October 27 2011
Violation of public order has been a recurring argument in challenging the confirmation of arbitral awards rendered outside Brazil, particularly those arising from proceedings applying foreign law. However, the Superior Court of Justice continues to uphold a restrictive view of such an important, yet fluid concept of law.
The court recently confirmed a judgment rendered in New York, which serves as an indicator for how the court should interpret the concept of public order when enforcing foreign arbitral awards. The opinion is likely to reinforce one of the cornerstones of international arbitration - namely, the parties' autonomy to select the applicable law to the underlying dispute (as under Article 2 of the Brazilian Arbitration Act).
On October 6 2011(1) the court confirmed a decision of the New York courts that changed the name of the applicant from 'Luiz Claudio Climaco II' to 'Louis Claude Nakamura Katzman', as he was commonly known in the United States. The confirmation had been challenged by the Office of the Attorney General on the grounds that the US court's decision violated Brazilian public policy, as this type of drastic name change was not expressly authorised by the Public Records Law.
Reporting Justice Felix Fischer rejected the public policy objection holding that:
"The public attorney's submission to this court implies that the alleged violation of public order and national sovereignty results from the absence, within the national legislation, of the specific justification used by the American court to grant the application for name change, namely that the applicant has always been known within his community in the U.S. as 'Louis Claude Nakamura Katzman'.
Such rationale, however, is not admissible. The foreign judgment in question was based on the legislation in force in the U.S. and is valid under said Law. Furthermore, the absence of similar provision within the Brazilian Law does not invalidate the foreign act, nor results, in the case at hand, in violation of public order or good customs."
In his opinion, unanimously approved by the court, the judge further concluded that:
"For these reasons, I believe the application for confirmation should be granted as it complies with the necessary requisites. Therefore, with due respect to the Public Attorney's argument, the judgment does not violate public order, or national sovereignty, because, as noted, we are not before a change of name within the Brazilian registry office, but instead the confirmation of a judgment that was legally rendered under the laws of the country where it originated, and authorized the name change requested by the applicant."
This recent opinion is in line with past precedents of the court and its clear restraint policy concerning the merits of foreign decisions, as the judges consistently reject attempts to use public policy as a way to challenge the enforceability of foreign arbitral awards in Brazil.
According to the court, the mere fact that a decision rendered outside the Brazilian territory was based on a rule, principle or concept that is also 'foreign' to the law does not, by itself, represent a violation to public order, national sovereignty or good custom.
Even though violation of public order remains a somewhat subjective ground for denying confirmation, at the very least the recent opinion by the court raises the burden of proof for asserting this type of challenge against arbitral awards validly issued under the substantive law chosen by parties to resolve their dispute.
For further information on this topic please contact Antonio M Barbuto Neto or Fernando Eduardo Serec at Tozzini Freire Advogados by telephone (+55 11 50 86 50 00), fax (+55 11 50 86 55 55) or email (firstname.lastname@example.org or email@example.com).
(1) Foreign Judgment (SEC) 5493, Reporting Justice Felix Fischer, opinion available at https://ww2.stj.jus.br/revistaeletronica/ita.asp?registro=201101254674&dt_publicacao=06/10/2011.
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