Arbitrability Under The New Brazilian Arbitration Act: A Real Change?

Arbitration International Advance Access published January 14, 2016
Arbitration International, 2016, 0, 1–22

doi: 10.1093/arbint/aiv084
Recent Developments
Arbitrability under the new Brazilian

arbitration act: a real change?
Leonardo V. P. de Oliveira*
ABSTRACT
Since the enactment of the 1996 Arbitration Act, the arbitrability of disputes in
Brazil followed the general rule in which disputes involving disposable
patrimonial rights could be submitted to arbitration. In 2015, the Brazilian
Downloaded from http://arbitration.oxfordjournals.org/ by guest on March 15, 2016

legislative enacted an Act amending some of the rules of the 1996 Act. The
general approach to arbitrability did not change but there was an attempt to
introduce provisions to the act regarding the arbitrability of disputes concerning
consumer law, labour law, corporate matters, and the participation of the state or
state-owned companies in arbitration. The first two ef- forts failed and the last two
prospered. This article explores if the changes made to arbitrability by the new Act
were actually necessary in face of the existing doctrinal and jurisprudential
understanding of arbitrability of disputes in Brazil. It argues that the general
approach to arbitrability already addressed the innovations brought by the new
statute. As a result, it asserts that the changes in the law were not a novelty as the
approach to arbitrability of disputes in Brazil was already settled by the 1996 Act
as well as the case law.
1. INTRODUCTION
On 27 May 2015, a legislative Act was published in the Brazilian federal official
ga- zette1 amending the 1996 Arbitration Act by repealing some of its
provisions and bringing new rules into force. The 2015 Act was introduced to
the Brazilian Senate in 2013 by Senator Renan Calheiros.2 In his justification,
Senator Calheiros asserted that despite the growth in the practice of arbitration in
Brazil, there was a need to improve the current legislation to synchronize it with
the continuous Brazilian participation in the international scenario.3 As a result,
he emphasized the need to modify a
* LLB (Brazil); LLM and PhD (University of Essex); Senior Lecturer, Law School, Anglia Ruskin
University, East Road, Cambridge CB1 1PT, UK; and Member of the Rio de Janeiro State Bar. Email:
leonardo.valla- dares@anglia.ac.uk. The author would like to thank Dr Sufyan El Droubi and Mr
Marcelo Gustavo Silva Siqueira for the comments on the early draft of this article. All mistakes of
interpretation and translations are the author’s own.
1 Law no 13129 of 26 May 2015. Pp 1 and 2 of the Brazilian federal official gazette.
2 Projeto de Lei do Senado no 406 of 2013.
3 ibid 6.
VC The Author 2016. Published by Oxford University Press on behalf of the London Court of International Arbitration.
All rights reserved. For Permissions, please email: journals.permissions@oup.com
● 1
2 ● Arbitrability under the new Brazilian arbitration act
few aspects of the law. The new statute will come into force on 27 July 20154
and among its important modifications it establishes that statutory limitations will be
suspended by the commencement of arbitration;5 it regulates the possibility of
seeking injunctions in court to be ratified by the arbitral tribunal once it has
been formed;6 and it creates an arbitral letter which will be a document used by
the arbitral tribunal to communicate with the respective court in order for the latter
to enforce a decision made by the arbitrator or the arbitral tribunal.7 The new
statute also changed one provision regarding arbitrability of disputes. Its original
aim was at regulating issues involving the state and state-owned companies,
corporate matters, employment, and consumer law. However, the provisions
respecting the two latter issues were vetoed by the Brazilian president.
Consequently, the new statute kept the general framework of arbitrability which was

established in the 1996 Act and added to it a provision in relation to arbitration
involving the state and state-owned companies and it changed some provisions in
the Joint-stock Companies Act.
The present article examines the adequacy of the changes that will be in force as
well as the ones that were vetoed. It argues that the new additions to the 1996
Act are not completely necessary and may lead to confusion as they try to regulate
issues that the courts have been successfully addressing through a consistent
case law. It also analyses the vetoed provisions and reaches a similar conclusion, that
is, the nov- elties brought by the 2015 Act are unlikely to make significant
differences to the 1996 framework regarding arbitrability. Thus, this article starts by
reviewing the general approach to arbitrability of disputes established in the 1996 Act.
After, it explores the arbitrability of disputes under the 2015 Act by evaluating
arbitrability involving the state and state-owned companies, employment issues,
consumer law, and corporate matters.
2. THE OVERVIEW OF ARBITRABILITY IN THE 1996

ARBITRATION ACT
The 2015 Act did not change the method employed to analyse whether a
dispute can be submitted to arbitration keeping the previous principle, namely,
rights that can be disposed are arbitrable.8 Article 1 of the 1996 Arbitration Act
states that ‘[p]ersons capable of contracting may settle through arbitration
disputes related to patrimonial rights over which they may dispose’. That
provision has to be read with Article 852 of the 2002 Brazilian Civil Code
which states that ‘[a] commitment is prohibited for the resolution of questions of
state, personal family rights and other questions that are not strictly patrimonial
in character’. This shows that the Act did
4 Law no 9.307 of 23 September 1996.

5 Art 19, para 2.
6 Art 22-A and 22-B.
7 Art 22-C.
8 During the legislative process for the 1996 Act, arbitrability was not a controversial topic. The only
proposed addition to the original text of the bill related to arbitrability was made by Congressman
Milton Mendes who wanted to specify a minimum value for arbitration. This was proposed during
the debate on 4 October 1995 and arbitration could not take place if it was inferior to two hundred
thousand fiscal uni- ties of reference or any other inflation adjustment indexation that would
eventually substitute it. The proposal was not successful. See Projeto de Lei no 4018-A/93.
Arbitrability under the new Brazilian arbitration act ● 3
not make a list of issues that are non-arbitrable, but that the Civil Code did.
Examining the provision in the Civil Code, it can be concluded that it followed
the same principled rationale of the Act by using the patrimonial criterion. In
reality, the Civil Code provision seems unnecessary when combined with the Act
since the general rule established in the Act—disposable patrimonial rights—
covers the issues listed in the Civil Code.
Article 1 of the 1996 Act has a clear two-fold structure. Its first part addresses
the capacity of the parties to conclude a contract (‘persons capable of
contracting’), that is, it refers to the so-called subjective arbitrability.9 In Brazil, a
person can be a natural person or a legal entity. Persons need personality in
order to be entitled to rights and obligations.10 According to Article 2 of the Civil
Code, a natural person acquires personality by a birth with life;11 and according to

Article 45, a legal entity acquires personality at the moment its constitutional acts
are registered at the proper regis- try.12 A natural person needs to be capable of
concluding a contract in order for it to be subject of arbitration in case of a
dispute. The incapacity of a natural person makes the contract null ab initio or
subject to annulment depending if the person is absolutely capable or relatively
capable of being entitled to rights and obligations.13 In relation to legal entities, the
capacity will fall on its representatives. Thus, if natural persons, they need to be
absolutely capable of civil acts and it is necessary for them to have the necessary
powers to represent the legal entity; otherwise they will not be able to bind the
entity to the arbitration agreements that they might conclude.
The second part of Article 1 refers to patrimonial rights, that is, it refers to the so-
called objective arbitrability.14 The Brazilian approach seems to mirror the German
and Swiss view of what can be submitted to arbitration. In Germany, any claim
involving economic interest can be arbitrated15 and in Switzerland ‘[a]ll
pecuniary claims may be submitted to arbitration’.16 Patrimonial rights are the
rights that can
9 See Karl-Heinz Bo¨ckstiegel, ‘Public Policy and Arbitrability’ in Pieter Sanders (ed),
Comparative Arbitration Practice and Public Policy in Arbitration, ICCA Congress Series, 1986 (Kluwer
Law International 1987) vol 3, 180–82.
10 Art 1, Civil Code: ‘Every person is capable of having rights and duties within the civil order.’
11 Art 2, Civil Code: ‘The civil personality of a person begins with live birth; but the law safeguards,
from conception, the rights of the unborn.’
12 Art 45 Civil Code: ‘The legal existence of private law legal persons begins with the recording of their
constituting instrument in the appropriate register, preceded, if necessary, by authorization or approval
of the Executive Branch of Government; all alterations to the constituting instrument shall be
entered in the register.’
13 The Civil Code, on article 166, I declares that “[a] juridical transaction is null when: I it is entered
into by an absolutely incapable person;”. Article 171, I says that “[i]n addition to the cases expressly
provided for by law, a juridical transaction is voidable: I – by reason of the relative incapacity of the
agent”. These provisions are applied together with article 3, I and 4, I of the Civil Code that
respectively express: “Article 3. The following persons are absolutely incapable of performing
personally the acts of civil life: I – minors of less than sixteen years of age;” “Article. 4 The following
persons are incapable with respect to certain acts or the manner of performing them: I – those of
more than sixteen years of age but less than eighteen years of age”
14 Bo¨ckstiegel (n 9) 180–82.
15 Art 1030 of the German Code of Civil Procedure.
16 Art 177(II)(1) of the Swiss International Private Law Act.
be subject of a monetary quantification;17 hence, they can be assimilated with having

