Originally from Dispute Resolution Journal

Less than a year after Brazil’s Supreme Court upheld the constitutionality of the nation’s arbitration law, Brazil has signed on to the New York Convention. In the following article, Pedro Batista Martins discusses these important developments, which, despite Brazil’s previous reputation for hostility to arbitration, are consistent with a rich arbitral tradition dating back to the 19th century.

Brazil evokes images of Rio de Janeiro’s colorful carnival and sunny beaches. For international businesses, however, it also evokes hostility to arbitration. From the perspective of world trade, this tourist mecca has had its eyes closed to the method of dispute resolution most favored by international business. Fortunately, this may be changing due to two significant events. The first is the decision of Brazil’s Supreme Federal Tribunal (Brazil’s Supreme Court) affirming the constitutionality of the nation’s 1996 arbitration law. The second is the accession of the Federal Republic of Brazil in 2002 to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. These events signal to the international business community that Brazil, at last, has awakened to the benefits of arbitration and is ready to welcome international trade.

Background

Arbitration has had a place in Brazil’s legal history at least since 1824. The Brazilian Empire’s first constitution, the Constitution of 1824, contained provisions that called for disputes between Brazilian nationals and foreigners to be settled by arbitration. Under these provisions, the arbitrator’s decision was final and could not be appealed if the parties had included a “non-recourse clause” in their agreement. In 1831 and 1837, respectively, Brazil enacted laws making arbitration the mandatory process for resolving disputes arising from insurance contracts and services contracts. Arbitration gained a broader base in 1850 when it was recognized in the Commercial Code. It was also recognized legally in the 1916 Civil Code and the Civil Procedure Codes of 1939 and 1973.

Despite Brazil’s inexplicable aversion to the ratification of international treaties and conventions, it signed on to a few treaties that call for arbitration to resolve commercial disputes. In 1927, it ratified the 1923 Geneva Protocol on Arbitration Clauses.1 In 1983 it signed the Interamerican Convention on International Commercial Arbitration (the 1975 Panama Convention) and in 1991 it signed a treaty with several South American neighbors (the Mercosur Treaty), which encourages the use of arbitration of disputes that are not settled by negotiation.2 However, its absence from some important treaties was also notable, specifically, the New York Convention and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States.