Jonathan C. Hamilton, “Brazilian Supreme Court Upholds 1996 Arbitration Law,” International Dispute Resolution Newsletter (2002)

A decision of the Brazilian Supreme Court upholding the constitutionality of Law No. 9.307 (the “Arbitration Law”) gives effect to the parties’ agreement to arbitrate future disputes, without having to reach an additional specific agreement to arbitrate once a dispute has arisen.

After five years of deliberation, the Brazilian Federal Supreme Court recently decided to reject a constitutional challenge to a 1996 law that had been enacted in order to facilitate the enforcement of arbitration agreements and foreign arbitral awards. MBV Commercial and Export Management Establishment v. Resil Indústria e Comércio Ltda., Kingdom of Spain (SE 5.206-7, December 12, 2001). The decision of the Federal Supreme Court upholding the constitutionality of Law No. 9.307 (the “Arbitration Law”) gives effect to the parties’ agreement to arbitrate future disputes, without having to reach an additional specific agreement to arbitrate once a dispute has arisen.

The decision also facilitates the recognition and enforcement of foreign arbitral awards in Brazil by eliminating the requirement of double exequatur. By confirming the constitutionality of the Arbitration Law, the Federal Supreme Court’s decision creates a more predictable and favorable legal environment for foreign investors and merchants who prefer to rely on international arbitration rather than Brazil’s court system in order to resolve their disputes.

On September 23, 1996, Brazil had enacted the Arbitration Law, which for the first time made it possible to enforce a pre-dispute arbitration agreement and allowed for the execution in Brazil of arbitral awards rendered abroad without prior court approval. The goal of the Arbitration Law was in part to remedy the fact that Brazil is not a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. (Note that Brazil is, however, a party to the 1975 Panama Convention and the 1923 Protocol on Arbitration Clauses, known as the Geneva Protocol.)

Previously, Brazilian law had considered arbitration agreements relating to future disputes unenforceable. In addition, Brazilian courts previously had refused to recognize and enforce a foreign arbitral award unless it had been ratified by the foreign court at the place where the award was rendered (the so-called “double exequatur” requirement).

Shortly after the Arbitration Law entered into force in 1996, its constitutionality was challenged before the Brazilian Federal Supreme Court. This was done in the context of a case, MBV x Resil (Agravo Regimental na Sentença Estrangeira N. 5206-7, Reino Da Espanha, Oct. 10, 1996), in which the Swiss company MBV attempted to have an arbitral award rendered in Spain against the Brazilian company Resil confirmed by the Federal Supreme Court for enforcement purposes.

More than five years later, on December 12, 2001, a Court divided 7-4 rendered its final decision upholding the constitutionality of the Arbitration Law. The decision will contribute to the ongoing alignment of Brazil’s legal framework for arbitration with international practice.

The decision will contribute to the ongoing alignment of Brazil’s legal framework for arbitration with international practice.

Jonathan C. Hamilton