INTERNATIONAL COMMERCIAL ARBITRATION IN BRAZIL—HEADING TOWARDS TRUE LIBERALISATION also: Legal Scenario of the Oil Business in Brazil
| Jurisdiction | United States |
(Feb 2002)
INTERNATIONAL COMMERCIAL ARBITRATION IN BRAZIL—HEADING TOWARDS TRUE LIBERALISATION also: Legal Scenario of the Oil Business in Brazil
Paulo Marcos Rodrigues Brancher
Carvalho de Freitas e Ferreira Advogados Associados
Sço Paulo, Brazil
This is an adaptation of an article published at Latin Lawyer Review: Arbitration 2001.
Brazil has been an outstanding attraction pole for international investors. It is therefore only natural that this opening is reflected in the acceptance of arbitration as a privileged method for solving international commercial litigations. However, the references made to Brazil as a bastion of resistance to arbitration and the black sheep of arbitration in Latin America seem to indicate the contrary. Are these criticisms fair? In this analysis, we intend to show that arbitration in Brazil still suffers the consequence of years of resistance. Nonetheless, the coming into force of the Arbitration Law of 1996, the recent decision of the Supreme Court that confirmed the validity of the arbitration clause, the ratification of the Mercosur Agreement on International Commercial Arbitration by the Brazilian government as well as the imminent ratification (at last!) of the 1958 New York Convention on the Recognition and Enforcement of Foreign Awards, have brought innovations that represent a new era for arbitration in Brazil. Almost six years after Law 9,307/96 came into force, its application by the courts seems to indicate that the liberalising tendency is far more a reality than a myth, but consolidation demands further effort.
THE 'PRE HISTORY' OF ARBITRATION IN BRAZIL
Brazil experienced a long period of resistance to arbitration. Until the Arbitration Law (9,307/96) came into force, completely transforming this panorama, two legal statutes served as a source for the evolution of the arbitration process. The Brazilian Civil Code of 1916 contained provisions concerning arbitration in Articles 1,037-48 without, however, regulating the arbitration clause. The Civil Procedure Code of 1973, in its Articles 1,072-102, also brought rules relating to arbitration, arbitrators and the process and enforcement of arbitration awards, without, however, providing for a system for the specific execution of the arbitration clause.
Indeed, the absence of the arbitration clause's execution force was always one of the great obstacles for the development of arbitration in the country. By virtue of an interpretation inherited from a 19th century decree, the arbitration clause was held as apactum in contrahendo, i.e. a mere agreement, so that an arbitration compromise had to be executed in the future, in the case of a dispute arising between the parties to an arbitration clause. Refusal to submit the litigation to arbitration merely resulted in damages and losses against the recalcitrant party.
Another problem encountered under the system prior to the Arbitration Law of 1996 was the need for judicial enforcement of the arbitration award. The problem was aggravated in
[Page 9C-2]
the case of foreign awards, which had to be homologated twice (in their country of origin and, then, before the Supreme Court of Brazil), in order to obtain execution force in Brazil.
The liberalisation of arbitration in Brazil can be perceived through a gradual evolution that began in 1990, by means of a historical decision-a true leading case in Brazilian arbitration-hich, applying the Geneva Protocol of 1923, was received as confirmation of the validity of the arbitration clause embodied in international contracts. In 1996, the Inter-American Convention on International Commercial Arbitration (Panama Convention of 1975) was ratified, and the Arbitration Law came into effect, confirming the liberalising tendency in Brazilian arbitration. However, liberalisation is passing through a transitional period and still needs to be adjusted, as we shall see.
LAW 9,307/96-LIBERALISATION OF ARBITRATION IN BRAZIL
Innovations
Capable parties may resort to arbitration only in respect of disposable asset rights. Sensitive asset rights pose various problems, including consumer law, bankruptcy law, antitrust law, labour law and others. It is interesting to note that the biggest number of arbitrations in Brazil to follow the Law related to labour disputes. Ample proof of the liberalism was given by the legislator upon allowing the parties not only to choose between ex aequo et bono or law arbitration, but also to choose the 'rules of law that will be applied to the arbitration'. The use of this expression provides for wider choice, encompassing not only the uses and customs and international rules of commerce, but also lex mercatoria, as it did not limit the choice to a national law. It is worth remembering that the Arbitration Law applies to national and international arbitrations, as the Law did not distinguish between them.
