A recent decision of the Brazilian Superior Court of Justice – Brazil's highest court in non-constitutional matters – has confirmed that parties have 90 (ninety) days to file any judicial measures to try to set aside an arbitral award. If there is no filing within the limitation deadline, the award becomes legally untouchable.
The Brazilian Arbitration Act (Law 9.307, of 1996, as amended by Law 13.129 of 2015, the "BAA") establishes in its art. 33, paragraph 1, that a party has a 90 days term to file an action to set aside the arbitral award. The grounds for annulment are set forth in art. 32, and they all relate to procedural defects – errors in procedendo – as the merits of the award cannot be rediscussed in court. The 90 days are counted from the date of notification of the award to the party, or of the ensuing decision on a request for clarification, if there is one.
However, paragraph 3 of art. 33 of the BAA also states that an award may be set aside in a defensive proceeding filed by the debtor once the creditor files a judicial action to enforce it ("impugnação ao cumprimento de sentença"). There have been discussions among legal scholars if the 90 days term was also applicable to this defensive annulment, or only to the action to set aside the award.
The decision by the Superior Court of Justice has settled any doubts and clarified that if a party intends to set aside an arbitral award it must raise its arguments in court within the 90 days limitation period, whether through a request for annulment or through a defensive proceeding, or else its claim will be time-barred.
In this important precedent, Special Appeal n. 1.900.136-SP, decided by the 3rd Chamber of the Court on 06 April 2021, opinion by reporting Justice Nancy Andrighi, there was no lawsuit to set aside the award within the 90 days of its notification to the parties. A party moved to enforce the award in court later, and the defendant sought the annulment through the defensive proceeding ("impugnação"). The Court decided that the claim to set aside the award was time-barred, because it was filed in court after the 90 days limitation deadline. If any claims for annulment are time-barred, the defense in the enforcement action can only pertain to some procedural defect in the court enforcement proceeding itself, such as an excessive claim in relation to what has been awarded, lack of standing of the party seeking enforcement or similar defenses. The award itself, however, can no longer be questioned in any way.
Therefore, if a party intends to request the judicial annulment of an arbitral award in Brazil it must file its claim in 90 days, and it cannot wait for the other party to try to enforce the award in a court of law. If the enforcement action is filed after the 90 days limitation period, the defenses available to the debtor will be very limited and the award cannot not be set aside.
It is relevant to mention that the 90 days limitation period is also applicable to partial awards. Therefore, if the arbitral tribunal renders a partial award, the party seeking to annul it must file the action to set it aside within 90 days, regardless of the continuation of the arbitral proceeding. This was already the settled case-law of the Superior Court of Justice, as per the judgment of Special Appeal n. 1.519.041-SP, also by the 3rd Chamber, opinion by reporting Justice Marco Aurélio Bellizze, decided on 01 September 2015, and is explicitly provided for in art. 33, paragraph 1, pursuant to the amendment of Law 13.129 of 2015. If nothing is brought to court within the 90 days, the partial award will no longer be subject to any claim for annulment, even if the final arbitral award is timely questioned later on.
It is important to clarify that this limitation period is only applicable to arbitral awards rendered in Brazil, in arbitration proceedings seated in Brazil. Brazilian law is monist, and therefore does not make a distinction between domestic or international arbitration. However, it does differentiate between national awards, rendered in Brazil, and foreign awards, rendered abroad. National awards are immediately enforceable before the courts of first instance as any court judgments, and may be set aside on the grounds and procedures of arts. 32 and 33 of the Brazilian Arbitration Act. Foreign awards are subject to the New York Convention and need to be recognized before the Superior Court of Justice in order to become enforceable in Brazil. A party may contest the recognition of a foreign award on the basis of art. V of the New York Convention, which are also mirrored in arts. 38 and 39 of the BAA. However, a foreign arbitral award can only be set aside in the judicial courts of the seat of arbitration, so the limitation period applicable to each case will depend upon the law of the seat (lex fori).
The defense in the action to recognize a foreign arbitral award, before the Superior Court of Justice, is not subject to the filing of an annulment action in the country of the seat of the arbitration, nor to any limitation period. Different from the defense in an enforcement action of a national arbitral award, which may have the effect of setting aside the award, the defense in the action for recognition merely seeks to render the award unenforceable in Brazil, but it may not have the legal effect of annulling it. It is possible that an award may be valid and enforceable before the courts of a foreign seat but not in Brazil. This was the case, for example, in the Abengoa saga. In that case, there was an ICC award rendered in New York that survived an annulment action in the USA, but was not recognized in Brazil, due to potential conflicts of the presiding arbitrator that had not been disclosed to the parties and were considered by the Superior Court of Justice as a serious issue of public policy and due process, in spite of a decision to the contrary by the American courts.
The precedent of the Superior Court of Justice referred to in this article has done away with any doubts that could exist as to the definitive nature of the 90 days limitation period in relation to the annulment of arbitral awards. It is a "now or never" term. Once it passes, the party will no longer be able to set aside the award. It is yet another relevant example of the pro-arbitration case law of the Brazilian Judiciary, which has been key to ensure a secure legal environment that allowed for the impressive growth of arbitration in Brazil in the last 25 years since the enaction of the Brazilian Arbitration Act.
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