Arbitration in Brazil is governed by Law 9.307 of September 1996 (“the Arbitration Act”), which is based on the UNCITRAL Model Law, and various provisions of the Brazilian Code of Civil Procedure in relation to the enforceability and challenging of the arbitration award (for details see below).

Arbitration in Brazil can be conducted on an ad hoc basis or under the auspices of arbitral institutions. The main Brazilian arbitral institutions are the São Paulo Chamber of Mediation and Arbitration, the Getúlio Vargas Foundation Chamber of Conciliation and Arbitration and the Brazilian Centre of Mediation and Arbitration.

Since the enactment of the Arbitration Act, the number of domestic and international arbitrations has increased significantly and with the full support of the Brazilian courts.

Scope of application
The provisions of the Arbitration Act are applicable to all kinds of arbitration including institutional and ad hoc arbitration, arbitration at law and ex aequo et bono, provided that the seat of the arbitration is in Brazil.

The provisions of the Arbitration Act apply to both domestic and international arbitration, and include rules for the enforcement of foreign awards.

Subject matter
Parties may choose arbitration as a dispute resolution mechanism for disputes relating to freely transferable rights.

However, some types of dispute may not be submitted to arbitration. These include, for example, disputes relating to family law issues, tax, criminal cases and testamentary matters.

Formal requirements
An arbitration agreement has to be conducted in written form, although no specific wording is required (Article 2 of the Arbitration Act). That said, parties are always well-advised to seek professional advice regarding the drafting of their arbitration agreements to ensure that they are valid and enforceable.

The arbitration agreement can consist of a separate agreement or form part of a clause within the relevant contract. In “adhesion” or standard form contracts the arbitration agreement shall be valid only if the adhering party accepts, either expressly or by conduct, the settlement of its dispute through arbitration.

Article 267 of the Brazilian Code of Civil Procedure provides that a valid and enforceable arbitration agreement deprives the State Courts of any jurisdiction to determine the dispute. In the event that a party nevertheless commences proceedings in the State Courts, the other party will generally be able to rely on the existence of the arbitration agreement to persuade the court to dismiss those proceedings for lack of jurisdiction to hear the merits of the dispute.

It should be noted that even where there is an arbitration agreement, prior to the commencement of any arbitral proceedings the parties are required to execute an arbitration commitment (called the “compromisso arbitral”), under penalty of nullity. The compromisso arbitral is a commitment by the parties to grant effectiveness to the arbitration agreement.

The compromisso arbitral will contain all the specific provisions necessary to give effect to the arbitration proceedings, i.e. the appointment of arbitrators, the selection of any institutional rules (if any), and a statement of the issues to be submitted to the arbitral tribunal.

If a party refuses to execute the compromisso arbitral, the other party may apply to the state court for specific performance to that effect (Articles 6 and 7 of the Arbitration Act). In the absence of the other party’s cooperation, the order made at this hearing will take effect as the compromisso arbitral.

Effects
If the parties have concluded a valid and enforceable arbitration agreement, they are required to arbitrate all disputes that fall within the scope of that agreement and cannot submit such disputes to the Brazilian courts.

The constitution of the arbitral tribunal
The parties are free to decide how many arbitrators will constitute the arbitral tribunal, provided that they are of an uneven number (usually three). However, for more straightforward disputes the parties may agree to appoint a sole arbitrator.

The arbitrator(s) shall be appointed by any method agreed by the parties or in accordance with the rules of the arbitral institution chosen by them. The usual practice for appointing a tribunal of three arbitrators is for each of the parties to nominate one arbitrator, and mutually agree upon the third. Alternatively, the parties may agree that the two arbitrators can appoint the third arbitrator. In the event the parties fail to reach an agreement on this process, the State Court shall decide how many arbitrators may constitute the tribunal and will have the authority to appoint those arbitrators.

According to Article 13 of the Arbitration Act, anyone can be appointed as an arbitrator so long as they are capable of exercising their civil rights. However, once appointed, an arbitrator has a duty to behave competently and to act independently and impartially at all times.

