NEW OPPORTUNITIES FOR LITIGATION IN BRAZIL: AN INTERNATIONAL APPROACH TO THE PROVISIONS OF THE BRAZILIAN NEW CODE OF CIVIL PROCEDURE
José Augusto Fontoura Costa[1] & Daniel Tavela Luís**
ABSTRACT: The Brazilian New Code of Civil Procedure introduced some useful innovations in the section of international jurisdiction. The focus of this article will be on the provision of article 22, III, which gives to the Brazilian judicial authority jurisdiction to hear cases “in which the parties involved, expressly or tacitly, submit themselves to national jurisdiction”. This provision innovates the Brazilian legal order by recognizing the principle of autonomy of the parties as attributive of jurisdiction to Brazilian judges.
The main argument we sustain in this article is that the new Code of Civil Procedure allows Brazil to project itself as a leading jurisdiction for lusophone countries in the future. We further argue that the modernization in the Brazilian New Code of Civil Procedure in an effort towards internalization certainly could help Brazil to develop even further as a support jurisdiction for international arbitration.
KEYWORDS: Civil Procedural Code; Brazil; lusophone countries; litigation.
I. Introduction[2]
The Brazilian Code of Civil Procedure (Statute # 13.105/2015) (“New Code of Civil Procedure”), brought a handful of useful innovations in the section of international jurisdiction. Certainly, business wise the most important innovation is the new role that the autonomy of the parties play in determining when a Brazilian judge will retain jurisdiction to hear a case (by virtual of article 22, III) and when the parties will be able to derogate from Brazilian courts by their express or tacit agreement (article 25).
The focus of this article will be on the provision of article 22, III, which gives to the Brazilian judicial authority jurisdiction to hear cases “in which the parties involved, expressly or tacitly, submit themselves to national jurisdiction”. This provision innovates the Brazilian legal order by recognizing the principle of autonomy of the parties as attributive of jurisdiction to Brazilian judges.
This rule is particularly important and welcome for lusophone parties’ that wish to have access to the advantages of litigating in Brazil. This idea might seem far fetched, but we hope to shed some light in this article on the advantages of litigating in Brazil and the potential that Brazil has for establishing itself as an important center of litigation and arbitration in Latin America and among lusophone countries.
The main argument we sustain in this article is that new Code of Civil Procedure allows Brazil to project itself as a leading jurisdiction for lusophone countries in the future. In reason of costs and linguistic facilities, as well as an alternative to courts based on common law, Brazil seems to be a viable option for litigation services even for relationships without any material connection with the Brazilian territory.
We further argue that the modernization in the Brazilian New Code of Civil Procedure in an effort towards internalization certainly could help Brazil to develop even further as a support jurisdiction for international arbitration.
In order to develop both of these arguments, this article is structured in four sections, in which we will: (i) briefly introduce the modifications brought by the New Code of Civil Procedure in regards to international jurisdiction; (ii) identify the of advantages in litigating in Brazil; (iii) identify the advantages in arbitrating in Brazil; and (iv) present some concluding remarks.
II. International Jurisdiction in Brazil’s New Code of Civil Procedure
The New Code of Civil Procedure, in its purpose for greater flexibility in conducting legal proceedings, represents a significant change to the concept of jurisdiction that had been in force in Brazil until then. Brazilian jurisdiction was seen as an exercise of State power that could only be limited or used by specific provisions of the law.
The New Code of Civil Procedure still has some of the characteristics of the past. In fact, generally, Articles 21, 23 and 24 of the New Code of Civil Procedure establish very similar rules to the rules that had been in force ever since 1973, as interpreted by Brazilian courts.
The new provisions are found in Article 22 and 25. Article 22 indicates the new trend of Brazil’s scope of jurisdiction for lawsuits related to alimony, consumer relationships and voluntary submission of the parties to the Brazilian Judicial Authority. Article 25 gives full effect to choice of forum clauses, when such choice does not violate Brazil’s exclusive jurisdiction and is not deemed as abusive, pursuant to the criteria set forth in Article 63 of the New Code of Civil Procedure.
