Litigation 2021

Last Updated December 04, 2020

Brazil

Law and Practice

Authors



E. Munhoz Advogados is focused on litigation (judicial and arbitration), corporate law and restructuring. The firm is dedicated to complex and critical matters. An important part of the firm’s policy consists of limiting the number of cases in which it is involved, prioritising quality over quantity. The firm uses a multidisciplinary approach to obtain the best outcome for its clients in their biggest issues. This approach is reflected in a single, integrated team, without practice area distinctions. Team members are assigned to each matter as the case and context requires, based on the relevance of their skills and experience. Eduardo Munhoz and his team have been involved in a number of complex corporate and litigation assignments in Brazil, such as Abilio Diniz-Casino, Schincariol, DASA, Techint-Nippon Steel, Techint-CSN, Forjas Taurus, Bombril, J&F-Paper Excellence, BTG-XP, minority shareholders against JBS, Odebrecht and CCR, Stone-Linx and Laureate-Ser Educacional

Brazil is a civil law country that follows both adversarial and inquisitorial models. As an example, the parties are responsible for commencing Brazilian civil proceedings and establishing the contours of the issues under dispute. On the other hand, courts may have an active role in evidence production, choosing and determining ex officio the evidence production it deems relevant for the case.

Brazilian civil procedure is mainly conducted through written submissions by the parties and the court. All motions presented to the court must be in writing and procedural orders and all decisions are also provided and only effective in writing.

Brazilian civil procedure provides for a few hearings and opportunities for oral arguments. Unless parties object, in most proceedings there must be a settlement hearing before the defendant presents its response. Oral evidence, comprised of depositions of the parties, witness and experts (regarding experts, mainly after written reports have been submitted), is also produced in a hearing before the court, though generally introduced into the case records as a transcript. Finally, Brazilian litigation practice also allows and widely adopts ex parte meetings with the court, in which parties may present their arguments. However, because these meetings are not expressly provided for in the Civil Procedure Code (Law No 13.105/2015), the same arguments must be introduced in writing for courts to adopt them in their decisions.

The vast majority of Brazilian courts maintain case records electronically and are available for consultation and all submissions through the courts’ website.

The Brazilian court system is divided between federal courts, including both ordinary and special courts for certain subject matters, such as labour-related claims, and state courts. Federal and state courts adopt a two-level system with local trial courts and appellate courts. In counties where there are multiple trial courts these may administratively be assigned jurisdiction based on the subject matter of the proceeding, such as criminal, civil, corporate, social security and tax law, etc. There is a trend for more specialised courts within such counties, in particular regarding corporate law and related subjects, which is inspired by the good results achieved by the São Paulo business courts and other similar initiatives (eg, Rio de Janeiro business courts).

In addition to the two-level federal and state courts, there are superior courts which review appellate courts’ decisions in certain cases but that are also competent to hear original cases under certain limited circumstances.

Federal Courts

Federal courts are divided into ordinary courts and special courts. Ordinary federal courts hear cases where the federal government, its branches, agencies or state-owned companies are involved or where federal law expressly provides for federal jurisdiction (an exception). Ordinary federal courts are organised by region, with each region having its own appellate court that hears cases coming from an area of jurisdiction that generally encompasses several states. Federal special court systems with jurisdiction based on subject matter, includes the labour courts, electoral courts and military courts, each of which has special rules that governs their proceedings and are divided into regions typically different from those of ordinary federal courts.

State Courts

Each Brazilian state has its own set of state courts that hear the vast majority of cases (ie, all cases not subject to jurisdiction of the federal courts). In matters of internal organisation, each state can decide how to distribute its courts.

Superior Courts

The superior courts in Brazil are the Supreme Court (STF), the Superior Court of Justice (STJ), the Superior Electoral Court (TSE), the Superior Labour Court (TST) and the Superior Military Court (STM). The TSE, TST and STM handle cases related to federal, electoral, labour and military courts, respectively.

The STJ reviews ruling from appellate courts from both the ordinary federal and state courts when the decision:

  • violates federal law (which comprise a majority of relevant laws) or an international treaty;
  • discusses the validity of a local government act vis-à-vis the federal law; and
  • interprets federal law in a way that conflicts with a decision of another appellate court.

The STJ is also competent to originally hear claims against certain government officials, such as criminal actions against the governors of Brazilian states, as well as to domesticate foreign awards.

The STF is deemed the highest court in Brazil and reviews decisions of all other courts, including the STJ, when the decision violates the Federal Constitution or discusses the constitutionality of federal law, treaties, acts of local government or local law. The STF is also competent to originally hear certain constitutional claims as well as claims against certain government officials, such as criminal actions against the President.

Procedural Law

Depending on the type of lawsuit and applicable court system, there is a different set of procedural law applicable in Brazil. For purposes of this guide we will limit our analysis to the rules applicable to civil procedures in federal and state courts, where the Civil Procedure Code applies.

Publicity of legal proceedings is a constitutional principle in Brazil, and as such the general rule is that case records, decisions and general information regarding proceedings are available publicly. However, there are certain exceptions in the Civil Procedure Code by which, upon request from the parties (or by default in very limited circumstances, such as matters pertaining to minors), either the court may seal an entire proceeding or certain documents or acts, including in the following situations:

  • where social or public interests warrant sealing;
  • certain family law issues;
  • when the lawsuit contains information afforded constitutional confidentiality; or
  • certain lawsuits regarding arbitration, such as injunctions filed before an arbitral tribunal is established or actions to enforce an arbitral award. 

We note, however, that courts – especially São Paulo business courts – have recently tended to deny confidentiality requests based on the fact that the lawsuit is related to arbitration, and interpret the exceptions more narrowly. 

Attorneys licensed to practice law in Brazil by one of the state bar associations may represent clients and argue cases before any and all Brazilian courts without additional licences.

Except from attorneys licensed to practice law in Portugal, foreign-licensed attorneys are not allowed to represent a party in lawsuits in Brazil.

Litigation funding by a third party is not specifically regulated under Brazilian law; as such, it is not prohibited but there are no clear standards or restrictions to it.

In light of the absence of specific regulations, there are no clear limits on which types of lawsuits could be available for third-party funding (see 2.1 Third-Party Litigation Funding).