economic interest and being pecuniary since both would lead to a determination of
a specific quantity in some type of currency. It is the distinction between
patrimonial and non-patrimonial rights that leads to the notion of disposable
rights. Patrimonial rights include legal relationships of the law of obligations,
relationships rooted on contract and the illicit acts when there is a unilateral
manifestation of an intention.18 Non-patrimonial rights are the opposite of
patrimonial rights and the person that is entitled to them cannot, in principle,
extract economic utility from them.19 They concern human rights, broadly
defined as the right to life, the right to have a name, the right to privacy and the
right to preserve one’s honour. Any economic advantage obtained out of it is
made indirectly, this means that an injury to a non-patrimonial right will entitle

the victim to receive damages but not negotiate the right per se.20
The examination of patrimonial rights leads to the notion of disposability of the
rights because both ideas are naturally interconnected. Non-patrimonial rights are
characterized as non-disposable rights as they are the intangible part of a
person’s patrimony,21 whereas the disposable rights are the ones that can be
alienated, trans- ferred, renounced, and traded.22 If the patrimonial right is a right
that entitles a person to a pecuniary advantage, by logical reasoning it is a
disposable right that is susceptible of being ascribed an economic utility. In other
words, a disposable right, in principle, is in control of the person that possess it,
akin to an ownership of a property, while a non-disposable right might be out of
the person’s control. Among Brazilian scholars, there is no consensus on what can
be considered non-disposable rights; however, the following are commonly
presented: family rights (especially child support, child custody, and paternity
investigation), criminal law, inheritance rights, taxation, collective rights, antitrust
law, and cases requiring the intervention of the Public Attorney’s Office such as
guardianship, curator of the state of an absentee, and interdicted persons.23
For purposes of arbitrability, it is imperative to distinguish between non-
disposable rights and public policy because there are non-disposable rights that
do not enjoy public policy status; and there are disposable rights that enjoy that
status.24 Within the Brazilian system the arbitrator cannot decide a matter
related to a non- disposable right, but that does not necessarily mean that the
arbitrator cannot decide questions concerning public policy issues. Just like the
other examples presented in
17 Pedro A Batista Martins, Apontamentos Sobre a Lei de Arbitragem (Editora Foresnse 2008) 3 and
Jose´ Maria Rossani Garcez, ‘Arbitrabilidade no Direito Brasieliro e Internacional – Regras da Lei
9.307/96 e de outras legisla¸co˜es – Normas de ordem pu´blica em diversos sistemas – Antecedentes
jurisprudenciais’ [2001] 4(12) Revista de Direito Bancário e de Mercado de Capitais e da
Arbitragem 337, 340.
18 Luiz Antonio Scavone Junior, Manual de Arbitragem (4th edn, Editora Revista dos Tribunais 2011) 23.
19 Antonio Jose de Mattos Neto, ‘Direitos patrimoniais dispon´ıveis e indispon´ıveis A` luz da Lei
de Arbitragem’ [2002] 98(361) Revista Forense 293, 294.
20 ibid.
21 Batista Martins (n 17) 4.
22 Mattos Neto (n 19) 296.
23 Jose´ Maria Rossani Garcez, Arbitragem Nacional e Internacional, progressos recentes (Del Rey Publishers
2007) 51–52; Carlos Alberto Carmona, Arbitragem e Processo: Um Comentário a Lei No. 9,307/96
(3rd edn, Atlas Publishers 2009) 38; Joaquim T de Paiva Muniz and Ana Tereza Palhares Basilio,
Arbitration Law of Brazil: Practice and Procedure (Juris Publishing 2006) 27–28 and Mattos Neto (n
19) 299–303.
24 Batista Martins (n 17) 4.
the last paragraph, an arbitrator cannot rule a question concerning the right to life,
in itself, because it is a non-disposable right and also a matter of public policy.
Hence, permission to engage in assisted suicide will not be the subject of an arbitral
tribunal. However, the consequences of a violation of a non-disposable right that can
be quan- tified, such as damages resulting of a violation of a right to life, are
capable of being arbitrated by an arbitral tribunal. Moreover, if a contract is illegal
because it involves a criminal activity, the arbitrators can declare it void, but they
cannot impose criminal penalties to the contracting parties since this right is non-
disposable. Such a decision belongs to the exclusive jurisdiction of a court.
Another provision concerning arbitrability in the 1996 Act can be found in Article
25, but this regulation is actually about court interference on incidental issues of arbi-
trability. It declares that, if during the arbitration a question of arbitrability is

raised and the tribunal realizes that its final decision depends on the decision
regarding non-disposable rights, it has to send the case to the State Court and wait
for the judiciary to resolve the question and, only after the court ruling, the
arbitration can recommence.25 That provision is based on the Italian arbitration
law which has a similar regulation.26 The protection applied by the Brazilian
Arbitration Act seems unnecessary because even if the incidental question is
about non-disposable rights the arbitrator can analyse the issue and decline its
jurisdiction by ruling that the dispute cannot be subject to arbitration. One
example used by Brazilian literature is the allegation of incapacity of a party at
the time when the arbitration agreement is signed.27 The question of incapacity is
a typical non-patrimonial and non-disposable right and its declaration, as per the
provision above, has to be done by the judiciary. However, this does not stop the
arbitrators from recognizing it and later concluding that the arbitration agreement
is void due to a problem on its formation. The effect would be the same but with
procedure economy because, if the arbitrators refer the question to a court judge
and the court declares that there was incapacity to conclude a contract, once
the arbitration procedure is resumed, the outcome would be identical. If the
situation was to be different, that is, the arbitral tribunal concludes that there was
no incapacity and the court declares the person incapable, the parties could still
challenge the award. Thus, the practicality of the provision is not clear.
The last provisions concerning arbitrability are in relation to recognition and en-
forcement of foreign arbitral awards. Articles 38(I) and 39(I) and (II) of the
25 The full wording of the article is: ‘Art. 25. If, during the course of arbitral proceedings, a dispute shall arise
concerning rights over which a party may not dispose, and once convinced that the final decision may
de- pend thereon, the arbitrator or the Arbitral Court may refer the parties to the State Court with
jurisdiction therefore, ordering a stay of the arbitral proceedings. Sole paragraph: Arbitral
proceedings shall recommence after the detrimental issue shall have been settled and evidence thereof
entered in the file of the final and unappealable judgment thereon.’
26 Article 819 of the Italian Code of Civil Procedure declare that “[i]f during the course of the
proceedings a question arises which according to law is not arbitrable, the arbitrators, if they deem
that the decision submitted to them depends upon the resolution of said question, shall stay the
proceedings. In all other cases, the arbitrators shall decide all questions arising in the course of the
arbitration proceedings. In the case specified in the first paragraph, the time-limit set in Article 820
shall be suspended until the day on which one of the parties shall serve notice upon the arbitrators
of the judgment in the incidental issue once it has become.”
27 Alexandre Freitas Camara, Arbitragem Lei n˚ 9.307/96 (5th edn, Lumen Juris 2009) 110; and
Scavone Junior (n 18) 134–35.
Arbitration Act have similar wording to Articles V(1)(a) and V(2)(a) and (b) of
the 1958 New York Convention on Recognition and Enforcement of Arbitral
Awards (NYC). Article 38(I) states that the recognition and enforcement of a
foreign arbitral award can be denied if ‘the parties to the agreement lacked
capacity’. Here it is a matter of subjective arbitrability representing non-
disposable rights. Article 39 has the same rationale and in numbers (I) and (II) it
defines, respectively, the reasons why recognition should be denied: ‘in accordance
with Brazilian law, the subject matter of the dispute is not capable of settlement by
arbitration’ and ‘the decision is offensive to national public policy’. On one hand,
Article 39(I) covers issues of arbitrability and it used the exact same wording as
Article V(1)(a) of the NYC. On the other hand, Article 39(II) slightly changed
the wording from the NYC and established a national public policy instead of

