A. LEGISLATION AND RULES
A.1 Arbitration in numbers in Brazil
In 2024, Selma Ferreira Lemes, a famous arbitrator in Brazil, conducted a research study in 2024 considering data on arbitration proceedings for 2022 and 2023 from the largest arbitration institutions with a presence in Brazil.
This study concluded that there was a slight decrease in the number of cases between 2022 to 2023 (a 5.36% reduction) and a significant drop in the average value of these cases (from BRL 39 billion in 2022 to BRL 29 billion in 2023). The largest Brazilian arbitration institutions had 1,035 ongoing cases in 2023.
The leading areas of arbitration in Brazil were public administration, corporate disputes, construction, and energy contracts. There was an increase in labor arbitrations.
The findings of the study also indicated an increase in the duration of proceedings (from 19.87 months in 2022 to 23.91 months in 2023), mainly due to the complexity of cases and the need for extensive evidence collection.
Finally, it is interesting to note the growing female representation at arbitral tribunals, with women accounting for 35.39% of arbitrators in 2023. In the largest Brazilian arbitration institutions, women were more frequently appointed as presidents (51.32%) compared to men (48.68%).
The findings emphasized the importance of continued improvement in arbitration practices to address challenges and opportunities.
A.2 Brazilian new insurance law requires that arbitrations must take place in Brazil
On 9 December 2024, Federal Law 15,040 was enacted, establishing a new legal framework for insurance transactions in Brazil.
Article 129 of the new law enables arbitration for insurance transactions contracted within Brazil, provided that (i) Brazilian law governs the transaction, and (ii) the arbitral award is rendered in Brazil. The requirements under Brazilian law aim to address concerns that arbitration might be used to circumvent Brazilian public order insurance regulation.
The mandate for Brazil as the seat of arbitration is in line with article 130 of the law, which stipulates that only Brazilian courts can adjudicate judicial disputes on insurance policies.
In addition, the new law mandates that publicly accessible repositories be prepared with arbitral awards, redacted to ensure the anonymity of the parties involved. This measure seeks to address the concern that arbitration might hinder the development of widely known precedents in regulated industries.
A.3 Brazilian new rules regarding the parties’ freedom to choose the venue in court proceedings
On 4 June 2024, the Brazilian Congress enacted Federal Law 14,879, changing article 63 of the Brazilian Code of Civil Procedure (Code of Civil Procedure) on the parties’ freedom to choose the venue in court proceedings.
Beforehand, save in certain exceptional circumstances, the parties had freedom to choose any venue in court. The law inserted a new paragraph (paragraph 1 of article 63 of the Code of Civil Procedure), to state that the choice of venue shall only be accepted if it has some link to the residence or the domicile of one of the parties, or if it is the place of performance of a contractual obligation. Also, new paragraph 5 allows the judge to decline competence, even without formal agreement from the parties (sua sponte), in the absence of such a link.
The Code of Civil Procedure, enacted in 2016, originally adopted a liberal approach to the freedom of the parties to establish the court procedure, including the selection of the competent court. This recent change constitutes a throwback to a more inflexible viewpoint. The Bill[1] was supported by certain state courts, which were overwhelmed with work, since they used to be the preferred place due to specialization and costs.
This change does not affect the freedom of the parties to select the seat of an arbitration. Moreover, it is likely to foster the use of arbitration in complex business disputes. Parties located where courts were not so used to certain types of cases sometimes selected the more experienced courts of São Paulo, Rio de Janeiro or Brasília, but now the safest option is to arbitrate.
B. CASES
B.1 The Brazilian Superior Court of Justice ruled that the Brazilian Code of Civil Procedure does not apply to arbitration proceedings
The Brazilian Superior Court of Justice (STJ) has ruled that the Brazilian Civil Code of Procedure does not apply to arbitration proceedings.[2] In the case at hand, the losing party sought to set aside an arbitral award arguing that the winning party had translated the deposition of key witnesses, rather than engaging a sworn translator, as the Brazilian Civil Code of Procedure mandates.
The STJ rejected the claim, stating the absence of a statutory requirement for the mandatory application of procedural rules in arbitration. The reporting Justice Belizze emphasized the importance of maintaining the flexibility of arbitral proceedings.
