The enforcement of foreign arbitral awards in Brazil has always been a very controversial theme in the Brazilian legal system, given the conservatism of its courts. Since the colonial period, considering the Brazilian economic evolution and the consequent increase of international trade transactions, the legal unreliableness of the parties when trying to enforce foreign arbitral awards in Brazil demonstrated the need for modernization of its arbitral proceedings. Anxiously expected, this modernization gave its first step when the Brazilian Arbitration Law was enacted, strengthening the principle of party autonomy in the contracts. In 2002, finally attending the aspirations of the international trade community, Brazil ratified the New York Convention, which brought many changes regarding the enforcement of foreign arbitral awards in the country. This paper aims to expound some features concerning the enforcement of foreign arbitral awards in Brazil, before and after the ratification of the above-mentioned Convention by the South-American country. It also presents some important changes made in the Brazilian domestic arbitral proceedings in order to adapt the enforcement of foreign arbitral awards in Brazil to the international standards.

Université de Montréal

The enforcement of foreign arbitral awards in Brazil before and after the ratification of the New York convention

Leonardo Daldegan Lima

Faculty of Law

Research paper presented to the Faculty of Graduate Studies

LL.M – Business Law in a Global Context

Septembre, 2010

Université de Montréal

Faculty of Graduate Studies

This Research Paper entitled:

The enforcement of foreign arbitral awards in Brazil before and after the ratification of the New York Convention

presented by :

Leonardo Daldegan Lima

was supervised by Professor Dr. Marie-Claude Rigaud :

Table of Contents

Abstract …………………………………………………………………………………………………………………iii

Resumé ………………………………………………………………………………………………………………… iv

Resumo ………………………………………………………………………………………………………………… v

Introduction …………………………………………………………………………………………………………….1

A. The enforcement of foreign arbitral awards in Brazil before the ratification of the New York Convention ……………………………………………………………………………………………………..6

1. Changes to the Brazilian economy and its consequences ……………………………………6
2. The history of arbitration in Brazil until 2002 12

2.1. The conflict between Brazilian domestic legislation and the principle of party autonomy 19

2.2. The Brazilian Arbitration law (Lei 9.307/96) 22

B. The enforcement of foreign arbitral awards in Brazil after the ratification of the New York Convention 26

1. The ratification of the New York Convention by the Brazilian Government 26

1.1. The importance for Brazil of the ratification of the New York Convention …30

1.2. The requirements for the enforcement of foreign arbitral awards in Brazil after 2002 …………………………………………………………………………………………………………..32

Conclusion …………………………………………………………………………………………………………….41

Bibliography ………………………………………………………………………………………………………….43

This paper is dedicated to my wife Mariana Schutel, in gratitude for her unshakeable support and love

Acknowledgement

My gratitude to the following people cannot be adequately expressed:

Professor Guy Lefebvre, the coordinator of the LL.M, who has kindly supported me since the beginning of the application period for the program.

Professor Marie-Claude Rigaud, my supervisor, who has patiently guided me throughout this study.

To my father, Valner, brother Rodrigo, sister Juliana, siblings-in-law Vinícius and Carina and mother-in-law Margareth, for their inspiration and motivation.

To my LL.M colleagues and professors, thank you for encouraging me to persevere in this program, with your enthusiasm and co-operation.

Most of all to God, for protection, strength and wisdom bestowed upon me to complete this study.

Abstract

Résumé

Au Brésil, l’exécution des sentences arbitrales étrangères a été toujours un sujet très controversé dans son système juridique, étant donné le conservatisme de ses tribunaux. Depuis la période coloniale, l’évolution économique du pays a proportionné une considerable augmentation des transactions commerciales internationales menées; néanmoins, l’insécurité juridique des parties qui cherchaient à exécuter des sentences arbitrales étrangères au Brésil a montré combien était nécessaire la modernisation de la procédure d’arbitrage national. Très attendue, cette modernisation a franchi sa première étape en 1996, lorsque la Loi brésilienne d’arbitrage est entrée en vigueur; cet instrument juridique a renforcé le principe de l’autonomie des parties dans les contrats. Étant donné les aspirations de la communauté internationale, le Brésil a ratifié en 2002 la Convention de New York, qui apportait plusieurs changements en ce qui concerne l’exécution au pays des sentences arbitrales étrangères. Ce travail présente quelques caractéristiques concernant l’exécution au Brésil des sentences arbitrales étrangères, avant et après la ratification de la sousmentionée Convention par le gouvernement brésilien. Il montre de plus quelques changements importants dans la procédure d’arbitrage national en vue d’adapter l’exécution de ces sentences aux normes standardisées au niveau international.

Mots-clés : Exécution, Sentences Arbitrales Étrangères, Convention de New York

Resumo

A execução de sentenças arbitrais estrangeiras no Brasil sempre foi um tema bastante controverso no sistema legal brasileiro, dado o conservadorismo de suas cortes. Desde o período colonial, com a evolução econômica do país e o conseqüente aumento do número de transações comerciais internacionais realizadas, a insegurança jurídica das partes ao tentarem executar no Brasil os laudos arbitrais estrangeiros demonstrava o quão se fazia necessária a modernização dos procedimentos arbitrais nacionais. Ansiosamente aguardada, tal modernização deu seu primeiro passo em 1996, quando da entrada em vigor da Lei Brasileira de Arbitragem, instrumento legal adotado pelo Direito pátrio que destaca sobremaneira o princípio da autonomia das partes em um contrato. Em 2002, finalmente atendendo às aspirações da comunidade internacional, o Brasil veio a ratificar a Convenção de Nova Iorque, a qual trouxe importantes mudanças no que tange à execução das sentenças arbitrais estrangeiras no país. Este trabalho tem por objetivo expor algumas características relativas à execução dos laudos arbitrais estrangeiros no Brasil, anteriormente e posteriormente à ratificação da supramencionada Convenção pelo governo brasileiro, apresentando algumas importantes mudanças nos procedimentos arbitrais nacionais que vieram a adaptar a execução das sentenças arbitrais estrangeiras no Brasil aos padrões internacionais.

Palavras-chaves : Execução, Sentenças Arbitrais Estrangeiras, Convenção de Nova York

Introduction

Since the XVI century, still as a Portuguese colony, Brazil has been experiencing a continuous makeover in its economy[1], which has been bringing some consequences regarding its commerce with the world. In fact, even though the South American country has always been dependent on the export of primary goods – since its first economic cycles[2], it has diversified its trade and reached a current considerable level of industrialization.[3] Indeed, Brazilian relationships with the international trade community have been developing, reaching an important level nowadays.[4]

At this level, as one of the largest economies in the world, the Brazilian role has changed in the international commerce.[5] With the most representative gross domestic product in Latin America, Brazil has recently been improving its export rates[6], even though there has been a visible scenario of global crisis[7]. Inevitably, with the increase of its economy, there have also been growing international investments and consequently the number of international contracts settled in the country.

Obviously, with the growth of the international contracts conducted within and outside Brazil, the need for a modern legal system was also required, as a condition for the investors to carry on business in the country safely, with a sufficient protection. In this direction, against eventual conflicts which come from these private agreements[8], arbitration arises as an important instrument[9] to deal with them. To give support to its new role in the international trade community, it was indispensable to Brazil to make an adjustment in its legislation[10], mainly concerning international arbitration proceedings, since the provisions applied before were not compatible with the demands of the international investors which wanted to carry on business with the South American country.

The institution of arbitration in Brazil has been relatively a new way of solving conflicts resulting from international contracts. Although it has been present in Brazilian law since the “Ordenações Filipinas”[11], in XVI century, there has often been a conflict between the Brazilian legislation – mainly the LICC[12] (Introduction Law of Brazilian Civil Code) – and the principle of party autonomy, the main component of the institution of arbitration. Thus, the institution of arbitration was always kept under a certain level of conservatism by the Brazilian legislation.

This divergence between provisions in the Brazilian law prevented the parties, in an international contract established within the country to choose their rules. On the other hand, the interpretation of LICC[13] and its preference for the lex loci actus[14] always prevailed, which brought a lot of discontentment to the international investors, who wanted more autonomy to choose the most convenient arbitration rules for them.

Finally, with the enactment of “Lei 9307/96”[15] – the Brazilian Arbitration law, in 1996 –the arbitration proceedings were modernized in Brazil, by introducing practically the same provisions of the New York Convention[16], not ratified yet by Brazilian government, at that time. In the new law, some outmoded provisions were removed, like the obligation to formalize a new submission agreement (compromisso arbitral)[17] to complement the arbitration clause in the contract; the need for a Brazilian court to “homologate”[18] any arbitral award; and finally, the double homologation – in Brazil and in the foreign country – where the international arbitration award was made (duplo exequatur).[19]

Nonetheless, despite the importance of the enactment of that law, which made a revolution in Brazilian arbitration proceedings, it was not reasonable that Brazil had not yet ratified the New York Convention on the enforcement of foreign arbitral awards. For the international investors the ratification would be an evident signal that Brazil would give them the necessary juridical protection for their investments, since that Convention established many provisions guaranteeing the principle of party autonomy.

In 2002, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards was ratified by the Brazilian Government.[20] Since that, the international arbitration in Brazil has changed significantly, which shows its will to undergo the aspiration of international trade community, accepting universal rules determined by the signatories of that important convention of 1958.