‘the public policy of that country’. The question raised here is that Brazil opted
to use the barrier of its national public policy as an alternative to international
public policy. Since the NYC was ratified in Brazil after the enactment of the
Arbitration Act, there is an understanding that the NYC repealed the conflicting
provisions in the Arbitration Act.28 Now, the imposition of national public policy
is no longer valid for the reason that the NYC does not differentiate between
national and international. Regardless of the approach, Brazilian Courts have not
yet ruled a case of recognition and enforcement of foreign arbitral awards in
which the subject was discussed.29
The provisions regarding arbitrability mentioned above were not changed by the
2015 Act, which kept the general legal framework of arbitrability in Brazilian Law un-
touched. Nevertheless the new statute created a small list of disputes that can be
submitted to arbitration. It introduced provisions regarding the arbitrability of
disputes involving the state or state-owned companies and tried to create
provisions about consumer arbitration and employment arbitration, which will
be studied below.
3. ARBITRABILITY IN THE 2015 ACT

The provision regarding disposable patrimonial rights has not been repealed by
the 2015 Act. Nonetheless, what the new statute tried to do, was to insert new
provisions to the 1996 Act specifying how disputes involving the state and state-
owned companies, employment issues, consumer law, and corporate matters are
arbitrable. Therefore, to understand the modification, each issue must be verified
separately without disregard to the interpretation of what are disposable patrimonial
rights, as described above.
3.1 State or state-owned companies

The situation whereby a state or a state-owned company can make an agreement
to arbitrate is not a new issue and it has been subjected to discussion in other
jurisdic- tions.30 Moreover, until the enactment of the 2015 Act, the interpretation
regarding
28 Batista Martins (n 17) 399–400.

29 See Leonardo VP de Oliveira and Isabel Miranda, ‘International Public Policy and Recognition
and Enforcement of Foreign Arbitral Awards in Brazil’ [2013] 30(1) J Intl Arb 49.
30 See the following French cases: Hecht v Buismans (1972) Rev Arb 67, Cour D’appel de Paris, 19
June 1970; Ministry of Public Works (Tunisia) v Societe Bec Freres [1997] YBCA XXII, 682, Cour
D’Appel, Paris, 24 February 1994; Societé Ganz et autres v Societé Nationale des Chemins de Fer
Tunisiens [1991] Revue de l‘Arbitrage, 478, Cour d’Appel de Paris, 29 March 1991; and Societe
Gatoil v National Iranian
the capacity of the Brazilian state or its state-owned companies to participate in

arbitration relied on the general rule of patrimonial disposable rights. There was
no specific reason, at least not a statutory one, to constrain the government to
arbitrate its disputes; this was an option in which it could freely decide.31
Furthermore, Article 1 of the 1996 Arbitration Act did not exclude its application
to public entities; otherwise, it would have expressly said it in the provision.32
What is more, there are other statutory provisions allowing those entities to submit
disputes to arbitration, such as Article 11(III) of the Public–Private Partnership
Act33 which states that the public bid can have an arbitration clause as long as the
seat is in Brazil and the language is Portuguese.34 Apparently, the 2015 Act
decided to clarify the current scenario and by doing that, it inserted the following
paragraphs to Article 1 of the 1996 Act:

paragraph 1o The direct or indirect public administration can use arbitration
to settle disputes related to disposable patrimonial rights.
paragraph 2o The authority or the competent direct public administration

body for the conclusion of an arbitration agreement is the same for the
perform agreements or transactions.
Besides the two paragraphs added to Article 1, the new statute also included a
paragraph to Article 2 making the arbitrations concerning the direct or indirect
public administration open to the public.35 A similar approach had been adopted
in 2011 by the State of Minas Gerais when it enacted an Act determining that it
and its entities could adopt arbitration as a method to solve disputes concerning
patrimonial disposable rights.36 Now with the change promoted by the 2015 Act
the capacity of a state
Oil [1993] Revue de l’Arbitrage, no 2, 281, Cour D’Appel de Paris, 17 December 1991. See also
Bernard Hanotiau, ‘The Law Applicable to Arbitrability’ in Albert Jan van den Berg (ed), Improving the
Efficiency of Arbitration and Awards: 40 Years of Application of the New York Convention, ICCA Congress
Series, 1998 (Kluwer Law International 1999) vol 9; Karl-Heinz Bockstiegel, ‘The Legal Rules
Applicable in International Commercial Arbitration Involving States or State-controlled
Enterprises’ in ICC International Arbitration, 60 Years On: A Look at the Future (ICC 1984); and
Jan Paulsson, ‘May a State Invoke its Internal Law to Repudiate Consent to International Commercial
Arbitration?’ [1986] 2 Arb Intl 90.
31 Cesar Augusto Guimarães Pereira and Eduardo Talami, ‘Arbitragem e Poder Pu´blico: o Esbo¸co de um
Consenso e Novos Desafios’ in their, Arbitragem e Poder Pu´blico (Editora Saraiva 2010) 10.
32 Selma Lemes, Arbitragem Na Administra¸caõ Pu´blica: Fundamentos Jur´ıdicos e Eficiência Econoˆmica
(Quartier Latin 2007) 99.
33 Law no 11079, ICC, 30 December 2004.
34 The Article states: The invitation to tender shall contain a draft contract, shall expressly indicate the sub-
mission of the tendering procedures to the norms of this Act, observing, as applicable, §§ 3 and 4
of article 15, article 18, 19 and 21 of Act 8987, dated February 13th, 1995, and may further
provide for: .. . III – the use of private mechanisms for dispute resolution, including arbitration, to
be conducted in Brazil and in the Portuguese language, according to Act 9307, dated September 23rd,
1996, in order to resolve conflicts that may arise in relation to the contract.
35 The article expresses that “[a]t the parties’ discretion, arbitration may be in law or in equity Para 3
The arbitration involving the public administration will always be of law and shall respect the
principle of publicity.”
36 Law no 19477, 12 January 2011. Article 1 and 2 respectively declare: ‘Article 1 The arbitration court,
established by Federal Law no. 9,307, of 23 September 1996, for the solution of disputes in which
the State is a party, shall be effected according to the procedures laid down in this Law.’ ‘Article 2 The
State
or a state-owned company to be a party to arbitration was expressly affirmed at

the federal level and there will be no need for other Brazilian states to follow the
example adopted by the State of Minas Gerais. The modification avoids a
problem, as now any challenge to arbitration involving the Brazilian state or a
state-owned company will be rejected by the Brazilian Judiciary. However, this change
is just a confirmation of the existing case law on the subject.
Before the new Act, the main obstacle to arbitration involving the state or a
state- owned company was the interpretation of disposable rights. This is because
the understanding of patrimonial disposable rights in this case rested in the
fact that the public administration provides a service in the public interest and
public interest is not easily defined. Although its definition can be imprecise, in
its execution it has been classified as primary and secondary.37 The first relates to a

government’s conduct executing the public interest by discharging of its political
and legislative func- tions and the second concerns the ramifications of the first,
meaning that in order to make the execution of the public interest operational, the
guidelines established by the primary public interest are materialized in this
second stage. The secondary public interest works as an instrument to achieve
the aims established in the primary public interest. At this point, the rights which
the public administration will manage are normally patrimonial rights and, hence,
are capable of settlement by arbitration.38 In this area it is easy to distinguish
situations which are arbitrable and which are not. If a department of the
government has to buy computers to execute the primary public interest, why the
sales contract cannot have an arbitration clause? Why is the public interest here so
important that the judiciary has to decide a potential dispute?
When the contract refers to patrimonial rights, even if the government is a party,
it does not necessarily mean that the public interest at stake cannot exclude the
jurisdiction of courts. It would be a type of protectionism that does not make
any sense. Conversely, if the issue is about the execution of a primary public interest,
such as re- counting the votes of an election, the rights are not disposable or
patrimonial and they will be non-arbitrable.
Since the enactment of the 1996 Arbitration Act, the debate over the
possibility of the Brazilian government being a party to arbitration has been
subject of judicial scrutiny. It first was brought up in the Court of Appeal in two
different Brazilian states. In 1999, the Distrito Federal Court of Appeal ruled a
writ of mandamus39 challenging an act of the Distrito Federal Audit Court
barring a state-owned company to participate in arbitration. In Serveng CivilSan
S/A – Empresas Associadas de Engenharia and Andrade Gutierrez S/A v Tribunal de
Contas do Distrito Federal40 a
and its organs and entities of direct and indirect state administrations may opt for adoption of the arbitra-
tion court for the settlement of disputes concerning patrimonial disposable rights.’
37 Lemes (n 32) 130.
38 ibid 131.
39 According to the Brazilian Constitution in art 5(LXIX), ‘a writ of mandamus shall be issued to
protect a clear and perfect right, not covered by habeas corpus or habeas data, whenever the party
responsible for the illegal actions or abuse of power is a public official or an agent of a corporate
legal entity exercising duties of the Government’.
40 Writ of Mandamus (Mandado de Seguran¸ca) No 1998002003066-9, Especial Counsel of the Distrito
Federal Court of Appeal, Reporting Justice Nancy Andrighi, decided on 18 May 1999, published in
the Brazilian official gazette on 18 August 1999.
dispute arose in a contract signed in 1987 to readapt and expand the water and
sewer treatment system in Brasilia with the state-owned company of Brasilia
Water and Sewer Company being one of the parties. The contract provided for
arbitration to solve future disputes to be set and regulated by the provisions of the
Brazilian Code of Civil Procedure. The Distrito Federal Audit Court declared
that the company could not use arbitration to settle any future disputes since the
contract concerned non-disposable rights.41 The first issue addressed by the
Court of Appeal was if the clause, at the time, could be evoked since the law in
force regarding public tenders gave courts exclusive jurisdiction to solve
controversies in which a state or state entity was a party. This law had an
exception for international contracts and due to the fact that the contract was
financed by the World Bank, the Court of Appeal understood that the agreement

