Brazilian Superior Court of Justice rulings on arbitration

Overview

Arbitration has established itself as a key dispute resolution mechanism in Brazil, offering efficiency, flexibility, and legal certainty. With ongoing developments shaping the global dynamic and affecting the domestic scenario, arbitration in Brazil is poised to expand, solidifying its position as the leading dispute resolution mechanism for technical and sophisticated claims. 

Furthermore, the level of maturity of arbitration in Brazil is a direct reflection of a shift in the litigation culture. Brazilian society has witnessed a rise in the use of other appropriate dispute resolution methods (“ADR”), such as Mediation and Dispute Boards.

Brazilian Superior Court of Justice rulings on arbitration

The Brazilian Superior Court of Justice (“STJ”), the highest court for cases that do not involve constitutional matters and one of the main entities assuring arbitration’s autonomy, has established a robust pro-arbitration case record.

With regard to the judgments issued in 2024, there are three noteworthy cases:

Firstly, the STJ ruled that the Brazilian Code of Civil Procedure (“CPC”) does not apply to arbitral procedures. The issue was somewhat controversial within the Brazilian courts, although most arbitration specialists agreed that the CPC was inapplicable to arbitration.

In 2024, this matter was settled, in Special Appeal n. 1.851.324, in which the STJ recognized that there is no legal requirement for arbitrators to apply the rules of the CPC to arbitral proceedings, even on a subsidiary basis.

Threshold for the annulment of arbitral awards due to an arbitrator’s breaches of the duty of disclosure

Secondly, the STJ set the threshold for the annulment of arbitral awards due to arbitrator’s breach of the duty of disclosure. In that case, the STJ decided whether an arbitrator’s failure to disclose two specific topics was sufficient to annul the award.

The STJ recognized that the failure to reveal information does not automatically invalidate an arbitral award. Courts must assess whether the undisclosed facts are sufficient to taint the arbitrator’s impartiality and independence.

It is noteworthy that the International Bar Association (“IBA”) Guidelines on the Conflicts of Interest in International Arbitration served as a reference to the STJ’s reasoning. Furthermore, the Brazilian Arbitration Committee (“CBAr”) played a crucial part in this judgment through its role as amicus curiae.

Lastly, upon the analysis of Special Appeal n. 1.981.715, the STJ reinforced that the commencement of arbitration proceedings tolls the statute of limitations, even for cases initiated before the enactment of Law n. 13.129/2015 – which expressly recognized that initiating arbitration tolls the statute of limitations.

Brazil Becomes the New Host Country for the Permanent Court of Arbitration

The Permanent Court of Arbitration (“PCA”) was the first intergovernmental organization created to provide a forum for conflict resolution between States.

Despite being headquartered in the Netherlands, the PCA expanded internationally, and expressed interest in having Brazil as its main operation center in Latin America, culminating in the signing of the Host Country Agreement in December 2017.

By the end of 2024, the Brazilian Congress approved the Host Country Agreement. The choice of Brazil as the location for the PCA’s main headquarters in Latin America is a result of the country’s diplomatic tradition, marked by neutrality, reinforcing the perception that Brazil is an impartial actor in resolving disputes with geopolitical implications, particularly at the regional level. 

Arbitration alongside other ADRs

In Brazil, arbitration has reached a high level of development, and, as a result, the usage of other ADR methods grew as well[1].

Due to a rising demand for expedited solutions and self-resolution, the use of ADR methods, such as mediation and dispute boards, expanded in Brazil, especially after the enactment of the Mediation Law (Law n. 13.140/2015) and the impact of the COVID-19 pandemic.

These methods are beneficial to various sectors of the economy, as they allow for self-composition and for long-term partnerships to be preserved. Especially in the construction sector, which accounts for a significant portion of arbitration cases in Brazil, the use of dispute boards and mediation are notably successful.

Way Forward

Economic instability has been the world’s reality in the last years: first, the pandemic; then, multiple armed conflicts; and now, there is a major setback for global trade, caused by the uncertainty regarding the adoption of protectionist policies by the most relevant economic power in global trade. 

Although the full consequences of these policies are not yet clear, country leaders brace for tough times ahead. Likewise, markets throughout the world and economists have already forecasted a negative outlook.

Undoubtedly, these sudden shifts and the unstable scenario will pose significant challenges to businesses, especially due to investment decisions. This will likely affect Brazil – considering that it is a major player in the international trade. The possible lack of capitalization, alongside the increase in prices, may alter the risk matrix of contracts, enhancing the possibility of claims based on financial hardship and contract nonperformance, leading to an increase in commercial disputes, and, consequently, in arbitration. 

From the domestic standpoint, the use of arbitration clauses in contracts with the public administration is expanding. The public sector continues to turn to arbitration as a preferred method for dispute resolution, due to advantages related to expediency and cost-efficiency.

Furthermore, new legislative frameworks concerning energy transition and sustainable development – such as the establishment of carbon credit markets, the offshore wind power act, and the green hydrogen law – create a new environment for the rise of complex contractual disputes. 

Overall, arbitration continues to thrive in Brazil, and the current global uncertainties, alongside the particularities of the domestic scenario, may result in an increase in the number of arbitral proceedings.

[1] Such information is confirmed by Professor Selma Lemes, co-author of the Brazilian Arbitration Law (Law n. 9.307/1996), in her annual research, “Arbitration in Numbers”, for the 2022/2023 biennium, which indicated that other appropriate dispute resolution methods, such as mediation and dispute boards, are being increasingly used in Brazil.