Saturday, September 30, 2006

Enforcement of unreasoned awards in Brazil: is it possible?

In my previous posting (Non-lawyers as sole arbitrators in Brazil), I mentioned that naked or unreasoned awards were against Brazilian public policy, as arbitral awards made in Brazil must necessarily be reasoned (v. Section 26, II of the Brazilian Arbitration Act) ("BAA").

What about arbitral awards made overseas? Do foreign awards need to be reasoned, in order to be validly recognized and enforced in Brazil?

The Brazilian arbitration community awaits for the decision of the Brazilian Superior Tribunal de Justi├ža (“STJ”) in Kanematsu USA Inc v. ATS - Advanced Telecommunications Systems do Brasil Ltda. Kanematsu is seeking to enforce in Brazil a foreign arbitral award rendered under the Commercial Arbitration Rules ("Rules") of the American Arbitration Association ("AAA"), in which Kanematsu was the succesful party.

The arbitral award rendered in favor of Kanematsu was unreasoned.R-42(b) of the Rules establishes that "[t]he arbitrator need not render a reasoned award unless the parties request such an award in writing prior to appointment of the arbitrator or unless the arbitrator determines that a reasoned award is appropriate".

ATS claimed that Kanematsu's petition for enforcement of the AAA award is a violation of public policy, in view of the provision of Section 26, II of the BAA. However, Kanematsu and ATS have not requested in writing that a reasoned award was issued by the arbitral tribunal, and, (i) if the parties themselves voluntarily agreed to arbitrate under such conditions —each using its party autonomy— and (ii) such conditions were in accordance with the lex arbitri, why shouldn't the award be recognized by the STF?

The question is whether the STJ will apply the concept of international public policy, and recognize the Triple A arbitral award in favor of Kanematsu. Brazilian practitioners will certainly welcome the application of the international public policy in Brazil, which will leave behind the old and narrow interpretation of Supremo Tribunal Federal ("STF") on public policy (Constitutional Amendment No. 45/2004, which entered into force on December 31, 2004, has transfered the jurisdiction for the exequatur of foreign arbitral awards from the STF to the STJ).


Anonymous said...

What do Brazilian specialists say about enforcement of unreasoned arbitral awards in Brazil? I'd be glad if you could comment on that.

Pedro Alberto Costa Braga de Oliveira said...
This comment has been removed by the author.
Pedro Alberto Costa Braga de Oliveira said...

Dear Anonymous:

Specialists are waiting for the decision of the STJ on Kanematsu.

In any case, it is worth mentioning a seminar that I attended a couple of years ago. When asked whether foreign unreasoned awards could be recognized and enforced in Brazil, one of the panel members —a well-known practitioner— said no. In fact, he mentioned that this was a matter of public policy, and that the recognition and enforcement of foreign unreasoned arbitral awards was not possible under the Brazilian Federal Constitution.

Another panel member, an experienced law professor and arbitration practitioner, said exactly the opposite. He even said that — in the past— he was counsel to parties seeking the recognition of unreasoned awards before the STF. And he said he had it recognized. He never mentioned the case number, before the seminar was over...

Who was right? Let’s wait for the STJ decision on Kanematsu.

Best regards,