Indeed, the ratification of the New York Convention was an important step for Brazil in order to be an actor in the international trade. It gave more certainty to the eventual parties involved in an arbitration proceeding, even though it has not brought so much innovation[21] in Brazilian law – since the “Lei 9307/96” had already fulfilled those requirements.

Still, according to Brazilian Arbitration law[22], the ratification of the New York Convention by the Brazilian government brings to this convention absolute primacy on the domestic legislation, concerning the recognition and enforcement of foreign arbitral awards in Brazil.

Certainly, the ratification of the most important convention regarding international arbitration in the world[23] brought many advantages for Brazil as a signatory, mainly considering the possibility of reciprocity in the international trade.[24] It surely brings rapidity in the recognition and enforcement of international arbitral awards in Brazil.

Additionally, it is important to bring out the discussions brought by the incorporation of the New York Convention within the Brazilian legislation, specifically concerning the need – or not – for the Brazilian Supreme Court to ratify the foreign arbitral award.[25] There are some divergent opinions considering both interpretations.[26]

In fact, even though there are controversies in the current arbitration proceedings in Brazil, the ratification of the New York Convention clearly represents one of the most important steps given to consolidate the institution of arbitration as an efficient way of resolving international commercial conflicts in the country. As other important developing economies in the world, Brazil has been adapting its arbitration legislation to the aspirations of the international trade community, which now sees the South American country as a potential and safe destination for carrying on business.

Thus, facing the mentioned historic and economic features, this paper aims to discuss the evolution of the enforcement of foreign arbitral awards in Brazil before and after the ratification of the New York Convention by the Brazilian government, bringing out some important changes occurred in the Brazilian arbitration proceedings, which finally put Brazil in tune with the aspirations of the international trade community.

A.The enforcement of foreign arbitral awards in Brazil before the ratification of the New York Convention

Brazilian economy changes and its consequences concerning arbitration

Until 1822, as a Portuguese colony, Brazil did not have so much significance in the international trade, since all of its commerce was still considered Portuguese trade. Since the XIX century and mainly in the XX century, however, Brazil has been reaching an important level concerning the international commercial transactions.[27] In fact, from a strictly agricultural exporter country to a considerable industrialized country, Brazil has gained increasing importance on the international scene and, consequently, has entered a growing number of international contracts.[28]

Accompanying the increasing number of international trade contracts, there should have been also an increase of regulation on arbitration, an essential instrument of resolution of conflicts in the trade transactions[29].

While all over the world the arbitration proceedings had already reached a huge importance since it was implanted by the Romans (apud iudicem),[30] and mainly in Europe and North America in the XVIII century, Brazil until the end of XX century – maybe due to historical and political factors – had not taken the important step of establishing a good and actual arbitration procedure.[31]

Although arbitration has been part of Brazilian legislation since XIX century, until the end of XX century its domestic laws had not been accompanying the evolution of that important institution.[32] In fact, since its insertion as an important actor in the international trade, Brazil needed to show the international trade community much consistence in issues regarding arbitration in its laws.[33]

The Brazilian economy had many cycles during its history. In each cycle, one sector was privileged to the detriment of others, which caused continuing social, political and cultural changes within the Brazilian society. Due to all these transformations, Brazil has also been changing its role in the international trade, which also brought about many consequences[34], mainly regarding its arbitration law.

Brazilian economy gradual transformation

In the XVI and XVII centuries, while a Portuguese colony, Brazil was purely economically explored. The Portuguese metropolis had no desire, at that stage, to effectively colonize its new American lands.[35]

Thus, the first economic cycle in Brazil in XVI century (between 1530 and 1580) was the extraction of “pau-brasil”, a reddish wood largely used in tinting tissue in Europe and abundant in Brazilian coast at that time. The Portuguese metropolis extracted the wood by exchanging things with the Indians.[36] Another important activity was the collect of drugs in Amazon, also made by the Indians and controlled by Portugal. At that time, the only kind of trade in the newly found Brazilian land was the exchange with the Indians, called “escambo”.[37]

At the end of the XVI century and beginning of the XVII century, the Portuguese metropolis realized the increasing importance of sugar-cane[38], largely used in Europe to produce sugar (until that stage, beetroots were mostly used). They used a process in which there was a sugar mill moved by animal or human traction, the slaves. The sugar-cane culture brought a new kind of control of lands, called “latifúndios”[39] (landowners), which were based in a monoculture and enslaving mode of production. At that time, the import and enslavement of Africans[40] constituted a highly lucrative economic activity. It is also important to bring out the role of the extensive husbandry. This activity helped to expand the occupation of the newly found lands, bringing people to the countryside, widening Brazilian boundaries.

During the XVII century, there were many expeditions to the countryside, called “entradas” and “bandeiras”.[41] They were very important, since they aimed finding bullions (mainly gold, silver, copper and diamonds). At the beginning of the XVIII century, besides constituting the third cycle of Brazilian economy, the mining activity fostered the trade between the new provinces and villages.[42] Anyway, since the trade was rigorously kept under Portuguese control – and its economy was largely dominated by English influence, the growing of the economic activities did not benefit the Brazilian colony. However, at the beginning of the XIX century (1822), Brazil conquered its independence from Portugal.[43]

A little before, at the end of the XVIII century, coffee was brought to Brazil from French Guyana and was successfully produced in São Paulo, Rio de Janeiro and Minas Gerais, the principal Brazilian states. During more than a hundred years, it was the main export product in Brazil, which fostered an increasing development in those provinces.[44] At that time, Brazil had became a huge agro exporter country, in which the activity of extraction and export of latex from “seringueiras”[45], a common tree in Amazon, also contributed, due the increasing need for latex in the industries all over the world. It was the fourth cycle of the Brazilian economy.

At the beginning of the last century, Brazil made a complete makeover in its economy, leaving its dependence from export of agricultural products and becoming a country with considerable and solid industrialization.[46] With development policies, in Brazil were built base industries, like siderurgy, mining and oil, which upscaled its economic expertise and, consequently, increased its participation in the international trade.[47] At that time, Brazil prepared its secondary industries – like automobilist industry, to be implanted in the successive years. Thus, after the two world wars, Brazil knew a spectacular growing in its economy, due to the industrialization occurred until the beginning of 1960’s, when the new Federal Capital was also planned and built.[48] A new Brazil was being born.

At that time, however, arbitration was rarely used in the country. In fact, in any commercial dispute arising out of international contracts in which there were a Brazilian party, the arbitration clauses were not considered valid by the Brazilian judges, since those clauses were considered only a promise to arbitrate in the future.[49] Therefore, no legal provision provided legal effects for the foreign arbitral awards to be enforced in Brazil.

Subsequently, with the increasing tension in the world, due to the cold-war, some political and social events happened. At that time, even though Brazil was experiencing a huge growth in its economy, there were many social problems arising in Brazilian society. The increase of its economy was not meaning the growth of people’s quality of life, so that most of Brazilian population was in poverty.[50] Consequently, a socialist candidate was elected Brazil’s president, causing a deep social tension in the country. This tension induced a takeover by the military forces, which brought serious consequences to the Brazilian society.

With the political makeover, Brazilian economy knew an increase of its exports, under the “milagre econômico”[51], which was a phase where the economic growth rates increased to high levels, never seen before. Some techniques were discovered in the sugar-cane culture, to provide bio fuel – since at that time (1970’s) a grave oil crisis arose in the world. Brazil also expanded its exports of industrialized goods and, finally, began to produce soy, which became one of the main Brazilian export products quickly.

Again, despite the considerable growth of its economy, at that time, Brazil still ignored the arbitration proceedings in its legal practice. Two issues were crucial for that: first, the fact that the Brazilian courts considered the arbitration clauses only as a promise to arbitrate in the future (pactum in contrahendo). In addition, in Brazil, it was required the double exequatur to enforce foreign arbitral awards.[52]

At the 1980’s, there were a succession of changes in the country, as much politically, as economically. A democratic movement removed the military forces and, in 1988, Brazil promulgated its last Constitution, called “A Constituição cidadã”[53], in which a lot of social changes were observed. For many scholars, the 1980’s was considered economically a lost decade, due to the stagnation of the Brazilian economy and loss of international credit.[54] The institution of arbitration was still ignored in the country.

In the 1990’s, Brazil experienced a process of economic stabilization, in which the inflation was strictly controlled. This movement of stabilization, however, brought recession to the Brazilian economy, which caused more stagnation.[55] Anyway, it was very important for the successive years, until the end of first decade of the present century, where Brazil step-by-step retook its vocation as an export country. At that time, however, with a diversified economy, reaching a good status between the largest economies in the world and increasing its importance in the international trade.[56]

Thus, it became necessary for Brazil to have a modern legislation, capable of resolving efficiently and quickly all commercial conflicts arising out of its international trade – and, consequently, its international contracts. For international companies to carry on business and investments in the country, it is primordial that clear rules about protection regarding their investments exist, in which there is autonomy of parties to choose the legislation more adequate to be applied.[57] In other words, Brazil had to establish mechanisms to resolve trade conflicts rapidly and attract international investments on a large scale, through a complete makeover of its arbitration rules.[58]

2. The history of arbitration in Brazil until 2002

In this Chapter, some approaches about the history of Brazilian arbitration are going to be done, emphasizing how this important institution has been treated by Brazilian law, in which sometimes the needs for an effective regulation were ignored.