to arbitrate fell in the exception. Moving to the question of disposable rights,
Justice Andrighi stated that the public interest was non-disposable. Nonetheless, the
contractual disagreements that could not be amicably solved could be settled by
arbitration because the arbitration itself did not affect the non-disposability of
the public interest. Moreover, she said that decisions from the Audit Court are of
an inspection nature having no jurisdictional character. The ruling’s foundation is
reasonable because the type of service that the contract required meant the su-
premacy of the public interest was not in danger. On the contrary, as the decision
described, the contract would entail services that could easily be resolved by
arbitration.
In 2003, the Rio de Janeiro State Court of Appeal had to decide a similar case. In
Eliomar de Souza Coelho v Cesar Epitácio Maia & Solomon R Guggenheim
Foundation42 an individual brought a suit called peoples’ legal action43 aimed at
annulling the contract between the Rio de Janeiro Municipality and the
Solomon R Guggenhein Foundation to build a Guggenhein museum in Rio de
Janeiro. The claim was based on three points which would lead to the annulment
of the contract, they were (i) the existence of an arbitration agreement, (ii) the
applicable law to the main contract, and (iii) annual limitations to the state’s
government budget. An interlocutory decision was requested and granted by the
first instance judge and an appeal was made. Justice Ademir Pimentel declared
that the budgetary issues could be solved through time and would not create an
obstacle to the contract’s performance; however, the other two claims were more
complicated. The applicable law to the contract employed two legal systems to
deal with impasses, namely the law of the
41 According to the Brazilian Constitution, arts 70–75, the Audit Courts provide the external control of
the government accounts, finances, budgets, operations, and properties.
42 Interlocutory Appeal (Agravo de Instrumento) No 2003.002.07839, 13th Civil Chamber of the Rio de
Janeiro State Court of Appeal Reporting Justice Ademir Pimentel, decided on 26 May 2003, published
in the Brazilian official gazette on 30 May 2003.
43 It is a type of class action provided by the Brazilian Constitution in art 5(LXIII) expressing: ‘Article 5.
All persons are equal before the law, without any distinction whatsoever, Brazilians and foreigners
residing in the country being ensured of inviolability of the right to life, to liberty, to equality, to
security and to property, on the following terms: .. . LXXIII – any citizen is a legitimate party to file a
people’s legal action with a view to nullifying an act injurious to the public property or to the
property of an entity in which the State participates, to the administrative morality, to the
environment, and to the historic and cultural heritage, and the author shall, save in the case of proven
bad faith, be exempt from judicial costs and from the burden of defeat.’
State of New York and Brazilian law. Being that the contract was an administrative
contract because it involved the public administration, it had to be regulated by
Brazilian law, namely, the Act governing public tenders.44 In relation to arbitration,
two situations were brought up: the fact that the rights negotiated in the
contract were non-disposable and that the arbitration required confidentiality of
proceedings which would be offensive to the publicity principle established in
Article 37 of the Brazilian Constitution.45 When assessing arbitrability, the court
first demonstrated that arbitration in administrative contracts had been permitted
in Brazil through the Acts regarding the concession of public services46 and
national energy policies.47 Conversely, such provisions were specific for the type
of contract regulated by the Acts and not in relation to parts of the government,
such as the city of Rio de Janeiro. For this reason the rights would be non-

disposable. Furthermore, the confidentiality clause was in direct conflict with the
publicity principle which requires the government’s transparency in its conduct,
save for reasons of national security. Therefore, the court ruled that the contract
was not permitted and, because of this decision, today there is no Guggenhein
museum in the city of Rio de Janeiro.
The new provision in the Arbitration Act would have changed the decision in
Eliomar de Souza Coelho v Cesar Epitácio Maia & Solomon R Guggenheim
Foundation, especially the fact that now the direct or indirect public administration
can have disputes solved by arbitration, including here the city of Rio de Janeiro.
Moreover, the confidentiality clause would not be valid. Even so, without the
new Act the non-arbitrability of the dispute was questionable. The contract was
to promote a secondary public interest, culture, which does not require the
constant supervision of the judiciary. Even if one thinks that courts should
participate, this can be done if an award is being enforced.
Examining the decision in Eliomar de Souza Coelho v Cesar Epitácio Maia
& Solomon R Guggenheim Foundation, it seems that the 2015 Act came to solve a
significant impasse. Nevertheless, the rationale of such decision was not
adopted in other cases in which contracts to provide essential services were
concluded between a state-owned company and the private sector. The argument
that the rights of a state- owned company are not disposable was debated in
three rulings made by the Superior Court of Justice. The first was AES
Uruguaiana Empreendimentos Ltda v Companhia Estadual de Energia Elétrica -
CEEE48 where a mixed capital company owned by the State of Rio Grande do Sul
made a public tender for the purchase of electric energy. AES was the successful
party to win the bid and it concluded a contract including an ICC arbitration
clause. Companhia Estadual de Energia Ele´trica (CEEE) argued that the
contract’s requirements were not met and started legal
44 Law no 8666 of 21 June 1993.

45 ‘Article 37 The governmental entities and entities owned by the Government in any of the powers of the
Union, the states, the Federal District and the Municipalities shall obey the principles of lawfulness,
impersonality, morality, publicity, and efficiency, and also the following.’
46 Law no 8987 of 13 February 1995, art 23.
47 Law no 9478 of 6 August 1997, art 43(X).
48 Special Appeal (Recurso Especial) No 612.439/RS, Second Chamber of the Superior Court of
Justice, Reporting Justice Joaõ Otávio de Noronha, decided on 25 October 2005, published in the
Brazilian official gazette on 14 September 2006.
proceedings at the Rio Grande do Sul State Court. There was a challenge to the
court’s jurisdiction and the decision centred on the fact that a state-owned company
providing public services could not waive the right to exclusive court
jurisdiction without the proper authorization from the state’s legislative sector. This
ruling was reversed by the Superior Court of Justice. In Justice Noronha’s
opinion the sup- posed necessity for a legislative authorization is absent when a
mixed capital company performs an agreement concerning its economic activities
in a strict sense (for instance, an activity of an industrial nature or for the
production and trade of goods for profit) and the rights and obligations arising
from it are disposable. The opposite would be true if the activities were
associated with the power to regulate, which would invade the area or primary
public interest and, consequently, would not be disposable.

