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Recognition of Arbitration

 

 Recognition of Arbitration

The Brazilian Superior Court of Justice (STJ) recently took another step towards the consolidation of arbitration as an alternative means of dispute resolution. In an unprecedented decision, the STJ recognized that the Arbitration Panel has absolute power to decide upon injunctive relief filed by parties as of the moment that the arbitration panel is formed.

Both legal doctrine and the justice system already accept the power of the Arbitration Panel to process and decide upon injunctive relief filed by parties during an arbitration process, based upon the terms provided in the “Arbitration Law” (paragraph 4, art. 22 of Law nr. 9.307/96). However, there has been enormous difference of opinion over the procedure that should be adopted when the parties, prior to the installment of arbitration, turn to the justice system in search of injunctive relief  in an effort to avoid possible damages and protection of their rights during the arbitration that is to be initiated.

Following the effective initiation of the arbitration process, with the naming of the arbitration panel, some argued that the subjects that were previously submitted to the Courts in injunctive relief issues should not be transferred to the Arbitration Panel, under penalty of violation of pacta sunt servanda and access to the judicial system. In other words, some felt that the Judiciary remained competent to decide upon the issue until a final and non-appealable decision had been reached. And even for those who recognized the alternative power of the arbitration panel to assess the injunctive relief, there still remained a great deal of confusion over the procedure which should be employed: whether the court records of the injunctive relief should be forwarded to the arbitration panel together with the main copies of the judicial process; whether the court action should be suspended until the same matter is filed by the parties during the arbitration process, and so on and so forth.

In one fell swoop, the STJ has resolved all these problems with its decision on Special Appeal nr. 1.297.974-RJ, which was taken by the Third Chamber, under Reporting Judge Nancy Andrighi. With this decision, the Judges have demonstrated that the state’s power ceases to exist with the installation of an arbitration panel, and the arbitrators assume complete control to decide upon all matters concerning the arbitration, including those which arose prior to coming before the judiciary. As such, in the words of the Judges, if “pending the installment of the Arbitration Council, a party is permitted to seek relief from the Judiciary by means of injunctive relief, to ensure an advantageous result from the arbitration,” where “the temporary circumstances justifying the contingent intervention of the Judiciary having been resolved and considering that the signing of the arbitration agreement implies, as a regulation, the exemption of the State’s jurisdiction, the court records should immediately be forwarded to the arbitration court, in order that such may assume the processing of the action and, if applicable, reconsider the jurisdictional protection conferred, maintaining, altering or revoking the respective decision.”

With this decision, Judge Nancy Andrighi also highlighted the need for the reduction of the bureaucracy in the process, including the avoidance of pointless and unnecessary measures and activities for the resolution of disputes.

This decision should be celebrated since it recognizes the importance of arbitration in Brazil, legitimizing a practice that has been increasingly used by companies as a faster and efficient means of resolving disputes, whilst also displaying a modern outlook on the part of the Judiciary, in the sense that it revitalizes the system and reduces the bureaucracy of the procedures. These are undoubtedly steps forward that show the country in a more reliable light.

For more information on arbitration and litigation matters, please contact Fabiana Solano at fabianabruno@felsberg.com.br

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