Article 2, Section 2 of the Convention on the Privileges and Immunities of the United Nations of 1946 (CPIUN), adopted by the Brazilian legal system through the Federal Decree n. 27.784/50, provides that:

Article 8, Section 29 of the CPIUN provides that:

Article 1 of Law No. 9307/96 (Brazilian Arbitration Act) provides that "persons capable of entering into contracts may settle through arbitration disputes related to freely transferable patrimonial rights".

Article 267, item VII, of the Code of Civil Procedure provides that a lawsuit brought before a state court shall be quashed without judgment on the merits when there is an arbitration agreement.

Article 5, item XXXV, of the Federal Constitution provides that no threat or violation of rights will be excluded from the judicial system; and item LIV declares that no individual shall be deprived of liberty or of its goods without the due process of law.

The dispute was based on the termination of a labour contract between the United Nations Development Programme (UNDP) and its employee, a Brazilian typist. The employee (Claimant) lodged an appeal (recurso de revista) with the TST against a decision rendered by a regional appellate court quashing a lawsuit without judgment on the merits based on the UNDP's immunity from jurisdiction and the presence of an arbitration clause in the labour contract. The decision was based on the understanding that the UNDP had fulfilled its obligation under the CPIUN, that is to provide a proper mode of settlement of disputes arising out of contracts with private parties, by establishing an arbitration clause in the labour contract entered into with the Claimant.

On appeal, the Claimant alleged that it was not obliged to submit the dispute to arbitration since the choice of arbitration as the mechanism to settle the dispute merely conferred on the parties an optional additional dispute resolution procedure, and could not affect the parties' rights to submit claims to the judicial system. Further, the autonomy of the arbitration clause from the main contract guaranteed the possibility to submit the dispute to the judiciary.

When ruling on the appeal, the TST did not ignore the fact that the United Nations and its agencies benefit from an absolute immunity from jurisdiction.

However, the TST found that, despite all UN's privileges, an arbitration clause inserted in a labour contract is invalid due to the non-arbitrable nature of labour rights. Bearing in mind the provisions of Article 1 of the Brazilian Arbitration Act, the court stated that individual labour disputes involving workers' untransferable rights could not be subject to arbitration, only court proceedings.

Besides, the TST understood that the arbitration clause was optional to the parties and therefore it could not prevent the Claimant from accessing the judicial system in light of the constitutional right set forth in its Article 5, XXXV.

Thus, the appellate court decision, quashing the lawsuit without judgment on the merits, was overruled on the ground that it violated workers' constitutional right of free access to the judiciary. In light of that, the TST remanded the case to the regional appellate court to evaluate the merits and make a valid decision.

Unfortunately, the TST ignored the fact that the treaty providing immunity from jurisdiction to the UN and its agencies was adopted by the Brazilian legislation and thus should always be respected - as long as the obligations set forth in the Article 8, Section 29 were fulfilled by UNDP.

Although the TST found that the UNDP had fulfilled its obligation under the CPIUN to provide a proper mode of settlement of disputes by setting forth an arbitration clause, it also found that the UNDP could not benefit from the immunity from jurisdiction in this case due to the following understandings:

However, the TST's rationale is regrettable. First, the Supreme Federal Court has already stated that arbitration is a constitutional mode of settlement of disputes that does not violate the right of free access to the judiciary (STF, Agravo Regimental na SE n. 5.206-7, Rel. Min. Sepúlveda Pertence, Tribunal Pleno, julgado em 12.12.2001, DJ de 30.04.2004 – "MBV v. Resil").

Moreover, it is well known that the fact that an arbitration clause is autonomous from the main contract does not make it optional to the parties.

Finally, TST's position goes against the trend of modern case law which has recognised the arbitrability of individual labour disputes when the rights at stake are transferable. The premise that individual labour disputes are non-arbitrable as a whole has been fading from the Brazilian courts, giving way to the idea that in some cases issues regarding workers' rights can be subject to arbitration: (TST, RR 1650/1999-003-15-00, published on 15.09.2005 and TST, REsp n. 635.354, Min. Rel. Castro Meira, published on 28.06.2005).