Since 2003 the Brazilian Government has been making a sustained effort to improve the structure of Brazilian justice so as to make it quicker, more flexible and effective, and more accessible to the entire population. The current problems stem partly from the decentralized nature of the Brazilian judicial system, which comprises autonomous structures in each of the twenty-seven States, ordinary and specialized federal justice, and a Supreme Court with functions typical of a constitutional court. This structure can be set out as follows:

Supreme Court

(Supremo Tribunal Federal)

Superior Electoral Court

(Tribunal Superior Eleitoral)

Superior Court of Justice

(Superior Tribunal de Justiça)

Superior Labour Court

(Tribunal Superior de Trabalho)

Superior Military Court

(Superior Tribunal Militar)

State Courts

(Tribunais estaduais)

Regional Electoral Courts

(Tribunais regionais eleitorais)

Regional Federal Courts

(Tribunais regionais federais)

Regional Labour Courts

(Tribunais regionais do trabalho)

State Judges

(Juízes estaduais)

Electoral Judges

(Juízes eleitorais)

Federal Judges (Juízes federais)

Labour Judges

(Juízes do trabalho)

Military Judicial Authorities

(Auditorias da Justiça militar)

The efforts to improve the judicial system have been pursued on four distinct and complementary fronts. Firstly, the functioning of the courts has been put under scrutiny so as to root out the problems and obstacles giving rise to injustice and identify cases of successful judicial management that could be applied more broadly. Secondly, the reform has sought to modernize judicial administration through simplifying and computerizing procedures, staff training, and by requiring parties to attempt to resolve their disputes initially by mediation. The third aspect lay in a reform of the Codes of Civil and Criminal Procedure, so as to make these procedures quicker, more flexible and more effective. The fourth and final aspect of this judicial restructuring was a constitutional amendment adopted on 8 December 2004 introducing measures to streamline justice and make it more transparent, notably through the creation of independent supervisory bodies and the standardization of entry requirements for the magistracy.[Page72:]

This article focuses mainly on aspects of the third and fourth fronts mentioned above that relate to the recognition of foreign arbitral awards in Brazil. A brief allusion is also made to proposed legislative changes relating to the enforcement of awards. It should be noted that the current judicial reform is likely to have a significant positive effect on the strengthening and expansion of arbitration in Brazil.

I. Transfer of jurisdiction over the recognition of foreign arbitral awards

Constitutional Amendment No. 45 of 8 December 2004 introduced into the Brazilian Constitution a new article (Art. 105(I)(i)), which makes an important change to instruments of international judicial cooperation. Pursuant to the new provision, jurisdiction over applications for the recognition of foreign arbitral awards and judgments1 and for authority to execute letters rogatory is transferred from the Brazilian Supreme Court ( Supremo Tribunal Federal) to the Superior Court of Justice ( Superior Tribunal de Justiça, hereinafter 'STJ'). The new provision has immediate effect, as it is a procedural rule. Thus, as of January 2005, all pending applications for the recognition of foreign judgments and arbitral awards and all applications for authority to execute letters rogatory have been transferred from the Supreme Court to the STJ.

In connection with this transfer of powers, the STJ issued Resolution No. 9 of 4 May 2005, which establishes the procedure applicable to applications for the recognition of foreign arbitral awards and judgments and for authority to execute letters rogatory. As in the previous system (before the Supreme Court), it is the chief judge ( Presidente) of the STJ who initially has the power to recognize all foreign awards and judgments and grant authority to execute letters rogatory. 2 The new regulations also confer on the Special Chamber ( Corte Especial) of the STJ powers that were previously held by the Supreme Court sitting in plenary session ( Plenário). These include the power to rule on applications for recognition that are challenged by the opposite party. 3

However, it should be noted that the constitutional reform has not altered the requirements-whether positive or negative-for the recognition of foreign arbitral awards, as provided in the 1996 Brazilian arbitration statute and the 1958 New York Convention, the 1975 Inter-American or Panama Convention and the 1992 Las Leñas Protocol to the Mercosur Treaty. Accordingly, it is still necessary to furnish a copy of the foreign award and the arbitration agreement, and it remains possible to object to the recognition of a foreign award on the grounds that the arbitration agreement was invalid, that the dispute was incapable of settlement by arbitration, or that the award violates public policy.

