Contracts with Brazilian companies: governing law, forum and arbitration

When a foreign company signs a contract with a Brazilian party, the clauses at the end of the agreement often matter more than they seem, because governing law, forum and dispute resolution provisions decide where a dispute will be heard, how it will be conducted and whether a favorable decision can actually be enforced against assets in Brazil.

Governing law

Under Brazil’s conflict of laws statute, known as LINDB, obligations are governed by the law of the country where they were constituted, and a contract is deemed constituted where the offeror resides (article 9 and its paragraph 2). Whether parties may freely choose the governing law of a contract litigated before Brazilian courts is a debated question, while in arbitration the answer is clear, since the Brazilian Arbitration Act allows parties to choose the rules of law that will apply, provided they do not violate public policy (Law 9,307/1996, article 2, paragraph 1). If the application of a foreign law is essential to you, arbitration is usually the safer route.

Jurisdiction and forum selection

Brazilian courts have jurisdiction, among other cases, when the defendant is domiciled in Brazil or when the obligation must be performed in Brazil (Code of Civil Procedure, article 21). The parties to an international contract may nonetheless choose an exclusive foreign forum, and a Brazilian court will then decline jurisdiction if the defendant raises the clause in its answer, except in matters reserved exclusively to Brazilian courts, such as claims concerning real estate located in Brazil (articles 23 and 25).

Keep in mind that a foreign judgment has no effect in Brazil until it is recognized by the Superior Court of Justice (article 961), so if your counterparty’s assets are in Brazil, winning abroad is only the first step. We explain that process in a separate article.

Arbitration

Brazil applies the New York Convention on the recognition of foreign arbitral awards (promulgated by Decree 4,311/2002), and a foreign award is recognized by the Superior Court of Justice, which may refuse it only on the limited grounds set out in articles 38 and 39 of the Arbitration Act. For contracts of meaningful value, an arbitration clause that names the seat, the language and the institution is often the most balanced option for both sides, while for smaller contracts a well-chosen forum may be enough.

Currency

As a rule, Brazilian law voids agreements to pay in foreign currency (Civil Code, article 318), but Law 14,286/2021, which governs the foreign exchange market, lists exceptions in its article 13, including contracts for the foreign trade of goods and services and obligations in which the creditor or the debtor is a non-resident. If you are the non-resident party, pricing in U.S. dollars or euros is therefore generally possible, as long as the clause is drafted with those rules in mind.

Language and documents

Bilingual contracts work well when they state which version prevails. If the contract is ever used in Brazilian court proceedings, documents in a foreign language must be accompanied by a Portuguese version, usually prepared by a Brazilian sworn translator (Code of Civil Procedure, article 192), and foreign public documents generally require an apostille, since Brazil is a party to the Hague Apostille Convention (Decree 8,660/2016).

Before you sign, check

• whether the governing law is stated and makes sense for the deal;
• whether disputes go to court or to arbitration, and where the counterparty’s assets are;
• whether the contract currency is allowed for this type of transaction;
• whether there is a Portuguese version and a rule on which language prevails;
• whether the person signing for the Brazilian company has the power to bind it.