Brazil’s new Code of Civil Procedure brings changes to international contracts and disputes

July 2015 | EXPERT BRIEFING | LITIGATION & DISPUTE RESOLUTION

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After five years of deliberations, on 18 March 2015 President Rousseff signed into law the new Brazilian Code of Civil Procedure. When it comes into force on 18 May 2016 the new Code will replace the old Code, which dates back to 1973.

The new Code aims to improve existing Brazilian civil procedure rules, speeding up litigation and modernising some of the provisions relating to matters pertaining to international law. Among other things, the new Code affects: (i) international jurisdiction of Brazil’s courts, including choice of forum in contracts; (ii) international assistance – letters of request/letters rogatory; and (iii) recognition and enforcement of foreign court orders and judgments.

International jurisdiction

Clarification of ‘action’. Under the old Code, Brazilian courts would have concurrent jurisdiction over disputes where the defendant was domiciled in Brazil, where an obligation was performed in Brazil or where “the action arose from a fact” that occurred in Brazil. The words “action arose from a fact” were replaced with “the legal ground being a fact” that occurred in Brazil. This should avoid future arguments that ensued from a strict interpretation of the word ‘action’ in the old Code.

Alimony and division of marital assets. The new Code now makes it clear that Brazilian courts will have jurisdiction over disputes involving alimony where the debtor is domiciled or resides in Brazil or “has connections with Brazil, such as possession or ownership of assets, receipt of income or the obtaining economic benefits”. This will allow former spouses and dependants to have their rights directly enforced in Brazil’s courts, avoiding the need to obtain judgement in the foreign court and the formalities of recognition proceedings. The formalities of recognition invariably allowed for defendants to move their assets to other jurisdictions prior to the foreign creditors were able to have their rights enforced. Moreover, Brazilian courts have now been given exclusive jurisdiction over assets located in Brazil relating to the dissolution of marriages. This will apply regardless of the nationality or domicile of the person entitled to these assets.

Consumer relationships. In another measure aimed at expanding the jurisdiction of Brazil’s courts, the new Code makes it clear that consumer relationships will be subjected to the concurrent jurisdiction of Brazil’s courts. The new provision gives jurisdiction to Brazilian courts over all disputes involving consumer relationships where the consumer resides or is domiciled in Brazil.

Choice of forum in contracts. Under the old Code, it was not clear whether parties were free to choose Brazilian courts to decide their dispute. The new Code allows for parties to a contract to choose Brazilian courts to resolve their dispute regardless of any specific connecting factor to Brazil. The new Code also makes clear that where an international contract contains an exclusive choice of forum provision and the defendant challenges the jurisdiction of the Brazilian court the proceedings before the Brazilian court will be stayed. This general rule will apply unless the dispute involves subject matter whose jurisdiction lies exclusively with Brazil’s courts.

Stay of proceedings (lis pendens). Brazilian law has never recognised the forum non conveniens doctrine. Hence, proceedings in a foreign court – no matter how connected to that forum – never give rise to a stay for the Brazilian proceedings where the Brazilian court has jurisdiction over the dispute. In addition to improving the wording of the applicable article, the new Code expressly states the rule will be subject to any contrary provisions contained in international treaties or bilateral agreements in force in Brazil. Although the latter was already part of the Brazilian legal system, this indicates that Brazil may be more willing to enter into agreements relating to this subject matter.

International assistance

Treaties and minimum guarantees. The old Code contains scant detail about how Brazilian courts are to deal with requests made by foreign courts. This was largely supplied by the internal rules of the court with applicable jurisdiction (currently the Superior Court of Justice) and many doubts remained as to how treaties and the laws would interact with one another. The new Code clarifies that international judicial cooperation will be primarily governed by treaties of which Brazil is a party then, in their absence, by reciprocity principles “manifested through diplomatic means”. While there is some concern relating to the need for formal manifestation of reciprocity – presumably by exchange of diplomatic letters – the new Code states this will not apply to requests for recognition of foreign judgements (note that Brazil is part of the New York Convention, so enforcement of foreign awards is assured under existing law). In addition to the public policy (ordre public) exception, a new ‘catch-all’ provision was introduced which may lead to disputes. Indeed, the article states that assistance will not be provided where this will lead to “acts that are contrary to or that produce effects incompatible with fundamental norms that govern the Brazilian State”. While this may appear to provide wide discretion to the judge in charge of the case, based on existing case law it is likely that the exception will only apply where recognition is against public policy principles.