It should be pointed out, however, that as a result of this constitutional reform there will be some important changes in the procedure before the STJ and the interpretation of some issues that have nonetheless already been settled by past decisions of the Supreme Court. This is due to the fact that the STJ is better suited to civil and commercial matters than the Supreme Court (whose chief role is to ensure that the Federal Constitution is respected) and more progressive in its decision-making. It should also be noted that cases referred to the STJ are, on average, settled more quickly than those referred to the Supreme Court, due to the fact that the [Page73:] former has more judges than the letter (thirty-three as opposed to eleven in the Supreme Court) and includes chambers specialized in private law. If a party's application for recognition of a foreign arbitral award is contested by the other party, the matter is entrusted to one of the eighteen judges comprising the Special Chamber of the STJ and then decided by all eighteen judges collectively. 4

In both its domestic law and the international conventions that it has ratified, Brazil has adopted a system of 'limited challenge' (juízo de delibação ) in respect of applications for the recognition of foreign awards and judgments. The grounds for challenging an application are therefore limited5 and the STJ will review the merits of the award only where there is a potential breach of public policy or national sovereignty. 6 Thus, as a general rule, only matters of form or procedure will be dealt with in these proceedings. In past decisions (especially those rendered after the adoption of the 1996 arbitration statute) the Supreme Court has refused recognition in the following instances: failure to provide a sworn translation done in Brazil (STF, Sentença Estrangeira Contestada 6.689-1/Austria), failure to provide evidence of the arbitration agreement (STF, Sentença Estrangeira Contestada 6.753-7/United Kingdom), lack of service on the respondent in the arbitration proceedings (STF, Sentença Estrangeira Contestada 5.378-1/ France).

In its very first decision on the recognition of a foreign arbitral award the Special Chamber of the STJ distinguished itself from the Supreme Court by confirming as valid the constitution of an arbitral tribunal within the Liverpool Cotton Association, despite the fact that the arbitration clause had not been signed by the parties to the dispute. 7 In its judgment, the STJ recognized the validity of a tacit arbitration clause, given that the (Swiss and Brazilian) parties had appeared voluntarily before the arbitral tribunal and that neither had objected to the arbitration. The STJ also ruled that neither Brazilian law nor the New York Convention made the validity of the arbitration clause dependent upon its having been signed by the parties.

Given its progressive outlook, the STJ is likely to take a different stance on other questions too, such as the limits to the violation of public policy, which is an impediment to the recognition of foreign awards and judgments or authorization to execute letters rogatory.

On the subject of gambling debts incurred abroad by a debtor resident in Brazil (gambling has been strictly prohibited in Brazil since 1946), the STJ has already taken a more liberal position than the Supreme Court, which would systematically refer to public policy in order to prevent service on debtors resident in Brazil by means of letters rogatory. The STJ has for instance confirmed a judgment of the Brasília Court of Appeal ( Tribunal de Justiça do Distrito Federal) allowing a US casino the right to enforce a gambling debt against a well-known figure in Brazilian political circles. 8 The STJ based its judgment on the (foreign) law applicable to the contractual obligation (Article 9 of the introductory statute to the Civil Code) and the principles of good faith and unjust enrichment, in order to dismiss the defence of public policy derived from the fact that gambling is an illegal activity in Brazil. 9

As far as public policy in arbitration is concerned, we await the STJ's judgment on an application for the recognition of an award rendered in an AAA arbitration in the USA, which, in accordance with the applicable rules (Commercial Arbitration Rules, effective [Page74:] 1 July 2003, Art. R-42(b)), was not reasoned. The application was challenged on various grounds, including violation of public policy (Art. 39(II) of the Brazilian arbitration statute), given the requirement laid down in Article 26(II) of the arbitration statute that arbitral awards must be reasoned. 10 We hope that the STJ will adopt the view-which has been recognized internationally-that there is a transnational public policy specific to international commerce, according to which an unreasoned foreign decision rendered in accordance with the rules of a world-renowned arbitration institution that have been chosen by the parties themselves is perfectly acceptable.