The institution of arbitration is present in Brazil since the colonial period, in the XVI century. At that time, as a Portuguese colony, Brazil was under the authority of Felipe I, king of Spain, since the two Crowns – Portuguese and Spanish – were united. With the new government, some provisions were enacted regarding the trade in the colony, which were called “Ordenações Filipinas”[59]. In these provisions, the institution of arbitration appeared for the first time, disciplined in the Book II, title XVI, under the name “Dos Juízes Árbitros” (The Judge-Arbitrators).[60]

In the provisions of “Ordenações Filipinas” regarding arbitration, there was also a possibility to appeal against the arbitral award, before the judge, regardless whether there was any clause in the agreement disposing the opposite. This procedure was very usual, since the arbitral award did not depend on the judge’s homologation.[61]

The provisions stated that “if each of the parties do not appeal from the arbitral award in the due time, this award will be enforced by the trial judges.”[62]

After years of the first appearance in the Brazilian law and after a gradual disuse of its provisions, the institution of arbitration resurfaced in the Brazilian imperial period, when the country had just become independent from Portugal (1822). Within the first Brazilian Constitution of its history, in 1824, it was stated in its article 160 that “in civil or criminal cases, the parties may nominate arbitrators. Their awards will be enforced, without appeal, if pre-matched by the parties.”[63]

A little after, in 1850, when the first Brazilian Commercial Code[64] was enacted, there was a provision in this law stating that “the social issues arising out of partnerships, during the existence of the company or society, including its liquidation or its shares, shall be submitted to an arbitrator.” Nonetheless, this provision was revoked sixteen years later.

Also in 1850, the commercial arbitration was regulated by Regulation 737, in which its article 411 distinguished consensual arbitration and mandatory arbitration.[65] At that time, arbitrators should been giving awards based on the commercial legislation and on the “promise to arbitrate” clauses.

In 1867, the Brazilian government enacted a provision, the “Decreto 3.900”, which regulated the arbitration proceedings in Brazil.[66] This enactment stated that arbitrators would judge by fairness, if authorized by the parties.

In 1916, Brazil elaborated its first Civil Code[67], and the provisions concerning arbitration were also there, in its Book III, stating about “Obligations”, specifically in its Title II, “Effects of Obligations”. However, there was no reference about the “promise to arbitrate” clauses.

In 1939, the Brazilian Civil Procedure Code[68] was enacted, and provisions regarding arbitration were also included. At that time, however, the provisions did not state clearly how the commercial disputes would be resolved; worse, it was stated the need for homologation of all the arbitral awards by the trial judges. Also, there was no reference concerning the “promise to arbitrate” clause (“cláusula compromissória”)[69], which would be treated in the amendment made in the Civil Procedure Code, in 1973.

As said, statements concerning the “cláusula compromissória” were brought by the above-mentioned amendment in the Civil Procedure Code, in 1973. However, the institution of arbitration was still confusing, since there was a lot of divergence concerning the “cláusula compromissória”. This provision was merely a promise to submit future disputes to arbitration, not an actual submission. Most of cases ended in state courts, since one party could refuse to sign the subsequent agreement. As Blackaby stated in his article “Arbitration and Brazil: A Foreign Perspective”,[70]

“In that regard, the arbitration clause was a simple obligation de faire and therefore no different from any other clause and did not give rise to a jurisdictional objection before the state courts.”

At that moment, there was no certainty for investors about doing business in Brazil, since the Brazilian law did not protect properly the issues concerning trade disputes. That is to say, investors did not feel reassured that clear arbitration proceedings could take place in Brazil.[71]

Certainly those issues about the “cláusula compromissória” and its non-enforcement are one of the most important difficulties that foreign investors found in international arbitration in Brazil. Besides, there was the problem concerning the “homologation” of arbitral awards made in Brazilian arbitration tribunals.[72] The Civil Procedure Code of 1973, generally considering, stated that all the arbitration awards made in Brazil had to be approved by the “Supremo Tribunal Federal”, the Federal Brazilian Supreme Court, which would analyze through a ‘homologation procedure’ if the Brazilian law had been properly applied.[73]

Twenty-three years later, in 1996, there was an enactment in Brazil which became its Arbitration law[74], “Lei 9.307/96”. This important law, which stated about the domestic and the international arbitration in the country, is going to be soundly treated in the Chapter Three of this paper.

Concerning to the international arbitration, Brazil gave its first step in signing and ratifying the Geneva Protocol[75], in 1923, in which Brazil should give effect to arbitration agreements established in contracts made by nationals of other Contracting States. Again, it was not enough, since Brazil did not sign and ratify neither the posterior Geneva Convention, in 1927, either the New York Convention, in 1958.[76]

Indeed, the international arbitration in Brazil had been marked by two features[77]: the need for double homologation of foreign arbitral awards (called “duplo exequatur”) and the need for citation of the Brazilian party by rogatory letter[78].

Thus, international arbitration had been becoming an unattractive option regarding Brazilian disputes, due to some peculiarities, as seen:[79]

“[…]first, when arbitrating in Brazil there was a requirement to conclude a post-dispute submission agreement (o compromisso) to supplement the arbitration clause in the contract (a cláusula compromissória), in the absence of which the judicial courts retained jurisdiction; secondly, the award had to be formally approved by the Brazilian courts in a process of ‘homologation’; thirdly, when the dispute had been arbitrated outside of Brazil the courts of the place of arbitration and the Brazilian courts needed to ‘homologate’ the award to ensure that the requirements of both the law of the place of arbitration and Brazilian law had been fulfilled.”

In many cases, in an international dispute involving the “cláusula compromissória”, a Brazilian party defied the obligation of application of arbitration proceedings made in the agreement, through a malicious strategy of submitting the dispute to Brazilian state courts, which sometimes did not properly apply the law, and took years to resolve the dispute.

As a party of Genebra Protocol of 1923, Brazil should[80]

“recognize the validity of both the arbitration clause and the submission agreement in commercial contracts where there was a dispute between a national of its State and a national of another Contracting State.”

Thus, in the same direction, a Brazilian party in an international contract, who had signed an arbitration clause, could not be permitted to refuse to sign a submission agreement, and ask for state courts to confirm their jurisdiction.[81]

These features caused several discontents regarding international parties searching for enforcement of arbitration clauses contained in contracts with Brazilian parties. As stated in the introduction of this paper, investors always search for protection of their investments, and thus, clear rules concerning eventual commercial disputes arising out of commercial contracts. When these rules are not taken into consideration, the investors feel unprotected and prefer not to consider do business in a country.

As Blackaby stated,[82]

“Concerns have been voiced that this basic protection for foreign investments is sometimes lacking in Brazil, which has long been regarded as the ‘black sheep’ of Latin America in its approach to arbitration.”

In the next two parts of this chapter, some important issues are going to be discussed, regarding the conflict between the Brazilian domestic law and the principle of party autonomy, besides the Brazilian arbitration law, certainly one of the most important advances concerning arbitrating proceedings in Brazil.

2.1 The conflict between Brazilian domestic legislation and the principle of party autonomy

There has often been a discussion between two antagonistic doctrinal tides in Brazil about the nature of arbitration procedure. The first one, the contratualist theory, attributes to arbitration procedure a private feature – or contractual feature, in which the award given by an arbitrator would be just a consequence of the agreement made by the parties, and does not have jurisdictional feature.[83] For its followers, arbitration is based on principle of the pacta sunt servanda.

The second tide, the jurisdictional or publicist theory, gives to arbitration a kind of jurisdiction, in which the State delegates to a particular the role to establish the rights between the parties, in an eventual conflict.[84] For the publicists, arbitration has a jurisdictional feature.

There was also the conciliation theory, in which arbitration proceedings contained both private and public features, meaning that even though the arbitrator does not have “imperium” authority regarding the parties and third parties, he demonstrates a public feature in his function (similar to the judge’s function in the state court).[85] This approach is considered majoritarian in the Brazilian doctrine.

The definition of party autonomy was created under the influence of the idea of own free will, which the economic-liberalist scholars considered as a subjective right.[86] Thus, any relationship in law is based in a rule that, once determined, gives to each party a sphere of freedom in which its will must prevail independently of other party’s will.[87]

In this direction, one can affirm that the principle of party autonomy is based on the possibility given to the parties to choose freely, through an agreement made by them, their interests in the contract, in which they will observe their wills and the chosen contents. Their choice in the contract will bring protection in the juridical order, given by the state, through its authority.

One can bring out, in this point of view, one or more theories in which the institution of arbitration is inserted, since there is a mix of jurisdiction in which there is a sphere of autonomy where the parties are sovereign, but there is also the important state authority to apply and enforce that will of the parties.

The principle of party autonomy states about the freedom to create a contract, to the parties to contract or not to contract, to the parties to choose another contractor and to the parties to establish the contents of the contract. This freedom, however, is limited by the law, through the rules of public order and general principles of law.[88]

In Brazil, until the Brazilian Arbitration Law – “Lei 9307/96”, enacted in 1996, there was a clear conflict between the principle of party autonomy and the Brazilian provisions – which were applied concerning arbitration proceedings: the Introduction law of Brazilian Civil Code (LICC)[89].

The “LICC (Lei de Introdução ao Código Civil)” has in its provisions some divergent elements, if compared to the principle of party autonomy. The LICC states, in its article 9, that “to qualify and to administrate obligations, the law of the country in which the obligations were constituted shall be applied.” Also in the same article, in its paragraph 2, it is stated that “the obligation resultant of a contract shall be considered constituted in the place in which the proponent resides”.