The story was repeated in TMC Terminal Multimodal de Coroa Grande SPE S/A v
Ministro de Estado da Ciência e Tecnologia49 and a similar approach was followed.
TMC filed a writ of mandamus claiming that a unilateral decision made by the
Minister of Science and Technology rescinded a contract between TMC and
Nuclebrás Equipamentos Pesados S/A–NUCLEP, a mixed capital company owned
by the Brazilian Federal Government. The service provided was for the
operation and management of a Seaport Terminal in the city of Itagua´ı, State of
Rio de Janeiro. TMC’s allegation was that there was an agreement to arbitrate
any dispute arising out of the contract and argued that the State Minister could
not rescind the contract whereas NUCLEP’s defence was of non-arbitrability.
Justice Fux examined the type of contract and the fact that the object of the
contract was of a disposable right. The conclusion reached was that ‘arbitration
aims at settling disputes relating to disposable patrimonial rights, which does
not mean disposability of the public interest, since there is no relation between
disposability or non-disposability of patrimonial rights and disposability or non-
disposability of public interest’.50 He also declared that a state-owned mixed-
capital company is a state entity but if it operates like a pri- vately owned company,
it cannot exclude arbitration as a dispute settlement method. In the end, he
concluded that holding an arbitration clause in an administrative contract invalid
would create a prohibition where the law does not lay down such impediment.
The two cases mentioned above set a strong precedent and one would imagine
that these would settle the argument. Yet in 2011, again, the Superior Court of
Justice had to rule on it in Companhia Paranaense de Gá s Natural –
COMPAGAS v Consórcio Carioca Passarelli.51 Another state-owned company,
COMPAGAS concluded a contract with a consortium having the sale of
natural gas as its object. A dispute arose and COMPAGAS claimed that the
rights in the contract were non- disposable and it started court proceedings to
annul the arbitration clause. At the
49 Writ of Mandamus (Mandado de Seguran¸ca) No 11308/DF, First Section of the Superior Court of
Justice, Reporting Justice Luiz Fux, decided on 9 April 2008, published in the Brazilian official gazette
on 19 May 2008.
50 ibid.
51 Special Appeal (Recusro Especial) No 904.813/PR, Third Chamber of the Superior Court of
Justice, Reporting Justice Nancy Andrighi, decided on 20 November 2011, published in the Brazilian
official gazette on 28 February 2012.
final instance, the Superior Court of Justice addressed once more that in the case
at hand the subject discussed in arbitration would be related to a change in the
mainte- nance of the economic and financial balance of the contracts made by delays
in starting the performance of the contract, which is a matter of disposable
patrimonial rights.
Given the above-mentioned decisions it could be argued that the provisions
in the 2015 Act are not making any expressive change in relation to the
arbitrability of disputes involving the state and state-owned companies in Brazil.
Nonetheless, the 2015 Act clarifies another issue involving the same topic. Article
37 of the Brazilian Constitution declares that the government has to abide by the
principle of legality.52 This means that the government can only discharge of its
competences according to what the law allows it do to. From this line of thought

it could be argued that it would be imperative for the government to have a law
allowing it to have its disputes being submitted to arbitration. From that
perspective, the new rule in the Arbitration Act would void any argument of
violation to the principle of legality. However, that is not be the case as the
general principle of arbitrability enshrined in Article 1 of the Arbitration Act
determines that disposable patrimonial rights can be subjected to arbitration and
the government, in its several spheres, has disposable patrimonial rights.
3.2 Arbitrability and labour disputes

Labour disputes are normally guided by a protectionist principle because, quite often,
on one side there is an employer with proper infrastructure to support lengthy
and expensive litigation and, on the other side, there is an individual who is not
in the same circumstances, creating unequal footing in the quarrel. For this reason,
labour rights benefit from special protections, making arbitration unattractive. In
Brazil, the Constitution gave it a constitutional status by providing, in Article
114, first paragraph, that if collective negotiations are unsuccessful, arbitration can
be used to solve collective labour agreements. On one hand, the law expressly
addressed the fact that collective labour controversies can be solved by arbitration;
on the other hand, when it comes to individual labour rights, there is no statutory
provision. The absence of an express law leads to the conclusion that what is not
forbidden would be allowed as long as it respects the terms of Arbitration Act,
namely, patrimonial disposable rights.53 Some labour rights are non-disposable,
such as the right to have holidays, to have a salary that will not be below the
minimum national wage, and the year-end salary bonus.54 Conversely, once the
employment contract is over, rights acquired by the employee can be negotiated
out of court or in court. This means that the employee can settle disputes and
receive a smaller compensation than what it was
52 The article declares: ‘The governmental entities and entities owned by the Government in any of
the powers of the Union, the states, the Federal District and the Municipalities shall obey the principles
of legality, impersonality, morality, publicity, and efficiency, and also the following.’
53 Karin Hlavnicka Skitnevsky, ‘O direito do trabalho e a arbitragem para solu¸caõ de controve´rsias’ in
Ana Luiza Baccarat da Motta Pinto and Karin Hlavnick Skitnevsky (eds), Arbitragem nacional e
internacional (Elsevier Editora 2012) 235.
54 These are among several other rights described as rights of urban and rural works by art 7 of the
Brazilian Constitution.
originally entitled to. Consequently, the employee cannot dispose the right but
the compensation for a violation of a right owned by the employer is of a
patrimonial character and it can be disposed.55 Perhaps that was the idea of the
legislator when it adopted the 2015 Act. The bill approved by both houses of the
Brazilian congress inserted to Article 4 of the Arbitration Act the following
provision:56
paragraph 4o As long as the employee occupies or will occupy a position or

a role of an administrator or a director of a company, in individual
employment contracts an arbitration clause can be agreed upon and it will
only be effective if the employee takes the initiative of starting the
arbitration or if expressly agree with its commencement.

This paragraph was vetoed by the Brazilian President. The main reason for the veto
was that the above-mentioned provision would allow arbitration in individual
employment contracts for a restrict group of employees, which would create
an ‘undesired distinction between employees’.57 The reasons for veto are sensible as
the provision could create uncertainty. Perhaps, its rationale is supported by the
protectionist principle as employees occupying a position or a role of an
administrator or a director of a company are not necessarily in a disadvantageous
position. Therefore, they would not be strangers to arbitration and perhaps, they
would prefer arbitration over litigation. Nevertheless, the provision would create
a distinction between employees which might not be good for arbitration. If
labour disputes are to be arbitrated, the dispute resolution method should not
discriminate between different types of employees.
The case law regarding the arbitrability of labour disputes in Brazil is quite rich
and until 2015, it produced decisions in favour and against arbitrability of labour dis-
putes. The permission affects atypical cases. In Andrea Carla Righetti v
Organiza¸caõ das Na¸co˜es Unidas (ONU) et al58 the claimant sought a claim in
court to recognize her employment relationship and the payment of severance.
Andrea Carla Righetti was hired by the United Nations (UN) and United
Nations Development Program (UNDP) to provide services at the Brazilian
Institute for the Environment and Renewable Natural Resources (IBAMA). Her
contract was terminated without proper registration of her worker record book
and without severance payment. The contract signed by her contained an
arbitration clause59 and once the defendants were served, they challenged the
jurisdiction of the courts requesting a stay of proceedings. At the first instance
court decided to stay proceedings, a decision that was
55 Carmona (n 23) 41–42; Scavone Junior (n 18) 33; and Hlavnicka Skitnevsky (n 53) 237.
56 Art 4 states: ‘An arbitration clause is an agreement by which the parties to a contract undertake to submit
to arbitration the disputes which may arise with respect to that contract.’
57 Message of veto no 162 of 26 May 2015.
58 Review Appeal (Recurso de Revista) RR 87985-12-2005-5-10-0007, Fourth Chamber of the Superior
Labour Tribunal (TST), Reporting Justice Fernando Eizo Ono, decided on 14 December 2011, published
on the Brazilian official gazette on 3 February 2012.
59 The wording of the clause was: ‘Any disputes arising from the interpretation or execution of this
contract, which cannot be settled amicably between the parties, shall be subject to arbitration. The
arbitration panel shall be composed of a representative of the Agency of Implementation of the
project, the Brazilian Cooperation Agency (ABC/SRM) and a representative of the UNDP.’
affirmed by the Employment Appeal Tribunal. A final appeal was made to the
Superior Labour Tribunal, arguing that in labour law, arbitration as a form of dispute
resolution can only be performed by Commissions of Prior Conciliation authorized
by professional and economic categories through Collective Labour
Agreements. The resolution of labour disputes outside of court jurisdiction has
an exceptional character due to the principle established by Article 5(XXXV)
of the Brazilian Constitution60 and the fact that the Arbitration Act allows
arbitration to take place when a dispute refers to disposable patrimonial rights,
which is not the case of labour rights. The ruling rejected all the arguments and
embraced a different viewpoint, which was that the defendants had immunity
from jurisdiction and the arbitration clause would be the only path for the
claimant to have access to justice. When the Superior Labour Tribunal upheld the

