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.
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