International Arbitration

The Arbitration Act (9.307/1996), as amended in 2015, is the main statutory regime applicable to arbitration in Brazil. In accordance with Article 4(1) of the act, an arbitration clause must be in writing.

Brazil is also a signatory to the New York Convention. However, it has not signed the International Centre for Settlement of Investment Disputes Convention or any bilateral investment treaty. Hence, investor-state disputes should be dealt with through an arbitration clause in cases where the investor can negotiate one. It is strongly recommended to avoid the Brazilian ordinary courts of justice wherever possible.

Preliminary injunctions and measures can only be ordered by arbitral tribunals once they have been constituted. Until that point in time, competence rests with the ordinary courts of justice (Articles 22-A and 22-B of the Arbitration Act).

Although the Arbitration Act explicitly treats both equally, there are practical differences. The main one is that foreign arbitral awards must undergo an exequatur process (validation to be an executable title in Brazil) before the Superior Tribunal of Justice (STJ), in accordance with Article 35 of the Arbitration Act, which takes about two years. This is not necessary for domestic awards, which can be enforced directly in Brazil.

The definition derives from the territorial principle:

• If the seat of arbitration is in Brazil, the arbitration is domestic; and
• If the seat of arbitration is in another country, the arbitration is international.

No. However, the Arbitration Act has been influenced by the UNICTRAL Model Law to some extent. It is fair to say that the Arbitration Act is home-grown.

In the 1980s, after decades of rapid growth of the Brazilian economy and the judiciary’s inability to deal with this in an efficient way, the business community, attorneys and scholars lobbied for the introduction of arbitration. In November 1991, a commission was formed with the aim of developing draft arbitration legislation. This was headed by Carlos Alberto Carmona, Selma Lemes and Pedro Batista Martin, and the outcome was the current Arbitration Act.

No, not all provisions are mandatory. The general principle is that party autonomy reigns. However, the following rules are mandatory:

• the right of the parties to be heard;
• the equality of the parties;
• the impartiality of arbitrators; and
• the freedom and independence of judgement of the arbitrators (within the limits of the applicable law).

Yes. The following legal reform projects aimed at revising the Arbitration Act have been introduced to the legislative process since 2015:

• Legislative Proposal 3293/2021: This proposal was introduced by Margarete Coelho. It is intended to regulate the behaviour of arbitrators and to impose certain duties on them. It also aims to facilitate greater publicity of concluded cases. It is uncertain as to whether this initiative will move forward.
• Legislative Proposal 4301/2021: An initiative of Carlos Bezerra, this proposal aims to exclude disputes relating to private pension plans from arbitration.
• Legislative Proposal 2791/2022: This proposal, authored by Alexis Fonteyne, aims to introduce the possibility to arbitrate disputes relating to tax and customs law.

Yes, Brazil signed the New York Convention on 7 June 2002. It came into force on 5 September 2002. No reservations were made.

Brazil has already signed the Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards, concluded at Montevideo on 8 May 1979.

In 1994, Brazil, along with the other member states of the Southern Common market (Mercosur), adopted two protocols to facilitate and protect investments:

• between themselves – the Colonia Protocol; and
• between any of them and other countries – Buenos Aires Protocol.

Furthermore, on 5 June 2003, Brazil signed the Mercosur International Commercial Arbitration Agreement, which is heavily influenced by the UNCITRAL Model Law.

Brazil is also a signatory to the Panama Convention on Commercial Arbitration, which prevails over the New York Convention where a majority of the parties involved are seated in countries which are signatories to the Panama Convention.

Finally, on 31 July 2019, the Mercosur Protocol on Cooperation and Facilitation of Investments between Member States of Mercosur came into force in Brazil.

Article 1 of the Arbitration Act states that all disposable rights may be subjected to arbitration by the parties to a dispute. The Superior Tribunal of Justice has determined that all matters about which parties can freely transact can be resolved by arbitration. It follows that matters of which at least one of the parties to a dispute cannot freely dispose – such as labour rights meant to protect a party with weaker negotiating power or the rights of minority creditors in insolvency cases – are not arbitrable.

No. The parties are free to choose:

• the administering institution; and
• the seat of the arbitration.

An arbitration agreement must be in written form, in accordance with Article 4(1) of the Arbitration Act. Since the COVID-19 pandemic, documents signed by certified electronic signature are deemed to be equivalent.

Brazilian law recognises the principle of the separability of the arbitration agreement. Hence, if a contract is null and void, the arbitration agreement – according to which the contractual relationship might have to be judged – can be analysed separately, even if it is contained in the same contract (see Article 8 of the Arbitration Act).

The use of separate arbitration agreements which are signed by consumers is common in accession agreements, as this is one of the two possibilities for an arbitration clause to be valid as means of dispute resolution for such contracts (Article 3(2) of the Arbitration Act).