As seen, the Brazilian law did not observe the principle of party autonomy in any international contract concluded with Brazilian parties. During years, this legal interpretation concerning international contracts by Brazilian law had resulted in an extreme bad will of the international investors to carry on business in Brazil,[90] since the principle of party autonomy has been an universal rule in international trade all over the world.

However, after the enactment of Brazilian Arbitration Law, in an arbitration proceeding in which expressly there is no mention of parties concerning the choice of law to be applied, the arbitrators may sustain their argumentation to make an award based in outsider rules – not necessarily the domestic laws.[91] That is to say, after the “Lei 9307/96” the parties have autonomy to choose the rules to be applied in arbitration proceedings, and also the law to be applied (or Brazilian or Foreign law).

Actually, the Brazilian Arbitration Law brought a complete makeover in the Brazilian arbitration proceedings, since it finished the conflicts between the LICC and the principle of party autonomy. Thus, this principle is now observed in all international contracts made in Brazil, which also fortified it ratifying the New York Convention, in 2002. The “Lei 9307/96” did modernize the arbitration proceedings in Brazil and also observed the principles of lex mercatoria,[92] which was an important aspiration of the international trade community.

2.2 The Brazilian Arbitration law (Lei 9.307/96)[93]

The Brazilian Arbitration Law, “Lei 9307/96”, enacted in 1996, was a revolutionary regulation in Brazilian Arbitration. In fact, the new law brought more celerity and simplicity concerning arbitration proceedings, in the commercial conflicts.

Indeed, until the enactment of this important law, it seemed the institution of arbitration as a method for the resolution of conflicts had been forgotten in the Brazilian law, due to the obstacles brought by the “cláusula compromissória” (as seen in the previous Chapters, a mere promise to solve eventual or future conflicts through arbitration), which had no effect in practice, and by the need to “homologate” arbitral awards to give the latter the same effects as a state judgment.[94]

Before these obstacles, people who could use the arbitration preferred going to state courts, since they could ignore the promise to go before an arbitrator. On the other hand, the need for “homologation” of arbitral awards removed the advantages of arbitration, since the cost of its proceedings was added to the cost to present a claim before a state court. Finally, going to state courts, there was no secrecy anymore, since the state proceedings have wide publicity, differently of arbitration proceedings.[95]

The Brazilian Arbitration Law, however, imposed a new structure to the arbitration proceedings: strengthening the “cláusula compromissória” (avoiding the state court), giving to the arbitral award the same efficacy as state court decisions, facilitating the “homologation” of foreign arbitral awards and fortifying the principle of party autonomy[96], in which the parties are free to regulate themselves the arbitration proceedings and to establish what are the rules the arbitrator must utilize.

Observing the principle of party autonomy, the “Lei 9.307/96” overruled the obstacle that existed in the previous Brazilian law, in article 9 of its Civil Code Introduction Law, which determines the forum to solve conflicts between eventual parties in a contract as being the place where the contract was concluded (lex loci actus).[97] Also, the new law gave freedom to the parties to choose the rules concerning the arbitration proceedings and the option for them to determine the arbitrator to make decisions based in fairness or in the general principles of law.[98]

The Brazilian Arbitration Law, in its article 19, also states that arbitration proceedings shall begin as soon as the arbitrators agree with the authority given to them by the parties, in the agreement. Thus, if there is any objection from any party concerning the beginning of arbitration proceedings, the state court may intervene: it may settle the arbitral proceedings, inviting the parties to present their arguments. If there is no plausible argument and no deal, it will make a decision, applying when possible the rules stipulated by the parties in the agreement.

There is also a possibility to avoid the state court intervention for the beginning of the arbitration proceedings, which is, according to article 5 of the “Lei 9.307/96”, a provision in the “promise to arbitrate” clause – “cláusula compromissória” – foreseeing another mechanism in case of one any party does not indicate an arbitrator (for instance, if the arbitration is conducted by institutional arbitration, it may nominate an arbitrator). Also, according to the new law, it is not necessary for a party to have a lawyer. The party may act personally, or advised by an expert.

The arbitral award may be annulled, according to the new law, within ninety days after the notification, in the state court. However, the impugnation to be solicited must talk about formal aspects of arbitration proceedings (formal mistakes in the agreement, in the arbitration proceedings or in the arbitral award). Concerning the merit of the case, however, it is not possible for any party to appeal against the arbitral award. The arbitrator has sovereignty over the merit.[99]

Finally, regarding foreign arbitral awards, the Brazilian Arbitration Law eliminated the “double homologation” (duplo exequatur), through which the Brazilian Federal Supreme Court demanded the pre-homologation of the arbitral award by the Foreign state court, before its official homologation. The Superior Tribunal of Justice (STJ)[100] now homologates the foreign arbitral awards directly – of course, observing there is any offense to the Brazilian public order or to its good customs.

The “Lei 9.307/96” was successfully accepted by the international trade community. However, a little after its enactment, it was raised by way of an appeal its unconstitutionality, which contested an arbitral award made by a Spanish arbitrator, for which the Brazilian Federal Supreme Court denied homologation, alleging lack of official registration of the arbitral award by the Spanish court. Five years after the enactment of the law, in 2001, Brazilian Supreme Court finally judged the “Lei 9.307/96” as constitutional, arguing it was not necessary for the Spanish award to be homologated by the Spanish Court, since in Spain any arbitral award has as much legitimacy and authority as any state court decision.[101] At that time, the new law won the battle, and so did the international trade community, which expected Brazil to take such a position.

As seen, the Brazilian Arbitration Law, enacted in 1996, was certainly the largest step forward the implementation of a modern legislation concerning arbitration in Brazil. Although the New York Convention was ratified in 2002, the “Lei 9.307/96” was born with practically the same provisions of the above-mentioned international convention.[102] Furthermore, with this step, Brazil demonstrated its good will concerning the aspiration of the international trade community, which needed a clear and efficient legal protection to carry on business in Brazil. After 1996, this protection was given, and in 2001 was confirmed with the decision of Brazilian Federal Supreme Court.[103]

B. The enforcement of foreign arbitral awards in Brazil after the ratification of the New York Convention

The ratification of the New York Convention by the Brazilian government

The ratification of the New York Convention by the Brazilian government was done through the Legislative Decree[104] n. 52/2002, which deals with the recognition and enforcement of the foreign arbitral awards in Brazil. This Convention, indeed, came to ensure in the Brazilian territory the validity of the foreign arbitral awards, as long as the basic principles of public order, the reciprocity and the due legal process are observed.[105]

In fact, analyzing the “Lei 9.307/96” – the law that exclusively treated about arbitration in Brazil until 2002 – concerning the enforcement of foreign arbitral awards in Brazil, one can realize that it had already been strongly influenced by the New York Convention, since almost all of its provisions had been taken by that instrument.[106]

After its ratification, the New York Convention also brought other important provisions to the Brazilian legal system.[107] For instance, since 2002, all the foreign awards rendered under bilateral conventions – for example, with Italy, France and Spain; all the awards rendered under members signatories of Bustamante Code[108] and, finally, all the awards rendered under any other system[109], were absorbed by the new provisions of the New York Convention. It is important to bring out that the STJ[110] has the competence to enforce all the foreign awards covered by the newly ratified Convention.

The only exception concerning the adoption of the New York Convention is related to the arbitral awards rendered under MERCOSUL.[111] These awards have a special procedure, in which the enforcement is done by the STJ in an easier manner, due to the agreements celebrated among its members, in the Protocol de Las Leñas.[112]

Thus, it can be stated there are two procedures of enforcement of foreign arbitral awards in Brazil by the STJ: the arbitral awards subordinated to the New York Convention – the wide majority of foreign awards; and the arbitral awards subordinated to the Protocol de Las Leñas – concerning the members of MERCOSUL – which are enforced through exequatur of rogatory letters.[113]

Although the ratification of the New York Convention has represented an important step to the institution of arbitration in Brazil, since it absorbed all the pre-existing provisions about the theme, it is important to bring out that the newly ratified Convention is not evinced in the STJ decisions yet; on the contrary, the Superior Tribunal of Justice keeps considering the Brazilian Arbitration law (the “Lei 9.307/96”) as the legal basis for conceding or not conceding the enforcement of the foreign arbitral awards.[114]

Below, is an extract from a recent decision[115] of the STJ, published in August 31^st, 2009:

“Foreign Arbitral Award. Active legitimacy. Interest. Contract for sale and purchase. Merit from the Arbitral decision. Analysis in the STJ. Impossibility. Absence of violation of the Public Order.

[…] the essential requirements predicted in articles 38 and 39 of Lei 9.307/96.”

As seen, curiously, there is no mention about the New York Convention in the STJ decisions; however, the Convention is in plenary force in the Brazilian legal system, with universal binding force in Brazil since its ratification.

