The CIArb Brazil Branch members, like other CIArb members elsewhere, may be subject to disciplinary sanctions in case of violation of the CIArb ethical standards.
Brazil has a very liberal and open approach to third-party funding. Contingency fees for law firms have been always there, so the premises for third-party funding were already widely accepted. There is no restriction in domestic or international arbitration. Certain institutional rules provide for disclosure of information to avoid conflicts of interest. The market for funders in Brazil is active, with many international funders doing business in Brazil.
Consolidation is not covered directly by the Brazilian Arbitration Act. However, many institutional rules in Brazil deal with consolidation. An example is item 4.20 of the CAM-CCBC 2012 arbitration rules. The basic requirements are the:
The Rio de Janeiro Court of Appeals ruled in 2013 on that which is the most representative Brazilian case on this topic (CEC III). The court ruled to consolidate three separate proceedings relating to the same EPC contract, with only partly coinciding parties (see Commentary on item 4.20 2012 CAM-CCBC Arbitration Rules and The CAM CCBC Arbitration Rules).
For the extension of an arbitration agreement to non-signatory third parties, Brazilian case law applies international standards such as the involvement of the non-signatory in the negotiations (State Court of Appeals of São Paulo (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, 08 May 2018).
In 2018, the STJ admitted that, in the context of related contracts, the one identified as the main contract governs the dispute resolution of other related contracts and, therefore, extend to the parties of the latter (STJ, REsp 1639035/SP, 18 August 2018).
National courts reach third parties in litigation under similar grounds. The 2015 Civil Procedure Code provides for specific proceedings for disregarding the corporate veil of third parties.