Arbitration agreement
As for the submission of any litigation to arbitration, the new law established that this procedure be conducted through the execution of an arbitration clause. This means through an arbitration clause, or clousula compromissiria (thus designated the agreement contained in a contract whereby the parties undertake to submit any possible conflict, resulting from any such legal act, to an arbitration tribunal) or the specific submission agreement, or compromisso, defined as the agreement whereby a litigation is submitted to arbitration and which may, in addition, be judicial or extra-judicial.
As for the validity of the arbitration clause, it emphasises its autonomy in relation to the contract, whereby the nullity thereof does not obligatorily give rise to the nullity of the former, it being up to the arbitrator to decide the issues on the existence, validity and force of the arbitration agreement and of the contract that contains the arbitration clause.
Without prejudice to the freedom of selecting the type of arbitration, if the parties, upon formulating the arbitration clause, make reference to some specialised institution, the rules provided by this specialised institution will be respected. The parties can also opt for an ad hoc arbitration.
[Page 9C-3]
The most polemic aspect, without any doubt, is the one pertaining to the effectiveness of the arbitration clause. Article 6 of the Arbitration Law determines that, if there is no prior agreement between the parties on the form for the institution of the arbitration, the interested party will notify the other party, in order that the specific submission agreement is executed on the specified date. If the party notified does not appear or refuses to sign the agreement, the other party may conclude its claim in court. Article 7 of the aforementioned law provides for the procedure before the courts, for, in the case of resistance in respect to the institution of arbitration, in spite of the existence of an arbitration clause, the resisting party may be summoned, in order to appear in court to execute the specific submission agreement. The sentence that judges the request made by the petitioning party, pursuant to law, will be valid as the arbitration agreement.
The compromisso, whether judicial or extra-judicial, will contain the identification of the parties, the arbitrators and the entity to which they belong, the matter in dispute and the place where the arbitration will occur. It may, optionally, contain the place of arbitration, authorisation for judgment ex aequo et bono, the timeframe for presenting the award, indication of the applicable rule of law or corporate rules, the declaration of liability for the payment of the arbitration fees and expenses and establishment of arbitration fees, whereupon if these are established they will be valid as the cognovit note.
The specific arbitration agreement will be extinguished if any of the arbitrators excuse themselves prior to their appointment, or happen to die, provided that the parties have declared the non-acceptance of substitutes, or further, if the term established for the arbitration award expires, despite the arbitrator or president of the arbitration tribunal, after prior notification, are granted 10 extra days to deliver the award.
The arbitrators, upon discharging their duties, are held equivalent to public employees for purposes of penal legislation, being considered judges of fact and law. Finally, the arbitration award is not subject to a judicial remedy or homologation.
The arbitration process
The arbitration process is deemed to be instituted at the time the arbitrator accepts the appointment. The party interested in opposing the competence, repute or disability of the arbitrator(s), or in the nullity, invalidity or non-enforceability of the arbitration agreement shall express such interest at the first opportunity following the institution of arbitration. If the alleged repute or disability is deemed to be founded, the arbitrator will be replaced pursuant to law.
The procedure established by the parties in the arbitration agreement will be complied with through the application of rules of specialised institutions or by delegation to the arbitrator or tribunal itself, to regulate any such procedure. The arbitrator or tribunal, at the request of the parties or ex officio, may hear witnesses and/or the parties, determine expert examinations to be conducted and ask for further evidence.
In the event a controversy arises with respect to inalienable rights during the course of arbitration, the incident, upon which the award depends, will be remitted to courts,
[Page 9C-4]
suspending the arbitration procedure until its resolution. The arbitration award shall be delivered within the term stipulated by the parties. If there is no provision regarding this effect, the term will be six months, reckoned from the institution of arbitration.
The law provides that...
To continue reading
Request your trial