Enter to open, tab to navigate, enter to select
Brazilian court reaffirms enforceability of arbitration agreements signed before the enactment of the Brazilian Arbitration Act
Practical Law Legal Update 4-504-1017 (Approx. 3 pages)
Brazilian court reaffirms enforceability of arbitration agreements signed before the enactment of the Brazilian Arbitration Act
| Published on 01 Dec 2010 • Brazil |
Eduardo Damião Gonçalves (Partner) at Mattos Filho Advogados and Flavia Foz Mange (Associate), Mattos Filho Advogados
In a decision dated 2 September 2010 but only recently published, the Superior Court of Justice reaffirmed that the Brazilian Arbitration Law (Law. N. 9.306/97) applies to contracts signed before its enactment. In doing so, and applying the Geneva Protocol on Arbitration Clauses to international agreements, the Superior Court of Justice overruled a lower court decision and dismissed court proceedings based on the existence of an arbitration agreement.
Background
Article 1 of the 1023 Geneva Protocol on Arbitration Clauses 1932 provides:
"Each of the Contracting States recognizes the validity of an agreement whether relating to existing or future differences between parties subject respectively to the jurisdiction of different Contracting States by which the parties to a contract agree to submit to arbitration all or any differences that may arise in connection with such contract relating to commercial matters or to any other matter capable of settlement by arbitration, whether or not the arbitration is to take place in a country to whose jurisdiction none of the parties is subject."
Prior case law on point:
- Superior Court of Justice, Request for Enforcement of Foreign Judgment N.º 349 (2007): settled the discussion regarding the immediate application of the provisions of Law 9.307.
- Superior Court of Justice, Special Appeal N.º 712.566 (2005): held that the provisions of 1996 Arbitration Law (1996 Law), in view of their procedural nature, have immediate application in contracts containing an arbitration clause, including those signed before the enactment of the 1996 Law.
- Superior Court of Justice, Request for Enforcement of Foreign Judgment N.º 5.847-1 (1999): held that the procedural provisions of the 1996 Law apply immediately.
Facts
Itaipu, a bi-national company created by an international treaty between Brazil and Paraguay in 1973, signed a service agreement with a consortium constituting Engerio, Engenharia e Consultoria S.A., Logos Engenharia S.A. and the Group Consultor Alto Paraná. The contract was for the construction of improvements related to the Hydroelectric Power Plant of Itaipu, the world's largest generator of renewable clean energy.
In 1997, Logos Engenharia S/A filed before the Rio de Janeiro Federal Courts an action seeking to recover monies and interest due to Itaipu's delay in making payments under the contract. Itaipu´s motion to dismiss the action, based on the existence of an arbitration agreement, was rejected by the lower Federal Court. Itaipu appealed to the Federal Court of Appeals. The Court of Appeals decided not to reverse the lower court denial, stating that the (1996 Law) did not apply as the service agreement containing the arbitration clause was signed prior to the enactment of the 1996 Law.
Decision
Overruling the lower courts' judgments, the Superior Court of Justice reaffirmed that the 1996 Law applies even if the underlying contract containing the arbitration agreement was signed before its enactment. The Superior Court noted that this was settled law and cited judgment N.º 349 (2007) as the leading case on point.
Furthermore, due to the international nature of the service agreement, the Superior Court of Justice recognised the application of 1932 Geneva Protocol on Arbitration Clauses. The Court stated that general principles of international law must prevail over national rules. Therefore, arbitration agreements contained in international contracts, as in this case, should be governed by the 1932 Geneva Protocol.
Comment
The Brazilian Courts have reaffirmed once more that the 1996 Law applies to contracts signed before its enactment. Although the issue was already settled by prior case law in Brazil, this decision involved an international contract and also considered the applicability of 1932 Geneva Protocol.