Originally from Dispute Resolution Journal

Since 1996, arbitration and ADR generally seem to have attained a high level of acceptance in Brazil. Brazil has a modern Arbitration Act (Law No. 9.307) and has ratified (in July 2002) the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). More recently, it enacted the International Commercial Arbitration Agreement of Mercosur (MERCOSUR Treaty), which provides for arbitration to resolve commercial disputes.1 In addition, mediation is being used more often in Brazil. A bill is now pending in the National Congress that would require parties to submit a conflict to mediation before initiating a lawsuit. These are significant developments indeed.

Many in the international community believe that allowing foreign investors to arbitrate disputes is essential to attract foreign investment. Whether Brazil subscribes to this view is a provocative issue—one that requires analysis of the status of arbitration in Brazil. This analysis must start with the acknowledgement that Brazil has not ratified the Washington Convention of 1965 (the ICSID Convention), which provides procedures for conducting arbitration of investment disputes, and it has not ratified any bilateral investment treaties (BITs).

One should not conclude from this that Brazil does not protect foreign investments within its borders, since that conclusion would be superficial. We must look more closely at the status of arbitration since Brazil’s Supreme Court (the Supremo Tribunal Federal or STF) upheld the constitutionality of Brazil’s modern Arbitration Act in December 2001, as well as the case law that is being developed. These decisions show that Brazil recognizes that having an enforceable arbitration system is relevant to attracting foreign investment within its borders.