Brazilian Supreme Court confirms the constitutionality of the Arbitration Law

The majority of the members of the Brazilian Supreme Court recognized the constitutionality of Law 9307/96 (Arbitration law). The decision was issued in the dockets of the unconstitutionality motion which originated from the homologation proceeding of the arbitration award in Spain, between MBV Commercial and Export management Establishment, from Spain and Resil Indústria e Comércio Ltda., from Brazil.

Initially, the request for homologation of the Spanish arbitration award had been rejected by the Supreme Court. However, with the advent of the Arbitration Law, in 1996, which exempts the legal ratification of the arbitration award in the country of origin, the issue was reexamined to prevent any conflicts with the new law.

Contrary to the ratification of the Spanish arbitration award, which was a unanimous decision, there was relevant divergence of votes concerning the constitutionality of the Brazilian law that deals with the issue. Of the 11 Justices who are part of the Federal Court, four considered the Arbitration Law unconstitutional, because access to the judiciary system, a fundamental right as stated in the article 5/XXXV of the Brazilian Constitution, would become more difficult.

However, the remaining Justices understood that articles 6 and 7 of the Arbitration Law are not in opposition to the Constitution, since in this case the parties are allowed to dispose of their patrimonial rights (which do not represent an offense to the public order).

Besides making the homologation in Brazil unnecessary and releasing the parties from filing a court action claiming recovery of damages (in case they disagree with the arbitration award), the above-mentioned ruling may encourage foreign companies to invest in the country. In the past, foreign companies did not want to submit their issues to the arbitration court because they did not want their decisions to be submitted to the Brazilian Judicial System.