We will further elaborate on the consequences and potential of Article 22, III[3]. By means of this provision, the Brazilian courts have opened their doors to any lawsuit that the parties voluntarily submit to its jurisdiction. The language of this articles poses no requirement of any material connection between the lawsuit and the territory of Brazil. In other word, regardless of the parties’ domicile, place of business, nationality, place of constitution or performance of the obligation or any other aspects, the Brazilian judicial authority can be competent to decide on the matter.
This submission to the Brazilian jurisdiction can be done in two ways: expressly or tacitly. The express submission is the parties' declaration of intention to choose the Brazilian court, as, for example, in a choice of forum clause. The tacit is derived from the absence of opposition to the Brazilian jurisdiction in defense submission.
This means that a Brazilian judge cannot, ex officio, refuse to hear the claim because it is not connected to Brazilian law or Brazilian territory. From a comparative law standpoint, Brazil’s choice seems to be aligned with the legislation of cities such as New York and London, which are quite adapted to foreign litigation.
From a commercial standpoint, this provision makes perfect sense. If the parties are able to choose the goods they want to buy, the price they want to pay and the method of payment, they should also be able to choose the jurisdiction to which they want to submit their disputes. In the business world of transnational companies, where the professionalism and the capability to keep the balance of the relationships established between the parties is paramount, the new rules introduced by the Brazilian Code of Civil Procedure are very much welcome.
III. Advantages of Ligate in Brazil
The question remains, though: why litigate in Brazil? We argue that there are advantages of litigating in Brazil particularly because of the transparency and costs associated with litigation in Brazil. Furthermore, Brazil’s judicial system seems to be in a growing and steady improvement of its traditional problem of delay.
Before turning to the advantages of litigating in Brazil, let us shed some light in the National Council of Justice reports that attest the evolution to which we have just referred to.
In "Justice in Numbers" report of 2014, the National Council of Justice identified an increase of 1.2% in new cases in Brazil and in the number of cases in stock of 4.2%. Since 2011, according to the National Council of Justice, the total number of lawsuits in Brazil has risen consistently, in a way that investments made in the Brazilian judiciary, particularly in the hiring of magistrates and civil servants did not result in an effective productivity gain in the justice´s administration.
A closer look at the numbers produced by the National Council of Justice allows us to conclude that a good part of the problems of the Brazilian justice system is due to the enforcement procedures and, in particular, tax law enforcement. This information is particularly relevant to demystify the common sense that in Brazil all claims take a long time.
A closer look to the numbers identified in the National Council of Justice reports indicates that enforcement of taxes lawsuits’ account for the great majority of cases that worsen the numbers of the Brazilian justice system. However, if one considers solely the cases of private nature, one will conclude that the length of such services is fairly adequate.
Therefore, considering the type of dispute to which this article refers - civil lawsuits, of a fundamentally corporate, professional and transnational nature - the rate of the National Council of Justice indicate improvements in the administration of processes and greater speed in its development. It is clear that the results have not reached the ideal level, but the notion of having a judiciary branch concerned with the administration of the volume of cases and that has evolved in order to improve (if not to solve) the challenge of delaying justice, is, at a minimum, a comfort for those who think about litigating in Brazil.
The second comfort for those who think about litigating in Brazil relates to the advantages we shall now indicate. The first advantage to be noted is the existence of a significantly developed and efficient local advocacy, in regards to litigation services. Specialized law firms have enough scale and technical prowess to deal with complex international matters, with especial attention to business interests. Every day, more and more Brazilian lawyers specialize themselves in international transactions, even those that don’t involve Brazilian parties.