The challenge of arbitrators
According to Article 14 of the Arbitration Act, arbitrators may be challenged by the parties on the same grounds as judges. Those grounds include if the arbitrator: has a personal or business relationship with one of the parties or their lawyer; has an interest in the outcome of the dispute; has expressed a prior opinion or recommendation on issues regarding the dispute; or has received an ‘important benefit’ from one of the parties.

Prior to accepting his or her appointment, an arbitrator shall disclose any fact that may be deemed to affect his or her impartiality or independence.

In principle, challenges can only be raised against party-appointed arbitrators for reasons arising after their appointment. In the event that the reason for the challenge against the arbitrator only became apparent after the appointment, an arbitrator may be challenged for a reason that occurred prior to the appointment.

Pursuant to Article 15 of the Arbitration Act, arbitrators are competent to rule upon any challenge that shall be filed at the first hearing after the constitution of the arbitral tribunal. If the challenged arbitrator refuses to hear the challenge, a judge is entitled to determine the issue and his decision cannot be appealed. In these circumstances, the arbitration proceedings will be suspended pending the resolution of the challenge. In the event of a successful challenge against an arbitrator, such arbitrator’s position shall be filled by an alternate member nominated by the parties prior to the constitution of the tribunal, if such nomination has taken place, otherwise on the basis of the agreed procedural rules.

Responsibility and liability of the arbitrators
In accordance with the Brazilian Code of Civil Procedure, where an arbitrator is in breach of their duties referred to above, he will have a general obligation to compensate third parties for damages caused by his or her negligence or wilful misconduct.

As well as civil liability for breaches of an arbitrator’s duty, arbitrators may also be criminally liable for their actions in the same way as if they were public servants (Article 17 of the Arbitration Act).

Arbitration fees
The Arbitration Act contains no express provisions on arbitrators’ fees.

In respect of institutional arbitration proceedings, each institution has its own rules governing the payment of administrative fees and the remuneration of arbitrators. For ad hoc arbitration, there will be no administrative fees payable and the remuneration of the arbitrators will be agreed between the parties and the arbitrators (usually in the compromisso arbitral).

Competence to rule on jurisdiction
Pursuant to Article 8 of the Arbitration Act, the arbitral tribunal is entitled to rule on its own jurisdiction, including the existence or validity of the arbitration agreement.

An arbitration clause which is part of another agreement is treated as an independent (and severable) arbitration agreement. The invalidity of the agreement containing the arbitration clause will therefore not ipso jure affect the validity of the arbitration clause.

Power to order interim measures
Unless the parties have agreed otherwise, arbitrators are empowered by Article 22 of the Arbitration Act to grant any interim measures to protect the parties’ rights and the integrity of the arbitral proceedings.

However, no decision or order on interim measures by the arbitral tribunal is directly enforceable. Instead, the competent State Court has to order the enforcement of the interim measures granted by the tribunal.

Commencement of arbitration
Arbitral proceedings are deemed to commence when all the arbitrators have accepted their appointment (Article 19 of the Arbitration Act).

General procedural principles
Article 21 of the Arbitration Act provides that the parties are free to choose the procedure to be followed by the arbitrators. If the parties do not agree upon the procedure to be applied – and unless the parties have agreed otherwise – Article 21 (1) of the Arbitration Act provides that the arbitral tribunal should choose the rules of procedure it considers most appropriate

Place and language of arbitration
The parties are also free to choose the seat of the arbitration in the compromisso arbitral.

There is no express provision in the Arbitration Act governing the language of the arbitration. It is generally accepted, however, that the parties are free to choose the language to be used in their arbitral proceedings.

Oral hearings and written proceedings
The Arbitration Act provides that the parties are free to decide whether to hold an oral hearing or whether to conduct the arbitration on a ‘documents only’ basis.

The arbitral tribunal must hear the parties and give them the opportunity to make oral submissions, if so requested. The tribunal shall also hear all the witnesses and experts (if they are called by the tribunal upon the request of the parties to explain their written reports). The parties shall be given sufficient prior notice of any hearings and any procedural action of the arbitral tribunal which involves the inspection of property or documents.

