Wednesday, May 23, 2007

Should São Paulo be considered the Latin American Arbitration Center?

I have read an article (in Portuguese) the other day which stated that São Paulo will be the most important arbitration venue of Latin America.

I think São Paulo may not necessarily become the leading arbitration venue of Latin America, mainly because:

  1. There is no strong arbitration institution in Brazil, and the existing Brazilian institutions have not signed cooperation agreements with the leading international organizations; and
  2. The Brazilian Arbitration Act must be revised, and the specificity of international arbitration must be expressly recognized by Brazilian law.

Parties from abroad very rarely choose São Paulo (or Rio de Janeiro) as seat of their arbitrations. When either seat is selected, it is not because they offer advantages to the participants, but because the contract has a strong connection with either city or any other strong reason. For example, if the party likely to be the defendant is domiciled in São Paulo, and their assets are located in Brazil, it may make sense to set a Brazilian city as the arbitral seat. Although Brazil is a party to the New York Convention, enforcement proceedings are very slow and it usually takes at least one year until the successful party at the arbitration obtains the so-called exequatur at the STJ (and the party still need to enforce the award through the Federal Court system).

São Paulo is never an option as a purely neutral third-country venue. For São Paulo to become a venue of choice for international arbitration, many things need to change.

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