Arbitration and Brazil: A Foreign Perspective

Abstract

AS A rapidly developing economy of 170 million consumers with ever increasing demands for new infrastructure and a long tradition of partnership with overseas industrial partners, Brazil cannot be ignored by foreign investors. Nevertheless, as in any developing economy, those investors look for basic standards of protection: they need a clear ‘exit’ route if the investment turns sour. They need to know that the resolution of any disputes arising out of their investment can be conducted in front of an arbitral tribunal resulting in an enforceable award whether such arbitration is conducted in Brazil or elsewhere. Concerns have been voiced that this basic protection for foreign investments is sometimes lacking in Brazil, which has long been regarded as the ‘black sheep’ of Latin America in its approach to arbitration. Does Brazil merit this reputation and what has it done to seek to assuage the concerns which have been voiced? The origin of Brazil's reputation is its failure to ratify the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (‘the New York Convention’), causing it to stand out in splendid isolation as the only non-signatory of the major trading nations and a last bastion of resistance in Latin America. This naturally causes a degree of concern amongst foreign investors, who are concerned that any arbitration of their Brazilian dispute should result in an award enforceable in Brazil. The concern is nevertheless being addressed and signature of the New York Convention is now before the Brazilian Congress. Separately, Brazil undertook a major reform of its arbitration legislation in 1996 which dealt with many of the historic concerns.1 Unfortunately, the position has been further complicated by a long outstanding constitutional challenge to the new law. In order to put the issues facing foreign investors in context, …