Brazil is one of the most litigious countries in the world, with its own unusual features. It has an independent judiciary that has to deal with new cases that number the hundreds of thousands every year. Alternative dispute resolution methods such as mediation and arbitration are available for those parties that wish to avoid having their disputes resolved by courts.
Where foreign court proceedings are filed against Brazilian parties, service of process via letter rogatory is required (except in some specific cases) and care should be taken in relation to how the foreign court proceedings are conducted, especially where the Brazilian defendant has chosen not to participate in the proceedings and a default judgment is obtained.
Brazil has continued to take steps towards joining the main conventions relating to international civil dispute resolution. In 2017, the Hague Evidence Convention came into force. This was followed by the Hague Service Convention, which became law in Brazil in March 2019.
Certain formal steps need to be taken after a foreign judgment is obtained for its recognition and enforcement in Brazil. Note that judgments and arbitral awards from Mercosur members have less cumbersome recognition procedures.
Lastly, it is important to understand how writs of mandamus work, as there are very useful when public officials misinterpret the law (among other things).
Mediation was not regulated as a dispute resolution method under Brazilian law until early 2016 when the Mediation Law came into force.
The Mediation Law sets out two types of mediation: judicial (court-based) and extra-judicial (out-of-court).
One of the main changes brought by the Mediation Law is the possibility of government bodies to use mediation not only to resolve its own internal disputes but also with private parties.
The Mediation Law delegates the creation of Mediation chambers to the governments of each State. Further, each State is given the discretion to decide whether the disputes should be submitted to mediation, which means there is no uniform procedure throughout Brazil. The good news is that the more economically advanced States, such as São Paulo, have already established sophisticated centres, providing even online mediations.
Mediation is still in its early stages in Brazil but it is starting to take hold. In August 2020 the Federal Supreme Court created its own Centre of Mediation and Conciliation. In February 2021, Justice Fux appointed the former Justice Ellen Gracie Northfleet to mediate the high profile dispute between Apple and Gradiente over the iPhone trademark under the auspices of the Centre. This is the first dispute to even go to mediation at the Supreme Court’s Centre.
Brazilian courts – especially in small towns – tend to be slow and generally inept to deal with cross‑border issues. Fortunately, Brazil’s Arbitration Law allows parties to choose any person or chamber (such as the International Chamber of Commerce, the London Court of International Arbitration and the International Centre for Dispute Resolution) to arbitrate conflicts that may arise between them.
Note that the choice of seat of the arbitration is crucial: if the seat is not in Brazil, it may take years for the foreign award to be recognised and enforced in Brazil (this is so despite Brazil being a member of the New York Convention).
Moreover, arbitration is the better way available under Brazilian law to have a foreign law to govern a contract. While there is much controversy relating to rules applicable to the freedom of the parties to choose the law to govern their bargain, the rules are much clearer where the parties opt for arbitration to resolve their disputes.
Until the passing of Law 13,467/2017 there was great uncertainty as to the possibility of individual employment disputes being resolved by arbitration. While there is still some uncertainty as to how the employment courts will interpret these changes, the Labour Code now provides that arbitration of disputes between individual employees and their employers will be allowed where the employee’s remuneration is greater than twice the maximum benefit under Social Security and the employee either proposes or expressly agrees to submit the dispute to arbitration. Among other issues, to minimise a challenge to the validity of the arbitration clause employers may consider expressly stating that the arbitration costs will be borne by the employer (especially where the employee’s remuneration is not far from the Social Security threshold).
Foreign Court Proceedings
(a) Letters rogatory (also known as “letters of request”)
Brazil is a civil law jurisdiction and, as such, its legal system gives greater emphasis to civil procedure rules, especially service of process.
While in the vast majority of common law jurisdictions service can be effected by any adult person without any specific qualification, service in Brazil must be carried out by a court marshal (oficial de justiça). The marshal is a public servant, who is remunerated directly by the courts (and not by the parties).
International service of process is given special attention under Brazilian law. For a Brazil-based company or individual to be served with foreign process a formal request must be made to the foreign court for service to be effected. The request is called a “letter rogatory” or “letter of request” (“carta rogatória”).
On 31 October 2017, the Superior Court of Justice decided that in certain circumstances a letter rogatory may not be necessary for service to be regarded as having been properly effected (see further here). Despite the Superior Court of Justice‘s more flexible position, the formalities of letters rogatory may still be required to be complied with, especially after Brazil adhered to the Hague Service Convention. For instance, since Supreme Court of the United States decision in Water Splash, Inc v Menon, service of Brazilian parties in Brazilian territory must be effected under the Hague Service Convention or other formal treaties (such as the Inter-American Convention on Letters Rogatory).
(i) The foreign court’s request and how it is processed
In broad terms, the letter rogatory must be sent to Brazil through diplomatic channels, legalised (stamped) by Brazilian diplomatic authorities (or apostilled) and translated into Portuguese. The request must be addressed to the Brazilian Ministry of Justice and Public Safety.
Once the foreign court’s request arrives at the Ministry of Foreign Affairs it is sent to the Superior Court of Justice. Each request is then filed as a separate set of court proceedings, having the President of the Superior Court of Justice as the reporting judge. Invariably Brazilian parties choose to challenge the request on a variety of grounds, and the whole service process often takes 12 months or longer to be completed. Having a Brazilian lawyer to assist with this is not a formal requirement – but in practice not doing May have the process drag out for longer than usual or even lead to the request being refused.