In light of the absence of specific regulations, both plaintiffs and defendants could be funded by a third party (see 2.1 Third-Party Litigation Funding).

In light of the absence of specific regulations, there is also no minimum or maximum amounts that may be funded by a third party (see 2.1 Third-Party Litigation Funding).

Third-party funders in Brazil typically consider funding court, attorney’s and expert fees. Because Brazil is a “loser pays” system, on occasion third-party funders may discuss supporting court imposed legal fees, although that is an exception.

Contingency fees are widely accepted and the market typically practises such fees in all sort of lawsuits. Despite being very common in practice, given the absence of specific regulations, there is no clear guidance regarding contingency fees (see 2.1 Third-Party Litigation Funding).

In light of the absence of specific regulations, there are no time limits according to which a party to the litigation should obtain third-party funding (see 2.1 Third-Party Litigation Funding).

There is no pre-action conduct required under Brazilian Law. To initiate a lawsuit, parties should present its pleadings provided that, concurrently or within 15 business days, they present a valid power of attorney and pay the court fees. If these requirements are not complied with, claims are dismissed.

In Brazil, statutes of limitations, called prescrição and decadência, are provided for under substantive law (eg, the Brazilian Civil Code). Therefore, the limitation periods and the events that trigger a limitation period depend on the subject matter of the claim. Among other substantive laws, the Civil Code, corporate law, the Criminal Code and the Consumer Code all provide for different limitation periods.

As an example, the general rule on the applicable statute of limitations applicable to civil liability is ten years from the event. There are several specific cases in the Civil Code, in which the limitation period is shorter (one to five years), such as the three-year limitation period regarding tort claims (responsabilidade extracontratual), rent or credit instruments (títulos de crédito) and the five-year limitation period for collections of contractually owed amounts in general (eg, loans).

Brazilian courts typically have jurisdiction over claims in which:

  • (i) the defendant is domiciled in Brazil;
  • (ii) the obligation should be performed in Brazil;
  • (iii) the facts that substantiate the claim occurred in Brazil;
  • (iv) the claim is related to assets, especially real state, located in Brazil;
  • (v) in estate or divorce matters in connection with assets located in Brazil; or
  • (vi) the parties expressly or tacitly submitted to Brazilian jurisdiction.

Regarding alimony obligations, Brazilian courts have jurisdiction whenever the creditor is domiciled in Brazil or the defendant has connections to Brazil and as to consumer matters, whenever the consumer is domiciled in Brazil.

Except for claims involving assets in Brazil, mentioned in items “iv” and “v” above, in which Brazilian jurisdiction is considered exclusive, parties may elect another jurisdiction (cláusula de eleição de foro). In such cases Brazilian courts should respect the parties’ agreement and reject the lawsuit on the basis of lack of jurisdiction, if the respondent successfully raises jurisdiction in its response (contestação).

The initial complaint (petição inicial) is the document filed by plaintiff to initiate a lawsuit. The initial complaint should contain:

  • the court to which the lawsuit is addressed;
  • the names and description of the parties, including addresses;
  • the facts and the legal grounds of the lawsuit;
  • the claims;
  • the claim amount (valor da causa);
  • a brief description of evidence to substantiate the allegations;
  • the party’s willingness (or not) to participate in a settlement hearing, when applicable.

After having filed its pleadings, the plaintiff may amend it:

  • before the respondent is summoned at any time;
  • if the respondent has already been summoned, only if the respondent agrees to the amendment; or
  • upon direction of the court if it finds the pleadings do not comply with legal requirements.

In Brazil, adequate service of process is a validity condition to any proceeding and it is performed by the court and its officials after receiving the initial complaint.

As a general rule, service is performed by letter with return receipt. In specific cases or when service by letter is unsuccessful, service may alternatively be performed in person by an officer of the court, by public notice published in the official gazette, or by electronic means, when applicable. Defendants are immediately deemed served when presenting any motion on the case records.

A party outside Brazilian jurisdiction may be sued. Service of process in a foreign jurisdiction depends on the rules of international co-operation between Brazil and such country. For most jurisdictions, the court in Brazil typically issues a rogatory letter to the foreign courts asking for international co-operation to serve the defendant according to rules on service of process in that country, provided the foreign rules do not violate Brazilian public policy or constitution. Co-operation could be facilitated if Brazil has a bilateral agreement of international co-operation with such country.

If the defendant does not respond to a lawsuit timely after being properly summoned, the defendant will be in default (revelia) and the proceeding will move forward with all facts claimed by the plaintiff in its pleadings presumed truthful. The defendant may present motions in the proceeding at any stage after being in default but may only challenge legal matters or new facts claimed by the plaintiff.

The general presumption of truthfulness of facts claimed by plaintiffs against default defendants does not apply if:

  • there are multiple defendants and one of them responds to the lawsuit timely and disputes the facts;
  • the dispute comprises so-called unavailable rights (direitos indisponíveis), such as life or freedom;
  • the initial complaint failed to present a document legally required to prove a fact;
  • the plaintiff’s statement of the facts is unlikely to be truth or is contradictory with evidence presented in the proceeding.

Collective actions are permitted in Brazil and are mainly regulated by Law No 7.347/85 and the Consumer Code (Law No 8.078/90). Collective actions may be used to protect collective or diffuse rights (direitos coletivos e difusos) or individual rights that are common to a certain group of persons (direito individual homogêneo). Those rights are typically related to the environment, consumers, artistic, architectural or historical landmarks, economic order, ethnic, racial or religious groups, public and social welfare matters.

Legal standing for those actions is restricted to the Public Prosecutor, the Public Defender, the federal government, states and cities, certain other public entities as well as private associations which purpose relates to the claims and that have been incorporated for at least one year.

If a class action aims to protect individual rights, the lawsuit is conducted by a lead plaintiff and the outcome only affects the entire class if the claims are granted. If not, individuals could still individually present claims. Also, in class actions the collective final award concerns only the broad aspects that could have effects on individuals of the class, but to seek actual damages individuals must file an individual lawsuit proving they are a member of the class and individualising the amount of damages.

There are no requirements that attorneys provide clients with a cost estimate of the potential litigation at the outset.