Considering the Brazilian Arbitration Law was strongly influenced by the New York Convention, in fact, even though the STJ decisions do not mention the newly ratified convention in its “acórdãos”[116], it is clear that there is no prejudice concerning the enforcement of foreign arbitral awards in Brazil, according to the Convention’s requirements. The New York Convention came to reaffirm the wide application of the “Lei 9.307/96”, and the enforcement of its prerequisites, since they are practically the same.[117]

However, part of the Brazilian doctrine considers that the ratification of the New York Convention revoked some provisions of the Brazilian Arbitration law, which are not compatible with that convention.[118] For instance, according to Magalhães[119], even though the two legal norms have essentially the same interpretation concerning the enforcement of foreign arbitral awards in Brazil, the New York Convention, in its article VII, has a different comprehension about an important issue. The Convention states that:

“the provisions of the present Convention shall not […] nor deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon.”(bolded emphasis added)

Magalhães[120] sustains that this article of the New York Convention does not have any correspondence with any article of the “Lei 9.307/96”; thus, even though a foreign arbitral award is eventually considered null by the law of the foreign country in which this award was pronounced, whether the requirements foreseen in the Brazilian law – in which the foreign arbitral award shall be analyzed – are observed, it may be enforced.

Essentially, the New York Convention has practically the same provisions of the Brazilian Arbitration Law. However, when there is no correspondence between the two legal norms, the Convention must prevail. In this direction, there is a decision of the STF[121] stating that any international treaty ratified by the Brazilian government revokes a prior law; on the other hand, any new enacted law also revokes a prior international treaty, since both of them have the same hierarchy.[122]

1.1 The importance for Brazil of the ratification of the New York Convention

According to the article 34 of the Brazilian Arbitration Law, the ratification of the New York Convention by the Brazilian government gave to this convention absolute primacy on the existing legal dispositions in the domestic law.

However, as seen, the legal dispositions of both the “Lei 9.307/96” and the New York Convention are very similar, regarding the enforcement of the foreign arbitral awards in Brazil. Thus, even though the ratification of the Convention brought just few significant practical changes, it brought important symbolic effects to this matter in the country.[123] Controversies aside, the ratification of the Convention represented one of the most important steps to the consolidation of the international arbitration in Brazil, as an efficient way to resolve trade disputes.

Indeed, the New York Convention is the most important treaty on the recognition and enforcement of foreign arbitral awards in the world. It was responsible for the proliferation of the use of arbitration proceedings in the international affairs, ensuring that the decisions pronounced by them were regularly, quickly and effectively enforced by any of its signatory members.[124] The Convention ensured more juridical safe in the international trade, regarding the commerce with Brazil. Furthermore, in the future, the Brazilian Superior Tribunal of Justice (STJ) may utilize the comparative doctrine and jurisprudence as sources to interpret new cases, concerning the enforcement of the foreign arbitral awards.[125]

The institution of arbitration related to the international affairs involving Brazil got, consequently, definitive consolidation after the ratification of the New York Convention. Adhering to this important Convention, Brazil demonstrates to the international trade community a more substantial confidence, showing it will have the necessary tools at its disposal to ensure its rights.[126] Also, concerning the symbolic and political point of view, the ratification of the New York Convention was extremely important for Brazil, since the country is reaching an important place in the world economy, as part of BRICS.[127]

At last, the importance of the ratification of the Convention by the Brazilian government can be demonstrated by the wide number of countries (approximately 140) which have already ratified it.[128] It indicates that the Convention’s legal provisions have succeed in many countries, concerning the recognition and enforcement of foreign arbitral awards; also, it demonstrates its solutions have identical representation and application all over the world, which favor internationally the operation and the development of the arbitration proceedings.[129]

That is why the ratification of the New York Convention was so important to Brazil: it is considered the legal infrastructure of the international commercial arbitration, which provides the key to the effective international circulation of the awards pronounced at that level.[130] And now, Brazil is playing the game under the same rules.

1.2 The requirements for the enforcement of foreign arbitral awards in Brazil after 2002

Considering the institution of arbitration one of the most efficient ways to resolve international commercial disputes, it is important to analyze the effectiveness of its awards and of its proceedings, concerning its relations with the state courts. As Fernandez Arroyo states, “[…]promoting a system that initially proposes rapidity, specialization and effectiveness, does not imply in abandoning the State courts functions, concerning the accomplishment of justice.”[131]

In this direction, the jurisdictional function of the State – as grantor of accomplishment of justice – occurs at the moment in which the foreign arbitral award is received by the State court. There, the State has the opportunity to authorize or not the enforcement of its effects in its territory.[132]

Thus, it is essential to the State to analyze its prerequisites to concede the enforcement of a foreign arbitral award, since eventual continuous denegation may become an important obstacle to the development of the international trade and to the legal relations established in the international community, concerning arbitration proceedings.[133]

To the enforcement of foreign arbitral awards in Brazil, the New York Convention and the Brazilian Arbitration Law expound some important prerequisites. These requirements are documents, and must accompany any petition of any party in an arbitral proceeding, in order to guarantee the enforcement of the arbitral award. There are also some formal and legal requirements, which must be present in the foreign arbitral award in order to it to be enforced by the Brazilian court, the STJ.[134]

The documents are listed in article 37 of the Brazilian Arbitration Law, which is in harmony with the dispositions presented in article IV of the New York Convention. It is expounded, as following: the original arbitral award or its certified copy, duly legalized by the Brazilian consulate of the State in which it was pronounced; and the arbitral agreement or its certified copy – duly translated by sworn translator, if it is the case.

Whether the above-mentioned documents are not presented to the court, the STJ may decide in two different ways[135]: as the enforcement of a foreign arbitral award is considered a contentious proceeding, the STJ may reject the petition, extinguishing the proceeding without judging its merit. Also, the Superior Tribunal of Justice may concede extra time to the party for supplying the formal defect, as disposed below in a decision[136] pronounced in August 2006:

“[…]the petition for the enforcement of a foreign arbitral award shall be accompanied by the indispensable documents, duly translated and legalized. Thus, the claimant shall be summoned to provide the translation of the arbitral award and it inherent contract by an official or sworn translator in Brazil.”

As seen, the two most important advances brought up by the New York Convention to the Brazilian domestic law were: the limitation of the denegation of the enforcement of foreign arbitral awards; and the necessity to the party that is doing the contestation to bring to the proceeding the proofs of the non-accomplishment of the formal prerequisites to concede the enforcement (the inversion of the burden of proof).[137]

Concerning the burden of proof, the provisions of the Brazilian Arbitration Law, which were influenced by the New York Convention, brought elements to a decision of April 2006, in the STJ:[138]

“1. To the enforcement of a foreign arbitral award judged in default of the required party, this party has to proof, by its own burden, that it was not duly communicated of the instauration of the arbitration proceedings, according to article 38, III, of the Lei 9.307/96.”

The above-mentioned decision is an incisive proof that the Brazilian Arbitration Law was totally inspired in the New York Convention, in the direction of an actual effectiveness of the arbitration proceedings.[139]

Regarding the formal and legal requirements, the New York Convention with the support of the Brazilian Arbitration Law brings out an important issue: the need for motivation.[140] In the foreign arbitral award, this issue is extremely important in order to it to be enforced. In fact, the Brazilian Constitution states, in its article 93, IX, that all the judicial decisions must be given through motivation of the judge. In this direction, both the New York Convention and the Brazilian Arbitration Law observe dispositions concerning the public order, which is closely related to the above-mentioned fundamental principle of the Brazilian Constitution. Thus, in order to respect the principle of public order, the two legal provisions make mention for the need of the state court to justify its decision, in which the factual and legal issues shall be analyzed.[141] Then, there shall be also an express mention to the foreign arbitral award, whether it was judged respecting the principle of “equité”[142] (fairness).

Also, it is important to bring out the requirements through which the STJ can reject the enforcement of a foreign arbitral award in Brazil, if not observed. Firstly, to not to be rejected by the Brazilian court, according to the article V (1) (a) of the New York Convention and to article 38 (I) of the Brazilian Arbitration Law, the parties must not be subjected to any kind of impediment regarding their legal capacity, which could provoke the invalidity of the agreement. The validity of the arbitral agreement, in turn, is essential to the existence and legitimacy of the arbitration proceedings.[143]

Thus, other important requirement to be observed is the validity of the arbitral agreement, stated in the article V (1) (a) of the New York Convention and in the article 38 (II) of the Lei 9.307/96. This issue was pronounced by the STJ in a decision of April 2003:[144]

“Brazilian Arbitration Law. Establishment of an Arbitration agreement. Object of

the dispute. Infringement of the contractual clauses. Validity. Absence of omission.

[…] III – Having the parties validly concluded an arbitration agreement, all the controversies resulting from the execution of the main contract must be resolved by that agreement.”

When the parties come to an arbitral agreement, it brings with itself two effects: a negative and a positive. The negative effect means that the state courts are prevented to analyze the issue, since the parties have already renounced state’s jurisdiction. In turn, the positive effect means that the parties are obliged to submit their disputes to the chosen arbitral tribunal. However, if the arbitral agreement is considered invalid, the state court may annul the arbitral award came of irregular arbitral proceeding.[145]

Also very important is the requirement of observing the correct notification of the parties, expounded in the article V (b) of the New York Convention, in harmony with the article 38 (III) of the Brazilian Arbitration Law. According to the STJ, in a decision pronounced in May 2009:[146]

“Foreign arbitral award. Arbitration proceeding. International contract concluded with arbitration clause. Contract in default. Lei 9.307/96 (Brazilian Arbitration Law), articles 38, III and 39. Award homologated.

[...]3. The defendant needs to proof the lack of notification in the arbitration proceeding to configure violation of the fundamental principle of due process of law (art. 38, III of the Brazilian Arbitration Law).”

