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Brazilian Superior Court of Justice upholds decision that ICC awards rendered in Brazil are domestic awards
Practical Law UK Legal Update Case Report 9-506-7038 (Approx. 3 pages)
Brazilian Superior Court of Justice upholds decision that ICC awards rendered in Brazil are domestic awards
by Practical Law
| Published on 30 Jun 2011 • Brazil, International |
Eduardo Damião Gonçalves (Partner), Flávio Foz Mange (Associate) and Débora Auler de Almeida Prado (Associate), Mattos Filho Advogados
In a unanimous decision dated 24 May 2011 and published on 1 June 2011, the Superior Court of Justice (STJ) confirmed its decision rendered in a preliminary injunction, which held that an arbitral award administered by the International Chamber of Commerce (ICC), but issued in Brazil, should be considered domestic and does not require homologation by the STJ to be enforceable in Brazil.
Background
According to the New York Convention, the state where the recognition and enforcement of an arbitral award is sought shall determine whether it is considered domestic (Article I(1)).
The Brazilian Arbitration Act 1996 (Law No. 9.307/96) (BAA) contains the following relevant provisions:
- The arbitral award shall have the same effect on the parties and their successors as a judgment issued by a state court, and if it includes an obligation for payment, it shall constitute an enforceable instrument (Article 31).
- A foreign arbitral award is an award that is rendered outside the national territory (Article 34, sole paragraph).
- In order to be enforced in Brazil, a foreign arbitral award must be ratified by the STJ (Article 35).
Under the Brazilian Code of Civil Procedure, an arbitral award is considered a judicially enforceable instrument (Article 475-N, IV).
Facts
Nuovo Pignone SpA (Claimant) requested the enforcement of an ICC arbitral award rendered in Rio de Janeiro against Marítima de Petróleo e Engenharia Ltda and Petromec Inc (Defendants). The Defendants filed a motion to stay the execution, arguing that the arbitral award could not be considered domestic as the proceedings were administered by an international institution. Therefore, the award was not an enforceable instrument and the Brazilian court lacked jurisdiction.
The first instance judge denied the Defendants' motion, but the decision was overturned by the State Court of Rio de Janeiro. The state court held that the arbitral award should be considered foreign because although it was made in Brazil, it was issued by an international institution (the ICC).
The Claimant filed a Special Appeal to overrule the state court decision and also sought a preliminary injunction to stay the decision before the STJ, until an analysis of the merits of the Special Appeal had been considered.
In February 2011, the STJ granted the preliminary injunction to suspend the state court's decision. The STJ confirmed that the BAA applied geographical criteria to determine the nationality of the arbitral award. Given that the award was rendered in Rio de Janeiro, it must be considered domestic.
Decision
The STJ held that the determination of the nationality of the arbitral award is regulated by national laws, according to the New York Convention. In this regard, Brazilian law adopts the geographical criteria (ius solis) to determine whether an award is domestic or not. Therefore, the nationality of the award remained Brazilian even though the request for arbitration was submitted to the ICC.
The court held that since the arbitral award had Brazilian nationality and constituted an enforceable instrument, it did not need to be ratified by the STJ to be executed.
Comment
The criterion established by the BAA as to how to determine whether an arbitral award is domestic or foreign, is solely based on the place where the award was rendered.
The STJ in both its decisions, namely the preliminary injunction and special appeal, confirmed that in the BAA, only the geographic criteria matter when determining the nationality of the arbitral award. The State Court of Rio de Janeiro misinterpreted the BAA and the STJ correctly overruled its decision by stating that an ICC award issued in Brazil shall be considered domestic.
It is important to note that the STJ abided by the terms of New York Convention in its decision, even though the Convention was only implemented in Brazil in 2002.