Parties in Brazilian proceedings may make an interim application or motion to obtain remedies from the court at any time, including before trial or substantive hearing of a claim. Remedies are granted before a final decision if the party demonstrates they comply with the requirements to grant interim or injunction reliefs (see 6.1 Circumstances of Injunctive Relief).

A party can apply for early judgment on some or all of the issues in dispute. The application must occur before the beginning of evidence production, when hearings and evidence production typically take part.

Early judgment of the dispute is possible when there is no need or request to produce further evidence or when the defendant is in default (revelia) (see 3.6 Failure to Respond). Besides this rule, early judgment is possible when one or more claims are not controversial.

The court may also dismiss a lawsuit before the beginning of evidence production in certain cases, including lack of jurisdiction or standing, existence of another proceeding between the same parties and with the same claims (litispendência) or if there is already a final decision regarding the matter (coisa julgada).

Dispositive motions in Brazil are typically related to procedural defects by which the lawsuit could be dismissed, as described in 4.2 Early Judgment Applications.

Third parties may request to join a lawsuit as either: (i) assistants if the third party has a legal interest in the outcome of the case (generally the assistant has the same powers and is subject to the same burden of the assisted party); or (ii) amicus curiae to assist the court.

Third parties may also be required to join a lawsuit, if:

  • the third party owns an asset which is disputed in the lawsuit or the third party is required by law or by agreement to compensate the loss of the defendant, such as an insurance company (denunciação da lide);
  • the third party is the principal obligor in a lawsuit in which the guarantor is the defendant, another guarantor when the lawsuit is filed against a co-guarantor, or a joint-obligor when the lawsuit is filed against another joint-obligor (chamamento ao processo);
  • the lawsuit seeks to pierce the corporate veil of a limited liability entity in which the third party is a direct or indirect partner (desconsideração da personalidade jurídica).

The defendant may apply for an order that the plaintiff must post a bond or otherwise provide a security for the defendant’s costs in the proceeding when the plaintiff is domiciled abroad and does not own any real estate in Brazil. Also, the defendant may apply for a similar order in interim application cases, where courts may demand that the plaintiff post a bond or other security in an amount sufficient to cover defendants’ potential losses.

There are no additional costs related to interim applications. However, as per 4.5 Applications for Security for Defendant’s Costs, courts may demand that the plaintiff post a bond or other security in an amount sufficient to cover defendants’ potential losses in connection with an interim application.   

Although the Civil Procedure Code provides deadlines for the court to rule, courts may, and often do, exceed these deadlines. The most relevant deadlines are:

  • five business days to issue administrative orders;
  • ten business days to issue interim orders;
  • 30 business days to issue final decisions.

There are no rules providing for expedited proceedings but parties may request interim or injunction reliefs, in which urgency is considered as a key factor to grant those measures (see 6.1 Circumstances of Injunctive Relief). 

Brazilian procedure is based on the principle that parties may ordinarily rely on their own evidence to substantiate their arguments, not allowing for broad common law discovery procedures.

Parties may prove their claims using any evidence legally accepted in Brazil. This means that parties could use documents of any kind that are available to them, as well as request the court to hear witnesses and personal depositions of counterparties, produce technical evidence made by experts retained by the parties or by experts appointed by the court, and request documents in the possession of the other party and third parties.

Documentary evidence should be produced by the parties with the initial statements and response (see 3.4 Initial Complaint). Other evidence must be determined by the court upon request from the parties or ex officio.

Discovery in evidence production is administered by the court. The court will decide in all relevant aspects, after hearing the parties, such as:

  • whether parties should produce documents, upon document request by the other party;
  • whether there should be a hearing to hear witness statements, parties' depositions and experts' depositions;
  • whether the court needs any technical evidence produced by an expert and how this evidence will be produced.

Concerning document production, if one party requests a document that only the other party or a third-party possesses, the court could issue a subpoena to such party to present the document. The request for a document must contain:

  • a detailed description of the document as complete as possible;
  • the purpose of the evidence and the facts related to it; and
  • reasonable circumstances that demonstrate that the document is in the possession of the requested party.

The requested party could answer the request within five business days (or, if a third party, within 15 business days). Available objections to not produce certain documents include:

  • the document is related to private affairs (life and family);
  • the disclosure of the document could violate the honour of the requested party or their families, or represent evidence to a criminal action;
  • the documents contain confidential information related to the professional or marital status of the party;
  • the disclosure violates legal provisions; and
  • other “serious motives” not specified in the law.

The document could also be redacted to hide confidential information.

All evidence should be analysed by the respective counterparty who is allowed to present comments and counterclaims.

It is possible to request document production from a third party which is not named as plaintiff or defendant (see 5.1 Discovery and Civil Cases).

Other than the requirements set forth in 5.1Discovery and Civil Cases, the Civil Procedure Code expressly provides for three cases where the requested party may not refuse to present a document:

  • the party has a legal obligation to disclose;
  • the party had already mentioned the document in the course of the proceeding in order to constitute evidence;
  • the document, due to its content, is common to the parties.

For a description of how evidence is generally developed and admitted into the case records, see 5.1Discovery and Civil Cases and 5.3 Discovery in This Jurisdiction.

Brazil recognises the concept of attorney-client privilege, which is provided for in the Federal Constitution and the Attorney Statute (Law No 8.906/1994). This law provides for protection to attorneys’ offices and places of work, and all its working instruments, including all types of professional communications. This means that all communication with lawyers is protected by privilege, which comprises in-house and external counsels. Privilege does not apply if there is evidence that the document is related to a crime.

The rules that allow a party not to disclose a document are described in 5.1Discovery and Civil Cases and 5.5Legal Privilege.

Injunctive relief may be awarded in circumstances where there is likelihood of the plaintiff’s claims (fumus boni iuris) and risk of irreparable harm if the injunction is not timely granted (periculum in mora) and provided there is no greater and irreparable harm to the other party (periculum reverso). The Brazilian Civil Procedure Code provides for two general types of injunctions: anticipatory and precautionary.

In the first case, the court anticipates partially or totally the effects of the final award, avoiding further damages to the plaintiff in the meantime, such as an order to suspend the effects of an agreement until the final award. In the second case, the decision aims to guarantee that the plaintiff’s claim may be adequately satisfied, such as an order that freezes assets of a debtor or prevents the transfer of an asset under dispute.