Thus, the case represents a substantial advance for arbitration, as the judge recognized the autonomy of the arbitration procedure and emphasized the flexibility inherent in such proceedings, ruling out the automatic subsidiary application of the Brazilian Civil Code of Procedure.
B.2 The Brazilian Superior Court of Justice ruled that a breach of the arbitrator’s duty of disclosure shall only invalidate an arbitration award if the undisclosed fact could sever the party’s trust.
On June 18, 2024, the Brazilian Superior Court of Justice (STJ) ruled that a breach of an arbitrator’s duty of disclosure shall only invalidate an arbitration award if the undisclosed fact could sever the party’s trust and affect the arbitrator’s independence and impartiality.[3]
In the case at stake, the losing party argued that the arbitrator should have disclosed that his law firm had a healthcare company as its client, which had strong commercial relations with the majority shareholder of the winning party. Moreover, the losing party challenged the arbitrator because he supposedly misrepresented facts on his past experience as an arbitrator.
The STJ rejected the claim stating that the undisclosed facts did not suffice to prove that the arbitrator was partial or lacked independence.
The STJ ruled that, when the issue concerns an arbitrator’s non-disclosure of facts, it is key to assess the relevance of the undisclosed fact in deciding the lawsuit to set aside the arbitral award for lack of independence and impartiality. For this purpose, evidence is required to support such a claim of lack of independence and impartiality, and the failure to disclose per se does not suffice. Additionally, the judgment highlighted the importance of raising issues related to the arbitrator’s jurisdiction, suspicion, impediment or competence at the earliest opportunity.
Overall, the case was favorable for arbitration. By requiring evidence of partiality and/or lack of independence of the arbitrators, the Court precludes parties dissatisfied with arbitral awards from challenging the arbitrator’s performance based on vague facts. Furthermore, the judgment emphasizes the importance of promptly submitting any requests for clarification in case of doubt.
B.3 The Brazilian Superior Court of Justice establishes that the initiation of an arbitration always tolls the statute of limitations
The Superior Court of Justice (STJ), Brazil’s highest court for non-constitutional matters, ruled that the initiation of arbitration proceedings tolls the statute of limitations, even for cases predating the enactment of Law No. 13,129 of 2015 (“Brazilian Arbitration Act“) which explicitly states that the initiation of arbitration tolls the statute of limitations.[4]
In 2007, the parties were involved in an arbitration proceeding (“First Arbitration“), concerning the non-payment of rent and lease charges. The award from the First Arbitration was later declared null and void in a judicial proceeding. In 2012, the claimant brought a new arbitration (“Second Arbitration“). The respondent Clinica Brasil Ltda. (“Clinica“) lost the Second Arbitration and filed a new judicial proceeding to annul its award, arguing that the claim was time-barred.
The trial judge accepted Clinica’s argument and declared the Second Arbitration award null and void due to the statute of limitations. However, the Respondents appealed, and the Court of Appeals of the State of Goias ruled that the initiation of arbitration proceedings tolls the statute of limitations, allowing the amounts to be collected. Clinica then filed a special appeal to the STJ, arguing that the rule to toll the statute of limitation only came into force with the enactment of the Brazilian Arbitration Act, and that awards prior to 2015 should not be subject thereto.
The STJ rejected the special appeal, stating that even before the enactment of the Brazilian Arbitration Act, the prevailing understanding among scholars and case law was that the commencement of arbitration proceedings tolls the statute of limitations. The rationale is that arbitral awards and proceedings are equivalent to judicial proceedings and judgments in terms of tolling the statute of limitations.
[1] Law 14,879/2024
[2] Brazilian Superior Court of Justice, Special Appeal no. 1.851.324/RS, Reporting Justice Marco Aurélio Bellizze, judged on August 21, 2024.
[3] Brazilian Superior Court of Justice, Special Appeal no. 2.101.901/SP, Reporting Justice Nancy Andrighi, judged on June 18, 2024.
[4] Brazilian Superior Court of Justice, Special Appeal No. 1.981.715/GO, Reporting Justice Ricardo Villas Bôas Cueva, judged on September 17, 2024.
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