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Brazilian Superior Court of Justice reaffirms its prima facie analysis on the recognition of foreign arbitration awards
Practical Law UK Legal Update Case Report 8-580-5805 (Approx. 4 pages)
Brazilian Superior Court of Justice reaffirms its prima facie analysis on the recognition of foreign arbitration awards
by Eduardo Damião Gonçalves (Partner), Flávio Spaccaquerche Barbosa (Associate) and Mariana Jungstedt (Associate), Mattos Filho Advogados
| Published on 10 Sep 2014 • Brazil |
In Newedge USA LLC (Newedge) v Manoel Fernando Garcia (Mr. Manoel), SEC 5.692, the Brazilian Superior Court of Justice considered whether to recognise an arbitral award that had allegedly been handed down without reasons.
Speedread
In a unanimous decision published on 1 September 2014, the Brazilian Superior Court of Justice granted recognition of an arbitration award that had allegedly been handed down without reasons. The court ruled that it was not for the court to analyse whether the award contained reasons since its jurisdiction was limited to a prima facie analysis of the award. Further, the arbitral proceedings had been conducted in accordance with the rules chosen by the parties, respecting due process. (Newedge USA LLC (Newedge) v Manoel Fernando Garcia (Mr. Manoel) SEC 5.692 STJ.)
Background
The Brazilian Arbitration Act 1996 (Law No. 9,307/1996) provides:
Article 38:
"The request for recognition or enforcement of an arbitral award may be denied only if the defendant furnishes proof that:
I – the parties to the arbitration agreement were under some incapacity;
II – the arbitration agreement was not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made;
III – it was not given proper notice of the appointment of an arbitrator or the arbitral proceedings or was otherwise unable to present its case;
IV – the arbitral award was rendered beyond the limits of the arbitration agreement and it was not possible to separate the exceeding part from what has been submitted to arbitration;
V – the commencement of the arbitration proceedings was not in accordance with the submission agreement (compromisso) or the arbitration clause;
VI – the arbitral award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which the arbitral award has been made."
Article 39:
"The request for recognition or enforcement of a foreign award shall also be denied if the Federal Supreme Court finds that:
I – according to Brazilian law, the subject-matter of the dispute is not capable of settlement by arbitration;
II – the recognition or enforcement of the award is contrary to Brazilian public policy.
Sole paragraph – The services of summons on a party resident or domiciled in Brazil, pursuant to the arbitration agreement or to the procedural law of the country in which the arbitration took place, including mail with confirmation of receipt, shall not be considered as contrary to Brazilian public policy, provided the Brazilian party is granted sufficient time to exercise its right of defence."
Facts
Newedge LLC USA and Fluxo-Cane entered into a brokerage agreement containing an arbitration clause, to which Mr Manoel was guarantor. Mr Manoel, a Brazilian citizen, previously owned 98% of Fluxo-Cane's shares.
Newedge initiated arbitration against Fluxo-Cane and Mr Manoel, claiming breach of the brokerage agreement. Fluxo-Cane and Mr Manoel subsequently initiated proceeding against Newedge in the US courts, which ruled that the issue should be settled by arbitration, in accordance with the arbitration agreement. This decision was confirmed by the Supreme Court of the State of New York.
The arbitral award found Mr Manoel and Fluxo-Cane severally liable to pay over US$ 3 million and Mr Manoel solely liable to pay almost another US$3 million to Newedge.
Newedge applied to the Brazilian Superior Court of Justice for recognition of the arbitral award granted under the rules of the Stock Exchange ICE Futures US Inc, with a New York seat. To ensure the effectiveness of the arbitral award, the Supreme Court of Justice granted an attachment of goods order against Fluxo-Cane and Mr Manoel.
Fluxo-Cane became insolvent and Newedge requested that it be excluded from the proceeding, continuing only against Mr Manoel.
Mr Manoel objected to the recognition request, claiming that the arbitral award did not contain any reasons and therefore the Superior Court of Justice could not grant exequatur.
Decision
The Superior Court of Justice dismissed Mr Manoel's objection and recognised the foreign arbitral award.
The court ruled that it was not for the court to analyse whether the award contained reasons since its jurisdiction was limited only to a prima facie analysis. Further, both the award and the arbitral proceedings were conducted in accordance with rules chosen by the parties, and due process had been respected.
In addition, the court understood that the arbitral award did not lack reasons, but rather contained short reasons. In this sense, the reasoning of the arbitral award had followed the standards of the seat of the arbitration and the applicable rules chosen by the parties, where short reasoning cannot be used to prevent the recognition of the arbitral award in Brazil.
Comment
The Brazilian Superior Court of Justice took another step forward with this leading case which illustrates that Brazil remains a safe environment to enforce foreign arbitration awards. The court reinforced its prima facie jurisdiction, respecting the rules chosen by the parties and the reasoning of the arbitral award in accordance with those rules.
Case
Newedge USA LLC (Newedge) v Manoel Fernando Garcia (Mr. Manoel) SEC 5.692 STJ (Brazilian Superior Court of Justice).