Subject matter of assistance. The new Code provides that international judicial cooperation will be available for service of process, subpoenas, court-issued or privately issued notices, obtaining evidence or information, recognition and enforcement of a foreign decision, granting urgent relief, “international judicial assistance”, and for “any other court or out-of-court measure not prohibited by Brazilian law”.

Formalities. Brazilian courts traditionally imposed various formalities to give effect to foreign requests for assistance. The new Code provides that documents that are issued by the foreign court, together with translations, no longer need to be legalised at Brazil’s consular authorities or be translated by a Brazilian certified translator. However, Brazil’s government is given the discretion to demand formalities where there is no reciprocity by the issuing court. Note that Brazil is not part of the Apostille Convention (The Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents), which will likely mean that reciprocity will not be widely available.

Direct assistance. Under the new Code, Brazil’s authorities are given the power to assist foreign courts on matters that under Brazilian law are not required to go through formal recognition proceedings. The foreign authority may request direct assistance seeking information about ongoing or completed court and administrative proceedings, evidence contained in court files (for as long as they do not relate to matters that fall within the exclusive jurisdiction of Brazil’s courts), and “any other matter not against the laws of Brazil”. If the request requires the assistance of Brazil’s courts, then it will be forwarded to the applicable Federal court with territorial jurisdiction where the request is to be fulfilled. Otherwise, the government authority receiving the request will take the necessary steps to provide the direct assistance.

Recognition and enforcement of foreign court orders and judgements

Foreign judgment directly enforceable. Brazilian law provides that certain types of contracts and negotiable instruments take a speedier route in civil proceedings, going straight to the enforcement stage. These are called enforceable certificates, and are divided into judicial (court and arbitration proceedings) and non-judicial (negotiable instruments and contracts that contain the signature of two witnesses). The new Code expressly states that foreign interlocutory judgements are deemed to be judicial enforceable certificates which should allow for a quicker enforcement.

Urgent relief. The new Code enshrines as law the right to enforce foreign judgements providing for urgent relief where the foreign court expressly decides on its urgency and the request for urgent enforcement of the order is made via letter rogatory. The new Code also provides that urgent relief may be enforced via ex parte proceedings.

Single decision by the Reporting Justice in the Special Court. The internal rules of the Superior Court of Justice were also recently revised. Under the new Code, the Reporting Justice is empowered to decide over for the recognition of foreign judgements when there is “consolidated case law” in the Special Court of the Superior Court of Justice pertaining to the matters of law relating to the request. This change is another attempt to speed up the proceedings as previously all matters had to be heard by the Special Court.

Final remarks

Any major legislative change brings about some uncertainty and ensuing litigation. This is especially the case in Brazil where there is no doctrine of precedent and the Federal Constitution is one of the lengthiest and most prescriptive in the world.

Even though the new Code will lead to various technical disputes relating to civil procedure, insofar as its private international law rules are concerned, the changes should be welcomed by international practitioners.

While the new Code could have gone much further and addressed a number of other unsettled questions involving private international law, the changes are likely to provide greater speed and predictability pertaining to international issues and allow for greater interaction between foreign and Brazilian courts.

Fabiano Deffenti is a partner and Luciana Queiroz Pereira is an associate at Carvalho, Machado, Timm e Deffenti Advogados. Mr Deffenti can be contacted on +55 11 5505 2485 or by email: fdeffenti@cmted.com.br. Ms Pereira can be contacted on +55 11 5505 2485 or by email: lpereira@cmted.com.br.

Fabiano Deffenti and Luciana Queiroz Pereira

Carvalho, Machado, Timm e Deffenti Advogados