Sunday, July 09, 2006

Onerous Conditions on Enforcement

The second part of Article III of the 1958 New York Convention, which relates to discriminatory treatment between domestic and foreign arbitral awards, states that:

“There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.”

The procedure for enforcement of foreign arbitral awards in Brazil is identical to the procedure for domestic awards (those made in the Brazilian territory): both are enforceable under provisions of the Brazilian Civil Procedure Code (Section 34 of the Brazilian Arbitration Act establishes that foreign arbitral awards are those made outside the Brazilian territory). Before becoming enforceable in Brazil, however, foreign arbitral awards must receive a leave for enforcement —known in Brazil as exequatur or "homologação"— from the Superior Tribunal de Justiça (“STJ”). Domestic arbitral awards, on the other and, are not subject to any exequatur procedure, as domestic awards are final and binding, and have the same and effect as a Brazilian court judgment (Section 18 of the Brazilian Arbitration Act).

The exequatur procedure before the STJ consists of separate hearings, and it is common that such separate hearings take place months apart from each other. One of the reasons for this long and cumbersome process is that the STJ has a remarkable backlog of cases waiting for judgment.

The application for recognition of a foreign arbitral award is a separate legal process that precedes enforcement. A foreign arbitral award is enforceable by means of a legal action filed with the local branch of the Justiça Federal (Federal Court) where enforcement is sought. Such action is separate —and subsequent— to the previous confirmation of the foreign award, which takes place physically in Brasília, capital of Brazil, where the STJ is located.

Does Brazilian law provides for a “more onerous condition” of enforcement of foreign arbitral awards, as per the language of Article III of the 1958 New York Convention? To date, the answer to this question has not been addressed by any Brazilian court of law.

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