The Arbitration Act contains no such provisions. However, most institutions have provided solutions in their rules. For example:

• the Arbitration Rules of the Centre for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada include:
• • Article 4.2 on the seat of arbitration in case of gaps in the arbitration clause; and
  • Article 6.2 on the language in case of gaps in the arbitration clause; and
• the 2021 Arbitration Rules of the International Chamber of Commerce include:
• • Article 18(1) on the seat of arbitration; and
  • Article 20 on the language.

A party can raise an objection to the jurisdiction of an arbitral tribunal in two ways:

• If a claimant is convinced that no arbitral agreement exists, it can try to bring its claim before the ordinary courts of justice. However, if an arbitral agreement is found to exist, the judge will be bound to decide in accordance with Article 485(7) of the Code of Civil Procedure that the procedure is extint, without finding on the merits, as it has no jurisdiction.
• Once the arbitral tribunal has been constituted, any party may allege that the tribunal does not have competence. It then falls under the competence of the tribunal to decide whether it has jurisdiction (the kompetenz-kompetenz principle).

Yes, it can.

A party can bring a claim before the ordinary court of jurisdiction, alleging that it has jurisdiction (instead of an arbitration tribunal).

According to Article 20 of the Arbitration Act, any objections to the jurisdiction of the tribunal must be raised before the tribunal itself once the tribunal has been constituted.

In principle, there are no restrictions other than those under general civil procedure law. All natural and legal persons, including state entities, qualify as a ‘party’ in accordance with Article 1 of the Arbitration Act.

The parties are under several duties, the most important being that of good faith. Other duties of the parties are derived from:

• the rules of the institution chosen by them; and
• the applicable procedural law.

The most relevant duties usually include a duty to:

• conduct the process in a speedy way; and
• pay the costs when so demanded by the institution.

The Civil Procedure Law includes provisions on third parties that are not the primary parties to the conflict, but which necessarily have an interest in the outcome of the dispute, such as:

• interveners (litisconsortes, Articles 113 to 118); and
• interveners (assistentes, Articles 119 to 124).

The application of the Civil Procedure Law as a complement to the Arbitration Act is not mandatory. However, the parties can agree on its complementary application in the arbitration agreement. In the absence of such determination, the tribunal may resolve to apply it, in accordance with Article 21(1), as part of the procedure to be established by it in such a case.

In practice, there are numerous scenarios in which multi-party arbitration might arise. Examples include disputes involving:

• agency agreements;
• the transfer of rights; and
• groups of companies.

Furthermore, Article 13(4) of the Arbitration Act states that in multi-party disputes, the parties are not free to suspend the application of a provision of the applicable rules that limits the nomination of arbitrators to a list maintained by the institution. Rather, in such cases, the rules of the institution chosen will prevail over the will of the parties.

Within the boundaries of ordre public and good practice, party autonomy prevails, according to Article 2(1) of the Arbitration Act. Where an arbitration clause is included in a contract, the choice of law in that contract will also govern the arbitration agreement. If there is a separate arbitration agreement that does not contain a choice of law clause, when in doubt, the principles of international private law will be applied. In general, the same law will apply as applies to the contractual relationship from which the dispute arose.

Yes, the tribunal will uphold an agreement between the parties on the applicable substantive law, within the limits outlined in question 6.1. If in doubt, the tribunal will apply the general rules of interpretation.

As this is not prohibited by Brazilian law, and as the rules of institutions such as the International Chamber of Commerce (Article 10) and the Centre for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (Article 19) regulate the joinder of arbitral proceedings, this is permitted, subject to the conditions of the applicable rules.

See question 5.3.

See question 5.3.

The parties can determine the process for the arbitrators’ appointment in accordance with Article 13(3) of the Arbitration Act.

The number of arbitrators must be uneven under Article 13(1) of the Arbitration Act. This also follows from Article 13(2) of the Arbitration Act, which states that if the parties have nominated an even number of arbitrators, the arbitrators are authorised to nominate an additional arbitrator. The reason for this is that the tribunal might need a majority to decide and cannot risk a split vote.

There are no restrictions relating to professional qualifications or nationality.

Yes, an arbitrator can be challenged on the grounds that he or she:

• is not impartial (eg, due to some economic involvement with one of the parties);
• does not have unlimited legal capacity; or
• has died.

See Article 16 of the Arbitration Act.

In such case, the arbitrator is replaced in accordance with Article 16 of the Arbitration Act, which provides that:

• if the arbitration agreement contains a substitute nomination for such cases, it will apply; and
• if it does not, either:
• • the parties will reach agreement on the substitute nomination; or
  • an interested party must follow the procedure set out in Article 7 of the Arbitration Act.