Although the Brazilian Civil Procedure Code establishes a ten business-day deadline for courts to decide on interim or injunctive relief, this deadline is not always complied with in practice (see 6.7 Consequences of a Respondent’s Non-compliance). Therefore, it is impossible to predict how quickly injunctive relief can be obtained in the country. In general, judges are sensitive to urgent matters and rule the issue within the applicable deadline, depending on the complexity and urgency of the case. For extremely urgent matters outside regular court hours (during weekends or holidays), there is also an on-call judge available.

Both anticipatory and precautionary injunctive reliefs may be obtained on an ex parte basis (ie, without notice to the respondent). Plaintiff must demonstrate that the matter is so urgent that providing time for the defendant to respond could irrevocably harm the plaintiff’s rights.

The applicant of an injunction relief may be held liable for damages suffered by the respondent if the respondent successfully discharges the injunction. There is no need to prove fault for the applicant to be held liable. A security or bond provided by an applicant for such potential damages is not mandatory under Brazilian Law, but courts could require it taking into account the circumstances of the case. See 4.4 Requirements for Interested Parties to Join a Lawsuit and 4.5 Applications for Security for Defendant’s Costs.

The Brazilian jurisdiction is territorial, therefore injunction reliefs against worldwide assets may be limited. In order to request international co-operation to fulfil the relief, courts may issue rogatory letters. The rules applied to rogatory letters and the efficacy of this measure depends on the existent rules between Brazil and other jurisdictions in which assets are located.

Although due process forbids courts to grant injunctive reliefs against third parties, third parties may still be affected by certain decision. For this reason, third parties may intervene in a lawsuit if an injunction relief affects their assets or other rights. For third party intervention, see 4.4 Requirements for Interested Parties to Join a Lawsuit.

If a respondent fails to comply with the terms of an injunction, civil courts in Brazil may apply fines, retain the defendant’s driver licence and passport as well as call upon police assistance if necessary.

Civil procedure in Brazil is mainly conducted in writing (see 1.1 General Characteristics of the Legal System). As a rule, the arguments of the parties are presented in writing to the court. However, witness statements, experts and parties’ depositions may be taken in an evidence production hearing before the judge.

There are no mandatory case management hearings in Brazilian civil procedure.

Jury trials are not available in Brazilian civil procedure, but only in certain limited criminal cases – for example, murder and other crimes against life.

Oral evidence is the only evidence that can be produced during a hearing in Brazil. In order to organise the hearing, the court schedules a date for the hearing. During the hearing oral evidence is produced, preferably in the following order

  • first, experts that assist the court and experts retained by the parties, if applicable;
  • second, the plaintiff and then, the respondent will deliver their personal testimony;
  • third, witnesses from plaintiff and respondent will be examined and cross-examined.

In the end, the court may allow counsel for the plaintiff and defendant to provide additional oral arguments.

Expert testimony is permitted in hearings in Brazil. As with all other types of evidence, expert testimony must be authorised by the court if requested by a party or determined by the court ex officio. Expert testimony could comprise the expert appointed by the court as well as expert assistants retained by the parties. In the priority order provided for the Civil Procedure Code as a matter of organisation of the evidence production hearing, expert testimony is the first testimony to be heard.

All hearings and transcripts of the hearings in civil procedures are open to the public, unless the court orders that the lawsuit or the hearing is confidential according to applicable rules (see 1.3 Court Filings and Proceedings).

During evidence production hearings, the judge presides and directs the hearing, asking questions and deposing experts, parties and witnesses.

Generally, courts only rule on procedural and evidence production matters during a hearing. Although the court could issue the final award in the hearing, it commonly issues the final award later in writing.

The timeframe of civil proceedings may vary significantly in Brazil, depending on the court. Corporate law disputes in the city of São Paulo (under the São Paulo business courts) have an average timeframe of one year from initial claim filing to the evidence production stage. The evidence production stage could vary depending on the discovery determined by the court and it may take another year or two until a final decision. For example, expert reports conducted by the court tend to delay the proceeding.

Appeals against certain interlocutory decisions (such as a decision on a preliminary or injunction relief) could have staying effects (see 6.1 Circumstances of Injunctive Relief), which could also delay the proceeding.

If parties settle a lawsuit, they typically request the court to confirm the settlement agreement because the confirmation decision provides the settlement agreement with the same effects of a final award. In confirming a settlement agreement courts assess if: (i) the agreement comprises rights which parties could dispose; and (ii) the agreement was executed in good faith and without undue influence or duress. The court should not interfere on the merits of the issues agreed between the parties.

If parties present a settlement agreement to the court and ask for its confirmation, which will provide the same effects of a final award, the settlement agreement will generally be public and will only remain confidential if the procedure is sealed or if the court exceptionally agrees to seal the settlement agreement itself, which is not common (see 1.3 Court Filings and Proceedings).

Alternatively, parties may jointly ask for the termination of a lawsuit without presenting the terms of the settlement agreement to the court.

A settlement agreement, if executed by parties and two witnesses, could be considered a título executivo extrajudicial, which could be enforced under an enforcement procedure. Additionally, the award that confirms a settlement agreement constitutes a título executivo judicial which has the same effects as a final award and is subject to a streamlined enforcement procedure. These enforcement procedures are slightly different, as the first gives the defendant a larger spectrum of applicable defences and requires summoning the debtor.

Settlement agreements when confirmed by the court by an unappealable decision are as binding to parties as final and unappealable awards. Settlement agreements may be set aside in certain very limited cases by a rescissory action (see 9.1 Awards Available to the Successful Litigant).

There are two kinds of awards available to a successful litigant under Brazilian Civil Procedure Code. If there are certain procedural defects (see 4.2 Early Judgment Applications), the lawsuit will be dismissed without prejudice before evidence production and without analysis of the merits. In this case, and if the procedural defect can be rectified, the plaintiff could file another lawsuit to discuss the same claims and facts. Otherwise, if the merit of the lawsuit is appreciated by the judge, in an early judgment (see 4.2 Early Judgment Applications) or after evidence production, and after all applicable appeals, a successful litigant will have the protection of a final and unappealable award (coisa julgada) which cannot be discussed or modified.

