Brazil: 10 Traps To Avoid In Drafting Arbitration Agreements*

Last Updated: 3 January 2013
Article by Walter Stuber


Arbitration in Brazil is regulated by Law No. 8,307, of September 23, 1996 (the Brazilian Arbitration Act), which applies to all arbitral proceedings with their seat in the Brazilian territory, and it is based on the UNCITRAL Model Law and on the Spanish Arbitration Law of 1988. Furthermore, Brazil ratified and introduced, without reservations or declarations, the New York Convention into its legal system through Legislative Decree No. 52, of April 25, 2002, and it is party to several multilateral treaties on international commercial arbitration, such as (i) the Geneva Protocol on Arbitration Clauses of 1923; (ii) the Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards of 1979 (the Montevideo Convention); (iii) the Inter-American Convention on International Commercial Arbitration of 1975 (the Panama Convention); (iv) the Protocol of Las Leñas of 1992; and (v) the MERCOSUR Agreement on International Commercial Arbitration of 1998.

A significant number of arbitration institutions or centers have been created or have gained reputable prestige in Brazil and abroad, such as the Arbitration and Mediation Center of the Chamber of Commerce Brazil-Canada (CCCB), the São Paulo Chamber for Mediation and Arbitration (FIESP/CIESP), the Conciliation and Arbitration Chamber of the Fundação Getúlio Vargas (FGV), the Corporate Chamber of Commerce in Brazil (CAMARB), the Arbitration and Mediation Center of the American Chamber of Commerce in São Paulo (AMCHAM), the Mediation and Arbitration Center of the Portuguese Chamber of Commerce in Brazil and the Market Arbitration Center (Câmara de Arbitragem do Mercado – CAM) instituted by the Brazilian Exchange (BM&FBOVESPA).

Use of institutional international arbitration is more common in Brazil than ad hoc international arbitration. If and when the parties choose ad hoc arbitration in Brazil, they will usually follow the UNCITRAL rules.

An arbitration agreement must fulfill certain requirements to be valid and enforceable under Brazilian law. We will now discuss ten traps that should be avoided in drafting arbitration agreements which might adversely affect their validity and enforceability in Brazil.

Trap No 1 – Is the Issue Arbitrable?

The first trap is to avoid the inclusion of a matter that cannot be arbitrated in the arbitration agreement. Some types of disputes are deemed to be non-arbitrable in Brazil.

The Brazilian Arbitration Act expressly provides that parties must have full legal capacity in order to arbitrate a dispute and the subject matter must be pecuniary patrimonial and negotiable rights (direitos disponíveis), i.e. rights over which the parties may negotiate.

Most commercial matters may be arbitrated, including many when the government or government-controlled entity is one of the parties.

Certain matters, however, may not be arbitrated even if the parties with full legal capacity were agree to arbitrate them, such as family matters, certain public law matters, and possibly individual employment-related matters, according to a recent precedent of the Brazilian Superior Labor Court.

Furthermore, an arbitration clause is only valid and effective in a consumer contract or an adhesion contract, in the following cases: (i) when the consumer of the adhering party initiates the arbitration; (ii) if the provision is in boldface; or (iii) when the arbitration clause is established in a separate signed document. In essence, in all these cases, the arbitration agreement is only deemed valid and enforceable if the weakest party (the consumer of the adhering party) wishes to resolve the dispute through arbitration.

If, during the course of the arbitral proceedings, a dispute arises concerning rights over which a party may not dispose, and once convinced that the final decision may depend thereon, the arbitrator(s) may refer the parties to the State Court having jurisdiction, ordering a stay of the arbitral proceedings. Then, the arbitral proceedings shall recommence after the preliminary question is settled and evidence has been entered in the file of the final non-appealable judgment thereon.

Trap No. 2 – Inadequate Choice of the Applicable Rules.

The second trap is to choose inadequately the applicable rules that will govern the arbitration agreement or not do it clearly.

The parties may freely choose the rules of law applicable to the arbitration provided that their choice does not violate good morals and public policy. This choice is permitted due to the principle of autonomy of the parties and the voluntary nature of the arbitration.

In this regard, it is important to make clear in the agreement the substantive law applicable to arbitration. Whenever the substantive applicable law is not clear, the conflict of law of the Brazilian Introductory Law to the Civil Code will prevail. If this situation happens, the applicable law would be the law of the country where the agreement was signed, unless the parties have signed the agreement in different venues. In this latter case, the applicable law would be the one of residence of the claimant.

Parties may even determine the use of equity by the arbitrator(s) if they so desire or may also agree that the arbitration shall be conducted under the general principles of law, customs, usages and international rules of trade.

Trap No. 3 – Non-fulfillment of the Mandatory Requirements.

The third trap to be avoided in an arbitration agreement is the lack of certain requirements that must be fulfilled under Brazilian law.