Arbitrators have a duty:

• to judge the facts according to the applicable law; and
• to draft the arbitral award in accordance with Article 18 of the Arbitration Act.

The arbitral award must include:

• a summary of the case;
• the considerations behind the decision, explaining the facts and the applicable law;
• confirmation of whether the decision was unanimous;
• resolution of all claims and relevant questions brought to the arbitrators’ attention, including deadlines for compliance with the decision, where necessary;
• the date and place where the sentence was rendered (see Article 26 of the Arbitration Act; and
• the signatures of the arbitrators.

Additionally, in accordance with Article 13(6) of the Arbitration Act, the arbitrators have a duty to be independent, impartial, competent, diligent and discreet. Accordingly, they have the duty to disclose, before they accept a nomination, any fact that could cause doubt as to their impartiality or independence (see Article 14(1) of the Arbitration Act).

Finally, the arbitrators have the right to be remunerated – usually (unless ad hoc) in accordance with what is stipulated in the rules of the institution that is administrating the arbitration (billed and distributed to the arbitrators by it).

(a) Procedure, including evidence?

With the exception of a pre-arbitration request for the production of evidence before the ordinary courts of justice, the arbitrators have the power to order the production of evidence from the moment that the tribunal is constituted (see Articles 22A and B of the Arbitration Act).

Arbitrators usually have wide discretion as regards procedure, except where bound by the overarching procedural principles, applicable procedural rules or parties’ determinations in the arbitration agreement (see Article 21 of the Arbitration Act).

(b) Interim relief?

In accordance with Articles 22A and B of the Arbitration Act, the arbitrators have the power to grant interim relief once the tribunal has been constituted. Until then, the parties must seek such relief before the ordinary courts of justice.

(c) Parties which do not comply with its orders?

As arbitrators cannot force the parties to comply with their orders (unlike the ordinary courts of justice), they must issue an arbitration letter in accordance with Article 22C of the Arbitration Act in order to request the ordinary courts of justice to compel whoever did not comply with the arbitrators’ orders to do so (see also Article 237IV of the Code of Civil Procedure).

(d) Issuing partial final awards?

Arbitrators can and should render partial final awards, in accordance with Article 23(1) of the Arbitration Act, if they cannot yet resolve on the merits of all claims – for example, if the merits of one claim are clear but those of another claim depend on a lengthy expert determination which is still to come. An analogy can be drawn with Articles 356 and 355 of the Code of Civil Procedure.

(e) The remedies it can grant in a final award?

The remedies that can be granted in a final award include:

• the payment of money;
• the performance of, or abstention from, acts;
• a declaration that:
• • a certain legal relationship has terminated or is ongoing; or
  • certain rights or duties exist or do not exist; and
• the reimbursement of costs.

In short, the arbitrators can resolve on the same issues as ordinary judges.

(f) Interest?

As Brazil is a high-interest jurisdiction with a volatile monetary climate, awards customarily include decisions on interest and monetary correction. It is recommended to include a provision on this in the terms of arbitration at the beginning of the proceedings.

The non-participating party must be given ample opportunity to legally defend itself and be heard. However, ultimately, according to Article 22(3) of the Arbitration Act, the arbitrators may issue their award.

They are not. In fact, they are liable – just as state court judges are, in theory – if they act grossly negligently or even wilfully. In practical terms, at least where a claim for payment of damages depends on the Brazilian judiciary, the plaintiff will need strong nerves and a lot of patience to perhaps obtain a positive outcome and even more time to eventually get the title executed, if execution in Brazil is necessary.

Usually, the courts will declare themselves without competence if there is an arbitration agreement. This was the case in Renault v CAOA, for example, in which Renault had sought a decision from the Brazilian judiciary: the court declared itself incompetent and remitted the dispute to arbitration due to the existence of an arbitration agreement between the parties.

There are examples in Brazilian jurisprudence of anti-arbitration injunctions being issued, regarding both domestic and foreign arbitral proceedings. One of the more prominent examples involved an arbitration against a mixed economy company, UEG Araucária Ltda v Copel, in which it was ultimately held that the ordinary courts had to leave it to the arbitrators to declare themselves competent unless the arbitration posed a threat to non-disposable rights (the arbitration had been initiated in Paris, France).

More specifically, the ordinary court have the power to:

• retrieve a dispute from arbitration where non-disposable rights of the parties are at stake;
• pass preliminary injunctions or measures of interim relief, as long as no arbitrator or arbitral tribunal of any kind has been instituted;
• enforce orders of the arbitrators or arbitral tribunal;
• enforce domestic arbitral awards directly and foreign arbitral awards upon homologation by the Superior Tribunal of Justice; and
• set aside arbitral awards if any of the grounds for finding them null and void applies.

