The Sao Paulo State Court was recently faced with a dispute between the contracting parties to a franchise agreement. While the judge rapporteur recognised that the Brazilian legal system provides for competence-competence as a general rule, given the circumstances of this case, he declared the arbitration clause in the relevant franchise agreement to be null.
The Superior Court of Justice recently issued an important decision that not only demonstrates the level of sophistication reached by the superior courts in relation to arbitration, but also the prestige that arbitration has achieved in the country as a dispute resolution method which has a jurisdictional characteristic. The decision is critical for the development of arbitration in Brazil, since it reinforces the state courts' position in favour of arbitration.
December 14 2016 is already being considered 'D-day' with regard to arbitration and corporate law, as before the Brazilian judiciary's court recess, two important precedents were set on the subject. Questions still exist regarding whether these precedents are conflicting and only time and the likely debates following these decisions will be able to resolve them. However, one thing is certain: the judiciary's final decisions in 2016 are likely to cause intense discussions in 2017.
The Superior Court of Justice recently ruled that an arbitration clause providing that disputes between the contracting parties must be settled by "arbitration or mediation" was valid. In addition, the court held that the arbitration clause would be valid even if inserted into an agreement that, despite the presence of the arbitration clause, also allowed certain situations to be resolved by the courts.
The Superior Court of Justice recently declared an arbitration clause inserted into a franchise agreement null, as it did not meet the requirements set out under Article 4(2) of the Arbitration Act. The court ultimately ruled that although franchise agreements are common commercial contracts, they are still considered adhesion contracts. As such, any arbitration clause provided therein must comply with the formal requirements set out in the Arbitration Act.
The Mediation Act and the new Code of Civil Procedure were recently enacted in an effort to usher in a new era for litigation and arbitration in Brazil. Among the innovations being introduced in the civil courts, the new code asserts a strong policy favouring alternative dispute resolution in order to reduce the cost of litigation and empower litigants and market players to resolve disputes amicably.
The Sao Paulo Court of Appeals recently ruled that an arbitration clause inserted into a contract by adhesion was binding. This decision has important implications, as many arbitration proceedings involve standardised commercial contracts in which clauses have been unilaterally established by one party without eliminating the bargaining power of the accepting party.
Congress recently approved Federal Law 13.129/2015, which has amended the Arbitration Law in order to address questions and concerns, consolidate court precedents and align the Arbitration Law with the new Civil Procedure Code. Changes introduced by the new law include new rights for parties when choosing an arbitrator, the introduction of partial awards and the establishment of a statute of limitations.
Congress recently approved a new Civil Procedure Code, which will come into force in March 2016. The new code has integrated the specific rules on arbitration and the civil rules in order to promote alternative dispute resolution – in particular, arbitration and mediation. This will reduce the number of suits filed before the courts and offer a definitive and quick means of dispute resolution.
After Brazil's enactment of the New York Convention, domestic regulations ended the old double exequatur system and obligation to have exequaturs in Brazil and the foreign jurisdiction where the arbitral award was made. To be enforced in Brazil, foreign awards must now be recognised by the Superior Tribunal of Justice. In light of these changes, the Superior Tribunal of Justice recently amended its internal regulations.
The American Chamber of Commerce for Brazil Arbitration and Mediation Centre recently launched its new rules. The changes include the addition of mediation into its activities and a new mediation clause model. The new rules are an example of how Brazilian arbitration centres are working to ensure their credibility and provide better conflict resolution for parties.
Arbitration has advanced considerably in Brazil in recent years. The number of cases, both domestic and international, has increased dramatically over the past decade. Further, Brazilian courts are almost uniformly in support of arbitration as a form of dispute resolution. This update provides an overview of arbitration, including procedures, arbitrator and party rights and the enforcement of foreign awards.
A recent decision by the Superior Court of Justice (STJ) – Brazil's highest court in federal law issues and responsible for confirming foreign awards – may tip the balance in favour of Brazil as the seat of arbitration. The STJ was called on to resolve a jurisdictional dispute between an International Chamber of Commerce arbitral tribunal seated outside Brazil and a first-instance local court.
Brazilian law requires arbitrators to state the reasons for their respective decisions. Failure to do so may result in annulment of the arbitral award. Plaintiffs in annulment actions usually invoke 'lack of reasoning' as one of the grounds in their attempts to set aside arbitral awards. Recent opinions rendered by the Sao Paulo appellate court shed some light on how much reasoning arbitrators are required to give in their awards.
The creation of specialised appeal courts has proved successful in several Brazilian states. In Sao Paulo, the nation's richest state, the business law chambers established within the state appellate court have produced relevant precedents that illustrate the interplay between the judiciary and arbitration. In one such precedent, the court's specialised chamber analysed the scope of pre-arbitral injunctions.
The Senate recently established a special committee to discuss amendments to the Arbitration Act. While the committee's president has pledged not to hinder the progress of arbitration in Brazil, he has expressed the need to adjust the legal text to reflect Brazil's dynamic economic environment and the modifications brought by changes to both the law and the judiciary in recent years.
The more the Brazilian courts get acquainted with arbitration, the more effective this method becomes. Another set of important court decisions from 2012 illustrates how knowledgeable the judiciary has become regarding the validity of agreements to arbitrate, the scope of arbitration, the enforcement of foreign awards and the judiciary's role before, during and after arbitral proceedings.
The concession agreements of three recently privatised airports contain clauses submitting any disputes to International Chamber of Commerce arbitration, sending a clear pro-arbitration message to all interested foreign investors. However, the draft agreements for two relevant upcoming projects indicate that the government may have shifted its position on arbitration in major infrastructure works.
The Sao Paulo appellate court recently held that insurance companies are precluded from commencing arbitral proceedings abroad until Brazilian courts have decided the merits of a challenge brought by the insureds against the validity of the underlying arbitration clause in the agreement. Proceedings which had been commenced in London were suspended as a result.
The quality of arbitration jurisprudence is likely to improve with the creation of a specialised chamber of the Sao Paulo Appellate Court which has exclusive jurisdiction over commercial law disputes, including lawsuits arising from arbitration. Despite the recent establishment of this chamber, a review of its first arbitration-related decisions reveals a pro-arbitration stance among its members.