Still in connection with the recognition of arbitral awards, the STJ has already radically reviewed the position of the Supreme Court, which was averse to granting emergency measures ( tutela de urgência, medida cautelar, tutela antecipada, etc.) in the course of proceedings. 11 Now, the STJ clearly allows this to be done, 12 which guarantees parties that emergency measures will be ordered in situations where rights arising from a foreign decision not yet recognized in Brazil are under threat of violation. Given that emergency measures are not unknown in the Brazilian legal system, 13 it is indeed more reasonable and consistent with the aim of achieving greater efficiency in the administration of justice for such measures to be granted when the right established by the foreign arbitral award cannot wait for a final decision on the application for recognition (which may take some years). The Brazilian Constitution guarantees individuals access to justice and this guarantee extends not only to the infringement of a right but also to the threat of infringement of a right. 14

With a view to fostering international cooperation, the STJ has gone slightly further than the Supreme Court to date by authorizing many applications for the execution of letters rogatory relating to enforcement, that is to say, for example, those that seek to attach property located in Brazil or to lift banking secrecy. 15 The aim of such decisions is not only to make it easier to establish the facts in a foreign trial or arbitration but also to ensure the actual effectiveness of the trial or arbitration even before the final decision is rendered. It should be added that such measures have the further advantage of improving Brazil's credibility with its international partners and will enable reciprocal treatment to be established in other countries. It may be noted that a few years ago the Supreme Court began to grant authority to execute letters rogatory of this kind, but only in cases where there was a treaty or convention between Brazil and the requesting country providing for the use of such measures. 16

Lastly, it should be pointed out that the new powers of the STJ to hear applications for the recognition of foreign arbitral awards will not preclude the Supreme Court from analysing the STJ's decision when an extraordinary appeal is brought for breach of a provision of the Constitution or the incompatibility of a treaty or federal law with the Constitution. 17 However, such extraordinary appeals are admissible only under rather limited conditions and, furthermore, the applicant will have the difficult task of proving to the Supreme Court judges that the constitutional issues raised in its case have general repercussions. 18

We shall now turn briefly to another reform which may affect the fate of foreign arbitral awards that have been recognized by the STJ.[Page75:]

II. Proposed legislative changes concerning the enforcement of domestic and foreign awards

The constitutional reform of the judicial system will not in itself greatly affect the enforcement of foreign arbitral awards. After recognition proceedings before the STJ, proceedings to enforce the foreign award will take place in the federal courts of first instance19 and follow the rules applicable to domestic awards and judgments contained in the Code of Civil Procedure. 20 Other legislative changes will therefore be necessary to streamline the procedure for enforcing awards. Several draft texts have been submitted to the Brazilian parliament. The proposals made include doing away with procedures for fixing amounts of damages and recovering debts, and abolishing the appeal procedures currently provided for in the Code of Civil Procedure. 21

III. Conclusion

The following points may be made by way of conclusion:

1. The new powers granted to the STJ (introduced by Constitutional Amendment No. 45/2004) in respect of the recognition of foreign arbitral awards have not altered the conditions-both positive and negative-laid down in the instruments relating specifically thereto (1996 arbitration statute, New York Convention, Panama Convention and Las Leñas Protocol).

2. As regards the current procedure before the STJ in respect of applications for recognition of a foreign arbitral award, the rules to be applied are those laid down in Resolution No. 9 of 4 May 2005.

3. We welcome the more liberal stance of the STJ over requirements for the validity of arbitration agreements, the granting of urgent measures ( tutelas de urgência) in cases concerning the recognition of foreign awards and judgments, and authorization for the execution of letters rogatory in respect of enforcement. Also, we hope that the STJ will take a more progressive line over public policy in international arbitration.

4. Finally, it is important to note that, notwithstanding the STJ's jurisdiction to hear applications for the recognition of foreign arbitral awards, the Supreme Court has the power to analyse the decision made when an extraordinary appeal is brought in the event of a breach of a constitutional rule or a declaration that a treaty or federal law is unconstitutional. However, the admissibility of such an appeal is limited, which should restrict its misuse in proceedings in general.

1
Brazilian law uses the term 'sentença' for both a judgment delivered by a State court and an award rendered by an arbitral tribunal. Under the Brazilian arbitration statute (Law No. 9.307/96), arbitral awards have the same effects as judgments.

