Brazilian Superior Court Suspends Lawsuit Pending Arbitration

March 2, 2017 By Joaquim de Paiva Muniz - Global Arbitration News

Last February 9, the Second Section of the Brazilian Superior Court of Justice (STJ), the highest court for non-constitutional matters, has suspended an execution lawsuit (ação de execução) based on a contract due to the existence of an arbitration discussing such contract[1]. The construction company filed before the 1st Civil Court of the city of Belém an execution lawsuit (execução de título extrajudicial), which is a fast track judicial procedure for enforcement of outstanding liquidated and mature contractual debts, against the developers of a real estate project.

The defendants, on their turn, brought arbitration before the Arbitration Chamber of the Chamber of Commerce Brazil-Canada (CCBC) to discuss certain issues of the contract, which has an arbitral clause. Respondents also went to the STJ with a conflict of competence, which is a judicial measure to decide which is the competent venue when two jurisdictional bodies consider themselves competent, seeking recognition that the arbitration tribunal, rather than the 1st Civil Court of Belém, shall rule on the merits of the dispute.

The relevance of this precedent is twofold. First, it confirms previous Brazilian case law in the sense that it is possible to file a conflict of competence[2] before the STJ in case both an arbitration tribunal and a judicial courts deem themselves to have jurisdiction to decide a certain dispute. This is quite controversial, as it may be seen as a departure from the principle of “Kompetenz‑kompetenz”, according to which only the arbitrators are competent to decide on their own competence.

Second, it demonstrates the high level of support of the Judiciary Power to arbitral proceedings. Not only did the STJ rule in favor of the arbitrators’ jurisdiction, but it also suspended the court execution lawsuit. This is a clear sign that the Brazilian courts are very friendly to arbitration.

[1] Brazilian Superior Court of Justice. Second Section. Conflict of Competence No. 150.830-PA. Reporting Justice Marco Aurélio Belizze. Decision rendered on February 9, 2017 and published on February 13, 2017. The text, in Portuguese, is available at the STJ’s webpage.

[2] Brazilian Superior Court of Justice. Second Section. Conflict of Competence No. 111.230/DF. Reporting Justice Nancy Andrighi. Decision rendered May 8, 2015 and published on April 3, 2014. The text, in Portuguese, is available at the STJ’s webpage.

Renato Butzer