By Eliana Maria Filippozzi,
11 January 2006
Initially, it is important to note that the 1958 New York Convention on the Recognition of Foreign Arbitration Awards (the "Convention") only came into force in Brazil with the enactment of Decree No.4.311, on July 24, 2002. Prior to that, foreign arbitration in Brazil was subject to Law 9.307 of September 23, 1996, which still prevails in matters not expressly superseded by the Convention.
In accordance with Arts 35 and 36 of Law 9.307 of September 23, 1996, combined with Art.105(i) of the Brazilian Federal Constitution in force (as amended by the 45th Constitutional Amendment of 2004), foreign arbitration awards must be ratified by the Supreme Tribunal of Justice ("STJ") in accordance with the Internal Rules of the Supreme Federal Tribunal ("RISTF"), as applicable to the ratification of foreign judicial decisions.
Accordingly, the enforcement by the Brazilian courts of any final and conclusive arbitration award obtained in England is subject to the ratification of any such final and conclusive award by the STJ. Such ratification will be granted provided the following requirements are observed:
(1) the award must have been rendered by a tribunal duly vested with jurisdiction;
(2) the defendant must have been properly summoned or have appeared before the tribunal;
(3) the judgement must be final, as certified by the foreign Court;
(4) the judgement must be legalised by a Brazilian Consulate in the pertinent jurisdiction and translated into Portuguese by a sworn translator (Art.15 of the Law of Introduction to the Civil Code ("LICC");
and (5) the judgement cannot violate Brazil´s national sovereignty, public order or good morals (Art.17 of the LICC and Art.216 of the RISTF).
The jurisdiction of the Brazilian courts is a matter of national sovereignty, as further detailed below.
Public order is the legal precept that certain norms cannot be modified by the interests of the parties. The constitutional, administrative, criminal and procedural provisions are considered public order norms. In accordance with Art.III of the Convention, each signatory member shall recognise foreign arbitration awards and shall enforce them in accordance with the procedural rules of the territory where the award is evoked.
This prompted a debate in Brazil as to whether foreign arbitral awards should get the same treatment by the STJ as foreign judgments do. The majority of studies pertaining to this matter, albeit recent, indicate such requirement is present. Nonetheless, those who oppose a formal validation of an arbitration award also agree that if there is a violation of public order, national sovereignty and good morals, said award shall not be enforced.
The Convention does not contain any express reference to international lis alibi pendens, which occurs when parallel proceedings involving the same parties and causes of action are pending in different countries.
However, the rules contained in the aforementioned Convention determine that a signatory country may refuse the recognition and enforcement of an arbitral award if its competent authority finds that it would be contrary to its public policy (Art.V(2)(b)). Given its national character and broad definition, the interpretation of public policy provides the courts with grounds for not enforcing a foreign award they deem unsuitable.
The question as to whether lis pendens is a matter of public policy depends on national jurisdiction:
"A broad interpretation in order to harmonize international proceedings would be appropriate. The denial of enforcement of a judgment based on the fact that a parallel lawsuit will be decided soon and will very likely be inconsistent with the judgment to be enforced is justifiable and can be part of a country´s public policy(2)" .
Internationally, the concept of public policy includes matters relating to national sovereignty, public order and good morals(3). In Brazil, the exclusive or concurrent jurisdiction of the Brazilian courts are matters of national sovereignty and thus,of public policy. The Brazilian courts have exclusive jurisdiction over disputes involving real estate located in Brazil and inheritance and probate involving property located in Brazil(4).
As to concurrent jurisdiction, no foreign jurisdiction may exclude the jurisdiction of the Brazilian Courts when:
(1) the defendants, whatever their nationality, are domiciled in Brazil;
(2) the obligation is to be performed in Brazil;
or, (3) the dispute arises from matters occurring or practised in Brazil(5).
If the matter falls within the above-mentioned cases and in the event that legal proceedings are brought simultaneously in Brazil and in another different jurisdiction, the decision to prevail in Brazil shall be the decision that first reaches the status of "res judicata", constituting an absolute bar to a subsequent action involving the same claim, demand or course of action(6).
Article 90 of the Code of Civil Proceedings ("CPC") determines that a proceeding in a foreign court does not cause litispendência and does not prevent the Brazilian courts from examining the same or connected causes of action .
Thus, if a decision of the foreign court is not ratified by the STJ before a decision of the Brazilian court on the same issue becomes "res judicata", then the decision of the foreign court will not be ratified in Brazil and the Brazilian decision will prevail in Brazil. Even if a decision of a foreign court is reached before a decision of a Brazilian court on the same issue becomes "res judicata", the STJ may eschew ratification of the former in view of an existing suit in Brazil as indeed happens in many cases, as for example:
(1) in ratification No.SEC 6729-4; and where a foreign judicial award was not ratified because there was an ongoing proceeding on the same object in the Brazilian court and the ratification would therefore be against the national sovereignty, Art.90 of the CPC and Art.216 of the RISTF;
and (2) in the ratification No.SEC 5.526-1 where a foreign judicial award was not ratified because it was against an interlocutory decision of the Brazilian courts (Decision of May 28, 2004).
1- Decree Law 4657 of September 4, 1942.
2- Nadine Balkanyi-Nordmann, "The Perils of Parallel Proceedings" (Nov 2001-Jan 2002) American Arbitration Association, Dispute Resolution Journal.
3- See J. Beatson, "Public Order and Public Morals", Anson´s Law of Contract (28th edn, Oxford University Press, 2002), pp.348-418 on illegality and public policy. Also, see City of Gotha and Federal Republic of Germany v Sotheby´s and Cober Finance SA (High Court, September 9, 1998). Also, see Russell J. Weintraub , Discretion Versus Strict Rules in the Field of Cross Border Torts (2005).
4- Art.12(i) of the LICC.
5- Art.12 of the LICC and Art.88 of the CPC, Law 5869 of January 11, 1973.
6- In accordance with Art.103 of the CPC, two or more proceedings are connected when they share a common object or cause or action.
ICCLR -International Company and Commercial Law Review, May 2006, Volume 17, Issue 5.