A final and unappealable award could only be modified by a rescissory action (ação rescisória) in exceptional cases, such as if there is corruption in the case or egregious violation of Brazilian rule of law. In either case, a successful litigant will be reimbursed by the costs incurred in the lawsuit (see 11.1 Responsibility for Paying the Costs of Litigation).

Damages may include direct losses (danos emergentes), loss of profits (lucros cessantes) and moral damages (danos morais). Although punitive damages are not expressly provided for in Brazil, case law has developed to interpret that one of the criteria to determine moral damages is to punish the wrongdoing by the condemned party.

A successful party may generally collect interest starting from the date a defendant is summoned until the defendant discharges the obligations set in the final award. Interest may accrue starting from the occurrence of the act that caused damages in tort-based claims.

The successful party could enforce an award issued by a domestic court amicably or by filing an enforcement proceeding before the court. In an enforcement proceeding a plaintiff may, for example, ask for the seizure of the defendant’s assets, ask for a daily fine until satisfaction, demand that a third party perform the action (eg, transfer an asset), ask the court to direct police assistance (eg, in case of an eviction) or request for the award to be replaced by a loss and damages indemnification.

A decision or award issued by a foreign country will only be effective in Brazil after domestication by the Superior Court of Justice.

In order to be domesticated, the foreign award must:

  • be issued by a competent authority;
  • have regularly summoned all defendants;
  • be enforceable in its origin country;
  • not offend Brazilian public order;
  • be accompanied by an official translation; and
  • not offend a final Brazilian award (coisa julgada).

Only federal courts are competent to enforce domesticated foreign awards.

In civil proceedings there is at least one level of appeal, which means that decisions issued by lower courts (interlocutory decisions and final decision) are subject to appeal to the appellate courts. In the appellate court the lawsuit is reviewed, as a rule, by a three-judge panel. In certain cases, a decision issued by the appellate court could be appealed to the STJ and STF. Those superior courts are not considered a third or fourth level of appeal, because they do not review the facts alleged in the lawsuit and are restricted to specific matters pertaining to the legality or constitutionality of the award (see 1.2 Court System).

There are six types of appeals in Brazilian civil procedure, as listed below.

Appeal (Apelação)

This appeal is directed to the respective appellate court and is applicable against a final decision issued by a lower court. As a rule, the filing of an appeal stays the effects of the appealed decision. The appellate court may rule on all challenged matters, whether legal or factual.

Interlocutory Appeal (Agravo de Instrumento)

Interlocutory appeals are directed to the respective appellate court and are applicable against certain interlocutory decisions issued by a lower court, exhaustively provided for the Civil Procedure Code. As a rule, the filing of an interlocutory appeal does not stay the effects of the appealed decision. The appellate court may rule on all challenged matters, whether legal or factual.

Special Appeal (Recurso Especial) and Extraordinary Appeal (Recurso Extraordinário)

These appeals are directed respectively to STJ and STF and are applicable against decisions from the three-judge panel of an appellate court, in cases described in 1.2 Court System. As a rule, the filing of those appeals does not stay the effects of the appealed decision. STJ and STF may only rule on legally challenged matters but not on factual matters.

Motion for Clarification (Embargos de Declaração)

This motion is directed to the same court that issued the challenged decision. Motion for clarification is applicable with the purpose of clarifying obscurities, eliminating contradictions and remedying omissions. As a rule, the filing of a motion for clarification does not stay the effects of the appealed decision.

Internal Appeal

The scope of an internal appeal is very limited.

As a rule, parties have the right to return legal and factual issues to a second degree of review (typically an appellate court). Appeals to STJ and STF may only be granted if they comply with the limited scope imposed for these (see 1.2Court System). See also 10.1 Levels of Appeal or Review to a Litigation.

Interlocutory appeals are filed directly before the appellate court and assigned to a reporting judge which is part of a three-judge panel. Appeals are filed before the lower court that must forward the proceeding to the respective court of appeals, where the appeal will be assigned to a reporting judge which is part of a panel.

Considering the limitation of the scope, special and extraordinary appeals are filed before the president or vice-president of the respective appellate court, who determines whether the appeal meets all requirements. The decision concerning this matter issued by the president or vice-president of the Court of Appeals is appealable to the STJ and STF.

Motion for clarifications will be ruled on by the same court that issued the decision.

All appeals must be filed within 15 business days as of the notice of the decision to the party, except for the motion for clarifications which must be filed within five business days.

The appellate court is able to freely re-examine all matters related to parties’ claims, since the claims were brought before the lower court, even if they were not examined. Regarding other appeals, see 10.1 Levels of Appeal or Review to a Litigation and 10.2 Rules Concerning Appeals of Judgments.

Except from the specific requirements applicable to each appeal (see 10.1Levels of Appeal or Review to a Litigation, 10.2Rules Concerning Appeals of Judgments and 10.3 Procedure for Taking an Appeal), courts cannot impose other conditions on granting an appeal.

After receiving an appeal, appellate courts (generally the reporting judge) can assign or withdraw staying effects to the appeals, depending on whether the appeal has automatic staying effect or not (see 10.1 Levels of Appeal or Review to a Litigation). Staying effect is generally granted if there is a likelihood in the claims and if there is danger of damaging the party if the decision is not timely stayed.

After judgment of the appeal, the court may (i) when it comes to a procedural error (error in procedendo, such as lack of due process), cancel the appealed decision and remand the proceeding to the lower court, or (ii) when it comes to an error in the decision (error in judicando, such as a different interpretation of applicable law), replace the original award.

As a general rule, each party shall initially (i) bear their own attorneys’ fees and (ii) advance payment of court costs and court-appointed expert fees.

Brazil is a “loser pays” system and, as such, at the end of the proceeding, the losing party (which may, to some proportion, be both parties) is required to reimburse the prevailing party for the costs of the litigation; this generally only includes reimbursing the prevailing party for direct court fees and fees of court-appointed experts as well as paying to the prevailing parties’ attorneys court-mandated attorneys' fees. The losing party does not reimburse the prevailing parties’ contractual attorneys’ fees or other expenses not mentioned above.

A party may, at the beginning of a proceeding, request exemption for paying such costs. The party that asks for such gratuity should declare their lack of resources, although it is not required to prove this condition. The judge must grant the benefit unless there ais evidence that the party has the resources.

