The Third Chamber of the Brazilian Superior Court of Justice (Superior Tribunal de Justiça - STJ) recently ruled that an arbitral award arising out of proceedings brought before the International Court of Arbitration of the International Chamber of Commerce (ICC), headquartered in Paris, but rendered in the Brazilian territory, is a domestic judgment and does not have to be ratified by the STJ to be enforceable in Brazil and to initiate execution proceedings in our jurisdiction. Therefore, only a foreign arbitral award needs to be recognized by the STJ in order to be enforced in Brazil.
The Reporting Justice Nancy Andrighi explained that Brazilian law has adopted the territorial system to define the nationality of an arbitral award. Thus, it is understood as domestic award any judgment based on an arbitral award handed down within the Brazilian territory, although the arbitrators deal with an issue concerning international trade and that various legal systems are at stake.
The thesis was discussed in a special appeal filed by Nuovo Pignone SPA against a court decision issued by the Court of Justice of Rio de Janeiro (Tribunal de Justiça do Rio de Janeiro), which dismissed the execution proceedings against the company Petromec Inc. The judges felt that the award was not a suitable way to base an enforcement action, even though the judgment was rendered in Rio de Janeiro by a Brazilian arbitrator and in the Portuguese language.
Nancy Andrighi stated that the fact that the application for initiation of arbitration had been submitted to the International Court of Arbitration of the ICC and that the arbitration proceedings have been governed by its regulation, does not change the nationality of the judgment.
She noted that the Brazilian Arbitration Law (Law No. 9307, of September 23, 1996) gave the domestic arbitral award the same effects of a domestic judicial decision, so an arbitral award constitutes an execution instrument suitable to base an enforcement action. Article 35 of Law 9307/96 provides that a foreign arbitral award to be recognized or enforced in Brazil must be ratified by the STJ.
According to Justice Andrighi, when the Brazilian legislator elected the geographic criteria he disregarded any other element. So there is no doubt: arbitral awards rendered in Brazil are domestic and those rendered outside our territory are foreign awards. This system follows the Spanish Arbitration Law and the New York Convention of 1958.
Andrighi further stated that the STJ has already ratified arbitral awards from other countries such as Uruguay and the United States, despite they have been originated from applications filed at the International Court of Arbitration of ICC in Paris.
Following the considerations of the Reporting Justice, the Third Chamber of the STJ allowed the appeal to reinstate the sentence that recognized the appropriateness of the enforcement of arbitral award and ordered the seizure of goods by Petromec Inc. The decision was unanimous.
Footnotes
1 Special Appeal (Recurso Especial) No. 1,231,554 – RJ (2011/0006426-8), having Nuovo Pignone SPA as Claimant/Appellant (Recorrente) and Petromec Inc. as Respondent/Appellee (Recorrida), and as Reporting (Relatora) Justice Nancy Andrighi, of the Brazilian Superior Court of Justice (Superior Tribunal de Justiça – STJ). The decision was issued on May 24, 2011 and published in the Electronic Official Gazette (Diário da Justiça Eletrônico - DJE) on June 1, 2011.
2 The STJ is highest Brazilian court in federal law issues and it is responsible for the recognition of foreign arbitral awards. Pursuant to the provisions of the Legal System Reform ratified by the President of Republic of Brazil, the STJ has authority to recognize foreign judgments. The rules applicable to the recognition are the same as those used by the Brazilian Federal Supreme Court (Supremo Tribunal Federal - STF) in the foreign judgments ratification process, as spelled out in Resolution No. 9, of May 4, 2005, of the STJ.
3 The courts of Brazil would enforce a final judgement given by a foreign court or a foreign arbitral award without examination of the merits of the case, provided that said final judgement or arbitral award is previously ratified by the STJ, which ratification is subject to the following criteria: (a) it must comply with formalities necessary for its enforcement under the law of the place where the foreign judgment was rendered; (b) it must have been given by a competent court after proper service of process on the parties or after sufficient evidence of the parties' absence has been given, as established pursuant to the applicable law; (c) it may not be subject to appeal; (d) it may not be contrary to the Brazilian sovereignty, public policy or good morals; and (e) it must be duly certified by the Brazilian Consular officer responsible under the laws of Brazil for the jurisdiction in which the foreign judgment was rendered and is accompanied by a sworn Portuguese translation. To ensure the legality, validity, enforceability or admissibility in evidence in Brazil of the service of process from a foreign lawsuit it is necessary that the service of process be executed by means of a Rogatory Letter (Carta Rogatória) in accordance with the laws of Brazil.
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