The second advantage is the absence of a nationalist bias in dispute resolution. In spite of the excessive criticism that many times follows the technical rigor of Brazilian magistrates, there are few cases which can be found a nationalist bias, protecting Brazilian citizens interests to the detriment of foreign ones. The notion of impartiality and independence of the judiciary power is one of the foundations of the development of the Brazilian Civil Procedure, which is noted with considerable strictness by Brazilian magistrates.
Thirdly, the Brazilian procedure has positive characteristics that deserve to be highlighted. The first of them is the fact that the country is one of the pioneers in the implementation of digital procedures. This means that parties can have online access to the case records, without needing go to the courthouse; parties can also petition to the courts electronically, 24 hours a day, directly from the lawyer’s computer. The easiness of digital procedures results in a positive effect, providing parties an extremely transparent conflict resolution service.
Finally, Brazil is one of the few lusophone countries with such technology in dispute resolution and easy access to other Portuguese speaking countries. Particularly with lusophone countries, Brazil also shares relatively similar legal systems, specially in comparison with traditional common law jurisdictions such as New York or London.
Therefore, respecting the structural problems that plague the Brazilian judiciary, with slowness being, maybe, its main component, the New Code of Civil Procedure allows Brazil to present itself as a viable alternative to judicial services in regard to conflict resolutions. This characteristic is accentuated when the advantages of arbitrating in Brazil are taken into account, as will be further developed below.
IV. Advantages of arbitrating in Brazil
A few years ago, Brazil was presented as the beauty in the ball in an article from Global Arbitration Review (BOLTON, 2012), which makes reference to the growth and strengthening of the institutions with regards to arbitration. In fact, since the enactment of Law 9.397/76 arbitration procedures and Brazilian courts have continuously superseded themselves in domestic and international cases. Today, there is a large number of well-qualified specialists both in big law firms and in arbitration boutiques.
The Brazilian Arbitration Act (Statute # 9.307/96) with its recent amendments (Statute No. 13.129/2015) gave even more solidity to the regulation of Brazil’s arbitral practice. The statute now consecrates important features for arbitral procedures, such as: (i) the possibility of arbitration with the public administration (direct or indirect); (ii) the possibility of parties requesting the Brazilian Judiciary Authority for the concession of urgent or provisional remedy; (iii) the competence of the arbitral tribunal to maintain, modify or revoke the urgency or provisional remedy granted by the Judiciary in a pre-arbitration phase, and; (iv) the referral of the case back to the arbitral tribunal in case of an award being vacated.
Furthermore, Brazilian legislation also provides for an effective and easy means of communication between the arbitral tribunal and the Judiciary: the so called arbitral letter. In a nutshell, it is a legal instrument by which the arbitral tribunal requires the Judicial authority to practice executory actions needed for the arbitral procedure.
Aside from all these characteristics, the Brazilian Arbitration Act is based on the same principles of the UNCITRAL Model Law on International Commercial Arbitration and Brazil is also a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) since 2002. All of these characteristics puts Brazil as a reliable seat of arbitration and place of enforcement of arbitral procedures, particularly for international business disputes.
On top of that, recent studies demonstrate that the Brazilian Superior Court of Justice (Superior Tribunal de Justiça – STJ) is a very pro arbitration judicial authority[4]. The well established practice of arbitration in Brazil should be deemed as a competitive advantage over several other lusophones countries that either do not figure as part of the New York Convention or have only recently become a party to the Convention. These countries are characterized by relatively small economies and development indexes ranging from middle (Cabo Verde, Guiné Equatorial e Timor Leste) to low (Guiné-Bissau). The table below indicates such characteristics.
Country or Region
The year in which it started to produce its effects
Angola
2017
Brazil
2002
Cabo Verde
2018
Guiné Bissau
Not part
Guiné Equatorial
Not part
Macau
2005
Moçambique
1998
Portugal
1995
São Tomé e Príncipe
2013
Timor Leste
Not part
(Table 1 – Elaborated with data available from http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html last seen on 31 august, 2018).
