A Few Notes on the Recognition of Foreign Arbitral Awards in Brazil

• Gustavo Favero Vaughn & Gustavo Henrique Torres Rocha

Keywords: recognition of arbitral awards; foreign arbitral awards; arbitral awards in Brazil.

Brazil’s legal system classifies arbitral awards rendered outside the country as foreign arbitral awards. As such, for foreign arbitral awards to produce their effects in Brazil, they must be recognized by the Brazilian Superior Court of Justice (the court responsible for uniformizing federal law). Only a recognized foreign arbitral award can be enforced. The Arbitration Act (Federal Law No. 9,307/1996) (“Arbitration Act”) regulates the procedure for recognizing foreign arbitral awards. Although the procedure for enforcing foreign arbitral awards is well-established in Brazilian legislation, it has gone through certain changes to arrive at the standard that is applied today. These changes have also been captured in the Arbitration Act in the form of amendments.

In 2002, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the New York Convention) was incorporated in Brazil via Decree 4,311/2002, which facilitated the process of recognition and enforcement of foreign arbitral awards in the country. According to a report on the second phase of a research project titled Arbitragem e Poder Judiciário (‘Arbitration and the Judiciary’) prepared by the Brazilian Arbitration Committee and the Getulio Vargas Foundation School of Law in São Paulo, twenty-three requests to recognize foreign arbitral awards were decided in Brazil after it adopted the New York Convention. In analyzing precedents from the Superior Court of Justice, it is possible to find cases in which the New York Convention was directly applied as the legal basis for recognizing foreign arbitral awards. For example, in a 2012 case (SEC No. 3,709/US), the late judge Teori Zavascki based his decision to recognize a foreign arbitral award on the New York Convention, together with the Arbitration Act.

Prior to Decree No. 4,311/2002, the Arbitration Act – in force since 1996 – was already handling the recognition and enforcement of foreign arbitral awards via a different procedure. Although the act gives preference to international treaties to regulate the recognition and enforcement of foreign arbitral awards under Article 34, any such treaties first have to be incorporated into the Brazilian legal system, which did not occur until the aforementioned decree was enacted in 2002. In the absence of international treaties, recognition and enforcement of foreign arbitral acts had to be conducted in strict accordance with the terms of the Arbitration Act itself.

Given the New York Convention was not part of Brazilian law until 2002, the Arbitration Act had established, in its former Article 35, that foreign arbitral awards must be recognized and enforced by Brazil’s Supreme Federal Court. However, with the enactment of Constitutional Amendment No. 45 to Brazil’s Federal Constitution in 2004, the jurisdiction for recognizing and enforcing foreign arbitral awards was transferred from the Supreme Court to the Superior Court of Justice as part of a so-called “Reform of the Judiciary”. Thus, Article 105 of Brazil’s Federal Constitution now provides for the jurisdiction of the Superior Court of Justice to recognize foreign judgments. This change was then directly included in the Arbitration Act in 2015 through Law No. 13,129/2015, which slightly modified the Arbitration Act.

At present, when a foreign arbitral award is rendered, interested parties can have it recognized in Brazil by filing a petition with the Superior Court of Justice that contains (i) the original arbitration award or a duly certified copy, authenticated by the Brazilian consulate and accompanied by a sworn translation; and (ii) the original arbitration agreement or a duly certified copy, also accompanied by a sworn translation, as provided in Article 37. Moreover, the petition must observe the requirements established in Brazil’s Civil Procedure Code, that are mainly set out in Article 319.

In order to recognize (or deny recognition of) a foreign arbitral award, the Superior Court of Justice will examine whether the procedural standards determined in Article 38 of the Arbitration Act were met by the interested party, namely (i) the legal capacity of the parties; (ii) the validity of the arbitration agreement under the law the parties had submitted it to, or, failing that, the law of the country where the award was rendered; (iii) the parties’ notification of the appointment of the arbitrator or the arbitration procedure; (iv) a possible violation of the adversarial principle (violation of due process); (v) the limits the arbitration agreement determined in regard to the arbitral award, and if the award exceeded these limits in a way that made it impossible to separate the excess award from the part submitted to arbitration; (vi) the institution of arbitration and if it is in accordance with the arbitration clause; and (vii) the enforceability of the arbitral award for the parties, or if it has been determined to be annulled, or if the award has been suspended by the Court of the country where it was rendered.