Whoever gave cause to the filing of a lawsuit shall be responsible for the expanses arising from it (the causality principle). All procedural expenses should be reimbursed and the losing party must pay the attorneys' fee of the prevailing party.

Upon the amount anticipated by the party in the procedures should be updated as of the date of disbursement. Interest is awarded on costs only after a final decision is issued and the amount is not duly payed by the losing party. 

Brazil is known for having an overloaded judicial system which results in longer terms for resolution of legal proceedings. In the last couple of decades, alternative dispute resolution methods (ADRs) have gained strength in the country and several rules regarding this subject have been updated. In this sense, ADRs could are an important alternative to the court system.

According to our experience, litigation derived from commercial agreements is very often resolved in arbitration proceedings.

Conciliation and mediation are increasingly becoming popular methods in less complex litigation, including consumer and labour issues. According to data provided by the National Council of Justice (Conselho Nacional de Justiça, CNJ), in-court conciliation and mediation helped courts provide better responses to parties and is slowly helping unload the system. In 2019, 3.9 million settlements were reached in conciliation hearings and confirmed by Brazilian courts, which represent an increase of 5.6% when compared to 2016. 

ADRs are not mandatory in Brazilian civil procedure unless both parties show an interest in such methods.

Since the 2015 reform of the Civil Procedure Code, mediation and conciliation gained additional importance in ordinary proceedings. Upon receiving the initial complaint, the court must schedule a conciliation or mediation hearing to be held before the defendant presents its response. The hearing can only be dismissed if (i) the dispute does not allow settlement or (ii) the parties expressly agree to dismiss the hearing. Unjustified non-attendance by the parties to such hearing is considered obstruction of justice and is sanctioned with a fine of up to 2% of the value involved in the cause, but parties don’t have an obligation to engage during the hearing.

In-court mediation and conciliation advanced significantly in recent years especially due to the regulation of the matter in the Civil Procedure Code, the enactment of the Mediation Law as well as the enactment of Resolution No 125/2010 of the CNJ. Several courts created centres for in-court conciliation and mediation. Private chambers also provide for centres of mediation and conciliation, although the use of those techniques is not as broad as in-court centres in Brazil.

On the other hand, arbitration is well developed and organised in Brazil, especially in complex corporate litigation. Several international arbitration chambers are held in Brazil, such as the International Chamber of Commerce (ICC) and the American Chamber of Commerce (AMCHAM). There are also national chambers such as Federação das Indústrias do Estado de São Paulo (FIESP)and Câmara de Comércio Brasil-Canadá (CCBC).

Also noteworthy is the chamber from the stock exchange B3 (Câmara de Arbitragem do Mercado, CAM) which is mandatory for corporate litigation involving publicly held companies listed in B3’s higher corporate governance standard segment (Novo Mercado), which must have arbitration clauses in their by-laws. There have been several corporate litigations before CAM and the chamber is becoming ever more common.

Arbitration Law (Law No 9.307) was enacted in Brazil in 1996 and provides general rules regarding arbitration in Brazil. The Civil Procedure Code also contains certain rules regarding arbitration.

An arbitration award in Brazil has the same effects of a final and unappealable decision issued by courts and enjoys the same benefits (see 9.4Enforcement Mechanisms of a Domestic Judgment).

Under Brazilian law the only matters that may not be resolved under arbitration are those relating to so-called unavailable rights (direitos indisponíveis), such as life or freedom.

Arbitration awards could be challenged in Brazil by an annulment action. Parties could seek for annulment if:

  • the arbitration clause is considered null or void;
  • the arbitration award was issued by someone that could not be an arbitrator under Brazilian law;
  • the arbitration award lacks certain narrow mandatory requirements;
  • the arbitration award violates the limits of the arbitration clause;
  • the arbitration award was rendered upon corruption;
  • the arbitration award was rendered after the date established as a limit by the arbitration clause, if applicable; and
  • fundamental principles of due process were violated.

As a matter of practice, courts tend to shy from voiding arbitration awards.

For domestic arbitration, see 13.1 Laws Regarding the Conduct of Arbitration. For foreign arbitration, see 9.5 Enforcement of a Judgment from a Foreign Country.

While there are always certain amendments being discussed in Congress, there are no reform proposals or significant amendments under discussion that are at an advanced stage.

In light of the COVID-19 pandemic, courts’ operation and proceedings deadlines were suspended across Brazil for several weeks during the first half of 2020, with the exception of urgent matters. The CNJ also released several resolutions directing the courts to avoid face-to-face service and incentivising the use of videoconferencing platforms in court hearings and other procedural acts.

It is also worth noting Law No 14.010/2020, which provided for certain rules applied to civil and corporate issues as a consequence of the pandemic – for example, the suspension of certain statues of limitations since the enactment of the law until 30 October 2020.

E. Munhoz Advogados

Av. Presidente Juscelino Kubitschek
1600, 2º floor
São Paulo/SP
ZIP Code 04543 000
Brazil

+55 11 3080 1930

analuiza@emunhoz.com.br www.emunhoz.com.br
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Trends and Developments


Authors



SABZ Advogados was founded in 2006. The firm has always focused on understanding its clients’ daily needs, creating solid links with legal departments and corporate executives. Its team of 50 professionals is trained in a multidisciplinary fashion, an approach that is responsible for a unique way of working based on offering intelligent and business-oriented legal solutions, including in litigation. It is committed to making a difference to its clients’ businesses. SABZ is hired by the top players in the relevant economic sectors (agribusiness, chemical industry, infrastructure, financial market, real estate market and insurance). Middle-market clients also request SABZ’s expertise in sensitive cases. The arbitration and litigation team handles commercial disputes involving all business-related issues as well as domestic and international arbitrations.

Efficiency Through Administration of Justice – the Impact of COVID-19 on Brazil's Judicial System

Introduction

According to Justiça em Números, the government report on Brazil’s judicial system – which comprises high, appellate and district courts at state and federal levels – there were 77.1 million lawsuits pending judgment in 2019. Despite that massive amount of cases before national courts, the official statistics indicate a decrease of 31.5% in the ongoing proceedings in comparison to previous years.

