This article was featured in our 2023 Energy Arbitration Report, which is part of a series of industry-focused arbitration reports edited by Jus Connect and Jus Mundi.
This issue explores the energy industry, encompassing information on electricity & renewables, based on data available on Jus Mundi and Jus Connect as of September 2023. Discover updated insights into energy arbitration and exclusive statistics & rankings, as well as in-depth global and regional perspectives on energy projects, disputes, & arbitration from leading lawyers, arbitrators, experts, arbitral institutions, and in-house counsel.
THE AUTHORS:
Elias Marques de Medeiros Neto, Partner at Tozzini Freire
Lucas Britto Mejias, Partner at Tozzini Freire
Anna Paula Yazaki Sun, Senior Associate at Tozzini Freire
Brazil has ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the New York Convention), which is in force within Brazilian territory since September 5, 2002, and the Inter-American Convention on International Commercial Arbitration (the Panama Convention). The country is also a party to the Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards (the Montevideo Convention), as well as the Geneva Protocol of 1923 on arbitration clauses. Finally, the confirmation of foreign arbitral awards rendered in Member States of Mercosur (Brazil, Argentina, Uruguay, and Paraguay) is regulated by the Protocol on Jurisdictional Assistance in Civil, Commercial, Labour, and Administrative Matters, also known as the Las Leñas Protocol.
Pursuant to the Brazilian Arbitration Act (Federal Law nº 9.307/1996), a foreign arbitral award is the arbitral award rendered outside Brazilian territory (Sole paragraph, Article 34 of the Brazilian Arbitration Act) and must be recognized by the Superior Court of Justice (Brazilian’s Federal
Court with jurisdiction to uphold federal legislation and treaties) in order to be enforceable in Brazil (Article 961 of the Brazilian Civil Procedure Code). Once recognized by the Superior Court of Justice, the foreign arbitral award may be enforced in the national territory before a Federal Court. Interim measures might be granted to protect the enforcement of a foreign award.
Currently, the recognition procedure of foreign arbitral award is regulated by Articles 15 and 17 of the Federal Introductory Law on Brazilian Rules (Lei de Introdução às Normas do Direito Brasileiro); by Articles 960 to 965 of the Brazilian Civil Procedure Code; by Articles 216-C, 216-D and 216-F of the Internal Regimental Rules of the Superior Court of Justice (Superior Tribunal de Justiça); and by Articles 38 and 39 of the Brazilian Arbitration Act (Superior Court of Justice. Interim Appeal filed in the Recognition Proceedings nº 6347 / EX. Reporting Judge Benedito Gonçalves).
According to such provisions, the recognition proceedings shall be instructed with copies of the foreign award and related exhibits (including copies of the arbitration agreement), all duly translated to Portuguese by an official sworn translator and ratified by the Brazilian Consulate – ratification is not mandatory depending on the country in which the award was rendered and the existence of correlated treaties between Brazil and said country.
The plaintiff must also provide evidence that:
(i) the foreign award was rendered by arbitrators with jurisdiction to decide on the matters provided for in the award;
(ii) the Respondents of the arbitration were duly summoned and/or the default judgment was rendered under applicable law;
(iii) the arbitral award is final and binding; and
(iv) the award does not violate any norms regarding Brazilian sovereignty and public order.
Certain criteria have already been set by the Superior Court of Justice to determine whether a foreign arbitral award has incurred in a violation of the Brazilian “public order” and therefore shall not be recognized in Brazilian territory, such as:
(i) the absence of evidence of summoning of the Respondent in the arbitration (Superior Court of Justice. Foreign Award Proceedings nº 14.385 / EX. Reporting Judge Nancy Andrighi);
(ii) the lack of an express consent with the arbitration agreement (Superior Court of Justice. Foreign Award Proceedings nº 978 / GB. Reporting Judge Hamilton Carvalhido; Superior Court of Justice. Foreign Award Proceedings nº866 / GB. Reporting Judge Felix Fischer; and Superior Court of Justice.
Foreign Award Proceedings nº 967 / GB. Reporting Judge José Delgado); and (iii) the partiality of the arbitrator (Superior Court of Justice. Foreign Award Proceedings nº 9412 / EX. Reporting Judge Felix Fischer).
The opposing party will be served to submit a defense and violation of the Brazilian public order can be raised as a defense argument against the recognition of the award.
When deciding on whether such an award shall be recognized in Brazilian territory, the Superior Court of Justice is not entitled to proceed with the reassessment of the merits of the arbitral award (Superior Court of Justice, Recognition Proceedings nº 7488 / EX. Reporting Judge OG Fernandes). As a matter of fact, the Superior Court of Justice must abide by the analysis of the formal requirements of the arbitral award, especially regarding the validity of the service of summons and that the award does not violate any norms towards Brazilian public order. Such criteria have been followed by the Superior Court of Justice regarding foreign arbitral awards related to energy arbitration (Superior Court of Justice. Recognition Proceedings nº 6896 / EX. Reporting Judge Maria Thereza de Assis Moura).
As such, in the Alstom vs. Mitsui case (Superior Court of Justice. Recognition Proceedings nº 14930/EX. Reporting Judge OG Fernandes), the Superior Court of Justice issued a decision recognizing a foreign arbitral award, setting aside claims of violation of the public order.