The arbitration agreement must mandatorily indicate:

  1. the qualification (name, profession, marital status and domicile) of the parties;
  2. the qualification of the arbitrator(s), or, if applicable, the identity of the arbitration institution or center to which the parties have delegated the appointment of the arbitrator(s);
  3. the subject matter to be arbitrated; and
  4. the place where the arbitral award will be rendered.

In addition, there are other requirements that are not mandatory but may be included in the arbitration agreement, namely:

  1. the place or places where the arbitral proceedings shall be held;
  2. if so agreed by the parties, the authorization for the arbitrator(s) to decide in equity;
  3. the time limit for the making of the arbitral award;
  4. the choice of the national law or institutional rules applicable to the arbitral proceedings, if the parties so agree;
  5. provisions as to the responsibility for the fees and costs involved in the arbitral proceedings; and
  6. provisions as of the fees of the arbitrator(s).

A complete (full) arbitration clause should cover all the above-mentioned requirements (mandatory and non-mandatory).

Brazilian law does not prevent the arbitrator(s) from choosing the most convenient place to carry out the hearings and procedural meetings. If Brazil is selected as the seat of arbitration, hearings and procedural meetings can also be conducted abroad.

Trap No. 4 – The Arbitration Clause is Distinct from the Main Agreement.

The four trap is the drafting of the arbitration clause to be inserted in the main agreement.

Under Brazilian law an arbitration clause is autonomous and separable from the main agreement.

Therefore, the validity and enforceability of the agreement to arbitrate must be analyzed separately from the validity and enforceability of the main agreement. The invalidity of the arbitration clause will not automatically entail the invalidity of the main agreement. Consequently, even if the main agreement is deemed to be invalid, the parties will remain bound by the arbitration clause for the purposes of submitting their issues to means of dispute resolution. For this reason, it is very important to draft properly the arbitration clause.

The principle of competence-competence is recognized by the Brazilian Arbitration Act. This means that the arbitrator(s) is(are) competent to decide, by virtue of his/her(their) office(s) or at the parties´ request, the issues concerning the existence, validity and effectiveness of the arbitration agreement, as well as of the contract containing the arbitration clause. The autonomy of the arbitration clause is the basis of the principle of competence-competence.

The arbitration clause inserted into an agreement, ie, a provision stating that any and all disputes arising/related to the agreement shall be resolved by arbitration, is legally binding on the parties. Pre-dispute arbitration clauses (cláusulas compromissórias) are legally binding on the parties as long they are in writing. An arbitration clause may be inserted in the underlying agreement itself or in a separate document which makes reference to it.

The Brazilian Arbitration Act provides for a special legal proceeding, which entitles a party to judicially demand the institution of arbitration if the other party fails to comply with the arbitration clause.

Trap No. 5 – Choice of Arbitrators.

The fifth trap may happen with the wrong choice of the arbitrator(s).

An arbitrator should be an individual (natural person) with full legal capacity, impartial and independent and, last but not least, entrusted by the parties. Foreign arbitrators who attend these requirements can act as arbitrators when the seat is in Brazil or hearings are held within the Brazilian territory. Brazilian law does not require arbitrators to be Brazilian nationals.

It should be mentioned that Brazilian law does not expressly forbid legal entities from acting as arbitrators. However, in practical terms this is absolutely impossible. The position of an arbitrator under Brazilian law is equivalent to a judge´s function and may entail personal civil and criminal liability, which is only applicable against natural persons.

Depending on the arbitration institution or center which the parties have chosen to submit the arbitration and the institutional rules of that entity, they will not be able to nominate arbitrators that are not inserted in the list of the arbitration institution or center.

When the parties have failed to nominate the arbitrator(s), they may still do so jointly, resort to the pertinent rules of the arbitration institution or center, if any, or indicate an appointing authority to nominate the arbitrators. The parties may also be assisted to nominate the arbitrator(s). In case of an "empty" arbitration agreement, a judge may nominate the arbitrator(s). This possibility is admitted by the Brazilian Arbitration Act. An arbitration agreement is deemed to be "empty" when it fails to deal with this requirement and does not mention the rules to nominate the arbitrator(s).

The grounds for challenging an arbitrator under the Brazilian Arbitration Act are the same for the disqualification of a judge under the Brazilian Code of Civil Procedure, namely: (i) impediments; and (ii) suspicions. This may happen when there are justifiable doubts as to the arbitrator´s independence and/or impartiality. The International Bar Association (IBA) Guidelines on Conflicts of Interest in International Arbitration will generally be taken into account.

An impediment is a clear sign that the arbitrator is biased and may not act in the arbitral proceedings under an objective interpretation of the circumstances. Nevertheless, based on the principle of autonomy of the parties, the parties are entitled to waive their right to challenge an arbitrator even in the most severe case, whereas a judge under the same circumstances would be required to withdraw from deciding the matter.