validity of the arbitration clause, it was actually guaranteeing the claimant’s right to
access justice and not the fact that labour rights might be non-arbitrable.
This decision contradicts another ruling from the same tribunal, but from a differ-
ent chamber in which, again, there was a UN contract with an arbitration clause.
In Ciro Voltaire Saldanha de Oliveira Junior v Programa das Na¸co˜es Unidas para o
desen- volvimento – PNUD61 the plaintiff was hired by the UNDP and the
contract had an arbitration clause which was challenged in the judiciary. This
time the Superior Labour Tribunal understood that labour rights are non-
disposable and of a constitutional nature even though they can be negotiated; thus,
extending this interpretation to consider it non-disposable cannot result in waiving
the right to pursue a claim in court. Moreover, it pronounced that the arbitration
agreement was concluded before the litigation, leading to a previous waiver of
court jurisdiction in a moment when the bargaining power between the
employee and the employer was in clear disproportion.
The discrepancies continued and the sixth chamber of Superior Labour Tribunal
also decided that labour disputes were non-arbitrable, but this time between a private
Brazilian company and a Brazilian individual. The case of Empresa Brasileira
de Seguran¸ca e Vigilaˆncia Ltda v Neirevaldo Nasareno de Lima62 dealt with an
arbitration clause inserted in the term that was signed on the termination of the
employment contract releasing the employer of all severance payments due to the
employee. The court considered the clause not valid under two arguments. First, it
was the idea that arbitration and labour disputes are incompatible because there is
no party autonomy in employment contracts since the weaker party, namely the
employee, does not always have the power to negotiate the contract, consequently
having limited party autonomy. Secondly, according to the provision of
Article 114 of the Brazilian
60 The article states: ‘All persons are equal before the law, without any distinction whatsoever,
Brazilians and foreigners residing in the country being ensured of inviolability of the right to life, to
liberty, to equality, to security and to property, on the following terms: ... XXXV – the law shall
not exclude any injury or threat to a right from the consideration of the Judicial Power.’
61 Review Appeal (Recurso de Revista) RR 51085-09-2005-5-10-0014, Eight Chamber of the
Superior Labour Tribunal (TST), Reporting Justice Maria Cristina Irigoyen Peduzzi, decided on 24
March 2010, published on the Brazilian official gazette on 30 March 2010.
62 Interlocutory Appeal in Review Appeal (Agravo de Instrumento em Recurso de Revista) AIRR
415/ 2005-039-02-40.9, Sixth Chamber of the Superior Labour Tribunal (TST), Reporting Justice
Horacio Senna Pires, decided on 17 June 2009, published on the Brazilian official gazette on 26
June 2009.
Constitution, arbitration of labour disputes would only be allowed when

collective negotiations are unsuccessful.
In contrast, the seventh chamber of the Superior Labour Tribunal in Arcanja dos
Santos Ferreira Vaz v Lojas Brasileira SA63 recognized an arbitral award in a
labour dispute as res judicata and considered it valid. The place of work of the
employee was shut down and, as a consequence, the employer terminated the
labour contract. By an agreement made between her and the company, having
representatives of her union witnessing the transaction, an arbitrator was chosen
by the employee and an award was made regarding her severance rights. The
court found no illegality in the contract and it did not even discuss the arbitrability
of the dispute. It applied the provision of Article 31 of the Arbitration Act that
declares that as long as the award was made within the law it has the effect of res

judicata.64
Although the above decisions make for an uncertain scenario, in Ministério Pu
´blico do Trabalho - Procuradoria Regional da 3a Regiaõ v Caˆmara de Media¸caõ de
Arbitragem de Minas Gerais S/S LTDA65 a decision in a class action created a
strong precedent against arbitration of labour disputes. The Ministe´rio Pu´blico do
Trabalho brought up a class action against the Chamber of Mediation and Arbitration
of Minas Gerais seeking that the chamber would stop promoting arbitration as a
method to solve conflicts involving employment relationships. The argument
against arbitration was that labour rights are non-disposable rights even after the
employment contract is over, that arbitral tribunals were not selected by the
legislator to decide labour disputes and that arbitration as a method to solve
individual labour disputes is unconstitutional. In the first instance, the court ruled
partially in favour of the claimant but the Employment Appeal Tribunal
reversed the ruling. An appeal was made to the Superior Labour Tribunal which
had two decisions. The first verdict reversed the Employment Appeal Tribunal ruling
deciding that the arbitral chamber could not act if the original employment
contract contained an arbitration clause or if one is added to it after its conclusion.
However, once the employment contract is over, if the employee wanted to have
the dispute solved by arbitration, there was no impediment to this method of
dispute resolution. The Ministe´rio Pu´blico do Trabalho filed a request for
clarification on the appeal based on a conflict between rulings of the Superior Labour
Tribunal which led to the redistribution of the case for another reporting justice
who changed the ruling again to stop the arbitral chamber from promoting
arbitration also after the employment contract is over.66 The final decision
acknowledged and rejected the
63 Interlocutory Appeal in Review Appeal (Agravo de Instrumento em Recurso de Revista) AIRR 1475-
09- 2005-5-10-0014, Seventh Chamber of the Superior Labour Tribunal (TST), Reporting Justice
Pedro Paulo Manus, decided on 15 October 2008, published on the Brazilian official gazette on 17
October 2008.
64 The wording of the article declares: ‘The arbitral award shall have the same effect on the parties and
their successors as a judgement rendered by a State Court and, if includes an obligation for payment,
it shall constitute an enforceable instrument thereof.’
65 Request for Clarification in Review Appeal (Embargos de Declara¸cão em Recurso de Revista) TST-E-
ED-RR-25900-67.2008.5.03.0075, Fourth Chamber of the Superior Labour Tribunal (TST),
Reporting Justice Joaõ Oreste Dalazen, decided on 16 April 2015, published on the Brazilian official
gazette on 22
May 2015.
66 The case was originally decided by Justice Ives Gandra da Silva Martins Filho and was redistributed
to Justice João Oreste Dalazen.
understanding that labour rights could be relatively disposable. Justice Dalazen was
of the opinion that even after the employment contract is over, the employee
cannot have disputes involving its labour rights settled by arbitration. The
rationale was that the Constitution limited the use of arbitration for collective labour
agreements and as the constitution does not allow a restrictive or an expansionist
interpretation of its provisions, one can understand that individual labour rights
are not arbitrable. The decision is a strong precedent, especially as it originates
from a class action and it will probably be used in future challenges to the use of
arbitration in labour disputes.
Regarding the enforcement of foreign arbitral awards, an unusual ruling
came from the Superior Court of Justice. In Delphi Automotive Systems do
Brasil Ltda v Javier Gerardo Mendoza Rascon67 a judgment from the Mexican

Board of Conciliation and Arbitration was brought to be recognized and
enforced in Brazil. The defendant argued that the decision was made by an
arbitral institution which does not have the competence to decide on non-
disposable rights and that arbitration was not adequate to solve disputes
involving labour rights. The Superior Court of Justice rejected the allegation,
but the reasoning was distinctive because the Mexican Board of Conciliation
and Arbitration is not entirely an arbitral tribunal. Thus, the so-called award
was in reality a foreign ruling. According to Article 123(A)(XX) of the
Mexican Constitution,68 the Board of Conciliation and Arbitration are
institutions that are part of the Labour Justice and it has the power to enforce its
decisions. Since it was a foreign ruling in which procedures are similar to the
employment tribunals in Brazil, there was no violation of public policy.
Concerning the rights being non-disposable, the court applied the idea that the
employees can negotiate their labour rights and it is acceptable for them to be
waived. Notwithstanding the decision was not about a proper award, the
rationale adopted leads to the conclusion that if it was a foreign award,
conceivably the Superior Court of Justice would allow its recognition; however,
the precedent is not so strong since a comparison of Brazilian Courts and the
Mexican Board of Conciliation and Arbitration shows similarities in procedure
which would not be the case if it was an arbitral award.
The vetoed provision in the 2015 Act when analysed together with the case law
does not seem to be very helpful. Vetoing it was reasonable. The protectionist princi-
ple in labour law can and must be employed in any type of dispute concerning labour
rights, either in court or in arbitration. The feasibility of labour arbitration is
also connected to costs. Unless the employee is wealthy, the cost of arbitration
could not be afforded, save if there is a system allowing unions to pay for it, but
even so, it would be imperative that that system comply with fairness and
transparency stan- dards. Arbitration per se is not incompatible with labour
conflicts. Depending on the type of system it can be in fact faster and better
because once the employee is
67 Recognition of Foreign Arbitral Award (Senten¸ca Estrangeira Contestada) SEC 4933/EX, Special Court
of the Superior Court of Justice, Reporting Justice Eliana Calmon, decided on 5 December 2011,
published in the Brazilian official gazette on 19 December 2011.
68 The differences or conflicts between capital and labour shall be subject to the decision of a Board
of Conciliation and Arbitration, made up of equal numbers of representatives of workers and
employers, and one of the Government.
unemployed, the sooner it gets paid the better chances it has of ‘surviving’ its
unem- ployment period.
3.3 Arbitrability and consumer contracts