In 2015, Alstom Power Inc. and Alstom Brasil Energia e Transporte Ltda. filed a recognition request before the Superior Court of Justice related to an arbitral award rendered against Mitsui Sumitomo Seguros S/A. The arbitral award was rendered in New York, United States of America, in relation to a Supply Agreement of a certain steam generation system executed by and between Alunorte-Alumina do Norte do Brasil S/A and Alstom. Mitsui was Alunorte’s insurer company and had indemnified
Alunorte for property damages related to incidents that occurred with the steam generators’ object of the Supply Agreement. Mitsui then commenced a court procedure against Alstom, to recover the indemnity paid.
According to Alstom, Mitsui had been subrogated into the rights, obligations, and actions of Alunorte, including the arbitration agreement provided for in the Supply Agreement. Mitsui, on the other hand, claimed that it was not bound to the arbitration agreement. The arbitral award decided that the Arbitral Tribunal had jurisdiction over the issues and disputes and that Mitsui was bound, as Alunorte’s subrogee, by the termination and full release issued under the Supply Agreement. In this context, Alstom was entitled to a declaration that Mitsui could not bring its claims to the Brazilian courts.
Alstom then requested the recognition of the arbitral award before the Superior Court of Justice. Mitsui’s defense was that the subrogation declared by the Arbitral Tribunal was invalid, claiming that the arbitral award could not be recognized due to a violation of Brazilian public order. The Superior Court of Justice set aside Mitsui’s reasoning, deciding that the Court should not assess the merits of the dispute and rejecting Mitsui’s claims of violating the public order.
In the same context, the Superior Court of Justice has also rejected claims of violation to the public order in the Vestas vs. Copabo case
(Superior Court of Justice. Foreign Award Proceedings nº 12.115 / ES. Reporting Judge Luis Felipe Salomão). The arbitral award in dispute was rendered in Madrid, Spain, related to a representation agreement
concerning the sales of aerogenerators executed by and between Vestas do Brasil Energia Eólica Ltda. and Copabo Consultoria e Negócios Ltda. According to Copabo, the arbitral award should not be recognized as it had been ruled out of the scope of the arbitration request.
The Superior Court of Justice rejected Copabo’s claims against the recognition of the arbitral award, reasoning that Copabo’s claims of violation of the public order are actually arguments related to the merits of the dispute and therefore cannot be submitted to the recognition proceedings.
The same reasoning was applied by the Superior Court of Justice in 2021, when deciding on the Gemini vs. State Grid Brazil case (Superior Court of Justice. Interim appeal in the Recognition Proceedings nº 4201/EX. Reporting Judge Paulo de Tarso Sanseverino). Gemini Energy S.A. and State Grid Brazil Holding S.A. executed a Quota Purchase Agreement related to the acquisition of certain Brazilian energy transmission companies. The arbitration was commenced by State Grid in Paris and Gemini was ordered to proceed with payment of certain amounts related to the QPA.
State Grid requested the recognition proceedings and Gemini filed a defense claiming that the arbitral award violated the Brazilian public order due to the lack of reasoning and because the award rejected the production of the evidence requested by Gemini. The Superior Court of Justice ruled that there was no evidence of violation of the public order, reasoning that Gemini was, in fact, aiming the reassessment of the merits of the dispute, which is not allowed under Brazilian law, in the context of recognition proceedings.
In conclusion, the Superior Court of Justice has consistently abided to the assessment of formal requirements of the arbitral award, in the context of recognition of foreign arbitral awards, and including those related to energy arbitration.
ABOUT THE AUTHORS
Elias Marques de Medeiros Neto is Tozzini Freire’s partner in the Litigation, Arbitration and Mediation practices, Elias is responsible for conducting strategic litigation issues, acting in arbitrations, mediations, and complex litigation matters. He also worked as a legal director/general counsel in a large national business group in the energy, fuel, lubricants, infrastructure, agribusiness and gas industries, having led, for over 11 years, teams in Civil Litigation and Arbitration, Tax Litigation, Labor Litigation, Environmental Litigation, Regulatory Litigation, and Criminal Litigation. Elias is a Professor of Civil Procedural Law and author of books and articles in the area. Graduated from the Law School of USP (University of São Paulo), Elias also holds an MBA in Business Management and a specialization degree in Business Law from FGV-SP; a Ph.D. and master´s degree in Civil Procedural Law from PUC-SP; postdoctoral degrees in Civil Procedural Law from the University of Salamanca/Spain and the University of Coimbra/Portugal; and recently was a visiting researcher in Civil Procedural Law at the Max-Planck Institute, in Hamburg (Germany).
Lucas Britto Mejias, a partner in Tozzini Freire’s dispute resolution practice, represents clients in legal proceedings and in national and international arbitrations, focusing on M&A, franchising, construction and real estate contracts, disputes in the financial and banking fields, infrastructure projects, and distribution agreements, among others. Lucas is a member of the CBAr (Brazilian Arbitration Committee), CEAPRO (Centro de Estudos Avançados de Processo), IBDiC (Instituto Brasileiro de Direito da Construção) and the Society of Construction Law. He is also a Fellow of the Chartered Institute of Arbitrators.
Anna Paula Yazaki Sun is a senior associate in the litigation and arbitration practice at Tozzini Freire and represents clients before Brazilian courts and in national arbitrations involving cor- porate, commercial and contractual disputes. She also provides pre-litigation assistance. She holds a bachelor’s degree in law from the Law School of USP (University of São Paulo).
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