Undoubtedly, the relative success in containing mass litigation in Brazil can be attributed to the wide adoption of electronic records and platforms for digital filing with courts all around the country. In fact, as indicated in the Justiça em Números report, almost 90% of all legal actions commenced in 2019 are recorded and processed via electronic platforms.

Brazilian courts are also taking seriously the advantages and possibilities that artificial intelligence offers in case management and Q&A assistance. The São Paulo State Court of Appeals, considered the largest appellate court in the world, has pioneered the implementation of a robot assistant named Judi. As of now, Judi, a chatbot, provides information about costs and procedure in small claims courts and, in the near future, will even make available brief templates to potential plaintiffs.

Additionally, court specialisation has also become key to ensure efficiency in the judgment of complex cases, such as those related to consumer protection, environmental and bankruptcy law. Particularly for commercial and corporate litigation, the experience of São Paulo State Court of Appeals with dedicated business courts will be increasingly valuable to other Brazilian states.

Besides IT and managerial innovations, there has also been relevant legislative action by the Brazilian Congress to deal with repetitive lawsuits, providing statutory grounds for collective procedures and alternative dispute resolution, which has even allowed private parties to arbitrate claims against government agencies.

It is thus clear that Brazil has struggled to implement jurisdictional and administrative measures to effectively cope with a seemingly unbounded amount of litigation. While much has been made in recent years in respect to the aggregation of claims and class action agreements, the pandemic crisis makes room for new developments on that front, including initiatives to fully digitalise the administration of justice.

As detailed below, the unprecedented isolation measures adopted to avoid the risk of COVID-19 infection of judges, attorneys and others have hastened those trends, which seem to be spearheaded by Conselho Nacional de Justiça (CNJ), the administrative body that oversees the functioning of the entire Brazilian judiciary.

Background – CNJ as a judicial administrative agency

The 45th Amendment to Brazil’s Constitution instituted the CNJ as an independent administrative body within the judiciary. It is designed by the Congress as a diverse council comprised of 15 members, including the Chief Justice of the Supreme Court and representative members from the judicial branches and public prosecutor’s offices at the federal and state levels, as well as representatives from the Bar Association.

According to the Constitution, the CNJ has powers not only to supervise and control the managerial and financial activities of courts, but also to ensure the legality of administrative action by the judiciary and to conduct and review disciplinary claims against judges and the judicial staff of district and appellate courts.

The CNJ is also entrusted with limited rule-making power to issue regulations, such as resolutions (resoluções), provisions (provimentos) and recommendations (recomendações), which are all meant to further the constitutional goals of transparency, accountability and, most importantly, efficiency in the administration of justice in Brazil.

The following sections of this article will illustrate how CNJ’s regulations have been enacted and applied amidst the pandemic, as a means to mitigate the massive litigation in Brazil that is expected to arise out of the COVID-19 sanitary and economic crises.

Towards the “digitalisation” of justice in Brazil – Juízo 100% Digital

At the outset, it is worth mentioning the recent enactment of Resolution No 345/2020 by the CNJ, allowing state and federal appellate courts to implement the "Juízo 100% Digital" programme, intended as a non-mandatory framework for the development of a totally online and remote court proceeding.

According to CNJ, remote judicial proceedings are to be promoted and implemented across the country not only during the pandemic crisis, as a precautionary measure, but also after the sanitary restrictions applicable to the judiciary are foregone.

That said, the recourse to the standard, in-person judicial proceeding is considered a right under the due process clause of the Brazilian Constitution, but parties to a lawsuit could, if not renounce it, then at least contract around such constitutional right if both of them agree to make use of the Juízo 100% Digital platform.

Pursuant to Resolution No 345/2020, all court sessions, including any hearings and even trials, will be held through videoconferencing or other means of instant communication based on data transmission over the internet.

Despite CNJ’s initiative to implement the Juízo 100% Digital platform, appellate courts at all federation levels will be responsible for detailing and adapting the provisions of Resolution No 345/2020. However, the basic framework established by CNJ will have to be observed:

  • the procedural switch to an entirely remote proceeding should be consensual and voluntary by the parties to the lawsuit;
  • the parties should be allowed to retract their choice for the remote judicial proceeding until a final judgment is rendered;
  • the right to switch back to an in-person judicial proceeding could be exerted by the parties only once in the course of the same lawsuit; and
  • the retraction from Juízo 100% Digital must not entail the parties’ escape from the court’s jurisdiction or a modification in the case’s original venue.

Finally, Resolution No 345/2020, despite not displacing the in-person proceedings as the standard avenue for litigation before Brazilian courts, creates a presumption of consensus about the remote proceeding, as long as it is explicitly proposed by the plaintiff when filing their claim.

To that end, CNJ’s regulation states that the defendant’s silence regarding the Juízo 100% Digital platform, up until his or her defence submission is filed, should be considered an acceptance of a proceeding fully based and dependent on video remote technology.

Scientific co-operation and expert knowledge in the cloud – the e-NATJus Nacional platform

Another administrative tool that has become particularly useful during the pandemic crisis is e-NATJus Nacional, an electronic platform for scientific advice that provides courts all over the country with authoritative expert opinion, as a way to rationalise and expedite the judgments of cases involving technical knowledge.

The e-NATJus Nacional platform was established by the CNJ under Provision No 84/19, and implemented through a co-operation agreement with the federal government’s Ministry of Health, with the support of two of the most reputable hospitals in Brazil: Hospital Sírio Libanês and Hospital Albert Einstein.

In March 2020, Technical Opinion (Parecer Técnico) No 123 was made available via e-NATJus Nacional to inform judges and other judicial staff about the scientific evidence of drugs based on hydroxychloroquine components, as prevention and treatment to COVID-19.

The controversy surrounding the prescription of hydroxychloroquine in the wake of the COVID-19 pandemic is well known, despite – or, perhaps, because of – its public endorsement by leaders such as the USA's President Trump and the Brazilian President, Mr Bolsonaro. Accordingly, the CNJ was prudent to anticipate that the amount of new health law cases would soar, and that such medicine would become a disputed issue not only in the political arena, but also in courts of law.