The court’s arbitration-related powers cannot be excluded, as they:

• ensure the functioning of the legal system; and
• protect non-disposable rights of the parties.

In accordance with Article 27 of the Arbitration Act, the arbitral tribunal will include a cost decision in its (final) arbitral award. As the law includes no specific rules on how to determine the ratio of cost and fee-bearing between the parties, it is strongly recommended that a binding rule on this be included in the arbitration clause. Unfortunately, some tribunals in Brazil try to appease the losing party by reducing its burden of costs to be reimbursed, even if that party provoked the arbitration in full knowledge of its remote chances of success and hence wilfully causes substantial cost to the successful party in such cases, even though the winning party wins almost 100% of its claim.

The rules of some institutions (eg, Section 30.4.1 of the Arbitration Rules of the Centre for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada) set out certain criteria for the arbitrators. However, if a party wishes to have the costs (fully) reimbursed in accordance with the overall success, it is imperative to include a clear instruction in this regard for the arbitrators in the arbitration agreement.

Party autonomy reigns with regard to agreements on the costs of the arbitral proceedings.

Yes. Third-party funding is still not very common in Brazil, but it is increasingly available. Several players from abroad, as well as some Brazilian entities, now offer process financing. It is important for such entities get a clear impression of the prospects of success, which is usually examined in a legal opinion.

The award must:

• clearly state:
• • the outcome of the proceedings; and
  • the parties’ rights and duties within the boundaries of the claims filed; and
• be easily comprehensible by non-lawyers.

Articles 23 to 27 of the Arbitration Act contain specific requirements for awards that go beyond the above common-sense considerations. The award must:

• be rendered within the timeframe agreed between the parties (the standard, in accordance with Article 23 of the Arbitration Act, where the parties are silent on this is six months);
• be in writing, in accordance with Article 24 of the Arbitration Act; and
• contain at least the following elements, in accordance with Article 26 of the Arbitration Act:
• • a summary of the facts, including the names of the parties;
  • the fundamentals of the legal appreciation of the case, including:
  • • an analysis of the facts and the applicable law; and
    • an express mention of whether the arbitrators reached their decision at equity (as opposed to in accordance with codified law);
  • the operative part of the award, in which the arbitrators decide:
    • all claims brought before them; and
    • the timeframe for performance of the parties, where applicable;
  • the date and place where the award was rendered;
  • a cost decision; and
  • the signatures of (all) arbitrator(s).

Yes, in accordance with the determinations of the parties – that is, by reference to the rules of an institution that contain deadlines or, where applicable, of the arbitrators.

The procedure for the enforcement of awards depends on whether they are domestic or foreign. Domestic awards are enforced directly in the same way as court sentences. Foreign awards must first undergo an exequatur procedure before the Superior Tribunal of Justice, which takes about two years, in order to be enforced in Brazil, in accordance with Article 37 of the Arbitration Act.

The grounds for setting aside an award in Brazil are enumerated in Article 32 of the Arbitration Act, as follows:

• The arbitration agreement was null and void;
• The arbitral award was rendered by someone who could not be an arbitrator;
• The award does not contain the minimum elements defined in Article 26 of the Arbitration Act;
• The limits of the arbitration agreement were not respected;
• It is proven that the award was rendered as a result of corruption, procedural fraud or extortion;
• The arbitrators did not respect the deadline for the award; or
• The award was rendered in non-compliance with the principles listed in Article 21(2) of the Arbitration Act (conduct in accordance with the main applicable procedural rules).

Yes, a challenge must be brought within 90 days of receiving notice of the award, in accordance with Article 33(1) of the Arbitration Act.

An appeal is not possible. Parties do not have the right to exclude other rights of challenging the award. However, they will frequently insert a penalty clause to prevent any challenge of the validity of the arbitration agreement.

Yes, in practice, arbitration is confidential in Brazil, even though there is no rule to this effect in the legislation. The rules of the arbitral institutions that frequently administer cases also provide for confidentiality; and the parties may include provisions on confidentiality in the arbitration agreement. Whenever a dispute arises in relation to a contract that contains a confidentiality clause, the arbitral proceedings must also be confidential.

Some exceptions are mentioned explicitly in law, such as arbitration involving state entities and public administration, in accordance with Article 2(2) of the Arbitration Act. This is logical, as the principle of accountability of administration reigns, which presupposes that there is transparency – at least legally and in theory – of all acts and omissions of the public administration.

Probably the most common examples of arbitral proceedings becoming public are those in which the parties opt not to keep them confidential.

While concerns are frequently voiced in this regard, neither carta arbitral proceedings nor requests to set aside awards before the ordinary courts make the arbitral proceedings public, as they must be conducted under the secrecy of justice, in accordance with Article 189(IV) of the Civil Procedure Act.