Furthermore, the Superior Court of Justice will also analyze if under Brazilian law, it is feasible to settle the subject-matter of the dispute via arbitration and if the arbitral award violates any Brazilian public policies or Brazil`s sovereignty, as provided in Article 39 of the Arbitration Act. In general, the court will take into account national public policy rather than international public policy when assessing the requirements for recognizing a foreign arbitral award.

In addition, the Internal Rules of the Superior Court of Justice also determine provisions for the recognition of foreign awards. The Articles 216-A to 216-N of the rules dispose about the aspects that shall be observed by the Superior Court of Justice during the process of recognition of a foreign award. Such as the Arbitration Act, these Internal Rules address the requirements for the recognition of foreign awards, but also include the procedure regarding the objection to the recognition of the award presented by the counterpart, reply and rejoinder and the possibility of appeal against the decision that recognizes (or not) the foreign award, among other provisions.

In a very famous case commonly known as the Abengoa case, the Superior Court of Justice made this crystal clear (SEC No. 9,412/US). It denied recognition of two ICC foreign arbitral awards because they would have been rendered in violation of a Brazilian public policy – the arbitrators duty of impartiality. In the Abengoa case, the Superior Court of Justice stated that the chair of the tribunals failed to disclose a relevant fact, and that this failure was not acceptable under Brazilian law. Furthermore, there are few precedents in which the Superior Court has decided a foreign arbitral award can only be recognized if it, inter alia, does not put Brazils sovereignty at risk (e.g., HDE No. 1,914/EX). In the event the arbitral award is in line with Brazilian legislation and the requirements listed above, recognition shall be granted without further concerns. In fact, the Superior Court of Justice has established case law stating that the procedure for recognizing a foreign arbitral award does not allow the court to review the merits of the foreign arbitration (e.g., HDE No. 1,809/EX). The court must only identify if the formal requirements are met, and more importantly, if the foreign award does not endanger Brazil’s public policies and sovereignty. As per Articles 38 and 39 of the Arbitration Act, if an award fails to meet any of the aforementioned requirements, recognition will be denied. This article has briefly described important aspects of how foreign arbitral awards can be recognized in Brazil before the Superior Court of Justice, the only court allowed to perform this task under the Federal Constitution. Although the procedure might seem relatively simple, parties interested in recognizing a foreign arbitral award may face difficulties if any aspect of Brazilian public policy and sovereignty is at stake.

*Gustavo Favero Vaughn has completed his LL.M from Columbia Law School (2022) and University of Sao Paulo (2021). He is a member of the Chartered Institute of Arbitrators (MCIArb), Young ITA, ICDR Young & International and the Co-Chair of the Academic Council, R.E.A.L.

Gustavo Henrique Torres Rocha is a graduate student at Mackenzie Presbyterian University Law School and an intern at Cesar Asfor Rocha Advogados.

Preferred Form of Citation: Gustavo Favero Vaughn & Gustavo Henrique Torres Rocha, ‘A Few Notes on the Recognition of Foreign Arbitral Awards in Brazil’ (ICAR, 8 Aug. 2022). *

ENDNOTES

[1] Art. 319. The claim shall include the following information: I – the court to which it is addressed; II – the surnames, first names, marital status, existence of a civil union, profession, the Individual or Corporate Taxpayer Identification Number, email address, address of domicile and residence of the plaintiff and of the defendant; III – the factual and legal grounds of the claim; IV – the claim and its specifications; V – the value of the claim; VI – the evidence with which the plaintiff intends to prove the truth of the alleged facts; VII – whether the plaintiff opts to hold a conciliation or mediation hearing. § 1 Should the plaintiff not have the information set forth in item II, he or she may request that the judge grant the measures necessary to obtain it in the claim. § 2 The claim shall not be denied if, despite the lack of information referred to in item II, the service of summons upon the defendant is possible. § 3 The claim shall not be denied due to non-compliance with the provisions of item II of this Article if obtaining said information renders access to justice impossible or excessively burdensome.

The views and opinions expressed in the article are those of the author(s) solely and do not reflect the official position of the institution(s) with which the author(s) is /are affiliated. Further, the statements of the author(s) produced herein should not be construed as legal advice.