These circumstances corroborate to the advantages of arbitrating in Brazil. Not only does the Brazilian legislation follow a pattern really close to the international standards – ensuring all parties legal security and familiarity in regard to the conduction and destiny of their arbitral procedure – but also arbitrating in Brazil generates the insurmountable advantage of being able to execute arbitration sentences nearly all over the world, where companies and citizens have assets.
Adding to that is the fact, already cited, that Brazilian advocacy has, each day, internationalized more and more of its activities and its formation, specializing itself in international transactions which do not involve Brazilian parties. Brazilian law firms have been able to reach a level of scale and technical prowess to deal with complex transnational matters in several areas: from international trade of goods and services, to complex infrastructure projects, structured in the modality of project finance, going though M&As of corporate groups of different sizes.
V. Conclusion
In conclusion, the New Code of Civil Procedure brings an opportunity to Brazil: to cast itself internationally as a center of excellence in arbitration and judicial conflicts resolutions. It also brings an opportunity for parties wishing to litigate in a different jurisdiction with the advantages offered by Brazilian legislation both in judicial and arbitral cases.
This idea can seem ambitious (some may even think wishful thinking, considering the innumerable problems that devastate the Brazilian judiciary), but it seems to us perfectly possible to take the news brought by article 22, III of the New Code of Civil Procedure to next step. The new normative provision is crystal clear when accepting the election of Judicial Court agreed by parties and makes perfect sense when thought from a transnational and business perspective.
In comparison with other judicial entities’, the Brazilian judiciary is particularly well developed. The digital process guarantees celerity, flexibility and transparency to the parties. The Brazilians judges, in spite of criticism that can be made (especially in failure of a demand), are known to maintain their impartiality, especially in regards to oy letting themselves be contaminated by a nationalist bias.
In addition, the Brazilian institutional environment is extremely propitious to the conduction of arbitration procedures. A culture pro arbitration has been created in Brazil ever since the enactment of the Brazilian Arbitration Act and the entry into force of the New York Convention. All of these characteristics reinforces Brazil’s competitive advantage over other Lusophone and Latin American countries for administering justice wither on the Judicial system or through arbitral proceedings.
VI. References
Bolton, Clare. “Brazil: belle of the ball”. Global Arbitration Review, vol. 7, no. 3 (2012).
CNJ. “Justiça em números 2014: ano base 2013”. Conselho Nacional de Justiça – Brasília: CNJ (2014).
Costa, José Augusto Fontoura. “A vontade e a forma: a percepção da arbitragem no caso do contrato de seguro do Projeto Jirau”. Revista de Arbitragem e Mediação. ed. 38 (2013).
Dinamarco, Cândido Rangel. “Instituições de Direito Processual Civil”. vol. I. 4a ed. rev. São Paulo: Malheiros (2004).
Júnior, Roberto Lincoln de S. Gomes. “Caso “Mendes Júnior vs. Banco do Brasil””. São Paulo: [s.n.]. (2011). <http://direitosp.fgv.br/casoteca/mendes-junior-vs-banco-brasil>.
STJ. Recurso Ordinário n. 114-DF (2011/0027483-8). Rel. Min. Raul Araújo (v.u. Julgado em 02/06/2015, DJe 25/06/2015).
[1] Professor at São Paulo University (USP).
** Partner at Manuel Luís Advogados Associados. PhD and Master in International Law by University of São Paulo (USP). Professor at Mackenzie Presbyterian University and FGV Sao Paulo Law School.
[2] The authors thank Giovanna Catelan Nardo and Paula Akemi for their contribution to the research and translation of parts of the article.
[3] Art. 22. The Brazilian judicial authority is also competent to hear cases: (…) III - in which the parties expressly or tacitly submit to the national jurisdiction.
[4] For further reference, the Brazilian Arbitration Committee conducted a major research on the practice of Brazilian courts in relation to arbitration. Those reports are available at: http://cbar.org.br/site/pesquisa-cbar-abearb-2016/