This requirement is also essential, since a valid notification is the guarantee to the parties that the arbitral proceedings respected the fundamental principle of due process of law. Anyway, concerning the analysis of the due notification of the parties by the Brazilian court, in the enforcement of a foreign arbitral award, this court must not apply the Brazilian law. On the contrary, the court must respect the law to which the arbitration proceedings were subjected. At last, the foreign law which regulated the arbitration proceedings must not disrespect the limits established by the parties, in the arbitral agreement.[147]

In the same direction, the New York Convention – in its article V (1) (c) – and the Brazilian Arbitration Law – in its article 38 (IV) – also bring out the importance of the content of the foreign arbitral award. According to these legal provisions, the award can not be done extra petita neither ultra petita; thus, if an arbitral award does not respect the limit imposed by the arbitral agreement, establishing more or less than that was accorded between the parties, the STJ may impugn it.[148]

Other very important requirement concerns to the institution of the arbitral tribunal, which must be in harmony with the arbitral agreement. According to the New York Convention, in its article V (1) (d), and to the Lei 9.307/96, in its article 38 (V), if the establishment of an arbitral tribunal is done in discordance with the arbitral agreement, an eventual arbitral award made in that condition may also be impugned.[149] The STJ, in a decision pronounced in June 2007, stated:[150]

“Foreign arbitral award. Homologation. Requirements. Lei 9.307/96 and Resolution 9/2005 of the STJ. Contract of Purchase and Sale. Arbitration Agreement. Existence. […]4. Duly observed the foreseen proceedings by the arbitral tribunal elected by the parties in an arbitration agreement, there is no defect that can prevent the enforcement of the arbitral award.”

Also, there is the requirement of the arbitral award, which can not be non-obligatory, annulated or suspended, according to the article V (1) of the New York Convention and the article 38 (VI) of the Lei 9.307/96. These provisions state that a non-obligatory arbitral award, or an arbitral award annulated or suspended by the competent authority of the country in which the award was pronounced, may not be enforced by the Brazilian court. However, this condition must be presented by the party who wants to impugn the award.[151]

At last, there are the requirements to be observed by the STJ, through which it may reject the enforcement of the foreign arbitral award. These requirements are disposed in the article V (2) (a) and (b) of the New York Convention and in the article 39 (I) and (II), paragraph unique of the Brazilian Arbitration Law. They concern to the inarbitrability of the dispute – according to the law of the country in which the enforcement of the arbitral award is to be done; and to the disrespect of the public order of that country.[152]

Concerning the inarbitrability of disputes in Brazil, there is no decision in the STJ; thus, since both the New York Convention and the Brazilian Arbitration Law do not define exactly what the acceptable disputes to be governed by the arbitration proceedings are, this issue is still too abstract.[153] There was a case, for instance, in which there was a conflict between the interpretation of the arbitral tribunal (ICC, in Paris) and the interpretation of the Brazilian court, where an administrative issue was being discussed. However, the parties made an accord before the analysis by the STJ, and all the proceedings (the state court one and the arbitral one) were extinguished. Thus, there is still no certainty that an administrative issue can be the object of an arbitral proceeding; also, other issues were not defined by the STJ yet, concerning their arbitrability (such as the use of arbitration in public-private partnerships and in the concession contracts).[154]

It is necessary, however, to bring out the approach of the STJ, in a decision pronounced in April 2008, in which it was stated that “[…] not all issues in public law are susceptible to arbitration, but only those considered ‘obtainable’, with a private or contractual nature.”[155]

Regarding the requirement of respecting the public order, there are regulations in both the New York Convention, in its article VI (2), and the Lei 9.307/96, in its article 39 (II), stating that the violation of the public order by a foreign arbitral award can be reason to the denegation of enforcement of it by the STJ. According to Carmona[156], the public order is the juridical institute which permits the tribunal, foreseeing a possible violation of provisions which are essential to the national sociability, to prevent the enforcement of a foreign state court award or a foreign arbitral award. It is important to bring out, however, that the judge can never disregard the international nature of the dispute between the parties, when he interprets the fundament of the foreign arbitral award, since the concept of public order in the country in which the decision was pronounced may be different of the concept in Brazil.[157]

Conclusion

The ratification of the New York Convention by the Brazilian government, although it was rather tardy, gave to Brazil a modern set of norms regarding arbitration law issues.

In fact, due to the importance of the Brazilian economy – that has been developing increasingly year after year since the end of the last century, reaching currently a considerable level on a world scale – it was necessary to put up the Brazilian arbitration proceedings to the level of the importance its economy has acquired, in a global context.

With the ratification of the New York Convention – and the prior enactment of the Brazilian Arbitration Law, Brazil demonstrated it would be respecting the consecrated rules of International commercial arbitration law, acquiring thus international credibility. Due to the ratification of the most important Convention related to arbitration in the world, since 2002 Brazil has been considered a place in which global business people can feel safe participating in arbitration proceedings, concerning the enforcement of the foreign arbitral awards.

It is important to bring out that the international trade community carries out its activities with much more confidence and facility in countries in which the arbitration proceedings can be evoked in an efficient, transparent and safe manner, respecting the international standards related to the solution of commercial disputes. That is why the ratification of the New York Convention was so important to Brazil.

As seen, the enforcement of the foreign arbitral awards in the country had already been ensured by the Brazilian Arbitration Law, the “Lei 9.307/96”, which was the first important step regarding the actual implementation of international standards of arbitration proceedings in Brazil. This law, nevertheless, was totally inspired in the New York Convention, and advanced many of its provisions.

Also important to bring out is that the ratification of the New York Convention did not threaten the good understanding and application of the Brazilian arbitration law; on the contrary, the Convention gave it more legitimacy, since it was only after its ratification that a dual obligation to enforce the foreign arbitral award appeared, under both domestic law and the international treaty.

In sum, concerning to the prerequisites related to the enforcement of the foreign arbitral awards, the STJ shall apply the dispositions of the New York Convention, and secondarily, the Brazilian Arbitration Law. Conjugating the above-mentioned legal norms, it can be brought out some causes of denegation of enforcement of those awards, which are: incapacity of the party; invalidity of the arbitration agreement; lack of notification of the parties (offense against the due process of law); extra and ultra petita arbitral awards; institution of arbitration proceedings in discordance with the arbitration agreement; non-obligatory, null or suspended arbitral award; inarbitrability of the commercial dispute, violation of the public order and invalid citation.

At last, it can be stated that the New York Convention came to complement the “Lei 9.307/96” provisions, giving to Brazil a complete framework regarding the arbitration proceedings. In addition, it put the South-American country definitely embraced with the international trade community expectations, reflecting the disposition of Brazil to take its place amongst the major trade nations in the world, with now an international standard to enforce the foreign arbitral awards.

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Freshfields Lecture, Arbitration International, vol. 21 n. 2 (London: LCIA, 2005)

Irineu Strenger, Arbitragem Comercial Internacional, (São Paulo: LTR, 1996)

Jan Paulsson et al., The Freshfields guide to arbitration and ADR: clauses in international contracts, 2nd ed. (London-Boston: Kluwer Law International, 1999)

John Hemming, Ouro Vermelho: A conquista dos índios brasileiros, (São Paulo: Editora da Universidade de São Paulo, 2007)

José Carlos Magalhães, A convenção de Nova Iorque e a lei de arbitragem, y.5, n. 18 (São Paulo: Revista de Direito Bancário, do Mercado de Capitais e da Arbitragem, 2002)

Lael Brainard & Leonardo Martinez-Diaz, Brazil as an economic superpower?: Understanding Brazil’s changing role in the global economy (Washington D.C : Brookings Institution Press, 2009)

Lauro da Gama, Arbitragem: a nova lei brasileira (9.307/96) e a praxe internacional, (São Paulo: LTr, 1997)

Ludovico Mortara, Commentario del Codice e delle legi di procedura, vol. 3 (Milano: Biblioteca Giuridica contemporânea, 1923)

Márcio A. M. Moraes, Arbitragem nas relações de consumo, 1st ed. (Curitiba: Juruá, 2006)

Marcos Paulo Félix da Silva, A arbitragem como alternativa à execução das obrigações no âmbito empresarial, Buscalegis, (Florianópolis: UFSC, 14 March 2007) online: <http://www.buscalegis.ufsc.br/revistas/index.php/buscalegis/article/viewFile/32706/31905

Marieta de Moraes Ferreira, João Goulart: entre a memória e a história, (Rio de Janeiro: Editora FGV, 2006)

Mariulza Franco, Aspectos da Arbitragem, Revista Unipar (Article presented to Universidade Paranaense) (31 March 2008) online: <http://revistas.unipar.br/juridica/article/viewFile/1288/1141>

Miguel Virgós Soriano, Arbitraje comercial internacional y El convenio de Nueva York de 1958, n. 6679 (Espanha: Revista La Ley, 2007)

Nicolas Cabezudo Rodriguez, Comentarios a los artículos 35, 36 y 37 de La Ley 60/2003, t. 2 (Espanha: Bosch, 2004)

Nigel Blackaby, Arbitration and Brazil: A Foreign Perspective in Arbitration International, vol. 17, no 2 (London: LCIA, 2001)

Paulo Borba Casella, A nova lei brasileira (9.307/96)e a praxe internacional, (São Paulo: LTr, 1997)

Philippe Fouchard et al., Fouchard, Gaillard, Goldman on International commercial arbitration, 2nd ed. (The Nederlands : Kluwer Law International, 1999)