Brazil is a party to the Inter-American Convention on Letters Rogatory and its Additional Protocol. While this Convention provides a set of written rules relating to foreign service within member countries, in practice the only key difference between service under the Convention is general service is that the former provides for a special form to be used containing certain specific details about the request.
In March 2019, the Hague Service Convention came into force in Brazil. Requests under this Convention need to follow its own procedural rules, although once the requests arrive in Brazil they differ little from those relating to letters rogatory by non-members of the Convention. See further here.
(ii) What if the Brazilian party is not served via a letter rogatory?
If the Brazilian party is not served via a letter rogatory, then the foreign party will generally need to establish that the Brazilian party voluntarily submitted to the foreign court’s jurisdiction while in the territorial jurisdiction of the foreign court (for instance, the Brazilian party may be served while visiting the foreign country where the court is located).
Until the new Code of Civil Procedure came into force, a contract providing that the Brazilian party “irrevocably submit[ted] to the jurisdiction of the courts of New York City”, for instance, would not be effective for the purposes of enforcement of the judgment in Brazil. However, in a decision published on 31 October 2017, the special court of the Superior Court of Justice found that where a party has expressly consented to being served by post (and this can be proved), the judgment is from a court that accepts service by post, and sufficient time is given to the defendant to appear in the foreign proceedings, then the judgment will be recognised (homologated) in Brazil.
While the safer approach is for service to be effected via letter rogatory, in specific circumstances a foreign judgment creditor may be able to seek recognition and enforcement of the foreign judgment even if service was effected by other means.
(b) Conduct of foreign court proceedings
In addition to service formalities, foreign litigants and courts must make sure that the proceedings are conducted in accordance with standards of justice that are acceptable under Brazilian law.
The general rule is contained in article 17 of the Law of Introduction to the Rules of Brazilian Law, which provides that a foreign judgment will not be recognised when it violates “national sovereignty, the public order and good customs”. Further, the 2015 Code of Civil Procedure made it clear that choice of forum clauses should prima facie be enforced and in 2019 the Economic Freedom Law set new rules that extend the parties’ freedom to set contractual terms as they think fit.
These are general concepts, which leave great discretion to the Superior Court of Justice when analysing if the judgment should be recognised. Therefore, the assessment of whether a foreign judgment meets these requirements will depend on the circumstances of the case.
In practice, the Superior Court of Justice has showed the necessary flexibility in accepting the peculiarities of foreign proceedings when considering the enforceability of foreign judgments.
(c) Default judgments
Greater care should be taken when the Brazilian party has chosen not to participate in the foreign court proceedings. Firstly, it is usual in common law jurisdictions not to provide detailed reasons for judgments entered in default. The foreign party is likely to face more difficulties in convincing the Brazilian court that the foreign proceedings were conducted properly if the judgment merely states that a debt exists against the Brazilian judgment debtor.
The more detail is inserted into the judgment – such as when it was commenced, how and when the Brazilian party was served, the legal basis for which the judgement debt exists, etc – are less likely it will be that the foreign judgment will be refused recognition in Brazil.
(d) Steps after a foreign judgment is obtained
Once the foreign judgment is delivered, the judgment creditor must wait until the time for filing an appeal has expired. Brazilian courts will not enforce a judgment that may still be subject to appeal. This applies throughout the foreign court’s hierarchy, so even if the judgment is from an appellate court, the foreign party must wait until no further appeal may lawfully be filed.
After the time for filing appeals has expired, the foreign party needs to obtain evidence showing this has occurred. A declaration from a court registry is often the best means used to prove it.
With the judgment and the declaration in hand, the foreign party must send them to the Brazilian diplomatic authorities for legalisation (obtaining the diplomatic stamp apostilling, as applicable).
With the legalised (or apostilled) documents and their respective translations (made by Brazilian certified translators) ready, the foreign party must file recognition proceedings at the Superior Court of Justice.
Upon filing, each request will be given its own file number and proceeding to the chambers of the President of the Superior Court of Justice, who will be the reporting judge.
If the petition complies with the formal requirements, the Court will order that the Brazilian judgment debtor be served with a notice that a request for recognition of a foreign judgment has been filed, the Brazilian party will have time to respond, and the proceedings will follow its course.
When recognition proceedings come to an end, the foreign judgment will be regarded as having the same force and effect as a Brazilian judgment. If the Brazilian judgment debtor still refuses to comply with the judgment, then the foreign party will need to file enforcement proceedings. These proceedings will be no different to those filed seeking to enforce a judgment issued by a Brazilian court.
(e) Judgments and arbitral awards from Mercosur members
Furthermore, the Agreement on International Commercial Arbitration within Mercosul provides for a standardised approach on arbitral awards for member countries.
Writs of mandamus (mandados de segurança)
With some specific exceptions, Municipalities, States or the Federal Union will only be bound by court those decisions to which they are a party. Because governments invariably disagree with court decisions that set non-binding precedents (or choose to ignore their findings for short-term cash flow reasons), it is not unusual for thousands of legal actions to be brought involving the same legal issue.
Also common are mandado de segurança actions. These are writs of mandamus issued by the courts that aim to order a government employee to do (such as clear goods at customs) or not to do (such as not to impose a tax) something. Mandados de segurança are available whenever a certain right which is protected by law is being violated or is threatened to be violated by a government employee.
Therefore, affected individuals and legal entities will often file mandados de segurança proceedings where a particular right has been found to exist but is not being followed by the tax department. Mandados de segurança are often issued on an interim basis until a final decision is obtained.