2
Art. 2 of Resolution No. 9 of 4 May 2005: 'Subject to Article 9 of this Resolution, the Chief Judge has the power to recognize foreign decisions and authorize the execution of letters rogatory.' The same article states that this power may be delegated to the Deputy Chief Judge of the STJ.

3
Art. 9(1) of Resolution No. 9 of 4 May 2005: 'If the application for recognition of a foreign decision is challenged, the proceedings will be referred to the Special Chamber and the reporting judge will be responsible for ordering the measures necessary for the proceedings to progress and the facts to be established.'

4
Art. 9(1) of Resolution No. 9 of 4 May 2005. The Special Chamber comprises the twenty-one most long-serving judges of the STJ, including its President, Vice-President and the Coordinating Judge, who do not take part in decisions on applications for the recognition of foreign arbitral awards.

5
Art. 9 of Resolution No. 9 of 4 May 2005: 'In applications for the recognition of foreign decisions or the execution of letters rogatory, defences can be raised only with respect to the authenticity of documents, the intelligibility of the decision and compliance with requirements laid down by this Resolution.' This article must be read in conjunction with Art. 38 of Law No. 9.307/96 or Art. V of the New York Convention.

6
Art. 6 of Resolution no. 9 of 4 May 2005: 'Foreign decisions will not be recognized and letters rogatory will not be granted execution if they offend sovereignty or public policy.' This article must be read in conjunction with Art. 39 of Law No. 9.307/96 or Art. V(2) of the New York Convention. As regards indemnity amounts and lack of violation of Brazilian public policy, see STF, Sentença Estrangeira Contestada 4.835-4/USA.

7
STJ, Sentença Estrangeira Contestada 856/Switzerland, L'Aiglon SA v. Têxtil União SA, 18 May 2005 (Reporting Judge: C.A. Menezes Direito).

8
See STJ, Recurso Especial 307.104. It should be noted that Art. 814 of the new Civil Code characterizes bets and gambling debts as natural obligations, which doubtless shows how quickly the new Civil Code has become obsolete in this respect.

9
See Supreme Court, Agravo Regimental Carta Rogatória 10.416/USA.

10
STJ, Sentença Estrangeira Contestada 885/USA, Kanematsu USA Inc. v. ATS - Advanced Telecommunications Systems do Brazil Ltda. (Reporting Judge: P. Gallotti)

11
See Supreme Court, Agravo Regimental Sentença Estrangeira 3.408/USA and 6.526/France.

12
Art. 4(3) of Resolution No. 9 of 4 May 2005: 'Urgent measures are allowed in proceedings for the recognition of foreign decisions.'

13
See Art. 15 of the Inter-American Convention on Support Obligations (Montevideo, 1989), promulgated in Brazil by Decree no. 2.428/97. See also Art. 13 of the Inter-American Convention on International Traffic in Minors (Mexico, 1994), promulgated in Brazil by Decree No. 2.740/98.

14
Art. 5(XXXV) of the Constitution: 'The law shall not exclude violations of a right, or threats of violation of a right, from consideration by the judicial power.'

15
Art. 7 of Resolution No. 9 of 4 May 2005: 'Letters rogatory may concern decisions whether enforceable or not.'

16
See Supreme Court, Carta Rogatória 11.531/Mexico. See also the Mercosur protocol on precautionary measures (Ouro Preto, 1994).

17
See Art. 102(III)(a) and (b) of the Constitution. The Supreme Court's intervention could, for instance, conceivably be justified in a situation where the respondent had been denied the right to fully defend himself in an application for recognition of a foreign award. In this case, the injured party that claims it was denied the right of adversarial proceedings and a full and proper defence could, on the basis of Art. 5(LV) of the Brazilian Constitution, bring an extraordinary appeal before the Supreme Court

18
See Art. 102(3) of the Constitution (introduced by Constitutional Amendment No. 45 of 8 December 2004).

19
See Art. 109(X) of the Brazilian Constitution and Art. 12 of Resolution No. 9 of 4 May 2005.

20
See Art. 584(IV) of the Code of Civil Procedure.

21
See parliamentary bills 3.253-B/2004, 4.727/2004 and 4.724/2004.