Consumer disputes face the same circumstances as labour disputes of
disproportion- ality between the parties. On one side there is a consumer, the
weaker party, and on the other side are traders, the stronger party. For that
reason, consumer regulations have a public policy nature since they try to break
down the inequality between consumer and traders; creating a mechanism to
protect the consumers against hostile practices. It could be argued that
arbitration of consumer disputes were a draconian approach, particularly if the
agreement to arbitrate can be found in the form of an adhesion contract of which

the consumer would not be aware of. It could also be argued that arbitration
would be forced onto the consumer excluding his or her autonomy and acting as
a ‘take it or leave it’ transaction. Even though this might be the scenario, consumer
disputes are not necessarily incompatible with arbitration. This was the view that
the 1996 Act intended to achieve in paragraph 2 of Article 4:
paragraph 2o In adhesion contracts, the arbitration clause will only be valid

if the adhering party takes the initiative to initiate arbitration proceedings or
if it expressly agrees to arbitration by means of an attached written
document, or if it signs or initials the corresponding contractual clause,
inserted in boldface type.
The 2015 Act would have transformed paragraph 2 into two provisions:
paragraph 2o In adhesion contracts, the arbitration clause will only be valid if it

is highlighted in bold or in a separate document.
paragraph 3o In a consumer relation established by an adhesion contract,

the arbitration clause will only be valid if the person adhering starts the
arbitration or expressly agrees with its commencement.
Both paragraphs were vetoed by the Brazilian President. The reason was that such in-
clusion would alter completely how arbitration takes place in consumer
relations without making it clear that the consumer’s consent to arbitration
should also be granted when a dispute arises and not only when the consumer
was signing the contract. If such alteration would have been approved it would
be a ‘retrocession and an offense to the principles governing consumer
protection’.69
What the new bill attempted was to the make one provision for adhesion
contracts in general and another for adhesion contracts involving consumer
transactions. In effect, many consumer contracts are made in a form of an
adhesion contract using standard forms but not all adhesion contracts arise out of
consumer transactions. Despite the failed proposal to insert provisions regarding
consumer arbitration in the
69 See n 57.
Brazilian Arbitration Act, this does not mean that there is no understanding over
the possibility of consumer arbitration.
The barriers are found in two provisions in the Brazilian Consumers Code.70
The first is Article 51(VII)71 which pronounces that compulsory arbitration
clauses in consumer contracts are void. An orthodox approach argues that this
provision declares any and all arbitration agreements in a consumer contract
void because they constitute abuse of power on the part of the trader.72
However, a more permissive and better view is that the Consumer Code
prohibits only compulsory arbitration. That signifies that if the contract establishes
a compulsory arbitration, it is void; however, if the contract is silent or establishes
arbitration as an option for the consumer, there would be no obstacle for the
parties to decide that a dispute can be solved by arbitration, as long as the

arbitration is not imposed to the consumer. After all, even though consumer rights
are of a public policy nature, they are still disposable patrimonial rights.73
Should that not be the case, the wording of Article 4(V) of the Consumer Code
would make little sense since it determines, as a matter of principle, the creation
by suppliers of alternative means for settling disputes.74
The second impasse comes from the 1996 Act. As the president vetoed the
change to paragraph 2 of Article 4, the previous wording is still in force. Since
the 1996 Act is more recent than the Consumer Code, Article 4 paragraph 2
would seemed to have implicitly revoked Article 51(VII) although the statute did
not express such repeal. A sensible counter-argument is that not all adhesion
contracts are consumer contracts.75 Moreover, what seems more adequate is the
harmonic interpretation of both provisions because one determines questions of
efficiency and validity of the arbitration clause and the other the prohibition of
compulsory clauses.76 If arbitration can be agreed in a non-compulsory manner
following the premises de- termined in the Arbitration Act, there is no reason for
it to be invalid. This understanding promotes arbitration in consumer
transactions, leaving to the consumer the decision of whether he or she wants to
pursue arbitration. This would take away the possibility of the trader forcing a
solution to a conflict in a way that disfavours the consumer.
Notwithstanding the scholarly perspective, the case law took a different direction.
It first showed a non-permissible view and later, it resolved all possible uncertainties.
70 Law no 8078 of 11 September 1990.

71 ‘Any clauses that impose any of the following situations, among others, will be nullified: .. . VII -
determine the compulsory use of arbitration’.
72 Jose´ Antonio Fichtner and Andre´ Lu´ıs Monteiro, ‘A Cláusula Compromissória nos contratos de
adesão submetidos ao código de defesa do consumidor’ in their, Temas de Arbitragem: Primeira Série
(Renovar 2010) 18.
73 This view is shared by Carmona (n 23) 53; Rodrigo Garcia da Fonseca, ‘Arbitragem e Direito do
Consumidor. Em busca da Convergeˆncia’ in Eduardo Jobim and Rafael Bicca Machado (coordenators)
(Quartier Latin 2008) 448 and Fichtner and Monteiro, ibid 21.
74 Art. 4. The objective of the National Policy for Consumer Relations is to ‘tend to consumers’
needs, impose respect for the consumer’s dignity, health, and safety, protect his interests and ensure
transparency and harmony in consumer relations, based on the following principles .. . V -
incentives given to suppliers so that they can create efficient ways to control the quality and safety of
products and services, as well as alternative conflict resolution mechanisms within consumer
relations’.
75 Fonseca (n 73) 459.
76 Fichtner and Monteiro (n 72) 29.
In CONAC – Construtora Anacleto Nascimento LTDA v Flavia Zirpoli Sobral77

the Superior Court of Justice considered an arbitration clause in a real estate
purchase agreement abusive and declared it null according to the Consumer
Code. Sobral started legal proceedings to rescind the contract and CONAC
challenged the court’s jurisdiction based on an arbitration agreement. The court
examined the insertion of the clause in a contract that was found to have been
unilaterally drafted by the con- struction company without any interference
from the consumer. It found that the contract was an adhesion contract in which
the consumer only had the option of ac- cepting the terms if it wanted to purchase
the real estate. Since the arbitration clause was imposed, there was no freedom of
contract in relation to arbitration and, following Article 51(VII) of the
Consumer Code, such an agreement is null.

A few years later, another decision was made by the Superior Court of Justice, but
this time a more thorough analysis of the topic was made. In CZ6
Empreendimentos Comerciais Ltda e Outros v Davidson Roberto de Faria Meira
Junior78 a similar suit was proposed, this time aimed at revising and annulling some
clauses of a real estate purchase agreement. CZ6 challenged the jurisdiction of
the court and a series of appeals lead to the arrival of the case at the Superior
Court of Justice. Justice Andrighi first stated that an arbitration clause excludes the
jurisdiction of courts, but this is the general rule established by the Arbitration Act
that can be changed according to the pe- culiarities of each case. From that point,
she concluded that the contract was an adhesion contract and also a consumer
contract, facts that imposed the assessment through the existing legislation. The
clause was drafted according to the rule of Article 4, paragraph 2 of the
Arbitration Act, but this did not exclude the application of the Consumer Code. In
effect, the court clarified the doubts about one act revok- ing the other by
declaring that a law can repeal the other explicitly or tacitly. The first option was
discarded and the second can only occur when the new statue completely
regulates the subject or when the previous rule is incompatible with the new
one. The finding was that the provisions in the Arbitration Act concerning
adhesion contracts did not encompass consumer contracts which will be
regulated by the Consumer Code. Thus, the court found that there are three
different degrees of situations in the current legislation: a general rule imposing
arbitration when there is an arbitration convention, a framework for adhesion
contracts to be followed when it has an arbitration convention, and the
prohibition of compulsory arbitration in consumer contracts. The ruling
continued and adopted the scholarly position that as long as the consumer wants
to have the dispute decided by arbitration, consumer disputes can be arbitrated.
For that reason, the Superior Court of Justice understood that once the
consumer chooses to litigate in court, the dispute cannot be arbitrated and the
rule of the Consumer Code should prevail.
It is undeniable that consumer regulation is embodied in public policy principles
aimed at protecting the consumer against abuses; however, consumers still enjoy
77 Special Appeal (Recurso Especial) No 819.519-PE, Third Chamber of the Superior Court of
Justice, Reporting Justice Humberto Gomes de Barros, decided on 10 October 2007, published in
the Brazilian official gazette on 5 November 2007.
78 Special Appeal (Recurso Especial) No 1.169.841-RJ, Third Chamber of the Superior Court of Justice,
Reporting Justice Nancy Andrighi, decided on 6 November 2012, published in the Brazilian official
gazette on 14 November 2012.
freedom of contract and party autonomy. There is no removal of the public

policy aspects from consumer laws by arbitration because arbitral tribunals can
only decide if there is a violation of a consumer right or not, it cannot implement
consumer policy. Therefore, the arbitrability of consumer disputes is rooted in a
matter incapable of settlement by arbitration based on a need to protect the
consumer in certain cases. However, if what is being sought is a relief originated
in a violation of a consumer protection rule, the consumer should have the power
to decide if it wants the dispute to be arbitrated.
3.4 Arbitrability and corporate matters