Ralph Lattimore & Przemyslaw Kowalski, Brazil in Organisation for Economic Co-operation and Development, Globalisation and Emerging Economies : Brazil, Russia, India, Indonesia, China and South Africa (Paris : OECD Publishing, 2008)

Renata Alvares Gaspar, Reconhecimento de sentenças arbitrais estrangeiras no Brasil, (São Paulo: Atlas, 2009)

Ricardo Ramalho Almeida, Arbitragem comercial internacional e ordem pública, (Rio de Janeiro/São Paulo/Recife: Renovar, 2005)

Romeu Falconi, A gênese das Ordenações Filipinas, Novos estudos jurídicos, vol. 10, n. 2, (27 March 2007) online: <https://www6.univali.br/seer/index.php/nej/article/view/411>

Tamás Szmrecsányi & Wilson Suzigan, História Econômica do Brasil Contemporâneo, 2nd ed. (São Paulo: Editora da Universidade de São Paulo, 2002)

Thiago Marinho Nunes, A prática das anti-suit injunctions no procedimento arbitral e seu recente desenvolvimento no Direito Brasileiro, n. 5 (São Paulo: RBA, 2005)

Werner Baer, A economia brasileira, 2nd ed. (São Paulo: Nobel, 2002)

Yolanda Vieira de Abreu & Carlos Alexandre Aires Barros, Visões sobre a economia colonial: a contribuição do negro, (Palmas: Editora, 2008)

[1] Lael Brainard & Leonardo Martinez-Diaz, Brazil as an economic superpower?: Understanding Brazil’s changing role in the global economy(Washington D.C : Brookings Institution Press, 2009) at vii.

[2] Ibid.

[3] Ibid.

[4] Ibid, at 2.

[5] Ralph Lattimore & Przemyslaw Kowalski, Brazil in Organisation for Economic Co-operation and Development, Globalisation and Emerging Economies : Brazil, Russia, India, Indonesia, China and South Africa (Paris : OECD Publishing, 2008) c.6 at 211.

[6] Ibid, at 212.

[7] Ibid, at 216.

[8] Philippe Fouchard et al., Fouchard, Gaillard, Goldman on International commercial arbitration, 2nd ed. (The Nederlands : Kluwer Law International, 1999) at 11.

[9] Etiene Maria Bosco Breviglieri & Denis Marcos Veloso Soares, Contratos internacionais firmados no Brasil: a possibilidade de escolha da legislação aplicável mediante a Lei de Arbitragem (Barretos: Fundação Educacional de Barretos, 2007)

[10] Ibid.

[11] Márcio A. M. Moraes, Arbitragem nas relações de consumo, 1st ed. (Curitiba: Juruá, 2006) at 151.

[12] Decreto-Lei 4.657 de 04 de setembro de 1942, L.I.C.C., D.O.U., 09 September 1942, article 9.

[13] Ibid.

[14] Beat Walter Rechsteiner, Direito Internacional Privado: teoria e prática, 9th ed. (São Paulo: Saraiva, 2006) at 133-155.

[15] Lei 9.307 de 23 de setembro de 1996, Dispõe sobre a arbitragem, D.O.U., 24 September 1996.

[16] Convention on the Recognition and Enforcement or Foreign Arbitral Awards, 10 June 1958, UNCITRAL (enter into force 07 June 1959) [NY Convention].

[17] Nigel Blackaby, Arbitration and Brazil: A Foreign Perspective in Arbitration International, vol. 17, no 2 (London: LCIA, 2001) 129 at 131.

[18] Ibid, at 132.

[19] Ibid.

[20] Brazil ratified the NY Convention on 07 June 2002.

[21] Eleonora Pitombo & Renato Stetner, A Convenção de Nova Iorque: Ratificação pelo Brasil (Article presented to the Law Firm Castro, Barros, Sobral, Gomes Advogados, 2004).

[22] Supra note 14, article 34.

[23] Supra note 15.

[24] Jan Paulsson et al., The Freshfields guide to arbitration and ADR: clauses in international contracts, 2nd ed. (London-Boston: Kluwer Law International, 1999) at 29.

[25] Caroline La Banca de Sá, A aplicação da Convenção de Nova Iorque na homologação de sentença arbitral estrangeira, Jus Navigandi, 2174 (14 June 2009) online: Jus Navigandi <http://jus2.uol.com.br/doutrina/texto.asp?id=12977>.

[26] Supra note 20.

[27] Supra note 5, at 211.

[28] Renata Alvares Gaspar, Reconhecimento de sentenças arbitrais estrangeiras no Brasil, (São Paulo: Atlas, 2009) at 18.

[29] Irineu Strenger, Arbitragem Comercial Internacional, (São Paulo: LTR, 1996) at 23.

[30] Aloísio Gonçalves de Castro Mendes, Direito Processual Romano, Ajuferjes (13 March 2009) online: Ajuferjes < http://www.ajuferjes.org.br/PDF/011DireitoProcessualRomano.pdf>.

[31] Supra note 29.

[32] Carla Fernanda de Marco, Arbitragem Internacional no Brasil, (São Paulo: RCS Editora, 2005) at 25.

[33] Supra note 29, at 39.

[34] Bernardo Guimarães Fisher Sá Nogueira, Da ”casa d’el ReI” ao supremo tribunal de justiça: contributos para a sua história, (Lisboa: Imprensa Nacional – Casa da Moeda, 1995).

[35] Yolanda Vieira de Abreu & Carlos Alexandre Aires Barros, Visões sobre a economia colonial: a contribuição do negro, (Palmas: Editora, 2008) at 25.

[36] John Hemming, Ouro Vermelho: A conquista dos índios brasileiros, (São Paulo: Editora da Universidade de São Paulo, 2007) at 82.

[37] Ibid, at 83.

[38] Werner Baer, A economia brasileira, 2nd ed. (São Paulo: Nobel, 2002) at 33.

[39] Ibid, at 34.

[40] Ibid.

[41] Edith Porchat, Informações históricas sobre São Paulo no século de sua fundação, (São Paulo: Editora Iluminuras Ltda, 1993) at 54.

[42] Supra note 39, at 36.

[43] September 7th, 1822.

[44] Supra note 39, at 38.

[45] Supra note 39, at 40.

[46] Tamás Szmrecsányi & Wilson Suzigan, História Econômica do Brasil Contemporâneo, 2nd ed. (São Paulo: Editora da Universidade de São Paulo, 2002) at 3.

[47] Ibid, at 4.

[48] Bianor Scelza Cavalcanti et al., Desenvolvimento e construção nacional: políticas públicas, (Rio de Janeiro: Editora FGV, 2005) at 161.

[49] Pactum in contrahendo.

[50] Marieta de Moraes Ferreira, João Goulart: entre a memória e a história, (Rio de Janeiro: Editora FGV, 2006) at 57.

[51] Adriana Lopez & Carlos Guilherme Mota, História do Brasil : uma interpretação, (São Paulo: Editora SENAC São Paulo, 2008) at 834.

[52] Note: These issues are going to be analyzed in the next chapters.

[53] Constituição da República Federativa do Brasil de 1988, October 5th, 1988.

[54] Antônio Carlos Robert Moraes, Território e História no Brasil, (São Paulo: Annablume, 2005) at 142.

[55] Supra note 39, at 217.

[56] Supra note 5, at 237.

[57] Supra note 33, at 34.

[58] Supra note 29, at 44.

[59] Romeu Falconi, A gênese das Ordenações Filipinas, Novos estudos jurídicos, vol. 10, n. 2, (27 March 2007) online: <https://www6.univali.br/seer/index.php/nej/article/view/411>

[60] Ibid.

[61] Supra note 29, at 13

[62] Ordenações Filipinas, (1603) online: <http://www.planalto.gov.br/ccivil_03/revista/Rev_03/ordenamento%20jur%20brasil.htm>

[63] Constituição política do Império do Brazil, Secretaria de Estado dos Negócios do Império do Brazil, (22 April 1822) online: <http://www.planalto.gov.br/ccivil_03/constituicao/constitui%C3%A7ao24.htm>

[64] Lei 556 de 25 de junho de 1850, Código Comercial Brasileiro, Brazilian Commercial Code, (25 June 1850) online: <http://www.planalto.gov.br/ccivil_03/Leis/L0556-1850.htm>

[65] Mariulza Franco, Aspectos da Arbitragem, Revista Unipar (Article presented to Universidade Paranaense) (31 March 2008) online: <http://revistas.unipar.br/juridica/article/viewFile/1288/1141>

[66] Marcos Paulo Félix da Silva, A arbitragem como alternativa à execução das obrigações no âmbito empresarial, Buscalegis, (Florianópolis: UFSC, 14 March 2007) online: <http://www.buscalegis.ufsc.br/revistas/index.php/buscalegis/article/viewFile/32706/31905>

[67] Lei 3.071 de 01 de janeiro de 1916, Código Civil Brasileiro, Brazilian Civil Code (01 Jan 1916) online: <http://www.planalto.gov.br/CCIVIL/leis/L3071.htm>

[68] Decreto-lei 1.608 de 18 de setembro de 1939, Código de Processo Civil Brasileiro, Brazilian Civil Procedure Code (18 Sep 1939) online: <http://www.planalto.gov.br/CCIVIL/Decreto-Lei/1937-1946/Del1608.htm>

[69] Supra note 29, at 25.