Court assistance in taking evidence
The arbitrators may request the assistance of the courts to obtain evidence. For instance, they may ask the court to summon witnesses that have refused to attend voluntarily and give evidence. If a witness fails, without good cause, to comply with the tribunal’s request to give oral testimony, the tribunal may take such behaviour into account when determining the weight to be given to that witness’s evidence.

Choice of law
Pursuant to Article 1 of the Arbitration Act, parties are free to choose the rules that shall be applied to the arbitration procedure, provided that they do not violate Brazilian public policy. Parties may also agree that the award shall be granted based on basic principles of law, common practice, or rules of international commerce.

As an alternative, the parties may authorise the arbitral tribunal to decide ex aequo et bono (instead of pursuant to the applicable law).

Time, form, content and notification of the award
Article 11 of the Arbitration Act provides that the parties can stipulate the time­frame within which the arbitral award is to be issued, in accordance with the compromisso arbitral. In the absence of such provision, the arbitral award shall be rendered in writing within six months of the constitution of the arbitral tribunal. However, during the course of the arbitration the parties and the arbitrators may agree to extend this period.

Any arbitral award based on law (rather than ex aequo et bono) must be properly reasoned both in fact and in law. It must deal with all the issues submitted to arbitration as well as ancillary matters such as the costs of the proceedings.

The arbitral award itself must be in writing (containing the facts, grounds and legal provisions upon which it is based), signed by the arbitrators, and stating the place and date of its issuance.

The arbitral award must be signed by a majority of the arbitrators (Article 24 of the Arbitration Act). Should one arbitrator fail to sign the award, the chairman of the tribunal shall certify such absence.

Where the arbitrators disagree, the chairman shall make the final decision on the award (Article 24 (1) of the Arbitration Act).

Settlement
Provided that the parties settle their dispute the proceedings will terminate. At the request of the parties, the arbitral tribunal shall record the settlement in the form of an award on agreed terms. An award on agreed terms has the same effect as any other award made by an arbitral tribunal.

Costs
The parties can decide in the compromisso arbitral how future costs of the arbitration will be borne (including the arbitrators’ fees and the parties’ legal fees).

In the absence of any prior agreement between the parties on this issue, the arbitrators will determine the costs of the arbitration and allocate the responsibility for paying such costs between the parties. As a general rule, the winning party is entitled to recover its costs from the losing party. However, if the winning party is only partly successful, its recovery may be limited to those costs attributable to the extent of its success.

Termination of the proceedings
The arbitration proceedings terminate when the final arbitral award is issued. In certain limited circumstances, the arbitration proceedings may terminate before the rendering of the final award (for example, where an arbitrator dies or excuses himself prior to being appointed and cannot be replaced).

Correction, clarification and the issue of a supplemental award
Article 30 of the Arbitration Act provides that any party may file a motion for the arbitral tribunal to clarify the terms of the award. This motion should be filed within five days of receipt of the award, and may request that the arbitral tribunal correct any material error or omission, and/or clarify the grounds on which the award has been determined. This motion may be submitted even where the party expressly confirms that it will not be appealing the award.

Either party may request an additional award if the arbitral tribunal failed to make an award on any claim presented in the arbitral proceedings.

The jurisdiction of the courts
The ordinary courts are excluded from assuming jurisdiction over disputes that the parties have agreed to submit to arbitration (as explained above).

However, the Arbitration Act gives the courts limited jurisdiction to provide legal assistance to the arbitral process in certain circumstances.

In addition to the courts’ powers to enforce interim measures in relation to the appointment and challenging of arbitrators (as discussed above), the courts have the power to determine a request to nullify the arbitration agreement.

The courts may also assist in the enforcement of interim measures rendered by the arbitrators.

Dismissal of court proceedings
In the event that an action regarding a matter which is subject to an arbitration agreement is brought before a court, the court is obliged to dismiss the claim (without considering its merits) upon the request of one of the parties, unless it considers the arbitration agreement to be null and void, inoperative, or incapable of being performed.

Preliminary rulings on jurisdiction
Pursuant to Articles 20 and 33 (1) of the Arbitration Act, within 90 days from the date of service in the parties of an arbitral tribunal’s ruling on jurisdiction, a party may request that the competent court renders a decision on whether or not the arbitral tribunal has jurisdiction.