Corporate issues by nature are purely commercial questions that should not
raise questions about its arbitrability. However, the legislation in Brazil has used

wording inclining to the exclusive jurisdiction of courts to solve internal
corporate disputes. Any corporation, when it is formed, makes an agreement
whereby the rules and regulations of the company are described. These documents,
called article of associations, articles of incorporations, or bylaws, have a
contractual nature.79 As with any contract, an arbitration agreement can be
established to solve disputes arising from it.
In Brazil, the Act governing the joint-stock companies80 has a specific
provision allowing arbitration but the rule is contradictory. Article 109 provides
a list of rules in which the articles of association cannot deprive the shareholders of
when performing their duties. The third paragraph of the article establishes that
arbitration can be used to solve corporate disputes,81 while the second paragraph
of the article states that shareholders cannot be deprived of their rights to sue
having as the cause of action the protection of their shareholder’s rights.82 The
problem between the second paragraph and the third paragraph is that at one
hand, the articles of association could not deprive shareholders from starting
legal actions in courts and at the other hand it allows such possibility through
arbitration. So, which one should prevail? The answer should be about options.
If the articles of association provide for arbitration, which is allowed by the act,
the shareholders have to pursue arbitration. If that is not the case, the articles
cannot deprive the right of shareholder to access to justice. What the law
established was simply the right of shareholders to solve their in- tra-corporate
disputes through arbitration.
The 2015 Act inserted Article 136-A to the Act governing joint-stock
companies regulating the right of a shareholder to leave the company if an
arbitration clause is inserted in the articles of association. The modification
expressed:
The approval by the insertion of an arbitration agreement in the articles of

association, subject to the quorum of the art. 136, obliges all
shareholders,
79 See the Brazilian Civil Code, art 997.

80 Law no 6404 of 15 December 1976.
81 ‘Article 109. Neither the articles of association nor the general assembly may deprive the
shareholder rights of: .. . para 3o The articles of association can establish that the differences
between the shareholders and the company, or between the controlling shareholders and minority
shareholders, be resolved through arbitration, pursuant to which terms it specifies.’
82 ‘para 2◦ The means, processes or actions that the law confers on the shareholder to ensure their
rights may not be evaded by the articles of association or by the general assembly.’
assured the dissident shareholder the right to withdraw from the company
upon reimbursement of the value of its shares, according to art. 45.
If shareholders decide to insert and arbitration clause to the articles of

association, the shareholder that disagrees with such conduct can leave the company.
Article 136- A has two paragraphs. One states that the arbitration clause will only
be valid after 30 days from the publication of the minutes of the shareholder’s
meeting.83 The other creates an exception to the right to withdraw if the
arbitration clause is a re- quirement for the company to trade its shares in a stock
market or if the company already trade its shares in the stock market and such
traded shares have liquidity84 and are dispersed85 in the stock market.86
When it comes to new shareholders, the interpretation in Brazil is that the

arbitration agreement should be valid. That was the understanding of the
Federal Justice Council87 in its Commercial Law Journey88 when it decided on
Enunciation 16 that the new shareholder adheres to the articles of association
and to the arbitration clause if it is a part of the contract.89 In addition, it is
important to remember that whoever becomes a member of the company is
bound by the rights and obligations of the articles of association, being a recipient
of the bonus and onus that are offered to shareholders.90 The change in the new
Act concerning the arbitrability of a corporate dispute are questions that relate
more to the validity of the arbitration agreement and how it can bind parties,
rather than subjects of discussion falling within the exclusive jurisdiction of
courts.
4. CONCLUSION
The article in hand set out to assess if the 2015 Act brought a real change to
arbitrability in Brazil. It first described the general approach to arbitrability of
disputes
83 Art 136-A, para 1.

84 This means that the type or class of shares, or certificate, are part of a stock index in Brazil, for
instance, in corporate reorganizations it is the IBOVESPA index according to art 9 of Comissão
de Valores Imobiliários (CVM), Instruction no 565/15 or abroad, as defined by CVM which is the
Brazilian security and exchange commission.
85 The major shareholder and its controlled companies shall have less than half of the type or class of
the traded shares.
86 Art 136-A, para 2, I and II.
87 It is a council established aiming to ‘exercise, effectively, the budget and administrative supervision, the
correctional power and standardization, as well as promote the integration and enhancement of
Federal Justice’. In <http://www.cjf.jus.br/cjf/o-que-e> (accessed 29 June 2015).
88 This is a meeting held by the Brazilian Federal Justice endeavouring to provide specialists with the oppor-
tunity for debates in order to improve the interpretation of federal legislation. It is organized by a former
Superior Court Justice with the presence of prosecutors, judges, public defenders, and academics that, af-
ter the debates, vote on enunciations that are not binding but serve as guidelines for interpretation.
See I Jornada de Direito Comercial [23–24 de outubro de 2012, Bras´ılia]. Bras´ılia: Conselho da Justi¸ca
Federal, Centro de Estudos Judiciários, 2013.
89 Enunciation 16: the buyer of quotas or shares adheres to the social contract or statute with regard to
an existing arbitration agreement (arbitration clause); thus, being tied to the option of arbitral
jurisdiction, regardless of signature and/or specific manifestation in this respect.
90 Octávio Fragata Martins Barros, ‘Os lit´ıgios sociais e a arbitragem’ in Ana Luiza Baccarat da Motta
Pinto and Karin Hlavnick Skitnevsky (eds), Arbitragem nacional e internacional (Elsevier Editora
2012) 248.
outlined in the 1996 Act and after it; it demonstrated how the 2015 Act was not
successful in changing the landscape for arbitrability of disputes in Brazil. The 2015
Act is not in its entirety a failure,91 but the expansion of the list of disputes that
can be submitted to arbitration did not result in a positive endeavour.
The inclusion of the provision regarding the arbitration involving the public
administration consolidated the case law and the doctrinal understanding on the
subject. Its necessity can be argued based on the existing approach to the topic
but perhaps, in the international arena, it might give security to foreign investors
that are not familiar with the decisions of the Brazilian judiciary. Concerning
consumer contracts and labour disputes, the changes were not effective. The
Presidential veto was adequate as the bill’s proposal was not completely in line
with the current understanding of the matter.

Creating a list of disputes that can be submitted to arbitration is not
necessarily the best approach. Just because a statute is silent about the
arbitrability of a specific issue, it does not necessarily mean that such topic is non-
arbitrable. The assessment of arbitrability should be done through another source
of interpretation, such as the general rule of disposable patrimonial rights. The
general rule to determine what is arbitrable in Brazil should be upheld by leaving
the interpretation of what is a patrimonial disposable right to courts. Once several
decisions have defined what a patrimonial disposable right is, it will be simpler
to answer the question of what is arbitrable. Otherwise, the reasoning to have a
general perspective followed by a list of issues that are arbitrable sounds
inconsistent and it can generate distrust in the capacity of Brazilian courts to
interpret what is arbitrable.
91 As mentioned in the Section 1, there are some innovations made by the 2015 Act that should be
welcomed.

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Arbitration International Advance Access published January 14, 2016

Arbitration International, 2016, 0, 1–22

Arbitrability under the new Brazilian

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2. THE OVERVIEW OF ARBITRABILITY IN THE 1996

4 Law no 9.307 of 23 September 1996.

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be subject of a monetary quantification;17 hence, they can be assimilated with having

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3. ARBITRABILITY IN THE 2015 ACT

3.1 State or state-owned companies

28 Batista Martins (n 17) 399–400.

the capacity of the Brazilian state or its state-owned companies to participate in

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paragraph 2o The authority or the competent direct public administration

or a state-owned company to be a party to arbitration was expressly affirmed at

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44 Law no 8666 of 21 June 1993.

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3.2 Arbitrability and labour disputes

paragraph 4o As long as the employee occupies or will occupy a position or

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Constitution, arbitration of labour disputes would only be allowed when

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3.3 Arbitrability and consumer contracts

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paragraph 2o In adhesion contracts, the arbitration clause will only be valid

paragraph 2o In adhesion contracts, the arbitration clause will only be valid if it

paragraph 3o In a consumer relation established by an adhesion contract,

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70 Law no 8078 of 11 September 1990.

In CONAC – Construtora Anacleto Nascimento LTDA v Flavia Zirpoli Sobral77

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freedom of contract and party autonomy. There is no removal of the public

3.4 Arbitrability and corporate matters

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The approval by the insertion of an arbitration agreement in the articles of

79 See the Brazilian Civil Code, art 997.

If shareholders decide to insert and arbitration clause to the articles of

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83 Art 136-A, para 1.

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