Translating Arbitration Clauses in Cross-Border Contracts: Brazil

English into Brazilian Portuguese Legal Translation Services

We’ve blogged about professional Portuguese to English translations of Brazilian environmental regulations. When drafting an arbitration clause for a cross-border contract with a Brazilian party, there are five key considerations to keep in mind:

Account for National Laws Requiring Mandatory Submission Agreements

When arbitrating with a Brazilian party, one should always account for the requirement of a ‘compromiso’, or post-dispute agreement to arbitrate. In Brazil, the compromiso is required only when the constitution of the tribunal is not regulated in a pre-dispute arbitration clause. To avoid this requirement, parties should either provide for a mechanism to appoint the tribunal in their arbitration clause or refer to institutional rules that establish a default method for constitution.

Provide for Application of the IBA Rules on the Taking of Evidence

A provision requiring arbitrators to apply the IBA Rules on the Taking of Evidence in International Commercial Arbitration (1999) (IBA Rules) is one way to overcome different assumptions of parties regarding discovery.

Procedural laws in Brazil typically do not allow for the common law practices of document discovery and cross-examination of witnesses, except under very limited conditions. In addition, arbitrators are usually not agreeable to strictly enforcing a contractual provision for US-style discovery or rules of evidence.

The IBA Rules provide for general document production and cross-examination, but have nonetheless gained widespread acceptance among Brazilian arbitrators. They are regarded as offering satisfactory solutions for both civil and common law practitioners and have been increasingly applied in arbitrations in the region.

Parties from common law jurisdictions interested in preserving their rights to access documents held by the other side and/or to cross-examine witnesses should therefore provide for the application of the IBA Rules in their arbitration clauses, particularly when they foresee that the tribunal in a potential dispute will likely include Brazilian arbitrators.

Avoid Jurisdictions with a Record of Judicial Interference during the Proceedings

Judicial interference inevitably leads to added costs of local litigation and jurisdictional battles and poses a disadvantage for these jurisdictions as places of arbitration. The principal form of intervention in Brazil has occurred when courts, rather than arbitrators, decided on the validity of arbitration clauses. Although most Brazilian arbitration laws recognize the power of arbitral tribunals to rule on such issues, some courts have nevertheless stepped into the jurisdiction of arbitrators.

For example, courts in the States of Paraná and Rio Grande do Sul have displayed higher levels of intervention, particularly in relation to arbitrations against state entities. By contrast, courts in the States of Sao Paulo and Rio de Janeiro have displayed a pro-arbitration stance, making these locales preferred places in which to hold an arbitration in Brazil.

Avoid Jurisdictions Offering Non-Waivable Means of Recourse

The principal treaties on enforcement of arbitral awards permit denial of enforcement where the award has been annulled or set aside in the country of issuance. Parties should therefore seek to limit the opportunities of challenge against their awards and select a place of arbitration where appeals and other means of recourse are either not afforded or may be waived. This does not apply to the right to request the annulment of arbitral awards (as distinct from challenges to the award on the merits), because this right is typically not subject to waiver.

Avoid Jurisdictions Prone to Annul or Overturn Arbitral Awards

One of the most frequently used bases for the annulment of awards is the violation of public policy. To safeguard the integrity of their awards, parties should avoid jurisdictions where the concept of public policy is interpreted expansively or where the standards for vacatur are comparatively easy to meet.

For example, in Brazil the highest civil court refused to enforce an award in an international arbitration seated in Brazil, finding that the absence of a written arbitral agreement is contrary to Brazilian public policy. As previously mentioned, Sao Paulo and Rio de Janeiro courts have generally demonstrated a stronger commitment to arbitration. Among other cases, a Sao Paulo court refused to set aside an arbitral award issued in New York in the CAOA case, and a Rio de Janeiro court dismissed annulment proceedings based on the alleged failure of the parties to agree on the limits of arbitral jurisdiction in the arbitration clause.

#translationforlawyers #legaltranslation #braziliantranslation #portuguesetranslation #crossbordercontracttranslation #contracttranslation #portuguesecontracttranslation

Up Next: IP Document Translation Services
and Intellectual Property Rights