Brazil: Motion To Vacate Judgment Of Arbitration Award. Was The Discussion Reopened In The New Code Of Civil Procedure Or Is This A Mere Terminological Coincidence?

Finally enacted in Brazil, a new Code of Civil Procedure ("NCPC") entering into force in March 2016 has been widely discussed by law professionals, which means that it was praised in one hand and criticized on the other. Right or wrong, the fact is that the new code will apply to pending cases and shall be construed by the work of lawyers, magistrates, scholars and other law professionals.

In this regard, some provisions of the new code are recently drawing attention to, and arousing curiosity about, its practical application. That is the case of the new text of the legal provisions concerning res judicata and motion to vacate judgment ("ação rescisória"). Would the new language of the code allow the motion to vacate judgment apply to arbitration awards?

Many have discussed the applicability of motions to vacate judgment against arbitration awards. Arbitration, as a procedure regulated by Law 9307/96 ( Arbitration Law or "LA") that allows the parties to elect an individual to definitively try their controversies about alienable rights, result in a decision that has the same effects of a court order and is enforceable in court just as an award rendered by a state judge.

The arbitration award obviously has an annulment procedure duly regulated by the Arbitration Law (art. 32 of LA) if legal requirements are met and it is brought forward within ninety days after the parties are so notified. In the Code currently in force ("CPC") the issue seemed to be settled as it would deny, in the understanding of scholars and jurisprudence, the applicability of the motion to vacate judgment for challenging an arbitration award.

The text attributed by the writers to the new Code establishes, in turn, that "The decision on the merits, made final and unappealable, can be vacated."

When writers use the terminology "decision on the merits" ("decisão de mérito") instead of "award on the merits," ("sentença de mérito") as used in the current Code of Civil Procedure, would their intention have been to refer to first instance awards and appellate decisions alike (species of "decision"?). They might as well have intended to refer to decisions on the merits that are neither awards nor appellate decisions.

Whether this is a coincidence or not, the text of the abovementioned article 966 may cast an objective doubt on the possibility of using the motion to vacate judgment against arbitration awards. After all, the arbitration award is a decision on the merits. In addition to that, the arbitration award is usually not subject to appeal and, therefore, it perfectly fits into the definition in article 520 of the new Code: "Res judicata means the authority that renders immutable and unquestionable the decision on the merits no longer subject to appeal".

Well, if every final and unappealable decision on the merits can be vacated, the arbitration award – being a decision on the merits – could be challenged by a motion to vacate judgment within the legal period of two (2) years (art. 975 of NCPC)?

To try to answer to that, it is important to bear in mind that ratification decisions, previously subject to "querela nullitatis" (art. 486 CPC) which is similar to the procedure for nullity of the arbitration award provided for in the Arbitration Law, are now expressly subject to the motion to vacate judgment (because they are described as decisions on the merits). Could this also extend to arbitration awards?

What about the procedure for ratification of foreign judicial acts, which is clearly applicable to foreign arbitration awards. The new Code has started using the word "decision" ("decisão") rather than "award" ("sentença") for this procedure as well (art. 960 NCPC).

We will go further. An arbitration award is an instrument enforceable in court (art. 515, VII NCPC).

Instruments enforceable in court may be subject to motions to vacate judgment (art. 525, §15 NCPC) in the event of "unenforceability or lack of maturity of the instrument" (art. 475-L II, paragraph 2 CPC and art. 525, III NCPC), which means the instrument "grounded on a law or regulatory act deemed unconstitutional by the Federal Supreme Court, or grounded on the application or interpretation of the law or regulatory act deemed by the Federal Supreme Court incompatible with the Federal Constitution, in concentrated or diffuse control of constitutionality" (art. 525, §12 NCPC).

In this context, if the grounds for the arbitration award are rendered unconstitutional by the Federal Supreme Court ("STF"), would it be possible to claim the vacation of the arbitration award within two (2) years from the time the STF's decision became final and unappealable (art. 525, paragraph 15 NCPC)?

But this is not all.

Cases where a motion to vacate judgment applies include the possibility of vacating the decision on the merits "issued by a disqualified judge or by any court absolutely lacking jurisdiction" (art. 966, II, NCPC). The new text refers to either the judge or the "any court". Would the arbitral tribunal fit into this concept of "any court"? Thus, if the arbitral tribunal lacked jurisdiction to grant the arbitration award, could such award be vacated within two (2) years under the procedure provided for in article 966 et seq. of NCPC?

This is is one of the many discussions that will certainly be faced when the New Code of Civil Procedure enters in force, whereas the application of the new law to actual cases and the consolidation of court precedents will surely offer an answer to the questions raised herein and to many others that will still emerge.

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.

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