[70] Nigel Blackaby, Arbitration and Brazil : A foreign perspective, Arbitration International, vol. 17, n. 2, (London: LCIA, 2001).

[71] Supra note 30, at 14.

[72] Supra note 29, at 31.

[73] Supra note 70.

[74] Supra note 15.

[75] Decreto 21.187 de 22 de março de 1932, Promulgates the Geneva Protocol of 1923, regarding the arbitration clause, (22 March 1932) online: <http://www2.mre.gov.br/dai/arbitra001.htm>

[76] Supra note 70.

[77] Emir Calluf Filho, Arbitragem Internacional: o local da arbitragem, (São Paulo: Juruá Editora, 2006) at 24.

[78] In Brazil, the rogatory letter (“carta rogatória”) is the official document in which a judge from a determined jurisdiction requests a diligence to a judge from another jurisdiction. In: Natalia Guajardo Amigo, Arbitration to resolve international commercial disputes under the Brazilian Arbitration Act: Is Brazil a good site for arbitration?, (Thesis submitted to the Faculty of Law of the University of British Columbia, July 2004) at 113.

[79] Supra note 70.

[80] Ibid.

[81] Ibid.

[82] Ibid.

[83] Giuseppe Chiovenda, Princípios de Derecho Procesal Civil, t. 1 (Madrid: Reus, 1992) at 145-146

[84] Ludovico Mortara, Commentario del Codice e delle legi di procedura, vol. 3 (Milano: Biblioteca Giuridica contemporânea, 1923) at 34.

[85] Francesco Carnelutti, Instituciones del proceso civil, vol. 1 Trad. Santiago Sentis Melendo (Buenos Aires: Jurídicas Europa-América, 1989) at 77-96.

[86] Belt Walter Rechsteiner, Direito Internacional Privado: teoria e prática, 9th ed. (São Paulo: Saraiva, 2006) at 149.

[87] Ibid.

[88] Supra note 33, at 36.

[89] Supra note 12.

[90] Supra note 29, at 20-21.

[91] Supra note 29, at 43-44.

[92] “[…] the lex mercatoria is nowadays a wide set of rules emanated from private entities, international organisms, or from conventional origin of a ‘quasi-legal’ nature, acting in an independently manner of the specific jurisdictions or legal systems of any country.” See note 30, above. at 145.

[93] Supra note 15.

[94] Supra note 29, at 43-52.

[95] Ibid.

[96] Carlos Alberto Carmona, Arbitragem e processo: comentários à Lei 9.307/96, (São Paulo: Malheiros, 1998) at 19.

[97] Paulo Borba Casella, A nova lei brasileira (9.307/96)e a praxe internacional, (São Paulo: LTr, 1997) at 13-19.

[98] Supra note 29, at 43-52.

[99] Ibid.

[100] Through the ‘Emenda Constitucional 45/2004’, a constitutional amendment, the originary competence to enforce foreign arbitral awards in Brazil was given to the Brazilian Superior Tribunal of Justice (STJ). Before the amendment, the Brazilian Supreme Court (STF) had that competence. Supra note 29. at 52-53.

[101] Horacio Grigera Naón, Arbitration and Latin America : Progress and Setbacks, Freshfields Lecture, Arbitration International, vol. 21 n. 2 (London: LCIA, 2005).

[102] Supra note 29, at 43-52.

[103] Brazilian Supreme Court decision determining the constitutionality of the Brazilian arbitration law. (STF – SE – 5.206 – DJU (19 Dec 2001).

[104] Decreto Legislativo 52, de 25 de abril de 2002, About the ratification of the New York Convention (25 April 2002) online: < http://www.planalto.gov.br/ccivil_03/Decreto/2002/D4311.htm>

[105] Supra note 29, at 142.

[106] Ibid.

[107] Supra note 29, at 131.

[108] Decreto 18.871 de 13 de agosto de 1929, Código de Bustamante, About Private International law (Havana, 13 Aug 1929) online: <http://www2.mre.gov.br/dai/bustamante.htm>

[109] Such as the Panama Convention from 1975, the Montevidéu Convention from 1979, the Genebra Protocol from 1923 and the ‘Lex mercatoria’ system from UNCITRAL.

[110] Superior Tribunal de Justiça (STJ) is the Brazilian Superior Tribunal of Justice. Until 2004, the enforcement of all the foreign arbitral awards in Brazil was done by the Brazilian Supreme Court (STF).

[111] ‘Tratado de Assunção’, a sub-regional economic agreement among Brazil, Argentina, Uruguai and Paraguai, MERCOSUL (26 March 1991) online: <www.mercosur.org.uy>

[112] This treaty refers to judiciary cooperation among the members of MERCOSUL, regulating the recognition and enforcement of foreign arbitral awards. In: Decreto 2.067 de 12 de novembro de 1996, Promulgates the Protocol of cooperation and jurisdictional assistance in administrative, labor, commercial and civil matters, (12 Nov 1996) online:

< http://www2.mre.gov.br/dai/m_32.htm>

[113] Supra note 29, at 133.

[114] Supra note 29, at 138.

[115] Superior Tribunal de Justiça, STJ – SEC 3035/FR – Sentença Estrangeira Contestada, 2008/0044435-0 (31 Aug 2009) online:

<http://www.stj.jus.br/SCON/pesquisar.jsp?newsession=yes&tipo_visualizacao=RESUMO&b=ACOR&livre=sec%203035>

[116] Definitive awards pronounced by the STJ.

[117] Supra note 29, at 139.

[118] Supra note 33, at 101.

[119] José Carlos Magalhães, A convenção de Nova Iorque e a lei de arbitragem, y.5, n. 18 (São Paulo: Revista de Direito Bancário, do Mercado de Capitais e da Arbitragem, 2002) at 309-318.

[120] Ibid.

[121] Supremo Tribunal Federal (STF): The Brazilian Supreme Court.

[122] ‘Lex posteriori derogati priori’, STF – Ac. 80.004, RTJ 83/809 (01 Jun 1977).

[123] Supra note 33, at 86-111.

[124] Clávio de Melo Valença Filho, Ratificação da convenção sobre o reconhecimento e execução de sentenças arbitrais estrangeiras (Nova Iorque, 1958), y. 5, n. 16 (São Paulo: Revista de Direito Bancário, do Mercado de Capitais e da Arbitragem, 2002) at 387-390.

[125] Supra note 33, at 106.

[126] Supra note 29, at 140-144.

[127] Supra note 5.

[128] Supra note 29, at 135.

[129] Ibid.

[130] Miguel Virgós Soriano, Arbitraje comercial internacional y El convenio de Nueva York de 1958, n. 6679 (Espanha: Revista La Ley, 2007) at. 1.

[131] Diego Fernández Arroyo, Curso de contratación internacional, 2nd ed. (Madri: Colex, 2006) at 43-71

[132] Supra note 29, at 141.

[133] Lauro da Gama, Arbitragem: a nova lei brasileira (9.307/96) e a praxe internacional, (São Paulo: LTr, 1997) at 309-324.

[134] Supra note 29, at 142.

[135] Ibid.

[136] Superior Tribunal de Justiça, STJ – SEC 918 (28 Aug 2006).

[137] Supra note 123.

[138] Superior Tribunal de Justiça, STJ – SEC 887 (03 April 2006).

[139] Supra note 29, at 144.

[140] Nicolas Cabezudo Rodriguez, Comentarios a los artículos 35, 36 y 37 de La Ley 60/2003, t. 2 (Espanha: Bosch, 2004) at 851-893.

[141] Supra note 29, at 146.

[142] Catherine Valcke, Comparative History and the internal view of French, German and English Private Law, (2006, 19 C.J.L.J.) at 133-160.

[143] Supra note 29, at 149.

[144] Superior Tribunal de Justiça, STJ – REsp 450881 / DF – 2002/0079342-1 (11 April 2003).

[145] Supra note 29, at 152-160.

[146] Superior Tribunal de Justiça, STJ – SEC 3660 / GB – 2008/0218282-4 (28 May 2009).

[147] Ibid, at 160-163.

[148] Ibid, at 163-167.

[149] Ibid, at 167-171.

[150] Superior Tribunal de Justiça, STJ – SEC 1210 / GB – 2006/0185918-6 (20 June 2007).

[151] Ibid, at 171-187.

[152] Ibid, at 187-210.

[153] Ricardo Ramalho Almeida, Arbitragem comercial internacional e ordem pública, (Rio de Janeiro/São Paulo/Recife: Renovar, 2005). at 136.

[154] Thiago Marinho Nunes, A prática das anti-suit injunctions no procedimento arbitral e seu recente desenvolvimento no Direito Brasileiro, n. 5 (São Paulo: RBA, 2005) at 36-46.

[155] Superior Tribunal de Justiça, STJ – MS 11308 / DF – Mandado de Segurança – 2005/0212763-0 (09 April 2008).

[156] Carlos Alberto Carmona, Arbitragem e processo: comentários à Lei 9.307/96, (São Paulo: Malheiros, 1998) at 379.

[157] Supra note 29, at 203-208.

The enforcement of foreign arbitral awards in Brazil before and after the ratification of the New York convention by Leonardo Daldegan Lima

A.The enforcement of foreign arbitral awards in Brazil before the ratification of the New York Convention

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A.The enforcement of foreign arbitral awards in Brazil before the ratification of the New York Convention

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