A suspicion offers a subjective and tentative analysis of the decision-maker´s state of mind. Grounds for suspicion may result from non-disclosure of previous business relationships or financial interests between the arbitrator and the parties in connection with the dispute at hand. However, it does not necessarily lead to the conclusion that an arbitrator is biased in favor of one of the parties or has an interest in the subject-matter in dispute.

Trap No. 6 – Multi-party Agreements.

The sixth trap is the drafting of an arbitration clause in a multi-party agreement.

The Brazilian Arbitration Act is silent about the effects of arbitration agreements on third parties. Depending on the circumstances of the case at hand, the arbitral tribunal may exceptionally accept third parties in the arbitration. This only occurs in very specific situations, involving groups of companies, for example.

Since the issue of third-party agreements remains unsettled in Brazil, it is paramount to be precise when drafting the arbitration clause for multi-party agreements.

Drafting a complete arbitration clause providing for all the relevant issues can potentially avoid the disruption of the dispute resolution mechanism originally envisioned. Issues to the right of each incoming party to challenge the arbitral tribunal´s composition will constitute a relevant factor in the arbitration clause. It is advisable to include provisions for a potential appointment of arbitrators by third parties, particularly as this may encompass issues involving due process of law in Brazil, such as full defense and proper response, equal treatment of the parties, arbitrator´s impartiality and free convincement.

Trap No. 7 – Payment of Fees to the Arbitrator(s).

The seventh trap is not to secure payment of fees to the arbitrator(s).

In Brazil arbitrators may only secure payment of their fees if the arbitration agreement expressly establishes this possibility. As a rule, payment of arbitrator(s) is usually contingent upon the rendering of a decision. Consequently, the arbitrator(s) may only receive the payment of his/her (their) fees after he/she (they) issue(s) the arbitral award.

From a practical standpoint, payment of a part of the arbitrator´s fee is used as a guarantee. If there is no specific amount previously determined, the parties and the arbitrator(s) can jointly establish it, based on the number of hours that the arbitrator(s) is (are) expected to work.

Regarding arbitration´s costs, Brazilian law expressly provides that arbitrators can require the advanced payment of part of the costs of the arbitration. Often the arbitration institutions and centers require the payment of part of the costs as a guarantee and some of them provide rules to suspend the arbitration process, in order to compel the parties to pay in advance part of such costs. The opposing party can even pay the total amount owed and later collect if from the defaulting party, in order to prevent the suspension of the arbitration process.

Trap No. 8 – Confidentiality.

The eight trap is not to include a confidentiality provision in the arbitration agreement.

The Brazilian Arbitration Act does not impose the duty of confidentiality on the parties. However, the parties may establish it in the arbitration agreement. Furthermore, the arbitration institutions and centers can also require the duty of confidentiality in their rules.

The purpose of the confidentiality clause is to keep the dispute and sensitive information secret and to ensure that information disclosed in the arbitration process cannot be relied on in other legal proceedings.

Extent to confidentiality may depend on the grounds relied on when asking for disclosure. Recognized exceptions to the rule include where disclosure is: (i) made by express or implied consent of a party; (ii) made mandatory by law or a court order; (iii) in the public interest / interest of justice to disclose documents; (iv) necessary for the establishment or protection of an arbitrating party´s legal rights vis-à-vis a third party.

Trap No. 9 – Definition of the Limits of the Arbitration.

The ninth trap is the lack of the definition of the limits of the dispute in the arbitration agreement.

The arbitration agreement must define the limits of the dispute because the arbitration award will be deemed null and void if it has exceeded the limits of the arbitration agreement or it does not decide the whole dispute submitted to arbitration.

Furthermore, pursuant to the Brazilian Arbitration Act, the arbitral award shall be made within the time limit stipulated by the parties in the arbitration agreement. If no express stipulation is made thereon, however, the award shall be made within six months from the date of the commencement of the arbitral proceedings, or from the date of the substitution of the arbitrator (s). The stipulated period may be extended by the parties and the arbitrator(s) by mutual consent.

Trap No. 10 – State Immunity.

The tenth trap is to insist in the waiver to the state immunity when the Brazilian government is one of the parties of the arbitration agreement and is acting in its sovereign capacity.

State immunity is usually deemed to have been waived and may not be invoked whenever the Brazilian government (the Union, the States or the Municipalities) is acting in its commercial or private capacity (ius gestonis).

Whenever the Brazilian government is acting in its sovereign capacity in the public field, it may successfully raise a defense of state or sovereign immunity at the enforcement stage, particularly when the arbitration award is against national public policy or the subject matter is non-arbitrable.


*This article contains the notes prepared for the elaboration of the PowerPoint presentation related to the webinar organized by the GOAL - Global Outsourcing Association of Lawyers on "Arbitration Agreements: Pitfalls to Avoid While Drafting Them" on November 29, 2012 at 12:00 pm ET, in which the author was one of the speakers.

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.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Walter Stuber
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions