THE AUTHOR:
Caio Campello, Counsel at Linklaters
Brazil is becoming increasingly international when it comes to private commercial disputes.
Around 20-30 years ago, litigation in Brazil was perceived as a genuinely domestic practice, with cases filed before local state courts, governed by Brazilian law, involving Brazilian parties. This scenario has significantly changed. Due to the growth in the number of Brazilian companies doing business in foreign jurisdictions and, at the same time, due to the increase in foreign investments in the local economy, there has been a radical reshape in the way of litigating in the country.
Many commercial contracts executed by Brazilian parties with foreign counterparties have come to be governed by foreign laws and the mechanism of dispute resolution has largely migrated from court proceedings to arbitration proceedings.
International counterparties are usually reluctant to accept Brazilian law to govern international contracts. Major international players prefer to have those contracts governed by English or US laws, which have been tested and applied to a myriad of commercial issues. Regarding the method of dispute resolution, the common international practice is to avoid litigation before the state courts of the counterparty, whereas none of the parties wishes to litigate at the enemy’s battlefield. Consequently, the most recurring method of dispute resolution used in international contracts is arbitration, which is perceived as a neutral mechanism, with arbitrators appointed in a manner previously agreed upon by the parties in the contract.
The Brazilian Arbitration Act was enacted in 1996 and with some amendments in 2015, one may say that arbitration in Brazil has become a solid and liable mechanism of dispute resolution amongst Brazilian parties, not only internationally but also at a domestic level. On average, over the past seven years there have been around 1,000 ongoing arbitrations per year (both domestic and international) administered by the leading arbitration institutions based in Brazil. The International Court of Arbitration of the International Chamber of Commerce (ICC) has registered international arbitrations in which a significant number of Brazilian parties were involved: there were 119 Brazilian parties in 2021, 161 in 2022 and 80 in 2023.
Litigation in Foreign Courts
From an international court standpoint, Brazilian companies are currently involved, for example, in commercial disputes in the state courts of New York, London and Amsterdam/Rotterdam. This could be perceived as a recent change in the litigation environment and may be related to the fact that Brazilian entities have been strongly operating overseas (with physical presence through local branches) and/or are listed in foreign stock exchanges. As a result, they are subject to specific foreign laws, rules and policies governing capital markets, corporate governance and civil and administrative liabilities. There are Dutch commercial courts that handle cases entirely in the English language, precisely to attract more international cases, including those involving Brazilian parties (e.g. Brazilian claimants are seeking compensation before the Rotterdam courts for damages due to an environmental accident in Northeast Brazil).
There are currently approximately 30 national companies listed on the New York Stock Exchange (NYSE). As a result, they are regulated by the Securities and Exchange Commission (SEC) and, consequently, are exposed to possible investigation and litigation in the United States involving capital market and corporate governance issues. A large Brazilian company of the energy sector has been sued by defrauded foreign investors before the Southern District of New York (based on fraudulent scheme and kickbacks) in one of the largest securities class actions in the United States, which ended in a multi-billion-dollar settlement after over 3 years of hard-fought litigation.
Likewise, Brazilian companies in financial distress (under court protection debt restructuring proceedings in Brazil) have been filing for “Chapter 15” of the US Bankruptcy Law in the United States, to give force and effect to the Judicial Recovery Plan (executed in the insolvency proceedings in Brazil) and to protect their assets located in that country seeking to avoid freezing of assets by international creditors, such as the recent filing by a large Brazilian retailer in the Southern District of New York bankruptcy court.
Brazilian companies are also filing motions in “Section 1782” proceedings of the US Code seeking to have access to evidence located in the United States, such as documents, information and testimonies of people, which can later be used in legal proceedings in Brazil. For instance, a Brazilian plaintiff has successfully obtained an order from a US district court determining US banks to comply with the subpoenas and produce the discovery requested for use in a complaint to be filed with the Brazilian Securities and Exchange Commission (CVM).
Regulatory Cooperation
In addition, the members of the Brazilian state courts and regulatory agencies (such as the Brazilian Antitrust Authority (CADE)) have played an important role in the coordination and cooperation in the management of cross-border disputes and investigations in which Brazilian parties are involved, as well as in the exchange of information and evidence with international bodies. CADE, for instance, has cooperated with foreign competition authorities regarding various merger cases and anticompetitive conduct cases. International fora and foreign antitrust agencies have also been consulted for the carrying out of benchmarking and other specific studies.
Conclusion
In conclusion, commercial private disputes in Brazil tend to become less domestic and more exposed to international arenas, thus requiring all players (clients, lawyers and judges) to update and improve specific knowledge, experience and expertise of foreign legal systems, which need to be understood and adapted to the particularities of the Brazilian legal system. This requires constant learning and exchange of information between Brazil and other countries in a truly cross-cultural initiative to be co-headed by Brazilian legal authorities, lawyers and corporations.
ABOUT THE AUTHOR
Caio Campello is a Counsel in the Litigation, Arbitration & Investigations practice of Linklaters, Sao Paulo office. Caio is dual qualified Brazilian national with over 25 years of experience as a litigator handling cross-border matters involving Brazil, the U.S., Europe, and Asia with a focus on international arbitration, commercial litigation, cartel litigation, securities and shareholder litigation, and restructuring and insolvency. He holds a Master’s Degree in International Dispute Resolution from the University of London and is recognized by Chambers and Partners as a leading individual in Arbitration over the past 10 years. He is included in the Panel of Arbitrators of several Brazilian arbitration institutions.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
