Tuesday, December 18, 2007

Arbitration clauses in adhesion contracts under Brazilian law

In Brazil, the use of arbitration is restricted in adhesion contracts. In such contracts, an arbitration clause is valid only if the adhering party either (i) initiates arbitral proceeding against the other party or (ii) expressly agrees to arbitration by means of a written document attached to the adhesion contract, or if it signs or initials the corresponding contractual clause, which must be inserted in boldface type in the adhesion contract. This applies to adhesion contracts in general, whether or not the relationship of the parties are considered a “consumer relationship” under the so-called “Brazilian Consumer Code".

In theory, arbitration clauses are valid for non-adhesive contracts on a consumer-relationship basis. I meant “theoretically” because the “Consumer Code" addresses consumer arbitration in different terms: it prohibits arbitration when imposed in standard contracts, where the consumer has little or no bargaining power at all. Some scholars argue that the Brazilian Arbitration Act has revoked this provision of the Consumer Code, while some others argue the other way around.

The enforceability of arbitration clauses in non-adhesive consumer contracts is unsettled under Brazilian law.