On August 9, 2021, the Brazilian Superior Court of Justice (STJ)[1] published an interesting decision on the time limit to request the annulment of arbitral awards with a seat in Brazil.
Under art. 33, paragraph 2 of the Brazilian Arbitration Act, a party has a 90-day term to bring a judicial lawsuit to set aside an arbitral award. Such term shall be counted from the date such party is notified of the arbitral award. If there is a request for clarification, correction or interpretation of the arbitral award, the deadline shall count from the notification of decision of such request.
The claimant can go to the judicial court in Brazil to enforce rights under the arbitral award and seize assets of the respondent, in a procedure named “judicial execution” (execução de título judicial). The respondent however has some defenses to the judicial execution, one of which are related to the merits of the arbitral award: (i) defect in the service of process; (ii) lack of standing; (iii) non-enforceability of the award; (iv) incorrect seizure or mistaken valuation of assets; (v) excessive amount claimed; (vi) incompetence of the judicial venue of the execution; or (vii) any reason that modifies or terminates the obligation set forth in the award, such as payment, novation, offset, settlement or elapsing of the limitation period for execution[2].
Nonetheless, sometimes respondents also raised in its defense to the judicial execution one of the causes for setting aside the arbitral award, which are spelled out in article 32 of the Brazilian Arbitration Act. There is express legal authorization in art. 33, paragraph 3 of the Brazilian Arbitration Act to do so if such defense is raised within the 90-day term during which the arbitral award can be annulled. However, it was controversial whether respondents could also request the annulment of the arbitral award afterwards in its defense to a judicial execution.
The Brazilian Superior Court of Justice, which is the highest court for non-constitutional matters, gave a negative answer to this question. According to STJ, the possibility of raising the causes for annulment as a defense of a judicial execution, rather than as a separate lawsuit, is a matter of convenience. Therefore, if a respondent has 90 days to bring a lawsuit to request the annulment of an arbitral award, it shall have the same term to bring this argument as a defense. In case the defense is filed later, the respondent can no longer raise the cause of annulment.
This is an important step to provide legal certainty to arbitral awards with a seat in Brazil. Claimants sometimes wait 90 days to bring the judicial execution of the arbitral award, if the respondents do not voluntarily pay, to ensure that the award could no longer be challenged.
[1] STJ, 3th Chamber, REsp 1900136, reporting justice Nancy Andrighe, judged on April 6, 2021.
[2] Art. 525, first paragraph, of Brazilian Code of Civil Procedure.
