Brazilian law fully recognizes the concept of party autonomy (autonomia da vontade), subject only to matters of public policy (ordem pública) and morality (bons costumes). Therefore, parties to an arbitration agreement have freedom to either lay down the rules of procedure of their proceedings empower the arbitral tribunal to do so (as long as the selected rules of procedure comply with the following principles: (i) adversarial system; (ii) equal treatment of the parties — giving each party a reasonable opportunity to present its case—; (iii) impartiality; and (iv) arbitrator’s freedom of decision).
One Brazilian scholar understands that is possible for the parties to select a foreign law as the procedure law of arbitration, provided that such foreign law comply with the principles mentioned above, in the preceding paragraph [CARLOS A. CARMONA, ARBITRAGEM E PROCESSO 28 (1998)].
If the parties fail to select the arbitration's rules of procedure —or if they fail to indicate that this will be a resolution of the arbitral tribunal—, the arbitral tribunal is then authorized to take such decision, as it considers appropriate, as per Section 21(1) of the Brazilian Arbitration Act (“BAA”).
Brazilian law allows some "discovery": Section 22 of the BAA lays down that the arbitral tribunal —either at its own discretion or at the parties' request— may take the parties' deposition, hear witnesses, and determine the production of expert witness reports or other evidence. Parties may opt for the use of the IBA Rules on the Taking of Evidence in International Commercial Arbitration, a sort of “model discovery rules”, but US-style discovery is not permitted in international arbitrations where Brazilian law is the lex arbitri.
It is fair to say that BAA gives the parties —and the arbitrators— great freedom and flexibility to agree upon the arbitration rules.
Friday, October 06, 2006
Thursday, October 05, 2006
Does Brazilian law sets forth any requirements, qualifications or qualities for arbitrators?
Brazilian law does not require that potential arbitrators have particular qualifications in order to act as arbitrators, but there are a few mandatory requirements, found in Sections 13 and 14 of the Brazilian Arbitration Act ("BAA"): arbitrators must (i) have legal capacity, (ii) be trusted by the parties, and (iii) act with impartiality, independence, competence, diligence and discreetness.
To act as an arbitrator in Brazil, one doesn't need to be a lawyer or have formal legal education. Potential candidates don't need to obtain any specific qualifications to act as an arbitrator (no licensing, certification, or specific coursework is required by law). Foreigners can act as arbitrators —in arbitral proceedings or single arbitral hearings taking place in Brazil—, without any problems, as there are no restrictions under the BAA based on nationality or citizenship.
It is obvious that arbitrators must possess some particular qualities, such as experience in particular industries or sectors, and some personal and professional skills. But the particular qualities of an arbitrator should be determined by the parties themselves, in their arbitration agreement, or by the appointing authority, if it is the case.
To act as an arbitrator in Brazil, one doesn't need to be a lawyer or have formal legal education. Potential candidates don't need to obtain any specific qualifications to act as an arbitrator (no licensing, certification, or specific coursework is required by law). Foreigners can act as arbitrators —in arbitral proceedings or single arbitral hearings taking place in Brazil—, without any problems, as there are no restrictions under the BAA based on nationality or citizenship.
It is obvious that arbitrators must possess some particular qualities, such as experience in particular industries or sectors, and some personal and professional skills. But the particular qualities of an arbitrator should be determined by the parties themselves, in their arbitration agreement, or by the appointing authority, if it is the case.
Is arbitration confidential in Brazil?
The Brazilian Arbitration Act contains no provision regarding the confidentiality of arbitration proceedings. Yet, some Brazilian scholars believe that there is an implicit obligation of confidentiality under Brazilian law (I believe that arbitration is private, but not necessarily confidential).
To date, Brazilian courts have not dealt with the question on whether there is an implicit obligation —or implied duty— of confidentiality in arbitration proceedings.
More certainty regarding the position of Brazilian law vis-à-vis the confidentiality of arbitration, only when a Brazilian court issues a decision regarding this matter (either endorsing or opposing the views of those scholars who believe arbitration is confidential —albeit the absence of an express provision in that regard).
Until such time, it is recommended that the parties either insert a provision of confidentiality in their arbitration agreement —or choose arbitral rules expressly providing for confidentiality— if they want guarantee that aspects of an eventual arbitration between them will be kept confidential by all the parties involved in the proceedings, during the proceedings and after the arbitral awards are issued.
To date, Brazilian courts have not dealt with the question on whether there is an implicit obligation —or implied duty— of confidentiality in arbitration proceedings.
More certainty regarding the position of Brazilian law vis-à-vis the confidentiality of arbitration, only when a Brazilian court issues a decision regarding this matter (either endorsing or opposing the views of those scholars who believe arbitration is confidential —albeit the absence of an express provision in that regard).
Until such time, it is recommended that the parties either insert a provision of confidentiality in their arbitration agreement —or choose arbitral rules expressly providing for confidentiality— if they want guarantee that aspects of an eventual arbitration between them will be kept confidential by all the parties involved in the proceedings, during the proceedings and after the arbitral awards are issued.
Sunday, October 01, 2006
Important Question re: Enforcement of Foreign Arbitral Awards in Brazil
Since in my previous posting I wrote about recognition and enforcement of foreign arbitral awards, I would like to comment about something that I have not yet seen addressed anywhere.
