The Special Court of the Superior Court of Justice ("STJ") has confirmed that the 10% penalty over the debt, set forth in Article 475-J of the Brazilian Civil Procedure Code, for the cases where the debtor does not voluntarily comply with judgments, also applies to the enforcement of arbitral awards.

Article 475-J provides that if a debtor fails to pay a sum of money imposed by a court judgment within 15 (fifteen) days from the date he is summoned for that effect, then the amount of the award shall be automatically increased by a 10% penalty.

The STJ stated that final court decisions and arbitral awards have a similar nature, since they are equally enforceable pursuant to the Brazilian Civil Procedure Code and Brazilian Arbitration Act. As a consequence, the 10% penalty for lack of voluntary payment of a judicial decision must also apply upon enforcement of arbitral awards.

As the arbitral awards may be of significant amount, the imposition of the 10% penalty over the total debt may have a material financial impact on the debtor. Thus, the STJ's opinion follow the trend of Brazilian Courts to enhance the effectiveness of the arbitral awards.

Our arbitration and litigation team is ready to clarify any doubts, as well as to provide legal counseling on such matters.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.