Solange Neves Advogados Associados

Nowadays, the inclusion of an arbitration clause for the resolution of contractual disputes has become more common in Brazil, but even so, certain precautions must be taken so that such clauses or arbitration agreement can be considered valid and enforceable. That are traps that should be avoided in drafting arbitration agreements.

The first question to answer is the issue arbitrable? Some types of disputes are deemed non-arbitrable in Brazil. According to Brazilian arbitration Law parties must have full legal capacity and the subject matter involved has to be negotiable by the parties i.e., pecuniary patrimonial rights or disposable rights (direitos disponíveis). Usually the contract issue involves commercial Law or Contract Law.

Likewise, it is important to determine what is the applicable rules that will govern the arbitration proceeding and the substantive Law that will govern the outcome. The most used procedural rules applied in Brazilian arbitration Institutions are those of UNCITRAL. Parties may choose freely the applicable law based on the principle of autonomy and voluntary nature of the arbitration. Parties can for example choose whether Brazilian Law or the Law of one of the contracting party is applicable. If a dispute arises out of the contract involving the applicable Law, under Brazilian law, some specific rules may apply such as: where the contract was signed; where the contract obligation was carried out; are the parties countries signatory of the International Convention on Sales of Goods, the ICSG;

When parties choose to include an arbitration clause for the resolution of a dispute certain requirements have to be fulfilled because according to legal doctrine the arbitration clause is interpreted as “autonomous and independent” from the rest of the contract, and therefore, it is binding and important that the rules to which the parties will submit be drafted separately. Parties may choose a complete (full) arbitration agreement drafted separately with details about venue, proceedings rules, the arbitration institute, where the arbitral award will be rendered etc. Or an empty clause, that is, one that simply states that the parties will submit to an arbitration institute in the event of a dispute out of the contract.

It is recommended that the wording of the arbitration clause providing the submission of the parties to solve the issue before an arbitration institute should refer to a specific addendum to the contract that contains the rules that will govern future and eventual litigation

By Miriam Helena Schaeffer