Brazil acceded to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) in 2002 (The New York Convention entered into effect in Brazil pursuant to Decreto nº 4.311, de 23 de julho de 2002). Needless to say, Brazil’s accession to the New York Convention was very well received by Brazilian and foreign practitioners and scholars, for obvious reasons: it was a late —considering that the Brazilian Arbitration Act was dated September 1996, but a very important— step for the strengthening and further development of arbitration in Brazil.
The procedure for enforcement of foreign arbitral awards in Brazil is identical to the procedure for domestic awards: both are enforceable under provisions of the Brazilian Civil Procedure Code. Before becoming enforceable in Brazil, however, foreign arbitral awards must receive a leave for enforcement —known in the Brazilian legal writing as exequatur or homologação— from the Superior Tribunal de Justiça (“STJ”), which is the court with exclusive jurisdiction to confirm foreign arbitral awards.
Under Brazilian legal tradition, the application for recognition of a foreign arbitral award is a legal process that precedes enforcement, which is a distinct legal process that must be filed after the STJ has granted the exequatur to the foreign award (as per the sole paragraph of Section 34 of the Brazilian Arbitration Act, a foreign arbitral award is an award made outside the Brazilian territory). Domestic awards —those made in the Brazilian territory—, however, don't need to be previously confirmed by any court of law as, in Brazil, domestic awards are final and binding, and not subject to any leave for enforcement or registry by State Courts (Section 18 of the Brazilian Arbitration Act).
The second part of Article III of the 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”.
Could the conditions for the recognition and enforcement of foreign arbitral awards in Brazil, be considered more onerous than those imposed to the enforcement of domestic awards, in view of the New York Convention's Article III?
I believe so.
The Brazilian exequatur process increases time and cost to the enforcement of foreign awards in Brazil, because such process consists of separate sessions (hearings) before the STJ, each session taking place months apart from the other. And, once the exequatur order is finally obtained, the successful party must still file an execution lawsuit to secure enforcement of the award —before the Federal Court of with jurisdiction over the place where enforcement is sought— and this is not also obtainable without further delay.
The practical problems to enforce foreign awards in Brazil, including the applicant’s need to file another procedure to secure enforcement upon the grant of exequatur from the STJ, creates significant cost and time constrains to the applicants. It takes years until a foreign arbitral award is finally enforced in Brazil, counted from the application before the STJ.
Until Brazil passes an amendment to both the Federal Constitution and the Brazilian Arbitration Act to simplify the exequatur procedure, removing the exclusive jurisdiction of the STJ to that end, the enforcement of foreign arbitral awards —and eventual collection of the defendant's assets, in Brazil— will continue to be time-consuming and costly. The recognition of the foreign arbitral award inside the enforcement process, in the same process —as used in several countries— is the best solution to Brazil.
Brazil acceded to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) in 2002 (The New York Convention entered into effect in Brazil pursuant to Decreto nº 4.311, de 23 de julho de 2002). Needless to say, Brazil’s accession to the New York Convention was very well received by Brazilian and foreign practitioners and scholars, for obvious reasons: it was a late —considering that the Brazilian Arbitration Act was dated September 1996, but a very important— step for the strengthening and further development of arbitration in Brazil.
The procedure for enforcement of foreign arbitral awards in Brazil is identical to the procedure for domestic awards: both are enforceable under provisions of the Brazilian Civil Procedure Code. Before becoming enforceable in Brazil, however, foreign arbitral awards must receive a leave for enforcement —known in the Brazilian legal writing as exequatur or homologação— from the Superior Tribunal de Justiça (“STJ”), which is the court with exclusive jurisdiction to confirm foreign arbitral awards.
Under Brazilian legal tradition, the application for recognition of a foreign arbitral award is a legal process that precedes enforcement, which is a distinct legal process that must be filed after the STJ has granted the exequatur to the foreign award (as per the sole paragraph of Section 34 of the Brazilian Arbitration Act, a foreign arbitral award is an award made outside the Brazilian territory). Domestic awards —those made in the Brazilian territory—, however, don't need to be previously confirmed by any court of law as, in Brazil, domestic awards are final and binding, and not subject to any leave for enforcement or registry by State Courts (Section 18 of the Brazilian Arbitration Act).
The second part of Article III of the 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”.
Could the conditions for the recognition and enforcement of foreign arbitral awards in Brazil, be considered more onerous than those imposed to the enforcement of domestic awards, in view of the New York Convention's Article III?
I believe so.
The Brazilian exequatur process increases time and cost to the enforcement of foreign awards in Brazil, because such process consists of separate sessions (hearings) before the STJ, each session taking place months apart from the other. And, once the exequatur order is finally obtained, the successful party must still file an execution lawsuit to secure enforcement of the award —before the Federal Court of with jurisdiction over the place where enforcement is sought— and this is not also obtainable without further delay.
The practical problems to enforce foreign awards in Brazil, including the applicant’s need to file another procedure to secure enforcement upon the grant of exequatur from the STJ, creates significant cost and time constrains to the applicants. It takes years until a foreign arbitral award is finally enforced in Brazil, counted from the application before the STJ.
Until Brazil passes an amendment to both the Federal Constitution and the Brazilian Arbitration Act to simplify the exequatur procedure, removing the exclusive jurisdiction of the STJ to that end, the enforcement of foreign arbitral awards —and eventual collection of the defendant's assets, in Brazil— will continue to be time-consuming and costly. The recognition of the foreign arbitral award inside the enforcement process, in the same process —as used in several countries— is the best solution to Brazil.
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