Interim protective measures
The courts in Brazil have jurisdiction to grant interim measures in support of arbitral proceedings both before and after the constitution of the arbitral tribunal.

The courts are also exclusively competent to enforce interim measures granted by the arbitral tribunal.

Obtaining evidence and other court assistance
The local courts have jurisdiction to assist the arbitral tribunal to obtain evidence, pursuant to Article 22 (4) of the Arbitration Act.

The application to set aside the award
The arbitral award is effective and binding on the parties to the arbitration, as well as their successors, in the same way as if the arbitral award was a court judgment. An arbitral award is not generally subject to appeal or the approval of the State Courts.

However, the arbitration award may be challenged before the competent court and set aside for any one or more of the following reasons specified in Article 32 of the Arbitration Act:

1. the arbitration agreement is null;
2. the arbitral award is issued by one or more individuals who are not capable of acting as an arbitrator;
3. the arbitral award does not comply with the requirements provided in the Arbitration Act as to its drawing up (facts, grounds, legal provisions upon which the award is based, date and place, signature);
4. the arbitral award extends to issues that fall outside the scope of the arbitration agreement;
5. the arbitral award does not decide all issues submitted to the tribunal for resolution;
6. it is proved that the arbitral award was rendered under illegal circumstances (extortion, corruption, etc.);
7. the arbitral award was issued after the agreed time limit; or
8. an arbitrator failed to act impartially or independently when rendering the award, or disregarded the obligation to treat the parties equally.

Where any one or more of the grounds set out above applies, the application for setting aside the award must be submitted to the relevant court within 90 days of receipt of the award.

The competent State Court may either declare the arbitral award null and void in the case of grounds 1, 2, 6, 7 and 8 of Article 32, or order the arbitrators to make a new award.

Domestic awards
An arbitration award has the same effect as a final, binding and non-appealable court judgment. The court which has jurisdiction for enforcement is the local court where the arbitration procedure was held, except in respect of a foreign arbitration award, which shall follow the enforcement procedure set out below.

Foreign awards
Awards issued rendered outside of Brazil are enforceable in Brazil according to international treaties ratified by Brazil (principally the New York Convention – see below). In the absence of any applicable treaty, foreign awards shall be recognised and enforced in accordance with the rules provided in the Arbitration Act.

Foreign arbitral awards are subject to approval (or “homologation”) by the Superior Court of Justice. The homologation of the arbitration award by the Superior Court of Justice is subject to confirmation of:

• the capacity of the parties to the arbitration agreement;
• the validity of the arbitration agreement according to the law to which the parties have submitted it or, in the absence of an express choice of law, according to the law of the place where the arbitration award is issued;
• the defendant party having been given proper notice of the arbitration procedure, including the right to submit its defence;
• the arbitral award not exceeding the scope of the arbitration agreement (unless it is possible to sever those excesses from the valid part of the award);
• the arbitration award being duly enforceable and not having been set aside or suspended by a court of the jurisdiction in which it has been issued;
• the arbitration award not involving a dispute which, according to Brazilian law, may not be resolved by means of arbitration; and
• the arbitration award not being contrary to Brazilian public policy.

Once the arbitral award is homologated by the Superior Court of Justice, it shall be enforced by a lower Brazilian federal court.

Finally, as Brazil has been a signatory to the 1958 New York Convention (NYC) since 2002, the provisions of the NYC are in force in Brazil and apply to the recognition and enforcement of foreign arbitral awards. For this reason, in principle all foreign awards should be recognised and enforced in Brazil under the NYC.

CMS Bureau Francis Lefebvre
Marcelo T. de Alvear 612 Piso 1
C1058AAH Capital Federal
Buenos Aires, Argentina


Marcelo Cippitelli
T +54 11 43 11 10 08
F +54 11 43 11 80 88
E mcippitelli@cms-bfl.com.ar


Patrick Patelin
T +54 11 43 11 10 08
F +54 11 43 11 80 88
E ppatelin@cms-bfl.com.ar