The scientific and medical effectiveness of hydroxychloroquine would be a decisive fact, particularly in collective litigation seeking injunctive relief against the Brazilian government, to assure the distribution of that drug to all citizens through the public health system. This was the case in the Ação Civil Pública No 1015707-53.2020.4.01.4000, a collective proceeding brought by the Brazilian Federal Attorney’s Office (MPF) against the city of Teresina, the state of Piauí and the Union. Actually, the federal district court for Teresina, when ruling to deny the MPF’s motion for preliminary injunction, relied inter alia on e-NATJus Nacional and on the scientific findings about hydroxychloroquine, or the lack thereof, as provided by Technical Opinion No 123.

The technical opinions made available to courts via e-NATJus Nacional, under request of the CNJ, are not binding and can never be a surrogate for expert evidence adduced by the parties in a trial. Nevertheless, such ready-made knowledge about disputed scientific facts, when shared with courts across the country, facilitates the control and greater uniformity of court rulings in socially relevant, albeit repetitive, litigation, such as that related to the right to healthcare and the access to hydroxychloroquine during the current pandemic crisis.

Facing bankruptcy and reorganisation proceedings during and after the pandemic

The CNJ has also issued Recommendation No 63/2020, a non-mandatory regulation offering guidelines to the state judges that, during the pandemic crisis, preside and conduct judicial reorganisations and bankruptcy proceedings throughout the country.

According to CNJ’s recommendation, Brazilian bankruptcy courts are advised to:

  • prioritise the analysis of creditor or debtor claims related to the access of funds or assets already collected and restrained by judicial order;
  • suspend in-person general meetings of creditors, allowing virtual meetings;
  • authorise the extension of the automatic stay provided in Article 6 of the Brazilian Bankruptcy Law if the general meeting of creditors is needed to be delayed, and until the first court ruling on whether the plan submitted by the debtor will be approved or not;
  • permit amendments to the reorganisation plan, as long as supported by evidence of correlation between the pandemic crisis and the debtor’s incapacity to carry out its obligations, and only if the ongoing recuperation plan is being duly fulfilled;
  • determine that trustees in judicial reorganisations keep performing their duties to the court, overseeing debtors in a virtual or remote manner, and presenting the monthly activity reports via online platforms on the internet; and
  • evaluate, with special caution, emergency motions for interim injunctions, eviction orders, and seizure measures in claims against debtors in default during the state of public calamity, as recognised by the Congress through Legislative Decree No 6/2020.

Indeed, those recommendations have been observed and applied by most courts with jurisdiction to rule on judicial reorganisation and bankruptcy proceedings since 1 April 2020, the date on which Recommendation No 63/2020 came into effect.

Among the said recommendations, the possibility to hold general meetings of creditors remotely could be identified as the most important guideline of Recommendation No 63/2020 to ongoing judicial reorganisations and bankruptcies proceedings – it encourages judges to freely authorise virtual meetings, benefiting creditors and debtors alike, by reducing transaction costs, increasing the effectiveness of those meetings, and providing celerity for the creditors’ payment under the reorganisation plan.

Additionally, it is worth mentioning the CNJ’s approval of the Normative Act (Ato Normativo) No 0005479-03.2020.2.00.0000, on 2 July 2020, recommending to courts at all federation levels the creation of judicial centres for alternative dispute resolution specialised in business and commercial law.

According to CNJ deliberations, as formalised in that Normative Act, many of the expected bankruptcy and reorganisation proceedings following the pandemic crisis could be resolved with conciliation and mediation endorsed by the judiciary.

In particular, commercial mediation is considered both a healthy business practice and a means to avoid the increasing number of lawsuits related to the pandemic, which is desirable in a scenario of widespread insolvency leading to massive litigation by creditors that challenge the extension of their claims under the reorganisation plan. In fact, business mediation has been recently and successfully employed to solve several conflicts in connection with the judicial reorganisation of Oi S/A, the telecommunications company.

Conclusion

The challenges posed to the judicial system in the wake of the pandemic crisis are, unfortunately, not new in nature and only reinforce the need for an efficient administration of justice to tackle, at a national level, mass and repetitive litigation in Brazil.

The recourse to the limited regulatory tools available to CNJ, often non-binding even to lower courts, is certainly a second-best option, in view of the limited rule-making power and authority provided by the Constitution. Nonetheless, while the definitive and mandatory adoption of entirely remote judicial proceedings could only be achieved via legislative action by the Congress, the CNJ regulations, if not effective, reveal at least a sensible policy design.

Indeed, to the extent that urgent solutions to unanticipated problems, such as the COVID-19 pandemic, are required also in the administration of justice, litigation in time of crisis have to be dealt with by thorough planning, thinking rationally and, inevitably, employing technology on a large scale.

SABZ Advogados

Avenida Brasil, 842
Jardim América, São Paulo, SP
01430-000 Brazil

+55 11 3111 2233

contato@sabz.com.br www.sabz.com.br
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E. Munhoz Advogados is focused on litigation (judicial and arbitration), corporate law and restructuring. The firm is dedicated to complex and critical matters. An important part of the firm’s policy consists of limiting the number of cases in which it is involved, prioritising quality over quantity. The firm uses a multidisciplinary approach to obtain the best outcome for its clients in their biggest issues. This approach is reflected in a single, integrated team, without practice area distinctions. Team members are assigned to each matter as the case and context requires, based on the relevance of their skills and experience. Eduardo Munhoz and his team have been involved in a number of complex corporate and litigation assignments in Brazil, such as Abilio Diniz-Casino, Schincariol, DASA, Techint-Nippon Steel, Techint-CSN, Forjas Taurus, Bombril, J&F-Paper Excellence, BTG-XP, minority shareholders against JBS, Odebrecht and CCR, Stone-Linx and Laureate-Ser Educacional

Trends and Development

Authors



SABZ Advogados was founded in 2006. The firm has always focused on understanding its clients’ daily needs, creating solid links with legal departments and corporate executives. Its team of 50 professionals is trained in a multidisciplinary fashion, an approach that is responsible for a unique way of working based on offering intelligent and business-oriented legal solutions, including in litigation. It is committed to making a difference to its clients’ businesses. SABZ is hired by the top players in the relevant economic sectors (agribusiness, chemical industry, infrastructure, financial market, real estate market and insurance). Middle-market clients also request SABZ’s expertise in sensitive cases. The arbitration and litigation team handles commercial disputes involving all business-related issues as well as domestic and international arbitrations.

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